AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan"), is made as of this
1st day of December, 2000, by and between Franklin Asset Allocation Fund ("Asset
Allocation Fund"), a business trust created under the laws of the State of
Delaware in 1996, and Franklin Growth and Income Fund ("Growth and Income Fund")
a business trust created under the laws of the State of Delaware in 2000, each
with its principal place of business at 000 Xxxxxxxx Xxxxxx Xxxxxxxxx, Xxx
Xxxxx, Xxxxxxxxxx 00000.
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of Reorganization")
will consist of (i) the acquisition by Growth and Income Fund, of substantially
all of the property, assets and goodwill of Asset Allocation Fund in exchange
solely for full and fractional shares of beneficial interest, par value $0.01
per share, of Growth and Income Fund - Class A ("Growth and Income Fund Class A
Shares") and full and fractional shares of beneficial interest, par value $0.01
per share, of Growth and Income Fund - Class C ("Growth and Income Fund Class C
Shares") (collectively, " Growth and Income Fund Shares"); (ii) the distribution
of (a) Growth and Income Fund Class A Shares to the shareholders of Asset
Allocation Fund - Class A shares ("Asset Allocation Fund Class A Shares") and
(b) Growth and Income Fund Class C Shares to the shareholders of Asset
Allocation Fund - Class C shares ("Asset Allocation Fund Class C Shares"),
according to their respective interests; and (iii) the dissolution of Asset
Allocation Fund as soon as 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 Agreement and Plan of Reorganization and in
consideration of the premises and of the covenants and agreements hereinafter
set forth, and intending to be legally bound, the parties hereto covenant and
agree as follows:
1. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF ASSET
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ALLOCATION FUND.
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(a) Subject to the terms and conditions of this Plan, and in reliance on
the representations and warranties of Growth and Income Fund herein contained,
and in consideration of the delivery by Growth and Income Fund of the number of
Growth and Income Fund Class A Shares and Growth and Income Fund Class C Shares
hereinafter provided, Asset Allocation Fund agrees that it will convey, transfer
and deliver to Growth and Income Fund at the Closing all of Asset Allocation
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 Asset Allocation 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 its
Board of Trustees shall reasonably deem to exist against Asset Allocation Fund,
if any, at the Closing Date, for which contingent and other appropriate
liability reserves shall be established on Asset Allocation Fund's books
(hereinafter "Net Assets"). Asset Allocation 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 Asset Allocation Fund herein contained, and in
consideration of such sale, conveyance, transfer, and delivery, Growth and
Income Fund agrees at the Closing to deliver to Asset Allocation Fund: (i) the
number of Growth and Income Fund Class A Shares, determined by dividing the net
asset value per share of the Asset Allocation Fund Class A Shares by the net
asset value per share of Growth and Income Fund Class A Shares, and multiplying
the result thereof by the number of outstanding Asset Allocation Fund Class A
Shares, as of 1:00 p.m. Pacific time on the Closing Date; and (ii) the number of
Growth and Income Fund Class C Shares, determined by dividing the net asset
value per share of the Asset Allocation Fund Class C Shares by the net asset
value per share of Growth and Income Fund Class C Shares, and multiplying the
result thereof by the number of outstanding Asset Allocation Fund Class C
Shares, as of 1:00 p.m. Pacific time on the Closing Date. All such values shall
be determined in the manner and as of the time set forth in Section 2 hereof.
(c) Immediately following the Closing, the Asset Allocation Fund shall
dissolve and distribute pro rata to its shareholders of record as of the close
of business on the Closing Date, Growth and Income Fund Shares received by Asset
Allocation Fund pursuant to this Section 1. Such liquidation and distribution
shall be accomplished by the establishment of accounts on the share records of
Asset Allocation 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 Growth and Income 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 Asset Allocation Fund shall be entitled to surrender the same to the
transfer agent for Growth and Income Fund in exchange for the number of Growth
and Income Fund Shares into which the Asset Allocation Fund Shares theretofore
represented by the certificate or certificates so surrendered shall have been
converted. Certificates for Growth and Income 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 Asset Allocation Fund shall be deemed for all Growth and
Income Fund's purposes to evidence ownership of the number of Growth and Income
Fund Shares into which the Asset Allocation Fund Shares (which prior to the
Closing were represented thereby) have been converted.
2. VALUATION.
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(a) The value of Asset Allocation Fund's Net Assets to be acquired by Growth
and Income Fund, hereunder shall be computed as of 1:00 p.m. Pacific time on the
Closing Date using the valuation procedures set forth in Asset Allocation Fund's
currently effective prospectus.
(b) The net asset value of a share of beneficial interest of Asset
Allocation Fund Shares shall be determined to the fourth decimal place as of
1:00 p.m. Pacific time on the Closing Date using the valuation procedures set
forth in Asset Allocation Fund's currently effective prospectus.
(c) The net asset value of a share of beneficial interest of Growth and
Income Fund Shares shall be determined to the nearest full cent as of 1:00 p.m.
Pacific time on the Closing Date using the valuation procedures set forth in
Growth and Income Fund's currently effective prospectus.
3. CLOSING AND CLOSING DATE.
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The Closing Date shall be February 8, 2001, or such later date as the
parties may mutually agree. The Closing shall take place at the principal office
of the Funds at 2:00 p.m., Pacific time, on the Closing Date. Asset Allocation
Fund shall have provided for delivery as of the Closing of those Net Assets of
Asset Allocation Fund to be transferred to the account of Growth and Income
Fund's Custodian, Bank of New York, Mutual Funds Division, 00 Xxxxxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000. Also, Asset Allocation Fund shall deliver at the
Closing a list of names and addresses of the shareholders of record of its Asset
Allocation Fund Class A Shares and Asset Allocation Fund Class C Shares and the
number of full and fractional shares of beneficial interest of such classes
owned by each such shareholder, indicating thereon which such shares are
represented by outstanding certificates and which by book-entry accounts, all as
of 1:00 p.m. Pacific time on the Closing Date, certified by its transfer agent
or by its President to the best of its or his knowledge and belief. Growth and
Income Fund shall issue and deliver a certificate or certificates evidencing the
shares of beneficial interest of Growth and Income Fund to be delivered to the
account of Asset Allocation Fund at said transfer agent registered in such
manner as the officers of Asset Allocation Fund may request, or provide evidence
satisfactory to Asset Allocation Fund that such Growth and Income Fund Shares
have been registered in an account on the books of Growth and Income Fund in
such manner as Asset Allocation Fund may request.
4. REPRESENTATIONS AND WARRANTIES BY GROWTH AND INCOME FUND.
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Growth and Income Fund represents and warrants to Asset Allocation Fund
that:
(a) Growth and Income Fund is a business trust created under the laws of the
State of Delaware on March 21, 2000, and is validly existing under the laws of
that State. Growth and Income Fund is duly registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified open-end,
management investment company and all Growth and Income 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 the required
initial capital.
(b) Growth and Income Fund is authorized to issue an unlimited number of
shares of beneficial interest of Growth and Income Fund Shares, par value $0.01
per share, each outstanding share of which is fully paid, non-assessable, freely
transferable and has full voting rights. Growth and Income Fund is further
divided into four classes of shares of which Growth and Income Fund Class A
Shares and Growth and Income Fund Class C Shares are two, and an unlimited
number of shares of beneficial interest, par value $0.01 per share, have been
allocated and designated to each Class of Growth and Income Fund.
(c) The financial statements appearing in the Growth and Income Fund's
Annual Report to Shareholders for the fiscal year ended June 30, 2000, audited
by PricewaterhouseCoopers, LLP, copies of which have been delivered to Asset
Allocation Fund, fairly present the financial position of Growth and Income Fund
as of such date and the results of its operations for the period indicated in
conformity with generally accepted accounting principles applied on a consistent
basis.
(d) The books and records of Growth and Income Fund accurately summarize the
accounting data represented and contain no material omissions with respect to
the business and operations of Growth and Income Fund.
(e) Growth and Income Fund has the necessary power and authority to conduct
its business as such business is now being conducted.
(f) Growth and Income Fund is not a party to or obligated under any
provision of its Agreement and Declaration of Trust or By-laws ("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.
(g) Growth and Income Fund has elected to be treated as a regulated
investment company ("RIC") for federal income tax purposes under Part I of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
Growth and Income Fund has qualified as a RIC for each taxable year since its
inception, and will qualify as a RIC as of the Closing Date.
(h) Growth and Income Fund is not under jurisdiction of a Court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(i) Growth and Income Fund does not have any unamortized or unpaid
organizational fees or expenses.
5. REPRESENTATIONS AND WARRANTIES BY ASSET ALLOCATION FUND.
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Asset Allocation Fund represents and warrants to Growth and Income Fund
that:
(a) Asset Allocation Fund is a business trust created under the laws of the
State of Delaware on July 24, 1996, and is validly existing under the laws of
that state. Asset Allocation Fund is duly registered under the 1940 Act as a
diversified open-end, management investment company and all Asset Allocation
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) Asset Allocation Fund is authorized to issue an unlimited number of
shares of beneficial interest of Asset Allocation Fund, par value $0.01 per
share, each outstanding share of which is fully paid, non-assessable, freely
transferable, and has full voting rights. Asset Allocation Fund is further
divided into two classes of shares, Asset Allocation Fund Class A Shares and
Asset Allocation Fund Class C Shares, and an unlimited number of shares of
beneficial interest, par value $0.01 per share, have been allocated and
designated to each Class of Asset Allocation Fund.
(c) The financial statements appearing in the Asset Allocation Fund's Annual
Report to Shareholders for the fiscal year ended December 31, 1999, audited by
PricewaterhouseCoopers, LLP, and the Semiannual Report to Shareholders for the
six month period ended June 30, 2000, copies of which have been delivered to
Growth and Income Fund, fairly present the financial position of Asset
Allocation Fund as of such dates 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 Asset Allocation Fund accurately summarize the
accounting data represented and contain no material omissions with respect to
the business and operations of Asset Allocation Fund.
(e) Asset Allocation Fund has the necessary power and authority to conduct
its business as such business is now being conducted.
(f) Asset Allocation Fund is not a party to or obligated under any provision
of its Agreement and Declaration of Trust or By-laws, or any contract or any
other commitment or obligation, and is not subject to any order or decree, that
would be violated by its execution of or performance under this Plan.
(g) Asset Allocation Fund has elected to be treat as a RIC for federal
income tax purposes under Part I of Subchapter M of the Code, and Asset
Allocation Fund has qualified as a RIC for each taxable year since its inception
and will qualify as a RIC as of the Closing Date.
(h) Asset Allocation 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) Asset Allocation Fund does not have any unamortized or unpaid
organization fees or expenses.
6. REPRESENTATIONS AND WARRANTIES BY THE FUNDS.
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Asset Allocation Fund and Growth and Income Fund each represents and
warrants to the other that:
(a) The statement of assets and liabilities to be furnished by it as of 1:00
p.m. Pacific time on the Closing Date for the purpose of determining the number
of Growth and Income Fund Shares to be issued pursuant to Section 1 of this
Plan, will accurately reflect its Net Assets in the case of Asset Allocation
Fund and its net assets in the case of Growth and Income Fund, 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 prospectuses, there is no
material suit, judicial action, or legal or administrative proceeding pending or
threatened against it.
(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 Boards of Trustees, and this Plan
constitutes a valid and binding obligation enforceable in accordance with its
terms.
(f) Each Fund anticipates that consummation of this Plan will not cause it
to fail to conform to the requirements of Subchapter M of the Code for federal
income taxation as a RIC at the end of its fiscal year.
(g) It has the necessary power and authority to conduct its business, as
such business is now being conducted.
7. COVENANTS OF ASSET ALLOCATION FUND AND GROWTH AND INCOME FUND.
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(a) Asset Allocation Fund and Growth and Income Fund each covenant to
operate their respective businesses, as presently conducted between the date
hereof and the Closing.
(b) Asset Allocation Fund undertakes that it will not acquire Growth and
Income Fund Shares for the purpose of making distributions thereof to anyone
other than Asset Allocation Fund's shareholders.
(c) Asset Allocation Fund undertakes that, if this Plan is consummated, it
will liquidate and dissolve Asset Allocation Fund.
(d) Asset Allocation Fund and Growth and Income Fund each agree that, by the
Closing, all of the their Federal and other tax returns and reports required by
law to be filed on or before such date shall have been filed, and all Federal
and other taxes shown as due on said returns shall have either been paid or
adequate liability reserves shall have been provided for the payment of such
taxes.
(e) At the Closing, Asset Allocation Fund will provide Growth and Income
Fund a copy of the shareholder ledger accounts, certified by the Asset
Allocation Fund's transfer agent or its President to the best of its or his
knowledge and belief, for all the shareholders of record of Asset Allocation
Fund Shares as of 1:00 p.m. Pacific time on the Closing Date who are to become
shareholders of Growth and Income Fund as a result of the transfer of assets
that is the subject of this Plan.
(f) Asset Allocation Fund agrees to mail to each shareholder of record
entitled to vote at the meeting of its shareholders 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 Securities
Exchange Act of 1934, as amended, and Section 20(a) of the 1940 Act, and the
rules and regulations, respectively, thereunder.
(g) Growth and Income Fund will file with the U.S. Securities and Exchange
Commission a registration statement on Form N-14 under the 1933 Act relating to
Growth and Income Fund Shares issuable hereunder ("Registration Statement"), and
will use its best efforts to provide that the Registration Statement becomes
effective as promptly as 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 Asset Allocation Fund's shareholders' 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.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY ASSET ALLOCATION FUND AND GROWTH
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AND INCOME 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
the Board of Trustees 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 Agreement and Plan of Reorganization contemplated
hereby shall have been adopted and approved by the appropriate action of the
shareholders of Asset Allocation Fund at an annual or special meeting or any
adjournment thereof.
(e) That a distribution or distributions shall have been declared for Asset
Allocation Fund prior to the Closing Date that, together with all previous
distributions, shall have the effect of distributing to its shareholders (i) all
of its ordinary income and all of its capital gain net income, if any, for the
period from the close of its last fiscal year to 1:00 p.m. Pacific time on the
Closing Date; and (ii) any undistributed ordinary income and capital gain net
income from any period to the extent not otherwise declared for distribution.
Capital gain net income has the meaning given such term by Section 1222(a) of
the Code.
(f) That there shall be delivered to Asset Allocation Fund and Growth and
Income Fund an opinion from Messrs. Stradley, Ronon, Xxxxxxx & Xxxxx, LLP,
counsel to Asset Allocation Fund and Growth and Income 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 Asset Allocation Fund
and Growth and Income Fund with regard to matters of fact:
(1) The acquisition by Growth and Income Fund of substantially all the
assets of Asset Allocation Fund as provided for herein in exchange for Growth
and Income Fund Shares followed by the distribution by Asset Allocation Fund to
its shareholders of Growth and Income Fund Shares in complete liquidation will
qualify as a reorganization within the meaning of Section 368(a)(1) of the Code,
and Asset Allocation Fund and Growth and Income Fund will each be a "party to
the reorganization" within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Asset Allocation Fund upon the
transfer of substantially all of its assets to Growth and Income Fund in
exchange solely for voting shares of Growth and Income Fund (Code Sections
361(a) and 357(a)). 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 Asset Allocation Fund upon the
distribution of Growth and Income Fund Shares to its shareholders pursuant to
the liquidation of Asset Allocation Fund (in pursuance of the Plan) (Section
361(c)(1) of the Code);
(4) No gain or loss will be recognized by Growth and Income Fund upon
the receipt of substantially all of the assets of Asset Allocation Fund in
exchange solely for voting shares of Growth and Income Fund (Section 1032(a) of
the Code);
(5) The basis of the assets of Asset Allocation Fund received by Growth
and Income Fund will be the same as the basis of such assets to Asset Allocation
Fund immediately prior to the exchange (Section 362(b) of the Code);
(6) The holding period of the assets of Asset Allocation Fund received
by Growth and Income Fund will include the period during which such assets were
held by Asset Allocation Fund (Section 1223(2) of the Code);
(7) No gain or loss will be recognized to the shareholders of Asset
Allocation Fund Shares upon the exchange of their shares in Asset Allocation
Fund for voting shares of Growth and Income Fund including fractional shares to
which they may be entitled (Section 354(a) of the Code);
(8) The basis of Growth and Income Fund Shares received by Asset
Allocation Fund Shares' shareholders including fractional shares to which they
may be entitled shall be the same as the basis of the Asset Allocation Fund
Shares exchanged therefor (Section 358(a)(1) of the Code);
(9) The holding period of Growth and Income Fund Shares received by
shareholders of Asset Allocation Fund Shares (including fractional shares to
which they may be entitled) will include the holding period of the Asset
Allocation Fund Shares surrendered in exchange therefor, provided that the Asset
Allocation Fund Shares were held as a capital asset on the effective date of the
exchange (Section 1223(1) of the Code); and
(10) Growth and Income Fund will succeed to and take into account as of
the date of the transfer (as defined in Section 1.381(b)-1(b) of the Income Tax
Regulations) the items of Asset Allocation 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 Income Tax Regulations thereunder.
(g) That there shall be delivered to Growth and Income Fund an opinion in
form and substance satisfactory to it from Messrs. Stradley, Ronon, Xxxxxxx &
Young, LLP, counsel to Asset Allocation 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) Asset Allocation Fund is a business trust organized under the laws
of the State of Delaware on July 24, 1996, and is a validly existing business
trust and in good standing under the laws of that state;
(2) Asset Allocation Fund is authorized to issue an unlimited number of
shares of beneficial interest, par value $0.01 per share. Two classes of shares
of Asset Allocation Fund have been designated as the Asset Allocation Fund Class
A Shares and Asset Allocation Fund Class C Shares, and an unlimited number of
shares of beneficial interest of the Trust has been allocated to each Class of
Asset Allocation Fund. Assuming that the initial shares of beneficial interest
of Asset Allocation Fund were issued in accordance with the 1940 Act and the
Agreement and Declaration of Trust and By-laws of Asset Allocation Fund, and
that all other outstanding shares of Asset Allocation Fund were sold, issued and
paid for in accordance with the terms of Asset Allocation 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) Asset Allocation Fund is a diversified open-end investment company
of the management type registered as such under the 1940 Act;
(4) Except as disclosed in Asset Allocation Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against Asset Allocation Fund,
the unfavorable outcome of which would materially and adversely affect Asset
Allocation Fund;
(5) All actions required to be taken by Asset Allocation Fund to
authorize this Plan and to effect the Agreement and Plan of Reorganization
contemplated hereby have been duly authorized by all necessary action on the
part of Asset Allocation Fund; and
(6) Neither the execution, delivery, nor performance of this Plan by
Asset Allocation Fund violates any provision of its Agreement and Declaration of
Trust or By-laws, or the provisions of any agreement or other instrument known
to such counsel to which Asset Allocation Fund is a party or by which Asset
Allocation Fund is otherwise bound; this Plan is the legal, valid and binding
obligation of Asset Allocation Fund and is enforceable against Asset Allocation
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 Asset Allocation Fund with regard to
matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of Asset Allocation
Fund.
(h) That there shall be delivered to Asset Allocation Fund an opinion in
form and substance satisfactory to it from Messrs. Stradley, Ronon, Xxxxxxx &
Xxxxx, LLP, counsel to Growth and Income 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) Growth and Income Fund is a business trust organized under the laws
of the State of Delaware on March 21, 2000 and is a validly existing business
trust and in good standing under the laws of that state;
(2) Growth and Income Fund is authorized to issue an unlimited number of
shares of beneficial interest, par value $0.01 per share. Growth and Income Fund
is further divided into four classes of shares of which Growth and Income Fund
Class A Shares and Growth and Income Fund Class C Shares are two, and an
unlimited number of shares of beneficial interest, par value $0.01 per share,
have been allocated and designated to each of those Classes of Growth and Income
Fund. Assuming that the initial shares of beneficial interest of Growth and
Income Fund were issued in accordance with the 1940 Act, and the Agreement and
Declaration of Trust and By-laws of the Trust, and that all other outstanding
shares of Growth and Income Fund were sold, issued and paid for in accordance
with the terms of Growth and Income Fund's prospectus in effect at the time of
such sales, each such outstanding share of Growth and Income Fund is fully paid,
non-assessable, freely transferable and has full voting rights;
(3) Growth and Income Fund is a diversified open-end investment company
of the management type registered as such under the 1940 Act;
(4) Except as disclosed in Growth and Income Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against Growth and Income Fund,
the unfavorable outcome of which would materially and adversely affect Growth
and Income Fund;
(5) Growth and Income 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 Growth and Income Fund;
(6) All actions required to be taken by Growth and Income Fund to
authorize this Plan and to effect the Agreement and Plan of Reorganization
contemplated hereby have been duly authorized by all necessary action on the
part of Growth and Income Fund;
(7) Neither the execution, delivery, nor performance of this Plan by
Growth and Income Fund violates any provision of its Agreement and Declaration
of Trust or By-laws, or the provisions of any agreement or other instrument
known to such counsel to which Growth and Income Fund is a party or by which
Growth and Income Fund is otherwise bound; this Plan is the legal, valid and
binding obligation of Growth and Income Fund and is enforceable against Growth
and Income Fund in accordance with its terms; and
(8) The registration statement of Growth and Income Fund, of which the
prospectus dated November 1, 2000 is a part (the "Prospectus") 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 Growth and Income Fund with regard to
matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of Growth and Income
Fund.
(i) That Asset Allocation Fund shall have received a certificate from the
President and Secretary of Growth and Income 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
(j) That Growth and Income Fund's Registration Statement to be delivered to
Asset Allocation 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.
(k) That Growth and Income 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 Growth and Income Fund Shares
lawfully to be delivered to each holder of Asset Allocation Fund Shares.
(l) That, at the Closing, there shall be transferred to Growth and Income
Fund, aggregate Net Assets of Asset Allocation 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 Asset Allocation Fund on the
Closing Date.
9. BROKERAGE FEES AND EXPENSES.
---------------------------
(a) Asset Allocation Fund and Growth and Income 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 Growth and Income Fund, one-quarter by Asset
Allocation Fund, and one-half by Franklin Advisers, Inc.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
-----------------------------------------
(a) Anything contained in this Plan to the contrary notwithstanding, this
Plan may be terminated and the Agreement and Plan of Reorganization abandoned at
any time (whether before or after approval thereof by the shareholders of Asset
Allocation Fund) prior to the Closing, or the Closing may be postponed as
follows:
(1) by mutual consent of Asset Allocation Fund and Growth and Income Fund;
(2) by Growth and Income Fund if any condition of its obligations set
forth in Section 8 has not been fulfilled or waived; or
(3) by Asset Allocation Fund if any conditions of its obligations
set forth in Section 8 has not been fulfilled or waived.
An election by Growth and Income Fund or Asset Allocation Fund to
terminate this Plan and to abandon the Agreement and Plan of Reorganization
shall be exercised respectively, by the Board of Trustees of either Growth and
Income Fund or Asset Allocation Fund.
(b) If the transactions contemplated by this Plan have not been consummated
by June 30, 2001, the Plan shall automatically terminate on that date, unless a
later date is agreed to by both Growth and Income Fund and Asset Allocation
Fund.
(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 Asset
Allocation Fund nor Growth and Income Fund, nor their trustees, officers, or
agents or the shareholders of Asset Allocation Fund or Growth and Income Fund
shall have any liability in respect of this Plan.
(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 if, in the judgment of such Board of
Trustees, 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 Agreement and Plan of
Reorganization, and neither Asset Allocation Fund nor Growth and Income Fund,
nor any of their officers, trustees, agents or shareholders shall have any
liability with respect to such representations or warranties after the Closing.
This provision shall not protect any officer, trustee, agent or shareholder of
Growth and Income Fund or Asset Allocation 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 Asset Allocation Fund or Growth and Income 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 Asset Allocation Fund, unless such terms and
conditions shall result in a change in the method of computing the number of
Growth and Income Fund Shares to be issued to Asset Allocation Fund in which
event, unless such terms and conditions shall have been included in the proxy
solicitation material furnished to the shareholders of Asset Allocation 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 Asset Allocation Fund shall promptly call a special meeting of the
shareholders at which such conditions so imposed shall be submitted for
approval.
11. 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.
12. 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.
13. 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 Asset Allocation Fund, at 000
Xxxxxxxx Xxxxxx Xxxxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, Attention: Secretary, or
Growth and Income Fund, at 000 Xxxxxxxx Xxxxxx Xxxxxxxxx, Xxx Xxxxx, Xxxxxxxxxx
00000, Attention: Secretary, as the case may be.
14. GOVERNING LAW.
--------------
This Plan shall be governed by and carried out in accordance with the laws
of the State of Delaware.
IN WITNESS WHEREOF, Asset Allocation Fund and Growth and Income 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 GROWTH AND INCOME FUND
Attest:
/s/Xxxxxx X. Xxxxxxx By:/s/Xxxxx X. Xxxx
-------------------- ----------------
Xxxxxx X. Xxxxxxx Xxxxx X. Xxxx
Secretary Vice President
FRANKLIN ASSET ALLOCATION FUND
Attest:
/s/Xxxxxx X. Xxxxxxx By:/s/Xxxxx X. Xxxx
-------------------- ----------------
Xxxxxx X. Xxxxxxx Xxxxx X. Xxxx
Secretary Vice President
