19
NAME OF REGISTRANT
Franklin Investors Securities Trust
File No. 811-04986
EXHIBIT ITEM No. 77Q (g): Exhibit to accompany Exhibit No. 77M.
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement") is made as of this 19th day of January, 2005, by
and between Franklin Floating Rate Trust ("Floating Rate
Trust"), a Delaware statutory trust with its principal place of
business at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000,
and Franklin Investors Securities Trust ("FIST"), a
Massachusetts business trust with its principal place of
business at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000,
on behalf of its series, Franklin Floating Rate Daily Access
Fund ("Daily Access Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the
"Reorganization") will consist of (i) the acquisition by Daily
Access Fund of substantially all of the property, assets and
goodwill of Floating Rate Trust in exchange solely for full and
fractional shares of beneficial interest, par value $0.01 per
share, of Daily Access Fund - Class A ("Daily Access Fund Class
A Shares"); (ii) the distribution of Daily Access Fund Class A
Shares to the holders of shares of beneficial interest, par
value $0.01 per share, of Floating Rate Trust ("Floating Rate
Trust Shares"), according to their respective interests in
Floating Rate Trust in complete liquidation of Floating Rate
Trust; and (iii) the dissolution of Floating Rate Trust as soon
as is practicable after the closing (as defined in Section 3,
hereinafter called the "Closing"), all upon and subject to the
terms and conditions of this Agreement 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
Floating Rate Trust.
(a) Subject to the terms and conditions of this Agreement,
and in reliance on the representations and warranties of FIST,
on behalf of Daily Access Fund, herein contained, and in
consideration of the delivery by FIST, on behalf of Daily Access
Fund, of the number of Daily Access Fund Class A Shares
hereinafter provided, Floating Rate Trust agrees that it will
convey, transfer and deliver to FIST, on behalf of Daily Access
Fund, at the Closing all of Floating Rate Trust'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 Agreement (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 Floating Rate Trust'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 those liabilities that would otherwise be discharged at a
later date in the ordinary course of business; and (iii) pay
such contingent liabilities as the Board of Trustees of Floating
Rate Trust shall reasonably deem to exist against Floating Rate
Trust, if any, at the Closing Date, for which contingent and
other appropriate liability reserves shall be established on
Floating Rate Trust's books (hereinafter "Net Assets"). Floating
Rate Trust 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. Neither
FIST nor Daily Access Fund will assume any liabilities of
Floating Rate Trust, whether absolute or contingent.
(b) Subject to the terms and conditions of this Agreement,
and in reliance on the representations and warranties of
Floating Rate Trust herein contained, and in consideration of
such sale, conveyance, transfer, and delivery, FIST, on behalf
of Daily Access Fund, agrees at the Closing to deliver to
Floating Rate Trust the number of Daily Access Fund Class A
Shares, determined by dividing the net asset value per share of
the Floating Rate Trust Shares by the net asset value per share
of Daily Access Fund Class A Shares, and multiplying the result
thereof by the number of outstanding Floating Rate Trust Shares,
all 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, Floating Rate Trust
shall distribute pro rata to its shareholders of record as of
the close of business on the Closing Date, Daily Access Fund
Class A Shares received by Floating Rate Trust pursuant to this
Section 1. Such distribution shall be accomplished by the
establishment of accounts on the share records of Daily Access
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 Daily Access Fund Class A 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 Floating Rate Fund shall be entitled to surrender
the same to the transfer agent for Daily Access Fund in exchange
for the number of Daily Access Fund Class A Shares into which
the Floating Rate Trust Shares theretofore represented by the
certificate or certificates so surrendered shall have been
converted. Certificates for Daily Access 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
Floating Rate Trust shall be deemed for all Daily Access Fund's
purposes to evidence ownership of the number of Daily Access
Fund Class A Shares into which the Floating Rate Trust Shares
(which prior to the Closing were represented thereby) have been
converted.
2. Valuation.
(a) The value of Floating Rate Trust's Net Assets to be
acquired by FIST, on behalf of Daily Access Fund, hereunder
shall in each case be computed as of 1:00 p.m., Pacific time, on
the Closing Date using the valuation procedures set forth in
Floating Rate Trust's currently effective prospectus.
(b) The net asset value of Floating Rate Trust Shares
shall be determined as of 1:00 p.m., Pacific time, on the
Closing Date using the valuation procedures set forth in
Floating Rate Trust's currently effective prospectus.
(c) The net asset value of Daily Access Fund Class A
Shares shall be determined as of 1:00 p.m., Pacific time, on the
Closing Date using the valuation procedures set forth in Daily
Access Fund's currently effective prospectus.
3. Closing and Closing Date.
The Closing Date shall be June 2, 2005, or such later date as
the parties may mutually agree. The Closing shall take place at
the principal office of FIST at 2:00 p.m., Pacific time, on the
Closing Date. Floating Rate Trust shall have provided for
delivery as of the Closing those Net Assets of Floating Rate
Trust to be transferred to the account of Daily Access Fund's
custodian, Bank of New York, Mutual Funds Division, 000 Xxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. Also, Floating Rate Trust
shall deliver at the Closing a list of names and addresses of
the shareholders of record of its Floating Rate Trust Shares and
the number of full and fractional Floating Rate Trust Shares
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. FIST,
on behalf of Daily Access Fund, shall provide evidence
satisfactory to Floating Rate Trust that the Daily Access Fund
Class A Shares to be delivered to the account of Floating Rate
Trust hereunder has been registered in an account on the books
of Daily Access Fund in such manner as the officers of Floating
Rate Trust may request.
4. Representations and Warranties by FIST, on behalf of Daily
Access Fund.
FIST, on behalf of Daily Access Fund, represents and
warrants to Floating Rate Trust that:
(a) Daily Access Fund is a series of FIST, a business
trust created under the laws of the Commonwealth of
Massachusetts pursuant to an Agreement and Declaration of Trust
dated December 16, 1986, and validly exists under the laws of
that Commonwealth. FIST is duly registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-
end, management investment company, and all of the Daily Access
Fund Class A Shares sold were sold pursuant to an effective
registration statement filed under the Securities Act of 1933,
as amended (the "1933 Act"), except for those shares sold
pursuant to the private offering exemption for the purpose of
raising initial capital as required by the 1940 Act.
(b) FIST is authorized to issue an unlimited number of
shares of beneficial interest, par value $0.01 per share, each
outstanding share of which is fully paid, non-assessable, freely
transferable and has full voting rights, and currently issues
shares of eight series, including Daily Access Fund. Daily
Access Fund is further divided into four classes of shares and
an unlimited number of shares of beneficial interest, par value
$0.01 per share, has been allocated and designated to each of
these classes of shares.
(c) The financial statements appearing in FIST's Annual
Report to Shareholders for the fiscal year ended October 31,
2004, audited by PricewaterhouseCoopers LLP, including the
financial statements for Daily Access Fund for the fiscal year
then ended, copies of which have been delivered to Floating Rate
Trust, fairly present the financial position of Daily Access
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 Daily Access Fund accurately
summarize the accounting data represented and contain no
material omissions with respect to the business and operations
of Daily Access Fund.
(e) FIST has the necessary power and authority to conduct
Daily Access Fund's business as such business is now being
conducted.
(f) FIST, on behalf of Daily Access Fund, is not a party
to or obligated under any provision of its Agreement and
Declaration of Trust, as amended to date ("Declaration of
Trust"), or By-laws, as amended to date ("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 Agreement.
(g) Daily Access 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"), Daily Access Fund has
qualified as a RIC for each taxable year since its inception and
will qualify as a RIC as of the Closing Date, and consummation
of the transactions contemplated by this Agreement will not
cause it to fail to be qualified as a RIC as of the Closing
Date.
(h) Daily Access 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) Daily Access Fund does not have any unamortized or
unpaid organizational fees or expenses.
5. Representations and Warranties by Floating Rate Trust.
Floating Rate Trust represents and warrants to FIST, on
behalf of Daily Access Fund, that:
(a) Floating Rate Trust is a statutory trust created under
the laws of the State of Delaware pursuant to an Agreement and
Declaration of Trust dated May 13, 1997, and validly exists
under the laws of that State. Floating Rate Trust is duly
registered under the 1940 Act as a closed-end, management
investment company and all of the Floating Rate Trust 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) Floating Rate Trust is authorized to issue an
unlimited number of shares of beneficial interest, par value
$0.01 per share, without class designation, each outstanding
share of which is fully paid, nonassessable, and has full voting
rights.
(c) The financial statements appearing in Floating Rate
Trust's Annual Report to Shareholders for the fiscal year ended
July 31, 2004, audited by PricewaterhouseCoopers, LLP, copies of
which have been delivered to FIST, on behalf of Daily Access
Fund, fairly present the financial position of Floating Rate
Trust 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 Floating Rate Trust
accurately summarize the accounting data represented and contain
no material omissions with respect to the business and
operations of Floating Rate Trust.
(e) Floating Rate Trust has the necessary power and
authority to conduct its business as such business is now being
conducted.
(f) Floating Rate Trust is not a party to or obligated
under any provision of its Agreement and Declaration of Trust,
as amended to date, or By-laws, as amended to date, 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 Agreement.
(g) Floating Rate Trust has elected to be treated as a RIC
for federal income tax purposes under Part I of Subchapter M of
the Code, Floating Rate Trust is a "fund" as defined in Section
851(g)(2) of the Code, Floating Rate Trust has qualified as a
RIC for each taxable year since its inception and will qualify
as a RIC as of the Closing Date, and consummation of the
transactions contemplated by this Agreement will not cause it to
fail to be qualified as a RIC as of the Closing Date.
(h) Floating Rate Trust 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) Floating Rate Trust does not have any unamortized or
unpaid organization fees or expenses.
6. Representations and Warranties by Floating Rate Trust and
FIST.
Floating Rate Trust and FIST, on behalf of Daily Access
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 Daily Access
Fund Class A Shares to be issued pursuant to Section 1 of this
Agreement, will accurately reflect each such party's Net Assets
and outstanding shares of beneficial interest, as of such date,
in conformity with generally accepted accounting principles
applied on a consistent basis.
(b) At the Closing, it will have good and marketable title
to all of the securities and other assets shown on the statement
of assets and liabilities referred to in (a) above, free and
clear of all liens or encumbrances of any nature whatsoever,
except such imperfections of title or encumbrances as do not
materially detract from the value or use of the assets subject
thereto, or materially affect title thereto.
(c) Except as disclosed in its currently effective
prospectus, there is no material suit, judicial action, or legal
or administrative proceeding pending or threatened against it.
Neither FIST, on behalf of Daily Access Fund, nor Floating Rate
Trust is a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which
materially and adversely affects Daily Access Fund or Floating
Rate Trust's business or their ability to consummate the
transactions herein contemplated.
(d) There are no known actual or proposed deficiency
assessments with respect to any taxes payable by it.
(e) The execution, delivery, and performance of this
Agreement have been duly authorized by all necessary action of
its Board of Trustees, and this Agreement, subject to the
approval of Floating Rate Trust's shareholders, constitutes a
valid and binding obligation enforceable in accordance with its
terms.
(f) It anticipates that consummation of this Agreement
will not cause Floating Rate Trust or FIST, with respect to
Daily Access Fund, to fail to conform to the requirements of
Subchapter M of the Code for federal income taxation
qualification as a RIC at the end of its fiscal year.
(g) It has the necessary power and authority to conduct
its business, as such business is now being conducted.
7. Covenants of Floating Rate Trust and FIST, on behalf of
Daily Access Fund.
(a) FIST, on behalf of Daily Access Fund, and Floating
Rate Trust each covenant to operate their respective businesses
as presently conducted between the dates hereof and the Closing.
(b) Floating Rate Trust undertakes that it will not
acquire Daily Access Fund Class A Shares for the purpose of
making distributions thereof to anyone other than Floating Rate
Trust's shareholders.
(c) Floating Rate Trust undertakes that, if this Agreement
is consummated, it will liquidate and dissolve.
(d) Floating Rate Trust and FIST, on behalf of Daily
Access Fund, each agree that, by the Closing, all of their
federal and other tax returns and reports required by law to be
filed on or before such date shall have been filed, and all
federal and other taxes shown as due on said returns shall have
either been paid or adequate liability reserves shall have been
provided for the payment of such taxes.
(e) At the Closing, Floating Rate Trust will provide Daily
Access Fund a copy of the shareholder ledger accounts, certified
by Floating Rate Trust's transfer agent or its President to the
best of its or his knowledge and belief, for all the
shareholders of record of Floating Rate Trust Shares as of 1:00
p.m., Pacific time, on the Closing Date who are to become
shareholders of Daily Access Fund as a result of the transfer of
assets that is the subject of this Agreement.
(f) The Board of Trustees of Floating Rate Trust shall
call and Floating Rate Trust shall hold, a meeting of Floating
Rate Trust's shareholders to consider and vote upon this
Agreement (the "Shareholders' Meeting") and Floating Rate Trust
shall take all other actions reasonably necessary to obtain
approval of the transactions contemplated herein. Floating Rate
Trust agrees to mail to each shareholder of record entitled to
vote at the Shareholders' Meeting at which action on this
Agreement 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 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) FIST, on behalf of Daily Access Fund, will file with
the U.S. Securities and Exchange Commission a registration
statement on Form N-14 under the 1933 Act relating to Daily
Access Fund Class A Shares issuable hereunder ("Registration
Statement"), and will use its best efforts to provide that the
Registration Statement becomes effective as promptly as is
practicable. At the time it becomes effective, the Registration
Statement will (i) comply in all material respects with the
applicable provisions of the 1933 Act, and the rules and
regulations promulgated thereunder; and (ii) not contain any
untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading. At the time the Registration
Statement becomes effective, at the time of the Shareholders'
Meeting, and on 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 Floating Rate Trust
and FIST, on behalf of Daily Access Fund.
The consummation of this Agreement and the Reorganization
contemplated 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 Agreement 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 or
any Vice President and by the Secretary or any Assistant
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 this Agreement adopted
and approved by the appropriate action of its Board of Trustees,
certified by its Secretary or equivalent officer of such Fund.
(c) That the U.S. Securities and Exchange Commission shall
not have issued an unfavorable advisory report under Section
25(b) of the 1940 Act or instituted or threatened to institute
any proceeding seeking to enjoin consummation of the
Reorganization 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 Agreement and the Reorganization
contemplated hereby shall have been adopted and approved by the
appropriate action of the shareholders of Floating Rate Trust at
a meeting of shareholders or any adjournment thereof.
(e) That a distribution or distributions shall have been
declared for Floating Rate Trust 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(9) of
the Code.
(f) That there shall be delivered to Floating Rate Trust,
and FIST, on behalf of Daily Access Fund, an opinion from
Xxxxxxxx, Xxxxx, Xxxxxxx & Xxxxx, LLP, counsel to Floating Rate
Trust and FIST, to the effect that, provided the Reorganization
contemplated hereby is carried out in accordance with this
Agreement, the laws of the State of Delaware and the laws of the
Commonwealth of Massachusetts and based upon certificates of the
officers of Floating Rate Trust and FIST, on behalf of Daily
Access Fund, with regard to matters of fact:
(1) The acquisition by Daily Access Fund of
substantially all the assets of Floating Rate Trust as
provided for herein in exchange for Daily Access Fund Class
A Shares followed by the distribution by Floating Rate
Trust to its shareholders of Daily Access Fund Class A
Shares in complete liquidation of Floating Rate Trust will
qualify as a reorganization within the meaning of Section
368(a)(1) of the Code, and Floating Rate Trust and Daily
Access 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 Floating
Rate Trust upon the transfer of substantially all of its
assets to Daily Access Fund in exchange solely for voting
shares of Daily Access Fund (Sections 361(a) and 357(a) of
the Code);
(3) No gain or loss will be recognized by Daily
Access Fund upon the receipt by it of substantially all of
the assets of Floating Rate Trust in exchange solely for
voting shares of Daily Access Fund (Section 1032(a) of the
Code);
(4) No gain or loss will be recognized by Floating
Rate Trust upon the distribution of Daily Access Fund Class
A Shares to its shareholders in liquidation of Floating
Rate Trust (in pursuance of the Reorganization) (Section
361(c)(1) of the Code);
(5) The basis of the assets of Floating Rate Trust
received by Daily Access Fund will be the same as the basis
of such assets to Floating Rate Trust immediately prior to
the exchange (Section 362(b) of the Code);
(6) The holding period of the assets of Floating Rate
Trust received by Daily Access Fund will include the period
during which such assets were held by Floating Rate Trust
(Section 1223(2) of the Code);
(7) No gain or loss will be recognized by the
shareholders of Floating Rate Trust upon the exchange of
their shares in Floating Rate Trust for voting shares of
Daily Access Fund, including fractional shares to which
they may be entitled (Section 354(a) of the Code);
(8) The basis of Daily Access Fund Class A Shares
received by the shareholders of Floating Rate Trust shall
be the same as the basis of the Floating Rate Trust Shares
exchanged therefor (Section 358(a)(1) of the Code);
(9) The holding period of Daily Access Fund Class A
Shares received by shareholders of Floating Rate Trust
(including fractional shares to which they may be entitled)
will include the holding period of the Floating Rate Trust
Shares surrendered in exchange therefor, provided that the
Floating Rate Trust Shares were held as a capital asset on
the effective date of the exchange (Section 1223(1) of the
Code); and
(10) Daily Access 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 Floating Rate Trust 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 FIST, on behalf of
Daily Access Fund, an opinion in form and substance satisfactory
to it from Stradley, Xxxxx, Xxxxxxx & Xxxxx, LLP, counsel to
Floating Rate Trust, 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) Floating Rate Trust is a statutory trust
organized under the laws of the State of Delaware, and is a
validly existing statutory trust and in good standing under
the laws of that State;
(2) Floating Rate Trust is authorized to issue an
unlimited number of shares of beneficial interest, par
value $0.01 per share;
(3) Floating Rate Trust is a closed-end investment
company of the management type registered as such under the
1940 Act;
(4) Except as disclosed in Floating Rate Trust's
currently effective prospectus, such counsel does not know
of any material suit, action, or legal or administrative
proceeding pending or threatened against Floating Rate
Trust, the unfavorable outcome of which would materially
and adversely affect Floating Rate Trust;
(5) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby
have been duly authorized by all necessary trust action on
the part of Floating Rate Trust; and
(6) Neither the execution, delivery, nor performance
of this Agreement by Floating Rate Trust, violates any
provision of its Agreement and Declaration of Trust or By-
laws, as amended to date, or the provisions of any
agreement or other instrument known to such counsel to
which Floating Rate Trust is a party or by which Floating
Rate Trust is otherwise bound; and this Agreement is the
legal, valid and binding obligation of Floating Rate Trust
and is enforceable against Floating Rate Trust 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
Floating Rate Trust with regard to matters of fact, and certain
certifications and written statements of governmental officials
with respect to the good standing of Floating Rate Trust.
(h) That there shall be delivered to Floating Rate Trust
an opinion in form and substance satisfactory to it from
Xxxxxxxx, Xxxxx, Xxxxxxx & Xxxxx, LLP, counsel to FIST, 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) FIST is a business trust organized under the laws
of the Commonwealth of Massachusetts, and is a validly
existing business trust and in good standing under the laws
of that Commonwealth;
(2) FIST is authorized to issue an unlimited number
of shares of beneficial interest, par value $0.01 per
share. Four (4) classes of shares of Daily Access Fund have
been designated as Daily Access Fund Class A Shares, Daily
Access Fund Class B Shares, Daily Access Fund Class C
Shares, and Daily Access Fund Advisor Class Shares, and an
unlimited number of shares of beneficial interest of Daily
Access Fund has been allocated to each class of shares;
(3) FIST is an open-end investment company of the
management type registered as such under the 1940 Act;
(4) Except as disclosed in Daily Access Fund's
currently effective prospectus, such counsel does not know
of any material suit, action, or legal or administrative
proceeding pending or threatened against Daily Access Fund,
the unfavorable outcome of which would materially and
adversely affect Daily Access Fund;
(5) Daily Access Fund Class A Shares to be issued
pursuant to the terms of this Agreement have been duly
authorized and, when issued and delivered as provided in
this Agreement and the Registration Statement, will have
been validly issued and fully paid and will be non-
assessable by FIST, on behalf of Daily Access Fund;
(6) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby
have been duly authorized by all necessary trust action on
the part of FIST, on behalf of Daily Access Fund;
(7) Neither the execution, delivery, nor performance
of this Agreement by FIST, on behalf of Daily Access Fund,
violates any provision of its Declaration of Trust or By-
laws, or the provisions of any agreement or other
instrument known to such counsel to which FIST, on behalf
of Daily Access Fund, is a party or by which FIST, on
behalf of Daily Access Fund, is otherwise bound; and this
Agreement is the legal, valid and binding obligation of
FIST, on behalf of Daily Access Fund, and is enforceable
against FIST, on behalf of Daily Access Fund, in accordance
with its terms; and
(8) The registration statement of FIST, with respect
to Daily Access Fund, of which the prospectus dated March
1, 2005, as supplemented to date (the "Prospectus"), is
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
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 FIST
with regard to matters of fact, and certain certifications and
written statements of governmental officials with respect to the
good standing of FIST.
(i) That Floating Rate Trust shall have received a
certificate from the President or any Vice President and
Secretary or any Assistant Secretary of FIST 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
Agreement, 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 FIST's Registration Statement with respect to
Daily Access Fund Class A Shares to be delivered to Floating
Rate Trust's shareholders in accordance with this Agreement
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 Daily Access Fund Class A 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 Daily Access Fund Class A Shares lawfully to be delivered
to each holder of Floating Rate Trust Shares.
(1) That, at the Closing, there shall be transferred to
FIST, on behalf of Daily Access Fund, aggregate Net Assets of
Floating Rate Trust 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 Floating Rate Trust
on the Closing Date.
(m) That there be delivered to FIST, on behalf of Daily
Access Fund, information concerning the tax basis of Floating
Rate Trust in all securities transferred to FIST, on behalf of
Daily Access Fund, together with shareholder information
including the names, addresses, and taxpayer identification
numbers of the shareholders of Floating Rate Trust 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 Floating Rate
Trust respect to each shareholder.
9. Brokerage Fees and Expenses.
(a) FIST, on behalf of Daily Access Fund, and Floating
Rate Trust 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 Agreement shall be borne one-quarter by Daily
Access Fund, one-quarter by Floating Rate Trust, and one-half by
Xxxxxxxx Advisers, Inc.
10. Termination; Postponement; Waiver; Order.
(a) Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated and the
Reorganization abandoned at any time (whether before or after
approval thereof by the shareholders of Floating Rate Trust)
prior to the Closing, or the Closing may be postponed as
follows:
(1) by mutual consent of FIST, on behalf of Daily
Access Fund, and of Floating Rate Trust;
(2) by FIST, on behalf of Daily Access Fund, if any
conditions of its obligations set forth in Section 8 have
not been fulfilled or waived; or
(3) by Floating Rate Trust if any conditions of its
obligations set forth in Section 8 have not been fulfilled
or waived.
An election by FIST or Floating Rate Trust to terminate
this Agreement and to abandon the Reorganization shall be
exercised respectively, by the Board of Trustees of FIST or the
Board of Trustees of Floating Rate Trust.
(b) If the transactions contemplated by this Agreement
have not been consummated by December 31, 2005, this Agreement
shall automatically terminate on that date, unless a later date
is agreed to by both FIST and Floating Rate Trust.
(c) In the event of termination of this Agreement pursuant
to the provisions hereof, the same shall become void and have no
further effect, and neither Floating Rate Trust nor FIST nor
their trustees, officers, or agents or the shareholders of
Floating Rate Trust or Daily Access Fund shall have any
liability in respect of this Agreement, but all expenses
incidental to the preparation and carrying out of this Agreement
shall be paid as provided in Section 9(b) hereof.
(d) At any tine prior to the Closing, any of the terms or
conditions of this Agreement 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, such action
or waiver will not have a material adverse effect on the
benefits intended under this Agreement 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 Reorganization on the Closing Date, and
neither Floating Rate Trust nor FIST, nor any of their officers,
trustees, agents or shareholders shall have any liability with
respect to such representations or warranties after the Closing
Date. This provision shall not protect any officer, trustee,
agent or shareholder of Floating Rate Trust or FIST 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 Agreement 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 FIST, on behalf of Daily Access Fund, and the Board
of Trustees of Floating Rate Trust to be acceptable, such terms
and conditions shall be binding as if a part of this Agreement
without further vote or approval of the shareholders of Floating
Rate Trust, unless such terms and conditions shall result in a
change in the method of computing the number of Daily Access
Fund Class A Shares to be issued to Floating Rate Trust. In
which event, unless such terms and conditions shall have been
included in the proxy solicitation material furnished to the
shareholders of Floating Rate Trust prior to the Shareholders
Meeting at which the transactions contemplated by this Agreement
shall have been approved, this Agreement shall not be
consummated and shall terminate unless Floating Rate Trust shall
promptly call a meeting of the shareholders of Floating Rate
Trust at which such conditions so imposed shall be submitted for
approval.
(g) It is acknowledged that the Declaration of Trust of
FIST is on file with the Secretary of The Commonwealth of
Massachusetts and that this Agreement is executed on behalf of
FIST by the undersigned as officers and not individually and
that the obligations of this Agreement are not binding upon any
of them, the Trustees or the shareholders of FIST individually
but are binding only upon the assets and property belonging to
Daily Access Fund for the benefit of which the Trustees have
caused this Agreement to be made.
11. Entire Agreement and Amendments.
This Agreement embodies the entire agreement between the
parties and there are no agreements, understandings,
restrictions, or warranties relating to the transactions
contemplated by this Agreement other than those set forth herein
or herein provided for. This Agreement may be amended only by
mutual consent of the parties in writing. Neither this Agreement
nor any interest herein may be assigned without the prior
written consent of the other party.
12. Counterparts.
This Agreement 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 Agreement shall be in writing and shall be
deemed to have been given if delivered or mailed, first class
postage prepaid, addressed to the appropriate Fund, at Xxx
Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, Attention:
Secretary.
14. Governing Law.
This Agreement shall be governed by and carried out in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, FIST, on behalf of Daily Access Fund,
and Floating Rate Trust have each caused this Agreement to be
executed on its behalf by its duly authorized officers, all as
of the date and year first-above written.
FRANKLIN INVESTORS SECURITIES TRUST, on
behalf of XXXXXXXX FLOATING RATE DAILY
ACCESS FUND
Attest:
/s/Xxxxxx X. Xxxxxxx By: /S/Xxxxx X. Xxxx
Xxxxxx X. Xxxxxxx Xxxxx X. Xxxx
Vice President and Secretary Vice President
FRANKLIN FLOATING RATE TRUST
Attest:
/s/Xxxxxx X. Xxxxxxx By: /s/Xxxxx X. Xxxx
Xxxxxx X. Xxxxxxx Xxxxx X. Xxxx
Vice President and Secretary Vice President
