NAME OF REGISTRANT
Franklin New York Tax-Free Income Fund
File No. 811-03479
EXHIBIT ITEM No. 77q1(g): Exhibits
FORM OF AGREEMENT AND PLAN
OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan"), is made
as of this 27th day of August, 2010, by and among Franklin New York Tax-Free
Trust ("FNYTFT"), a statutory trust created under the laws of the State of
Delaware, with its principal place of business at Xxx Xxxxxxxx Xxxxxxx,
Xxx Xxxxx, XX 00000-1906, on behalf of its series, Franklin New York Insured
Tax-Free Income Fund ("NY Insured Fund"), Franklin New York Tax-Free Income
Fund ("NY Tax-Free Fund"), a statutory trust created under the laws of the
State of Delaware, with its principal place of business at Xxx Xxxxxxxx
Xxxxxxx, Xxx Xxxxx, XX 00000-1906, and Franklin Advisers, Inc., a California
corporation.
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Reorganization")
will consist of (i) the acquisition by NY Tax-Free Fund of substantially all
of the property, assets and goodwill of NY Insured Fund in exchange solely
for full and fractional Class A and Class C shares of beneficial interest,
with no par value, of NY Tax-Free Fund ("NY Tax-Free Fund Shares"); (ii) the
distribution of NY Tax-Free Fund Shares to the holders of Class A and
Class C shares of beneficial interest of NY Insured Fund (the "NY Insured
Fund Shares"), respectively, according to their respective interests in NY
Insured Fund in complete liquidation of NY Insured Fund; and (iii) the
dissolution of NY Insured Fund as soon as is practicable after the closing
(as described in Section 3, hereinafter called the "Closing"), all upon and
subject to the terms and conditions of the Plan hereinafter set forth.
AGREEMENT
In order to consummate the Reorganization and in consideration of
the premises and of the covenants and agreements hereinafter set forth, and
intending to be legally bound, the parties hereto covenant and agree as
follows:
1. Sale and Transfer of Assets, Liquidation and Dissolution of NY
Insured Fund.
(a) Subject to the terms and conditions of the Plan, and in reliance
on the representations and warranties of NY Tax-Free Fund herein contained,
and in consideration of the delivery by NY Tax-Free Fund of the number of
NY Tax-Free Fund Shares hereinafter provided, FNYTFT, on behalf of NY Insured
Fund, agrees that, at the time of Closing, it will convey, transfer and
deliver to NY Tax-Free Fund all of NY Insured Fund's then existing assets,
including any interest in pending or future legal claims in connection with
past or present portfolio holdings, whether in 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 Reorganization
(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 NY Insured Fund's books as liability reserves; (ii) discharge its unpaid
liabilities on its books at the Closing Date (as such term is defined in
Section 3), 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, if any, as the
officers of FNYTFT, on behalf of NY Insured Fund, shall reasonably deem to
exist against NY Insured Fund at the Closing Date, for which contingent and
other appropriate liability reserves shall be established on NY Insured
Fund's books (such assets hereinafter "Net Assets"). NY Tax-Free Fund shall
not assume any liability of NY Insured Fund or FNYTFT, whether accrued or
contingent, known or unknown, and FNYTFT shall use its reasonable best
efforts to discharge all of the known liabilities of NY Insured Fund, 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 FNYTFT, on behalf of NY Insured
Fund, herein contained, and in consideration of such sale, conveyance,
transfer, and delivery, NY Tax-Free Fund agrees at the Closing to deliver
to FNYTFT the number of NY Tax-Free Fund Shares, determined by dividing the
net asset value per share of each Class A and Class C shares of NY Insured
Fund by the net asset value per share each of Class A and Class C shares of
NY Tax-Free Fund, respectively, and separately multiplying the result thereof
by the number of outstanding Class A and Class C shares, respectively, of
NY Insured Fund as of 1:00 p.m., Pacific Time, on the Closing Date. The
NY Tax-Free Fund Shares delivered to FNYTFT at the Closing shall have an
aggregate net asset value equal to the value of NY Insured 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, NY Insured Fund shall be
dissolved and shall distribute the NY Tax-Free Fund Shares received by
NY Insured Fund pursuant to this Section 1 pro rata to NY Insured Fund's
shareholders of record, based upon their respective holdings of NY Insured
Fund, as of the close of business on the Closing Date. Such distribution
shall be accomplished by the establishment of accounts on the share records
of NY Tax-Free Fund of the type and in the amounts due such shareholders
based on their respective holdings in NY Insured Fund as of the close of
business on the Closing Date. Fractional NY Tax-Free 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 NY Insured Fund Shares shall be entitled to surrender the same
to the transfer agent for NY Tax-Free Fund in exchange for the number of
NY Tax-Free Fund Shares of the same class into which the NY Insured Fund
Shares theretofore represented by the certificate or certificates so
surrendered shall have been converted. Until so surrendered, each
outstanding certificate, if any, which, prior to the Closing, represented
NY Insured Fund Shares shall be deemed for all NY Tax-Free Fund purposes
to evidence ownership of the number of NY Tax-Free Fund Shares into which
the NY Insured Fund Shares (which prior to the Closing were represented
thereby) have been converted. Certificates for NY Tax-Free Fund Shares
shall not be issued, unless specifically requested by a shareholder.
After the distribution, NY Insured Fund shall be dissolved.
(d) At the Closing, each shareholder of record of NY Insured 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 NY Insured Fund that such person
had on such Distribution Record Date.
(e) All books and records relating to NY Insured 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 NY Tax-Free Fund from and after the date
of the Plan, and shall be turned over to NY Tax-Free Fund on or prior to the
Closing.
2. Valuation.
(a) The net asset value of NY Tax-Free Fund Shares and NY Insured
Fund Shares and the value of NY Insured Fund's Net Assets to be acquired by
NY Tax-Free Fund hereunder shall in each case be computed as of 1:00 p.m.,
Pacific Time, on the Closing Date, unless on such date: (i) the New York
Stock Exchange ("NYSE") is not open for unrestricted trading; or (ii) the
reporting of trading on the NYSE or other relevant market is disrupted; or
(iii) any other extraordinary financial event or market condition occurs
(each of the events described in (i), (ii) or (iii) are referred to as a
"Market Disruption"). The net asset value per share of NY Tax-Free Fund
Shares and NY Insured Fund Shares and the value of NY Insured Fund's Net
Assets shall be computed in accordance with the valuation procedures set
forth in the most recent respective prospectuses of NY Tax-Free Fund and NY
Insured Fund, as amended or supplemented, except that the net asset value
per share of Perspectives Fund shall be carried to the fourth decimal place.
(b) In the event of a Market Disruption on the proposed Closing Date,
so that an accurate appraisal of the net asset value of NY Tax-Free Fund
Shares or NY Insured Fund Shares or the value of NY Insured 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 NY
Tax-Free Fund Shares and NY Insured Fund Shares and the value of NY Insured
Fund's Net Assets shall be made by the administrator to the Funds.
3. Closing and Closing Date.
The Closing shall take place at the principal office of the FNYTFT
at 2:00 p.m., Pacific Time, on August 27, 2010 or such later date as the
officers of FNYTFT and NY Tax-Free Fund may mutually agree
(the "Closing Date"). FNYTFT, on behalf of NY Insured Fund, shall have
provided for delivery as of the Closing of those Net Assets of NY Insured
Fund to be transferred to the account of NY Tax-Free Fund's Custodian, The
Bank of New York Mellon, Mutual Funds Division, 000 Xxxxxx Xxxxxx, Xxx Xxxx,
XX 00000. FNYTFT, on behalf of NY Insured Fund, shall deliver at the Closing
a list of names and addresses of the holders of record of each class of NY
Insured 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, as of 1:00 p.m., Pacific Time, on the Closing Date,
certified by its transfer agent or by its Chief Executive Officer - Finance
and Administration to the best of its or her knowledge and belief.
NY Tax-Free Fund shall provide evidence satisfactory to FNYTFT, on behalf
of NY Insured Fund, that such NY Tax-Free Fund Shares have been registered
in an account on the books of NY Tax-Free Fund in such manner as the
officers of FNYTFT may reasonably request.
4. Representations and Warranties by NY Tax-Free Fund.
NY Tax-Free Fund represents and warrants to FNYTFT, on behalf of NY
Insured Fund, that:
(a) NY Tax-Free Fund, which was originally organized as a New York
corporation on May 14, 1982, was converted to a statutory trust (then known
as a Delaware business trust) created under the laws of the State of
Delaware effective on May 1, 1997. NY Tax-Free Fund is validly existing
under the laws of the State of Delaware. NY Tax-Free Fund is duly registered
under the 1940 Act as an open-end, management investment company and all of
the NY Tax-Free 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 or obtaining
any required initial shareholder approvals.
(b) NY Tax-Free Fund is authorized to issue an unlimited number of
shares of beneficial interest, without par value, 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. NY Tax-Free Fund currently is divided into four
classes of shares (of which NY Tax-Free Fund Shares represent two classes):
Class A, Class B, Class C and Advisor Class shares of beneficial interest.
No shareholder of NY Tax-Free Fund shall have any option, warrant or
preemptive right of subscription or purchase with respect to NY Tax-Free
Fund Shares, except for the rights of Class B shares to convert into Class
A shares after eight years.
(c) The financial statements appearing in NY Tax-Free Fund's Annual
Report to Shareholders for the fiscal year ended May 31, 2009, audited by
PricewaterhouseCoopers LLP, and in NY Tax-Free Fund's unaudited Semi-Annual
Report to Shareholders for the period ended November 30, 2009, copies of which
have been delivered to FNYTFT, on behalf of NY Insured Fund, and any interim
unaudited financial statements, copies of which may be furnished to FNYTFT,
on behalf of NY Insured Fund, fairly present the financial position of NY
Tax-Free Fund as of their respective dates and the results of NY Tax-Free
Fund's operations for periods indicated, in conformity with Generally
Accepted Accounting Principles applied on a consistent basis.
(d) The books and records of NY Tax-Free Fund accurately summarize
the accounting data represented and contain no material omissions with
respect to the business and operations of NY Tax-Free Fund.
(e) NY Tax-Free Fund is not a party to or obligated under any
provision of its Agreement and Declaration of Trust, as amended (the "NY
Tax-Free Declaration") or By-laws, as amended (the "NY Tax-Free 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 NY
Tax-Free Fund of the transactions contemplated by the Plan, except for the
registration of NY Tax-Free 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) NY Tax-Free 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").
NY Tax-Free 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, has not had any
earnings and profits accumulated in any taxable year to which the provisions
of Subchapter M of the Code (or the corresponding provisions of prior law)
did not apply, and intends to continue to qualify as a RIC as of the Closing
Date. Consummation of the transactions contemplated by the Plan will not
cause NY Tax-Free Fund to fail to be qualified as a RIC as of the Closing
Date.
(g) NY Tax-Free 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) NY Tax-Free Fund does not have any unamortized or unpaid
organizational fees or expenses.
(i) All information to be furnished by NY Tax-Free Fund to FNYTFT
for use in preparing any prospectus, information statement 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.
(j) NY Tax-Free 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 and of
a nature and amount similar to, and consistent with, those shown in such
financial statements since the dates of those financial statements..
(k) There is no inter-corporate indebtedness existing between NY
Insured
Fund and NY Tax-Free Fund that was issued, acquired, or will be settled at
a discount.
(l) NY Tax-Free Fund does not own, directly or indirectly, nor has
it owned during the past five (5) years, directly or indirectly, any shares
of NY Insured Fund.
(m) NY Tax-Free Fund has no plan or intention to issue additional
shares following the Reorganization except for shares issued in the
ordinary course of NY Tax-Free Fund's business as an open-end investment
company; nor does NY Tax-Free Fund have any plan or intention to redeem or
otherwise reacquire any shares of NY Tax-Free Fund issued pursuant to the
Plan, 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.
(n) NY Tax-Free Fund is in the same line of business as NY Insured
Fund before the Reorganization and did not enter into such line of business
as part of the Reorganization. NY Tax-Free Fund will actively continue NY
Insured Fund's business in substantially the same manner that FNYTFT, on
behalf of NY Insured Fund, conducted that business immediately before the
Reorganization and has no plan or intention to change such business. On the
Closing Date, NY Tax-Free Fund expects that at least 33 1/3% of NY Insured
Fund's portfolio assets will meet the investment objectives, strategies,
policies, risks and restrictions of NY Tax-Free Fund. NY Tax-Free Fund has
no plan or intention to change any of its investment objectives, strategies,
policies, risks and restrictions after the Reorganization. NY Tax-Free Fund
has no plan or intention to sell or otherwise dispose of any of the former
assets of NY Insured 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,
NY Tax-Free Fund will continuously review its investment portfolio
(as FNYTFT, on behalf of NY Insured Fund, did before the Closing) to
determine whether to retain or dispose of particular securities,
including those included among the former assets of NY Insured Fund.
(o) 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 NY Tax-Free 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 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 FNYTFT on behalf of NY
Insured Fund.
FNYTFT, on behalf of NY Insured Fund, represents and warrants to
NY Tax-Free Fund that:
(a) NY Insured Fund is a series of FNYTFT, which was originally
organized as a Massachusetts business trust on July 17, 1986 and
converted to a statutory trust created under the laws of the State of
Delaware effective as of February 1, 2008, and is validly existing under
the laws of the State of Delaware. FNYTFT is duly registered under the
1940 Act as an open-end, management investment company and all NY Insured
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) FNYTFT is authorized to issue an unlimited number of shares of
beneficial interest, without par value, of NY Insured Fund, each
outstanding share of which is fully paid, non-assessable, and has full
voting rights. FNYTFT issues shares of two (2) series, including NY Insured
Fund. NY Insured Fund has two classes of shares: Class A and Class C. An
unlimited number of shares of beneficial interest of FNYTFT have been
allocated and designated to each class of NY Insured Fund. No shareholder
of FNYTFT has or will have any option, warrant, or preemptive rights of
subscription or purchase with respect to NY Insured Fund Shares.
(c) The financial statements appearing in NY Insured Fund's
Annual Report to Shareholders for the fiscal year ended September 30,
2009, audited by PricewaterhouseCoopers LLP, and unaudited Semi-Annual
Report to Shareholders for the period ended [March 31, 2010], copies of
which have been delivered to NY Tax-Free Fund, and any interim financial
statements for FNYTFT, on behalf of NY Insured Fund, which may be furnished
to NY Tax-Free Fund, fairly present the financial position of NY Insured
Fund as of their respective dates and the results of NY Insured Fund's
operations for the periods indicated in conformity with Generally Accepted
Accounting Principles applied on a consistent basis.
(d) FNYTFT, on behalf of NY Insured Fund, is not a party to or
obligated under any provision of its Agreement and Declaration of Trust,
as amended to date (the "FNYTFT Declaration") 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. NY Insured 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 NY
Insured 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 from or payable
by NY Insured Fund.
(e) FNYTFT has elected to treat NY Insured Fund as a RIC for federal
income tax purposes under Part I of Subchapter M of the Code. NY Insured
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, has not had any earnings
and profits accumulated in any taxable year to which the provisions of
Subchapter M of the Code (or the corresponding provisions of prior law) did
not apply, and will qualify as a RIC as of the Closing Date. Consummation
of the transactions contemplated by the Plan will not cause NY Insured Fund
to fail to be qualified as a RIC as of the Closing Date.
(f) NY Insured 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) NY Insured Fund does not have any unamortized or unpaid
organization fees or expenses.
(h) NY Insured 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, 2010, there has not been any material adverse
change in NY Insured 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 FNYTFT, on
behalf of NY Insured Fund, of the transactions contemplated by the Plan,
except as may otherwise be required under the federal or state securities
laws or the rules and regulations thereunder.
(k) All information to be furnished by FNYTFT or NY Insured Fund,
including the Prospectus and Statement of Additional Information for Class
A and Class C shares of NY Insured Fund dated February 1, 2010, to be used
in preparing the Registration Statement, and the combined
prospectus/information statement to be included in the Registration
Statement, 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, and such information
shall 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. Any amended, revised, or new prospectus or
statement of additional information of NY Insured Fund or any supplement
thereto, that is hereafter filed with the SEC (copies of which documents
shall be provided to NY Tax-Free Fund promptly after such filing), shall
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 in which they were made,
not misleading.
(l) There is no intercorporate indebtedness existing between NY
Insured Fund and NY Tax-Free Fund that was issued, acquired, or will be
settled at a discount.
(m) During the five-year period ending on the Closing Date, (i)
FNYTFT, on behalf of NY Insured Fund, has not acquired, and will not
acquire, NY Insured Fund Shares with consideration other than NY Tax-Free
Fund Shares or NY Insured Fund Shares, except for redemptions in the
ordinary course of NY Insured 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 will have been made with respect to NY Insured
Fund Shares (other than regular, normal dividend distributions made
pursuant to the NY Insured 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.
(n) As of the Closing Date, NY Insured 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 NY
Insured 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 1940 Act.
(o) Throughout the five year period ending on the Closing Date,
FNYTFT, on behalf of NY Insured Fund, will have conducted its historic
business within the meaning of Section 1.368-1(d) of the Income Tax
Regulations under the Code. FNYTFT, on behalf of NY Insured Fund, did
not enter into (or expand) a line of business as part of the Reorganization.
FNYTFT, on behalf of NY Insured Fund, will not alter its investment
portfolio in connection with the Reorganization.
6. Representations and Warranties by FNYTFT and NY Tax-Free Fund.
FNYTFT, on behalf of NY Insured Fund, and NY Tax-Free 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 NY Tax-Free Fund Shares to be issued pursuant to
Section 1 of the Plan, will accurately reflect each 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 NY Insured Fund in the case of FNYTFT) there is no material
suit, judicial action, or legal or administrative proceeding pending or
threatened against it. Neither NY Tax-Free Fund nor FNYTFT 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 NY Tax-Free
Fund's or NY Insured 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 constitutes a valid and binding obligation enforceable in accordance
with its terms, subject 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 NY Insured Fund, in the case of FNYTFT, or NY Tax-Free 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 their respective
fiscal years.
7. Covenants of FNYTFT and NY Tax-Free Fund.
(a) FNYTFT, on behalf of NY Insured Fund, and NY Tax-Free 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) FNYTFT, on behalf of NY Insured Fund, undertakes that it will
not acquire NY Tax-Free Fund Shares for the purpose of making distributions
thereof to anyone other than NY Insured Fund's shareholders.
(c) FNYTFT, on behalf of NY Insured Fund, undertakes that, if the
Plan is consummated, NY Insured Fund will liquidate and dissolve.
(d) FNYTFT, on behalf of NY Insured Fund, and NY Tax-Free 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 either all federal and other taxes shown as due on said returns
shall have 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, FNYTFT, on behalf of NY Insured Fund, will
provide NY Tax-Free Fund a copy of the shareholder ledger accounts,
certified by NY Insured Fund's transfer agent or its Chief Executive
Officer - Finance and Administration to the best of its or her knowledge
and belief, for all the shareholders of record of NY Insured Fund Shares
as of 1:00 p.m., Pacific Time, on the Closing Date who are to become
shareholders of NY Tax-Free Fund as a result of the transfer of assets that
is the subject of the Plan.
(f) As of the Closing, FNYTFT, on behalf of NY Insured Fund, shall
have delivered to NY Insured Fund's shareholders at least 30 days prior to
the Closing Date, a combined Prospectus/Information Statement that complies
in all material respects with the applicable provisions of the 1933 Act,
Section 14(c) of the 1934 Act and Section 20(a) of the 1940 Act, and the
rules and regulations, thereunder (the "Prospectus/Information Statement").
(g) NY Tax-Free Fund 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
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, NY Tax-Free Fund and
FNYTFT, on behalf of NY Insured Fund, 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) FNYTFT, on behalf of NY Insured Fund, shall deliver to
NY Tax-Free Fund, at the Closing Date, confirmation or other adequate
evidence as to the tax costs and holding periods of the assets and
property of NY Insured Fund transferred to NY Tax-Free Fund in
accordance with the terms of the Plan.
8. Conditions Precedent to be Fulfilled by FNYTFT and
NY Tax-Free Fund.
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 Chief Executive Officer - Finance and Administration
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 such party.
(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 a distribution or distributions shall have been
declared for NY Insured Fund prior to the Closing Date that,
together with all previous distributions, shall have the effect of
distributing to its shareholders (i) all of NY Insured Fund's investment
company taxable income (determined without regard to any deductions for
dividends paid) for the taxable year ended September 30, 2009 and
substantially all of such investment company taxable income for the short
taxable year beginning on October 1, 2009 and ending on the Closing Date,
(ii) at least 90% of NY Insured Fund's net tax-exempt interest income for
the taxable year ended September 30, 2009 and at least 90% of such net
tax-exempt interest income for the short taxable year beginning on
October 1, 2009 and ending on the Closing Date and (iii) all of NY Insured
Fund's net capital gain recognized in its taxable year ended September 30,
2009 and substantially all of any such capital gain recognized in such short
taxable year (in each case after reduction for any capital loss carry-over).
(e) 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 NY Insured Fund or NY
Tax-Free Fund.
(f) That there shall be delivered to FNYTFT, on behalf of NY Insured
Fund, and to NY Tax-Free Fund an opinion in form and substance satisfactory
to them, from the law firm of Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP, counsel
to NY Tax-Free Fund and FNYTFT, to the effect that, provided the transaction
contemplated hereby is carried out in accordance with the Plan, and the laws
of the State of Delaware, and based upon certificates of the officers of
FNYTFT and NY Tax-Free Fund with regard to matters of fact:
(1) The acquisition by NY Tax-Free Fund of substantially all the assets of
NY Insured Fund as provided for herein in exchange for NY Tax-Free Fund
Shares followed by the distribution by NY Insured Fund to its shareholders
of NY Tax-Free Fund Shares in complete liquidation of NY Insured Fund will
qualify as a reorganization within the meaning of Section 368(a)(1) of the
Code, and NY Insured Fund and NY Tax-Free 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 NY Insured Fund upon the transfer
of substantially all of its assets to NY Tax-Free Fund in exchange solely
for voting shares of NY Tax-Free Fund (Sections 361(a) and 357(a) of the
Code);
(3) NY Tax-Free Fund will recognize no gain or loss upon the receipt of
substantially all of the assets of NY Insured Fund in exchange solely for
voting shares of NY Tax-Free Fund (Section 1032(a) of the Code);
(4) No gain or loss will be recognized by NY Insured Fund upon the
distribution of NY Tax-Free Fund Shares to its shareholders in liquidation
of NY Insured Fund (in pursuance of the Plan) (Section 361(c)(1) of the Code);
(5) The basis of the assets of NY Insured Fund received by NY
Tax-Free Fund will be the same as the basis of such assets to NY Insured Fund
immediately prior to the Reorganization (Section 362(b) of the Code);
(6) The holding period of the assets of NY Insured Fund received by NY
Tax-Free Fund will include the period during which such assets were held by NY
Insured Fund (Section 1223(2) of the Code);
(7) No gain or loss will be recognized by the shareholders of NY
Insured Fund upon the exchange of their shares in NY Insured Fund for voting
shares of NY Tax-Free Fund including fractional shares to which they may be
entitled (Section 354(a) of the Code);
(8) The basis of NY Tax-Free Fund Shares received by the
shareholders of NY Insured Fund shall be the same as the basis of the NY
Insured Fund Shares exchanged therefor (Section 358(a)(1) of the Code);
(9) The holding period of NY Tax-Free Fund Shares received by
shareholders of NY Insured Fund (including fractional shares to which they
may be entitled) will include the holding period of NY Insured Fund Shares
surrendered in exchange therefor, provided that NY Insured Fund Shares were
held as a capital asset on the effective date of the exchange (Section
1223(1) of the Code); and
(10) NY Tax-Free 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 NY Insured 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.
(g) That there shall be delivered to NY Tax-Free Fund, on behalf of
NY Tax-Free Fund, an opinion in form and substance satisfactory to it from
Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP, counsel to FNYTFT, on behalf of NY
Insured 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) NY Insured Fund is a series of FNYTFT and that FNYTFT
is a validly existing statutory trust in good standing under the laws of
the State of Delaware;
(2) FNYTFT 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 trust action on the part of FNYTFT on behalf
of NY Insured Fund; and
(4) The Plan is the legal, valid and binding obligation
of FNYTFT, on behalf of NY Insured Fund, and is enforceable against FNYTFT,
on behalf of NY Insured Fund, in accordance with its terms.
In giving the opinions set forth above, counsel may state that it is
relying on certificates of the officers of FNYTFT with regard to matters of
fact, and certain certifications and written statements of governmental
officials with respect to the good standing of FNYTFT.
(h) That there shall be delivered to FNYTFT, on behalf of NY Insured
Fund, an opinion in form and substance satisfactory to it from the law firm
of Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP, counsel to NY Tax-Free 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) NY Tax-Free Fund is a validly existing statutory trust
in good standing under the laws of the State of Delaware;
(2) NY Tax-Free Fund is authorized to issue an unlimited
number of shares of beneficial interest, without par value;
(3) NY Tax-Free Fund is an open-end investment company of the
management type registered as such under the 1940 Act;
(4) NY Tax-Free 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 NY Tax-Free
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 NY
Tax-Free Fund; and
(6) The Plan is the legal, valid and binding obligation of
NY Tax-Free Fund and is enforceable against NY Tax-Free Fund accordance with
its terms.
In giving the opinions set forth above, counsel may state that it
is relying on certificates of the officers of NY Tax-Free Fund with regard
to matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of NY Tax-Free Fund.
(i) That NY Tax-Free Fund's Prospectus contained in the
Registration Statement with respect to NY Tax-Free Fund Shares to be
delivered to NY Insured Fund 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 the Closing,
and no proceedings for the issuance of such an order shall be pending or
threatened on that date.
(j) That NY Tax-Free 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 NY Tax-Free Fund Shares lawfully
to be delivered to each holder of NY Insured Fund Shares.
(k) That, at the Closing, there shall be transferred to NY Tax-Free
Fund aggregate Net Assets of NY Insured 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 NY Insured Fund on the Closing
Date.
(l) That there be delivered to NY Tax-Free Fund information
concerning the tax basis of NY Insured Fund in all securities transferred
to NY Tax-Free Fund, together with shareholder information including the
names, addresses, and taxpayer identification numbers of the shareholders
of NY Insured 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 FNYTFT, on behalf of NY
Insured 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: FNYTFT, on behalf of NY
Insured Fund, and NY Tax-Free Fund will each pay 25% of the costs of the
Reorganization. Xxxxxxxx Advisers, Inc., the investment manager for each
Fund, will pay 50% of the costs of the Reorganization.
10. Termination; Postponement; Waiver; Order.
(a) Anything contained in the Plan to the contrary notwithstanding,
the Plan may be terminated and the Reorganization abandoned at any time
prior to the Closing, or the Closing may be postponed as follows:
(1) by mutual consent of FNYTFT, on behalf of NY Insured
Fund, and NY Tax-Free Fund;
(2) by NY Tax-Free 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 FNYTFT, on behalf of NY Insured 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 December 31, 2010, the Plan shall automatically terminate on
that date, unless a later date is agreed to by both NY Tax-Free Fund and
FNYTFT.
(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 FNYTFT, NY Insured Fund nor
NY Tax-Free Fund, nor their trustees, officers, or agents or the
shareholders of NY Insured Fund or NY Tax-Free 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 FNYTFT nor NY Tax-Free Fund, 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 of the SEC with respect to the Plan shall be issued
prior to the Closing that imposes any term or condition that is determined
by action of the Board of Trustees of FNYTFT, on behalf of NY Insured Fund,
and the Board of Trustees of NY Tax-Free Fund to be acceptable, such term or
condition shall be binding as if it were a part of the Plan.
11. Liability of FNYTFT and NY Tax-Free Fund.
(a) Each party acknowledges and agrees that all obligations
of NY Tax-Free Fund under the Plan are binding only with respect to NY
Tax-Free Fund; that any liability of NY Tax-Free Fund under the Plan or in
connection with the transactions contemplated herein shall be discharged
only out of the assets of NY Tax-Free Fund; and that neither FNYTFT nor NY
Insured Fund shall seek satisfaction of any such obligation or liability
from the shareholders of NY Tax-Free Fund, the trustees, officers, employees
or agents of NY Tax-Free Fund, or any of them.
(b) Each party acknowledges and agrees that all obligations
of FNYTFT under the Plan are binding only with respect to NY Insured Fund;
that any liability of FNYTFT under this Plan with respect to NY Insured Fund
in connection with the transactions contemplated herein, shall be discharged
only out of the assets of NY Insured Fund; that no other series of FNYTFT
shall be liable with respect to the Plan or in connection with the
transactions contemplated herein; and that NY Tax-Free Fund will not seek
satisfaction of any such obligation or liability from the shareholders of
FNYTFT or NY Insured Fund, the trustees, officers, employees or agents of
FNYTFT, 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 NY
Tax-Free Fund at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000,
Attention: Secretary, or NY Insured Fund, at Franklin New York Tax-Free
Trust, One Franklin Parkway, San Mateo, California 94403 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, FNYTFT, on behalf of NY Insured Fund, NY
Tax-Free Fund and Xxxxxxxx Advisers, Inc. 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.
XXXXXXXX NEW YORK TAX-FREE TRUST
on behalf of FRANKLIN NEW YORK TAX-FREE INCOME FUND
By: /s/Xxxxx X. Xxxx
Xxxxx X. Xxxx
Vice President and Assistant Secretary
XXXXXXXX NEW YORK TAX-FREE INCOME FUND
By: /s/Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
Vice President and Assistant Secretary
With respect to Section 9 of the Plan only:
XXXXXXXX ADVISERS, INC.
By: /s/Madison X. Xxxxxx
Madison X. Xxxxxx
Executive Vice President
