NAME OF REGISTRANT
Xxxxxxxx Custodian Funds
File No. 811-00537
EXHIBIT ITEM No. 77q1(g): Exhibits
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan"), is made as of this
6th day of May, 2009, by and between Franklin Custodian Funds, a statutory
trust created under the laws of the State of Delaware ("Acquiring Trust"),
with its principal place of business at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, XX
00000-1906, on behalf of its series, Franklin Growth Fund ("Acquiring Fund"),
and Franklin Capital Growth 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 ("Target Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Reorganization") will
consist of (i) the acquisition by Acquiring Trust, on behalf of Acquiring
Fund, of substantially all of the property, assets and goodwill of Target
Fund in exchange solely for full and fractional Class A, Class B, Class C,
Class R, and Advisor Class shares of beneficial interest, with no par value,
of Acquiring Fund ("Acquiring Fund Shares"); (ii) the distribution of
Acquiring Fund Shares to the holders of Class A, Class B, Class C, Class R,
and Advisor Class shares of beneficial interest of Target Fund (the "Target
Fund Shares") according to their respective interests in Target Fund in
complete liquidation of Target Fund; and (iii) the dissolution of Target Fund
as soon as is practicable after the closing (as 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 Target Fund.
(a) Subject to the terms and conditions of the Plan, and in reliance on the
representations and warranties of Acquiring Trust, on behalf of Acquiring
Fund, herein contained, and in consideration of the delivery by Acquiring
Trust of the number of Acquiring Fund Shares hereinafter provided, Target
Fund agrees that, at the time of Closing, it will convey, transfer and
deliver to Acquiring Trust, for the benefit of Acquiring Fund, all of Target
Fund's then existing assets, including any interest in pending or future
legal claims in connection with past or present portfolio holdings, whether
in the form of class action claims, opt-out or other direct litigation
claims, or regulator or government-established investor recovery fund
claims, and any and all resulting recoveries, free and clear of all liens,
encumbrances, and claims whatsoever (other than shareholders' rights of
redemption), except for cash, bank deposits, or cash equivalent securities
in an estimated amount necessary to: (i) pay 25% of the costs and expenses
of carrying out the 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 Target 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 Board of Trustees of Target Fund
shall reasonably deem to exist against Target Fund at the Closing Date, for
which contingent and other appropriate liability reserves shall be
established on Target Fund's books (such assets hereinafter "Net Assets").
Neither Acquiring Trust nor Acquiring Fund shall assume any liability of
Target Fund, and Target Fund shall use its reasonable best efforts to
discharge all of its known liabilities, so far as may be possible, from the
cash, bank deposits and cash equivalent securities described above.
(b) Subject to the terms and conditions of the Plan, and in reliance on the
representations and warranties of Target Fund herein contained, and in
consideration of such sale, conveyance, transfer, and delivery, Acquiring
Trust agrees to deliver to Target Fund at the Closing the number of
Acquiring Fund Shares, determined by dividing the net asset value per share
of Class A, Class B, Class C, Class R, and Advisor Class shares of Target
Fund by the net asset value per share of Class A, Class B, Class C, Class R,
and Advisor Class shares, respectively, of Acquiring Fund, and multiplying
the result thereof by the number of outstanding Class A, Class B, Class C,
Class R, and Advisor Class shares of Target Fund, all as of 1:00 p.m.,
Pacific Time, on the Closing Date. Acquiring Fund Shares delivered to Target
Fund at the Closing shall have an aggregate net asset value equal to the
value of Target Fund's Net Assets, all determined as provided in Section 2
of the Plan and as of the date and time specified herein.
(c) Immediately following the Closing, Target Fund shall be dissolved and
shall distribute the Acquiring Fund Shares received by Target Fund pursuant
to this Section 1 pro rata to Target Fund's shareholders of record 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
Acquiring Fund in the amounts due such shareholders based on their respective
holdings in Target Fund as of the close of business on the Closing Date.
Fractional Acquiring Fund Shares shall be carried to the third decimal
place. Certificates for Acquiring Fund Shares shall not be issued, unless
specifically requested by a shareholder. After the distribution, Target
Fund shall be dissolved.
(d) At the Closing, each shareholder of record of Target Fund as of the
record date (the "Distribution Record Date") with respect to any unpaid
dividends and other distributions that were declared prior to the Closing,
including any dividend or distribution declared pursuant to Section 8(e)
hereof, shall have the right to receive such unpaid dividends and
distributions with respect to the shares of Target Fund that such person
had on the Distribution Record Date.
(e) All books and records relating to Target Fund, including all books
and records required to be maintained under the Investment Company Act of
1940, as amended (the "1940 Act"), and the rules and regulations thereunder,
shall be available to Acquiring Trust from and after the date of the Plan,
and shall be turned over to Acquiring Trust on or prior to the Closing.
2. Valuation.
(a) The net asset value of Acquiring Fund Shares and Target Fund Shares and
the value of Target Fund's Net Assets to be acquired by Acquiring Fund
hereunder shall in each case be computed as of 1:00 p.m., Pacific Time,
on the Closing Date, unless on such date: (a) the New York Stock Exchange
("NYSE") is not open for unrestricted trading; or (b) the reporting of
trading on the NYSE is disrupted; or (c) any other extraordinary financial
event or market condition occurs (each of the events described in (a), (b)
or (c), a "Market Disruption"). The net asset value per share of Acquiring
Fund Shares and Target Fund Shares and the value of Target Fund's Net Assets
shall be computed in accordance with the valuation procedures set forth in
the most recent respective prospectuses of Acquiring Fund and Target Fund,
as amended or supplemented.
(b) In the event of a Market Disruption on the proposed Closing Date, so
that an accurate appraisal of the net asset value of Acquiring Fund Shares
or Target Fund Shares or the value of Target Fund's Net Assets is
impracticable, the Closing Date shall be postponed until the first business
day when regular trading on the NYSE shall have been fully resumed and
reporting shall have been restored and other trading markets are otherwise
stabilized.
3. Closing and Closing Date.
The Closing shall take place at the principal office of Acquiring Trust
at [2:00 p.m.], Pacific Time, on May 6, 2009 or such later date as the
parties may mutually agree (the "Closing Date"). Target Fund shall have
provided for delivery as of the Closing of those Net Assets of Target Fund
to be transferred to the account of Acquiring Fund's Custodian, The Bank of
New York Mellon, Mutual Funds Division, 000 Xxxxxx Xxxxxx, Xxx Xxxx, XX 00000.
Target Fund shall deliver at the Closing a list of names and addresses of
the shareholders of record of Target Fund Shares and the number of full and
fractional shares of beneficial interest owned by each such shareholder as of
1:00 p.m., Pacific Time, on the Closing Date, certified by its transfer agent
or by its President to the best of its or his knowledge and belief.
Acquiring Trust on behalf of Acquiring Fund shall provide evidence
satisfactory to Target Fund that such Acquiring Fund Shares have been
registered in an account on the books of Acquiring Fund in such manner as
the officers of Target Fund may reasonably request.
4. Representations and Warranties by Acquiring Trust on behalf of Acquiring
Fund.
Acquiring Trust, on behalf of Acquiring Fund, represents and warrants to
Target Fund that:
(a) Acquiring Fund is a series of Acquiring Trust, a statutory trust
organized originally as a Delaware corporation in 1947, reincorporated as
a MD corporation in 1979, and converted into a Delaware statutory trust
effective February 1, 2008. Acquiring Trust is duly registered under the
1940 Act as an open-end, management investment company and all of Acquiring
Fund Shares sold were sold pursuant to an effective registration statement
filed under the Securities Act of 1933, as amended (the "1933 Act"), except
for those shares sold pursuant to the private offering exemption for the
purpose of raising initial capital or obtaining any required initial
shareholder approvals.
(b) Acquiring Trust is authorized to issue an unlimited number of shares
of beneficial interest, without par value, of Acquiring Fund, each
outstanding share of which is, and each share of which when issued pursuant
to and in accordance with the Plan will be, fully paid, non-assessable, and
has or will have full voting rights. Acquiring Trust currently issues
shares of five (5) series, including Acquiring Fund. Acquiring Fund issues
five classes of shares: Class A, Class B, Class C, Class R, and Advisor
Class. No shareholder of Acquiring Trust shall have any preemptive or other
right to subscribe for Acquiring Fund Shares.
(c) The financial statements appearing in Acquiring Fund's Annual Report to
Shareholders for the fiscal year ended September 30, 2008, audited by
PricewaterhouseCoopers LLP, a copy of which has been delivered to Target
Fund, and any interim unaudited financial statements, copies of which may
be furnished to Target Fund, fairly present the financial position of
Acquiring Fund as of their respective dates and the results of Acquiring
Fund's operations for the periods indicated in conformity with Generally
Accepted Accounting Principles applied on a consistent basis.
(d) The books and records of Acquiring Fund accurately summarize the
accounting data represented and contain no material omissions with respect
to the business and operations of Acquiring Fund.
(e) Acquiring Trust, on behalf of Acquiring Fund, is not a party to or
obligated under any provision of its Agreement and Declaration of Trust,
By-laws, any contract or any other commitment or obligation, and is not
subject to any order or decree, that would be violated by its execution of
or performance under the Plan, and no consent, approval, authorization or
order of any court or governmental authority is required for the
consummation by Acquiring Fund or Acquiring Trust of the transactions
contemplated by the Plan, except for the registration of Acquiring Fund
Shares under the 1933 Act, the 1940 Act, or as may otherwise be required
under the federal and state securities laws or the rules and regulations
thereunder.
(f) Acquiring Trust has elected to treat Acquiring Fund as a regulated
investment company ("RIC") for federal income tax purposes under Part I of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Acquiring Fund is a "fund" as defined in Section 851(g)(2) of the Code, has
qualified as a RIC for each taxable year since its inception, and intends to
continue to qualify as a RIC as of the Closing Date. Consummation of the
transactions contemplated by the Plan will not cause Acquiring Fund to fail
to be qualified as a RIC as of the Closing Date.
(g) Acquiring Fund is not under jurisdiction of a Court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(h) Acquiring Fund does not have any unamortized or unpaid organizational
fees or expenses.
(i) Acquiring Fund does not have any known liabilities, costs or expenses
of a material amount, contingent or otherwise, other than those incurred
in the ordinary course of business as an investment company.
(j) There is no intercorporate indebtedness existing between Target Fund
and Acquiring Fund that was issued, acquired, or will be settled at a
discount.
(k) Acquiring Fund does not own, directly or indirectly, nor has it owned
during the past five (5) years, directly or indirectly, any shares of
Target Fund.
(l) Acquiring Trust has no plan or intention to issue additional shares
of Acquiring Fund following the Reorganization except for shares issued
in the ordinary course of Acquiring Fund's business as a series of an
open-end investment company; nor does Acquiring Trust have any plan or
intention to redeem or otherwise reacquire any shares of Acquiring 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.
(m) Acquiring Fund is in the same line of business as Target Fund before
the Reorganization and did not enter into such line of business as part of
the Reorganization. Acquiring Fund will actively continue Target Fund's
business in substantially the same manner that Target Fund conducted that
business immediately before the Reorganization and has no plan or intention
to change such business. On the Closing Date, Acquiring Fund expects that at
least 33 1/3% of Target Fund's portfolio assets will meet the investment
objectives, strategies, policies, risks and restrictions of Acquiring Fund.
Acquiring Fund has no plan or intention to change any of its investment
objectives, strategies, policies, risks and restrictions after the
Reorganization. Acquiring Fund has no plan or intention to sell or
otherwise dispose of any of the former assets of Target Fund, except
for dispositions made in the ordinary course of its business or
dispositions necessary to maintain its qualification as a RIC, although
in the ordinary course of its business, Acquiring Fund will continuously
review its investment portfolio (as Target Fund did before the Closing)
to determine whether to retain or dispose of particular securities,
including those included among the former assets of Target Fund.
(n) The registration statement on Form N-14 referred to in Section 7(g)
hereof (the "Registration Statement"), and any prospectus or statement of
additional information of Acquiring Fund contained or incorporated therein
by reference, and any supplement or amendment to the Registration Statement
or any such prospectus or statement of additional information, on the
effective and clearance dates of the Registration Statement, on the date
of the Special Meeting of Target Fund shareholders, and on the Closing
Date: (i) shall comply in all material respects with the provisions of
the 1933 Act, the Securities Exchange Act of 1934, as amended
(the "1934 Act"), the 1940 Act, the rules and regulations thereunder,
and all applicable state securities laws and the rules and regulations
thereunder; and (ii) shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which the statements were made, not misleading.
5. Representations and Warranties by Target Fund.
Target Fund represents and warrants to Acquiring Trust that:
(a) Target Fund was originally organized as a California corporation on
August 30, 1984, and was reorganized as a Delaware statutory trust
effective March 21, 2000. Target Fund is duly registered under the 1940
Act as an open-end, management investment company and all Target Fund
Shares sold were sold pursuant to an effective registration statement
filed under the 1933 Act, except for those shares sold pursuant to the
private offering exemption for the purposes of raising the required
initial capital or obtaining any required initial shareholder approvals.
(b) Target Fund is authorized to issue an unlimited number of shares of
beneficial interest, without par value, each outstanding share of which
is fully paid, non-assessable, and has full voting rights. Target Fund
has five classes of shares and an unlimited number of shares of beneficial
interest of Target Fund have been allocated and designated to each such
class. No shareholder of Target Fund has or will have any option, warrant,
or preemptive rights of subscription or purchase with respect to Target
Fund Shares.
(c) The financial statements appearing in Target Fund's Annual Report to
Shareholders for the fiscal year ended June 30, 2008, audited by
PricewaterhouseCoopers LLP, and unaudited Semi-Annual Report to Shareholders
for the period ended December 31, 2008, copies of which have been delivered
to Acquiring Trust, and any interim financial statements for Target Fund
that may be furnished to Acquiring Trust, fairly present the financial
position of Target Fund as of their respective dates and the results of
Target Fund's operations for the periods indicated in conformity with
generally accepted accounting principles applied on a consistent basis.
(d) Target Fund is not a party to or obligated under any provision of its
Agreement and Declaration of Trust or Bylaws, as amended, or any contract or
any other commitment or obligation, and is not subject to any order or
decree that would be violated by its execution of or performance under the
Plan. Target Fund has no material contracts or other commitments (other
than the Plan or agreements for the purchase of securities entered into in
the ordinary course of business and consistent with its obligations under
the Plan) which will not be terminated by Target Fund in accordance with
their terms at or prior to the Closing Date, or which will result in a
penalty or additional fee to be due or payable by Target Fund.
(e) Target Fund has elected to be treated as a RIC for federal income tax
purposes under Part I of Subchapter M of the Code. Target Fund is a "fund"
as defined in Section 851(g)(2) of the Code, has qualified as a RIC for each
taxable year since its inception, and will qualify as a RIC as of the
Closing Date. Consummation of the transactions contemplated by the Plan
will not cause Target Fund to fail to be qualified as a RIC as of the
Closing Date.
(f) Target Fund is not under jurisdiction of a Court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(g) Target Fund does not have any unamortized or unpaid organization fees
or expenses.
(h) Target Fund does not have any known liabilities, costs or expenses of
a material amount, contingent or otherwise, other than those reflected in
the financial statements referred to in Section 5(c) hereof and those
incurred in the ordinary course of business as an investment company and of
a nature and amount similar to, and consistent with, those shown in such
financial statements since the dates of those financial statements.
(i) Since December 31, 2008, there has not been any material adverse change
in Target Fund's financial condition, assets, liabilities, or business other
than changes occurring in the ordinary course of its business.
(j) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Target Fund of
the transactions contemplated by the Plan, except the necessary Target Fund
shareholder approval, or as may otherwise be required under the federal or
state securities laws or the rules and regulations thereunder.
(k) There is no intercorporate indebtedness existing between Target Fund and
Acquiring Fund that was issued, acquired, or will be settled at a discount.
(l) During the five-year period ending on the Closing Date, (i) Target Fund
has not acquired, and will not acquire, Target Fund Shares with consideration
other than Acquiring Fund Shares or Target Fund Shares, except for
redemptions in the ordinary course of Target Fund's business or to the
extent necessary to comply with its legal obligation under Section 22(e)
of the 1940 Act, and (ii) no distributions will have been made with respect
to Target Fund Shares (other than regular, normal dividend distributions
made pursuant to Target Fund's historic dividend paying practice), either
directly or through any transaction, agreement, or arrangement with any
other person, except for distributions described in Sections 852 and 4982
of the Code.
(m) As of the Closing Date, Target Fund will not have outstanding any
warrants, options, convertible securities, or any other type of rights
pursuant to which any person could acquire shares of Target Fund, except
for the right of investors to acquire its shares at the applicable stated
offering price in the normal course of its business as an open-end
management investment company operating under the 1940 Act.
(n) Throughout the five year period ending on the Closing Date, Target
Fund will have conducted its historic business within the meaning of
Section 1.368-1(d) of the Income Tax Regulations under the Code. Target
Fund did not enter into (or expand) a line of business as part of the
Reorganization. Target Fund will not alter its investment portfolio in
connection with the Reorganization.
6. Representations and Warranties by Target Fund and Acquiring Trust.
Target Fund and Acquiring Trust, on behalf of Acquiring Fund, each
represents and warrants to the other that:
(a) The statement of assets and liabilities to be furnished by it as
of 1:00 p.m., Pacific Time, on the Closing Date for the purpose of
determining the number of Acquiring Fund Shares to be issued pursuant
to Section 1 of the Plan, will accurately reflect Target Fund's Net
Assets and outstanding shares, as of such date, in conformity with
generally accepted accounting principles applied on a consistent basis.
(b) At the Closing, it will have good and marketable title to all of the
securities and other assets shown on the statement of assets and liabilities
referred to in (a) above, free and clear of all liens or encumbrances of any
nature whatsoever, except such imperfections of title or encumbrances as do
not materially detract from the value or use of the assets subject thereto,
or materially affect title thereto.
(c) Except as disclosed in its currently effective prospectus relating to
Target Fund or Acquiring Fund, as applicable, there is no material suit,
judicial action, or legal or administrative proceeding pending or threatened
against it. It is not 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 its business or its ability to consummate the transactions
herein contemplated.
(d) There are no known actual or proposed deficiency assessments with
respect to any taxes payable by it.
(e) The execution, delivery, and performance of the Plan have been duly
authorized by all necessary action of its Board of Trustees and the Plan,
subject with respect to Target Fund to the approval of Target Fund's
shareholders, 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 Target Fund
or Acquiring Fund, as applicable, to fail to conform to the requirements of
Subchapter M of the Code for federal income taxation qualification as a RIC
at the end its fiscal year.
7. Covenants of Target Fund and Acquiring Trust.
(a) Target Fund and Acquiring Trust, on behalf of Acquiring Fund, each
covenants to operate its respective business as presently conducted between
the date hereof and the Closing, it being understood that such ordinary
course of business will include the distribution of customary dividends and
distributions and any other distribution necessary or desirable to minimize
federal income or excise taxes.
(b) Target Fund undertakes that it will not acquire Acquiring Fund Shares
for the purpose of making distributions thereof to anyone other than Target
Fund's shareholders.
(c) Target Fund undertakes that, if the Plan is consummated, it will
liquidate and dissolve.
(d) Target Fund and Acquiring Trust, on behalf of Acquiring Fund, each
agree that, by the Closing, all of their federal and other tax returns
and reports required by law to be filed on or before such date shall have
been filed, and 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, Target Fund will provide Acquiring Fund with a copy of
the shareholder ledger accounts, certified by Target Fund's transfer agent
or its President to the best of its or his knowledge and belief, for all the
holders of record of Target Fund Shares as of 1:00 p.m., Pacific Time, on the
Closing Date who are to become shareholders of Acquiring Fund as a result
of the transfer of assets that is the subject of the Plan.
(f) As of the Closing, the Board of Trustees of Target Fund shall have
called, and Target Fund shall have held, a Special Meeting of Target
Fund's shareholders to consider and vote upon the Plan (the "Special
Meeting") and Target Fund shall have taken all other actions reasonably
necessary to obtain approval of the transactions contemplated herein.
Target Fund shall have mailed to each shareholder of record of Target
Fund entitled to vote at the Special Meeting at which action on the Plan
is to be considered, in sufficient time to comply with requirements as to
notice thereof, a combined Prospectus/Proxy Statement that complies in all
material respects with the applicable provisions of the 1933 Act, Section
14(a) of the 1934 Act and Section 20(a) of the 1940 Act, and the rules and
regulations thereunder (the "Prospectus/Proxy Statement").
(g) Acquiring Trust has filed the Registration Statement with the SEC and
used its best efforts to provide that the Registration Statement became
effective as promptly as practicable. At the time it became effective, the
Registration Statement: (i) complied in all material respects with the
applicable provisions of the 1933 Act and the rules and regulations
promulgated thereunder; and (ii) did not contain any untrue statement of
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. At the
time the Registration Statement became effective, at the time of the Special
Meeting, and at the Closing Date, the prospectus and statement of additional
information included in the Registration Statement did not and will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(h) Subject to the provisions of the Plan, Acquiring Trust and Target 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) Target Fund shall deliver to Acquiring Trust at the Closing Date
confirmation or other adequate evidence as to the tax costs and holding
periods of the assets and property of Target Fund transferred to Acquiring
Trust in accordance with the terms of the Plan.
8. Conditions Precedent to be Fulfilled by Target Fund and Acquiring Trust.
The consummation of the Plan hereunder shall be subject to the following
respective conditions:
(a) That: (i) all the representations and warranties of the other party
contained herein shall be true and correct as of the Closing with the same
effect as though made as of and at such date; (ii) the other party shall
have performed all obligations required by the Plan to be performed by it
prior to the Closing; and (iii) the other party shall have delivered to
such party a certificate signed by a Chief Executive Officer 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 the Plan and the Reorganization contemplated hereby shall have
been adopted and approved by the appropriate action of the shareholders
of Target Fund at a meeting or any adjournment thereof.
(e) That a distribution or distributions shall have been declared for Target
Fund prior to the Closing Date that, together with all previous
distributions, shall have the effect of distributing to its
shareholders: (i) all of its ordinary income and all of its capital
gain net income, if any, for the period from the close of its last
fiscal year to 1:00 p.m., Pacific Time, on the Closing Date; and (ii)
any undistributed ordinary income and capital gain net income from any
prior period to the extent not otherwise declared for distribution. Capital
gain net income has the meaning given such term by Section 1222(9) of the
Code.
(f) That all required consents of other parties and all other consents,
orders, and permits of federal, state and local authorities (including
those of the SEC and of state Blue Sky securities authorities, including
any necessary "no-action" positions or exemptive orders from such federal
and state authorities) to permit consummation of the transaction
contemplated hereby shall have been obtained, except where failure to
obtain any such consent, order, or permit would not involve a risk of
material adverse effect on the assets and properties of Target Fund or
Acquiring Fund.
(g) That there shall be delivered to Target Fund and Acquiring Trust, on
behalf of Acquiring Fund, an opinion in form and substance satisfactory to
them from the law firm of Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP, counsel to
Acquiring Trust and Target Fund, 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 Target Fund and Acquiring Trust with regard to matters of fact:
(1) The acquisition by Acquiring Fund of substantially all the assets of
Target Fund, as provided for herein, in exchange for Acquiring Fund Shares,
followed by the distribution by Target Fund to its shareholders of Acquiring
Fund Shares in complete liquidation of Target Fund, will qualify as a
reorganization within the meaning of Section 368(a)(1) of the Code, and
Target Fund and Acquiring Fund will each be a "party to the reorganization"
within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Target Fund upon the transfer of
substantially all of its assets to Acquiring Fund in exchange solely for
voting shares of Acquiring Fund (Sections 361(a) and 357(a) of the Code);
(3) Acquiring Fund will recognize no gain or loss upon the receipt of
substantially all of the assets of Target Fund in exchange solely for
voting shares of Acquiring Fund (Section 1032(a) of the Code);
(4) No gain or loss will be recognized by Target Fund upon the distribution
of Acquiring Fund Shares to its shareholders in liquidation of Target Fund,
in pursuance of the Plan (Section 361(c)(1) of the Code);
(5) The basis of the assets of Target Fund received by Acquiring Fund will
be the same as the basis of such assets to Target Fund immediately prior to
the Reorganization (Section 362(b) of the Code);
(6) The holding period of the assets of Target Fund received by Acquiring
Fund will include the period during which such assets were held by Target
Fund (Section 1223(2) of the Code);
(7) No gain or loss will be recognized by the shareholders of Target Fund
upon the exchange of their shares in Target Fund for voting shares of
Acquiring Fund including fractional shares to which they may be entitled
(Section 354(a) of the Code);
(8) The basis of Acquiring Fund Shares received by the shareholders of
Target Fund shall be the same as the basis of Target Fund Shares exchanged
therefor (Section 358(a)(1) of the Code);
(9) The holding period of Acquiring Fund Shares received by shareholders
of Target Fund (including fractional shares to which they may be entitled)
will include the holding period of Target Fund Shares surrendered in
exchange therefor, provided that Target Fund Shares were held as a capital
asset on the effective date of the exchange (Section 1223(1) of the Code);
and
(10) Acquiring Fund will succeed to and take into account as of the date of
the transfer (as defined in Section 1.381(b)-1(b) of the regulations issued
by the United States Treasury ("Treasury Regulations")) the items of Target
Fund described in Section 381(c) of the Code, subject to the conditions and
limitations specified in Sections 381, 382, 383 and 384 of the Code and the
Treasury Regulations.
(h) That there shall be delivered to Acquiring Trust, on behalf of Acquiring
Fund, an opinion in form and substance satisfactory to it from Xxxxxxxx Ronon
Xxxxxxx & Xxxxx, LLP, counsel to Target Fund to the effect that, subject in
all respects to the effects of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and other laws now or hereafter affecting
generally the enforcement of creditors' rights:
(1) Target Fund is a validly existing statutory trust in good standing under
the laws of the State of Delaware;
(2) Target Fund is an open-end investment company of the management type
registered as such under the 1940 Act;
(3) The execution and delivery of the Plan and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
statutory trust action on the part of Target Fund; and
(4) The Plan is the legal, valid and binding obligation of Target Fund and
is enforceable against Target 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 Target Fund with regard to matters of fact,
and certain certifications and written statements of governmental officials
with respect to the good standing of Target Fund.
(i) That there shall be delivered to Target Fund an opinion in form and
substance satisfactory to it from the law firm of Xxxxxxxx Ronon Xxxxxxx &
Xxxxx, LLP, counsel to Acquiring Trust, on behalf of Acquiring Fund, to the
effect that, subject in all respects to the effects of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other laws now or
hereafter affecting generally the enforcement of creditors' rights:
(1) Acquiring Fund is a series of Acquiring Trust and Acquiring Trust is a
validly existing statutory trust in good standing under the laws of the
State of Delaware;
(2) Acquiring Trust is authorized to issue an unlimited number of shares of
beneficial interest, without par value, of Acquiring Fund;
(3) Acquiring Trust is an open-end investment company of the management type
registered as such under the 1940 Act;
(4) Acquiring Fund Shares to be issued pursuant to the terms of the Plan
have been duly authorized and, when issued and delivered as provided in the
Plan and the Registration Statement, will have been validly issued and fully
paid and will be non-assessable by Acquiring Trust, on behalf of Acquiring
Fund;
(5) The execution and delivery of the Plan and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
statutory trust action on the part of Acquiring Trust, on behalf of Acquiring
Fund;
(6) The Plan is the legal, valid and binding obligation of Acquiring Trust,
on behalf of Acquiring Fund, and is enforceable against Acquiring Trust, on
behalf of Acquiring Fund, in accordance with its terms; and
(7) The registration statement of Acquiring Trust, of which the prospectus
dated February 1, 2009, of Acquiring Fund is a part (the "Prospectus"), is,
at the time of the signing of the Plan, effective under the 1933 Act, and,
to the best knowledge of such counsel, no stop order suspending the
effectiveness of such registration statement has been issued, and no
proceedings for such purpose have been instituted or are pending before or
threatened by the SEC under the 1933 Act.
In giving the opinions set forth above, counsel may state that it is relying
on certificates of the officers of Acquiring Trust with regard to matters of
fact, and certain certifications and written statements of governmental
officials with respect to the good standing of Acquiring Trust.
(j) That Acquiring Trust's prospectus contained in the Registration Statement
with respect to Acquiring Fund Shares delivered to Target Fund's shareholders
in accordance with the Plan shall be effective, and no stop order suspending
the effectiveness of the Registration Statement or any amendment or supplement
thereto shall have been issued prior to the Closing Date or shall be in effect
at Closing, and no proceedings for the issuance of such an order shall be
pending or threatened on that date.
(k) That Acquiring Fund Shares to be delivered hereunder shall be eligible
for sale with each state commission or agency with which such eligibility
is required in order to permit Acquiring Fund Shares lawfully to be
delivered to each holder of Target Fund Shares.
(l) That, at the Closing, there shall be transferred to Acquiring Trust, on
behalf of Acquiring Fund, aggregate Net Assets of Target Fund comprising at
least 90% in fair market value of the total net assets and 70% of the fair
market value of the total gross assets recorded on the books of Target Fund
on the Closing Date.
(m) That there be delivered to Acquiring Trust, on behalf of Acquiring Fund,
information concerning the tax basis of Target Fund in all securities
transferred to Acquiring Fund, together with shareholder information
including: the names, addresses, and taxpayer identification numbers of
the shareholders of Target Fund as of the Closing Date; the number of shares
held by each shareholder; the dividend reinvestment elections applicable to
each shareholder; and the backup withholding and nonresident alien
withholding certifications, notices or records on file with Target Fund
with respect to each shareholder.
9. Expenses.
The expenses of entering into and carrying out the provisions of the Plan
shall be borne as follows: each of Target Fund and Acquiring Trust, on behalf
of Acquiring Fund, will pay 25% of the costs of the Reorganization, and
Franklin Advisers, Inc., the investment manager for both Acquiring Fund
and Target 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
(whether before or after approval thereof by the shareholders of Target
Fund) to the Closing, or the Closing may be postponed, as follows:
(1) by mutual consent of Target Fund and Acquiring Trust, on behalf of
Acquiring Fund;
(2) by Acquiring Trust, on behalf of Acquiring Fund, if any condition of
its obligations set forth in Section 8 has not been fulfilled or waived and
it reasonably appears that such condition or obligation will not or cannot
be met; or
(3) by Target 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.
(b) If the transactions contemplated by the Plan have not been consummated
by December 31, 2009, the Plan shall automatically terminate on that date,
unless a later date is agreed to by both Acquiring Trust and Target Fund.
(c) In the event of termination of the Plan prior to its consummation,
pursuant to the provisions hereof, the Plan shall become void and have
no further effect, and neither Target Fund, Acquiring Trust, nor Acquiring
Fund, nor their trustees, officers, or agents or the shareholders of Target
Fund or Acquiring Fund shall have any liability in respect of the Plan, but
all expenses incidental to the preparation and carrying out of the Plan shall
be paid as provided in Section 9 hereof.
(d) At any time prior to the Closing, any of the terms or conditions of the
Plan may be waived by the party who is entitled to the benefit thereof if,
in the judgment of such party, such action or waiver will not have a material
adverse effect on the benefits intended under the Plan to its shareholders,
on behalf of whom such action is taken.
(e) The respective representations and warranties contained in Sections 4 to
6 hereof shall expire with and be terminated by the Plan on the Closing Date,
and neither Target Fund nor Acquiring Trust, nor any of their officers,
trustees, agents or shareholders shall have any liability with respect to
such representations or warranties after the Closing Date.
(f) If any order 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 the
Board of Trustees of Target Fund or the Board of Trustees of Acquiring Trust,
on behalf of Acquiring Fund, to be acceptable, such term or condition shall
be binding as if it were a part of the Plan without a vote or approval of the
shareholders of Target Fund; provided that, if such term or condition would
result in a change in the method of computing the number of Acquiring Fund
Shares to be issued to Target Fund, and such term or condition had not been
included in the Prospectus/Proxy Statement or other proxy solicitation
material furnished to the shareholders of Target Fund prior to the Special
Meeting, the Plan shall not be consummated and shall terminate unless Target
Fund promptly calls a special meeting of the shareholders of Target Fund at
which such condition shall be submitted for approval.
11. Liability of Acquiring Trust and Target Fund.
(a) Each party acknowledges and agrees that all obligations of Acquiring
Trust under the Plan are binding only with respect to Acquiring Fund; that
any liability of Acquiring Trust under the Plan with respect to Acquiring
Trust, or in connection with the transactions contemplated herein with respect
to Acquiring Fund, shall be discharged only out of the assets of Acquiring
Fund; that no other series of Acquiring Trust shall be liable with respect
to the Plan or in connection with the transactions contemplated herein; and
that Target Fund shall not seek satisfaction of any such obligation or
liability from the shareholders of Acquiring Trust, the trustees, officers,
or the employees or agents of Acquiring Trust.
(b) Each party acknowledges and agrees that all obligations of Target Fund
under the Plan are binding only with respect to Target Fund; that any
liability of Target Fund under the Plan in connection with the transactions
contemplated herein, shall be discharged only out of the assets of Target
Fund; and that neither Acquiring Trust nor Acquiring Fund shall seek
satisfaction of any such obligation or liability from the shareholders of
Target Fund, or the trustees, officers, or the employees or agents of
Target Fund.
12. Entire Agreement and Amendments.
The Plan embodies the entire agreement between the parties and there are
no agreements, understandings, restrictions, or warranties relating to the
transactions contemplated by the Plan other than those set forth herein or
herein provided for. The Plan may be amended only by mutual consent of the
parties in writing. Neither the Plan nor any interest herein may be assigned
without the prior written consent of the other party.
13. Counterparts.
The Plan may be executed in any number of counterparts, each of which shall
be deemed to be an original, but all such counterparts together shall
constitute but one instrument.
14. Notices.
Any notice, report, or demand required or permitted by any provision of
the Plan shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage prepaid, addressed to Franklin
Growth Fund, at Franklin Custodian Funds, Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx,
XX 00000-1906, Attention: Secretary, or Franklin Capital Growth Fund, at
Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, XX 00000-1906, Attention: Secretary, as
the case may be.
15. Governing Law.
The Plan shall be governed by and carried out in accordance with the laws
of the State of Delaware.
IN WITNESS WHEREOF, Target Fund and Acquiring Trust, on behalf of
Acquiring Fund, have each caused the Plan to be executed on its behalf
by its duly authorized officers, all as of the date and year first-above
written.
XXXXXXXX CUSTODIAN FUNDS, on behalf of FRANKLIN GROWTH FUND
By: /s/Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
Secretary
FRANKLIN CAPITAL GROWTH FUND
By: /s/Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
Secretary
