AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan"), is made as of this
25th day of February, 2002, by and between FTI Funds ("FTI Trust"), a business
trust created under the laws of The Commonwealth of Massachusetts in 1995 with
its principal place of business at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx
00000, on beha1f of its series, FTI Bond Fund ("FTI Fund"), and Franklin
Investors Securities Trust ("Franklin Trust"), a business trust created under
the laws of The Commonwealth of Massachusetts in 1986 with its principal place
of business at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, on beha1f of
its series, Franklin Total Return Fund ("Franklin Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by Franklin Trust on behalf
of Franklin Fund, of substantially all of the property, assets and goodwill of
FTI Fund in exchange solely for full and fractional shares of beneficial
interest, par value $0.01 per share, of Franklin Fund - Advisor Class ("Franklin
Fund Shares"); (ii) the distribution of Franklin Fund Shares to the shareholders
of FTI Fund ("FTI Fund Shares"), according to their respective interests in FTI
Fund in complete liquidation of FTI Fund; and (iii) the dissolution of FTI Fund
as soon as is practicable after the closing (as defined in Section 3,
hereinafter called the "Closing"), all upon and subject to the terms and
conditions of this Plan hereinafter set forth.
AGREEMENT
In order to consummate the Plan and in consideration of the premises and
of the covenants and agreements hereinafter set forth, and intending to be
legally bound, the parties hereto covenant and agree as follows:
1. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF FTI FUND.
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(a) Subject to the terms and conditions of this Plan, and in reliance on the
representations and warranties of Franklin Trust on behalf of Franklin Fund
herein contained, and in consideration of the delivery by Franklin Trust of the
number of Franklin Fund Shares hereinafter provided, FTI Trust on behalf of FTI
Fund agrees that it will convey, transfer and deliver to Franklin Trust at the
Closing all of FTI Fund's then existing assets, free and clear of all liens,
encumbrances, and claims whatsoever (other than shareholders' rights of
redemption), except for cash, bank deposits, or cash equivalent securities in an
estimated amount necessary to: (i) pay the costs and expenses of carrying out
this Plan (including, but not limited to, fees of counsel and accountants, and
expenses of its liquidation and dissolution contemplated hereunder), which costs
and expenses shall be established on FTI Fund's books as liability reserves;
(ii) discharge its unpaid liabilities on its books at the closing date (as
defined in Section 3, hereinafter called the "Closing Date"), including, but not
limited to, its income dividends and capital gains distributions, if any,
payable for the period prior to, and through, the Closing Date and excluding
those liabilities that would otherwise be discharged at a later date in the
ordinary course of business; and (iii) pay such contingent liabilities as the
Board of Trustees of FTI Trust shall reasonably deem to exist against FTI Fund,
if any, at the Closing Date, for which contingent and other appropriate
liability reserves shall be established on FTI Fund's books (hereinafter "Net
Assets"). Franklin Trust shall not assume any liability of FTI Fund and FTI Fund
shall use its reasonable best efforts to discharge all of its known liabilities,
so far as may be possible, from the cash and bank deposits described above. FTI
Fund shall also retain any and all rights that it may have over and against any
person that may have accrued up to and including the close of business on the
Closing Date.
(b) Subject to the terms and conditions of this Plan, and in reliance on the
representations and warranties of FTI Trust on behalf of FTI Fund herein
contained, and in consideration of such sale, conveyance, transfer, and
delivery, Franklin Trust agrees at the Closing to deliver to FTI Trust the
number of Franklin Fund Shares, determined by dividing the net asset value per
share of the FTI Fund Shares by the net asset value per share of Franklin Fund
Shares, and multiplying the result thereof by the number of outstanding FTI Fund
Shares, as of 4:00 p.m. Eastern time on the Closing Date. The number of Franklin
Fund Shares delivered to FTI Trust shall have an aggregate net asset value equal
to the value of the FTI Fund's Net Assets, all determined as provided in Section
2 of this Plan and as of the date and time specified therein.
(c) Immediately following the Closing, FTI Trust shall dissolve FTI Fund and
distribute pro rata to its shareholders of record as of the close of business on
the Closing Date, Franklin Fund Shares received by FTI Fund pursuant to this
Section 1. Such dissolution and distribution shall be accomplished by the
establishment of accounts on the share records of FTI Fund of the type and in
the amounts due such shareholders based on their respective holdings as of the
close of business on the Closing Date. Fractional Franklin Fund Shares shall be
carried to the third decimal place. As promptly as practicable after the
Closing, each holder of any outstanding certificate or certificates representing
shares of beneficial interest of FTI Fund shall be entitled to surrender the
same to the transfer agent for Franklin Fund in exchange for the number of
Franklin Fund Shares into which the FTI Fund Shares theretofore represented by
the certificate or certificates so surrendered shall have been converted.
Certificates for Franklin Fund Shares shall not be issued, unless specifically
requested by the shareholders. Until so surrendered, each outstanding
certificate which, prior to the Closing, represented shares of beneficial
interest of FTI Fund shall be deemed for all Franklin Fund's purposes to
evidence ownership of the number of Franklin Fund Shares into which the FTI Fund
Shares (which prior to the Closing were represented thereby) have been
converted.
(d) At the Closing, each shareholder of record of FTI Fund as of the record date
(the "Distribution Record Date") with respect to any unpaid dividends and other
distributions that were declared prior to the Closing, including any dividend or
distribution declared pursuant to Section 8(e) hereof, shall have the right to
receive such unpaid dividends and distributions with respect to the shares of
FTI Fund that such person had on such Distribution Record Date.
(e) All books and records relating to FTI Fund, including all books and records
required to be maintained under the Investment Company Act of 1940, as amended
(the "1940 Act") and the rules and regulations thereunder, shall be available to
Franklin Trust from and after the date of this Agreement, and shall be turned
over to Franklin Trust on or prior to the Closing.
2. VALUATION.
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(a) The value of Franklin Fund Shares and FTI Fund's Net Assets to be acquired
by Franklin Fund hereunder shall in each case be computed as of 4:00 p.m.
Eastern time on the Closing Date unless on such date (a) the New York Stock
Exchange ("NYSE") is not open for unrestricted trading or (b) the reporting of
trading on the NYSE or elsewhere is disrupted or (c)any other extraordinary
financial event or market condition occurs (all such events described in (a),
(b) or (c) are each referred to as a "Market Disruption"). The net asset value
per share of the Franklin Fund Shares and the value of the FTI Fund's Net Assets
shall be computed in accordance with the valuation procedures set forth in the
respective prospectuses of Franklin Fund and FTI Fund.
(b) In the event of a Market Disruption on the proposed Closing Date so that an
accurate appraisal of the net asset value of Franklin Fund Shares or the value
of FTI Fund's Net Assets is impracticable, the Closing Date shall be postponed
until the first business day when regular trading on the NYSE shall have been
fully resumed and reporting shall have been restored and other trading markets
are otherwise stabilized.
(c) All computations of value regarding the net asset value of the Franklin Fund
Shares and the value of FTI Fund's Net Assets shall be made by the investment
advisor to Franklin Fund; provided, however, that all computations of value
shall be subject to review by FTI Fund.
3. CLOSING AND CLOSING DATE. The Closing Date shall be March 27, 2002, or such
later date as the parties may mutually agree. The Closing shall take place at
the principal office of FTI Trust at 5:00 p.m., Eastern time, on the Closing
Date. FTI Trust on behalf of FTI Fund shall have provided for delivery as of the
Closing of those Net Assets of FTI Fund to be transferred to the account of
Franklin Fund's custodian, Bank of New York, Mutual Funds Division, 00
Xxxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000. Also, FTI Trust on behalf of FTI Fund
shall deliver at the Closing a list of names and addresses of the shareholders
of record of FTI Fund Shares and the number of full and fractional shares of
beneficial interest owned by each such shareholder, indicating thereon which
such shares are represented by outstanding certificates and which by book-entry
accounts, all as of 4:00 p.m. Eastern time on the Closing Date, certified by its
transfer agent or by its President to the best of its or his knowledge and
belief. Franklin Trust on behalf of Franklin Fund shall issue and deliver a
certificate or certificates evidencing the shares of beneficial interest of
Franklin Fund to be delivered to the account of FTI Fund at said transfer agent
registered in such manner as the officers of FTI Trust on behalf of FTI Fund may
request, or provide evidence satisfactory to FTI Trust that such Franklin Fund
Shares have been registered in an account on the books of Franklin Fund in such
manner as the officers of FTI Trust on behalf of FTI Fund may request.
4. REPRESENTATIONS AND WARRANTIES BY FRANKLIN TRUST ON BEHALF OF FRANKLIN
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FUND.
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Franklin Trust, on behalf of Franklin Fund, represents and warrants to FTI
Trust that:
(a) Franklin Fund is a series of Franklin Trust, a business trust created under
the laws of The Commonwealth of Massachusetts on December 22, 1986, and is
validly existing under the laws of that Commonwealth. Franklin Trust is duly
registered under the 1940 Act, as an open-end, management investment company and
all of the Franklin Fund Shares sold were sold pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended (the
"1933 Act"), except for those shares sold pursuant to the private offering
exemption for the purpose of raising initial capital as required by the 1940
Act.
(b) Franklin Trust is authorized to issue an unlimited number of shares of
beneficial interest of Franklin Fund, par value $0.01 per share, each
outstanding share of which is fully paid, non-assessable, freely transferable
and has full voting rights. Franklin Fund is further divided into five classes
of shares of which Franklin Fund Shares is one, and an unlimited number of
shares of beneficial interest, par value $0.01 per share, has been allocated and
designated to Franklin Fund Shares. No shareholder of Franklin Trust shall have
any option, warrant or preemptive right of subscription or purchase with respect
to Franklin Fund Shares.
(c) The financial statements appearing in the Franklin Fund's Annual Report to
Shareholders for the fiscal year ended October 31, 2001, audited by
PricewaterhouseCoopers LLP, copies of which have been delivered to FTI Trust,
and any interim unaudited financial statements, copies of which may be furnished
to FTI Trust, fairly present the financial position of Franklin Fund as of such
date and the results of its operations for the period indicated in conformity
with generally accepted accounting principles applied on a consistent basis.
(d) The books and records of Franklin Fund accurately summarize the accounting
data represented and contain no material omissions with respect to the business
and operations of Franklin Fund.
(e) Franklin Trust has the power to own all of its properties and assets, to
perform its obligations under this Plan and to consummate the transactions
contemplated herein. Franklin Trust is not required to qualify to do business in
any jurisdiction in which it is not so qualified or where failure to qualify
would not subject it to any material liability or disability. Franklin Trust has
all necessary federal, state and local authorizations, consents and approvals
required to own all of its properties and assets and to conduct Franklin Fund's
business as such business is now being conducted and to consummate the
transactions contemplated herein.
(f) Franklin Trust, on behalf of Franklin Fund, is not a party to or obligated
under any provision of its Declaration of Trust, as amended ("Declaration of
Trust") or Amended and Restated By-laws ("By-laws"), or any contract or any
other commitment or obligation, is not subject to any order or decree that would
be violated by its execution of or performance under this Plan, and no consent,
approval, authorization or order of any court or governmental authority is
required for the consummation by Franklin Trust of the transactions contemplated
by the Plan, except for the registration of the Franklin Fund Shares under the
1933 Act, the 1940 Act, or as may otherwise be required under the federal and
state securities laws or the rules and regulations thereunder.
(g) Franklin Trust has elected to treat Franklin 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"), Franklin 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, and consummation of the transactions contemplated by the Plan will
not cause it to fail to be qualified as a RIC as of the Closing Date.
(h) Franklin Fund is not under jurisdiction of a Court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code.
(i) Franklin Fund does not have any unamortized or unpaid organizational
fees or expenses.
(j) All information to be furnished by Franklin Trust to FTI Trust for use in
preparing any prospectus, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto.
(k) Franklin Fund does not have any known liabilities, costs or expenses of a
material amount, contingent or otherwise, other than those incurred in the
ordinary course of business as an investment company.
(l) There is no intercorporate indebtedness existing between FTI Fund and
Franklin Fund that was issued, acquired or will be settled at a discount.
(m) Franklin Fund does not own, directly or indirectly, nor has it owned during
the past five (5) years, directly or indirectly, any shares of FTI Fund.
(n) Franklin Trust has no plan or intention to issue additional shares of
Franklin Fund following the reorganization except for shares issued in the
ordinary course of its business as a series of an open-end investment company;
nor does Franklin Trust have any plan or intention to redeem or otherwise
reacquire any shares of Franklin Fund issued pursuant to the reorganization,
other than in the ordinary course of its business or to the extent necessary to
comply with its legal obligation under Section 22(e) of the 0000 Xxx.
(o) Following the Closing Date of the reorganization, Franklin Fund will
actively continue FTI Fund's business in substantially the same manner that FTI
Fund conducted that business immediately before the reorganization. Following
the Closing Date of the reorganization, Franklin Fund will not dispose of assets
acquired from FTI Fund in order to satisfy the investment objective of Franklin
Fund or for any other reason, except for acquisitions and dispositions made in
the ordinary course of its business as a RIC, and any proceeds from the
disposition of securities will be invested in accordance with Franklin Fund's
investment objective.
(p) The Form N-14 Registration Statement referred to in Section 7(g) hereof
(other than the portions of such documents based on information furnished by or
on behalf of FTI Trust for inclusion or incorporation by reference therein), and
any Prospectus or Statement of Additional Information of Franklin Fund contained
or incorporated therein by reference, and any supplement or amendment to the
Form N-14 Registration Statement or any such Prospectus or Statement of
Additional Information, on the effective and clearance dates of the Form N-14
Registration Statement on the date of the Special Meeting of FTI Fund
shareholders, and on the Closing Date: (a) shall comply in all material respects
with the provisions of the Securities Exchange Act of 1934 (the "1934 Act"), the
1940 Act, the rules and regulations thereunder, and all applicable state
securities laws and the rules and regulations thereunder; and (b) shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which the statements were made, not
misleading.
5. REPRESENTATIONS AND WARRANTIES BY FTI TRUST ON BEHALF OF FTI FUND.
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FTI Trust, on behalf of FTI Fund, represents and warrants to Franklin
Trust that:
(a) FTI Fund is a series of FTI Trust, a business trust created under the laws
of The Commonwealth of Massachusetts on October 18, 1995, and is validly
existing under the laws of that Commonwealth. FTI Trust is duly registered under
the 1940 Act as an open-end, management investment company and all of FTI
Trust's FTI Fund Shares sold were sold pursuant to an effective registration
statement filed under the 1933 Act, except for those shares sold pursuant to the
private offering exemption for the purpose of raising the required initial
capital.
(b) FTI Trust is authorized to issue an unlimited number of shares of beneficial
interest of FTI Fund, without par value, each outstanding share of which is
fully paid, non-assessable, freely transferable and has full voting rights, and
currently issues shares of seven (7) series, including FTI Fund. FTI Fund has
one class of shares, and an unlimited number of shares of beneficial interest of
FTI Trust, without par value, has been allocated and designated to this class of
FTI Fund.
(c) The financial statements appearing in the FTI Trust's Annual Report to
Shareholders for the fiscal year ended November 30, 2001, audited by Ernst &
Young LLP, copies of which have been delivered or will be delivered to Franklin
Trust prior to the Closing Date, and any interim financial statements for FTI
Trust which may be furnished to Franklin Trust, fairly present the financial
position of FTI Fund as of such date and the results of its operations for the
period indicated in conformity with generally accepted accounting principles
applied on a consistent basis.
(d) The books and records of FTI Fund accurately summarize the accounting data
represented and contain no material omissions with respect to the business and
operations of FTI Fund.
(e) FTI Trust has the power to own all of its properties and assets, to perform
its obligations under this Plan and to consummate the transactions contemplated
herein. FTI Trust is not required to qualify to do business in any jurisdiction
in which it is not so qualified or where failure to qualify would not subject it
to any material liability or disability. FTI Trust has all necessary federal,
state and local authorizations, consents and approvals required to own all of
its properties and assets and to conduct FTI Fund's business as such business is
now being conducted and to consummate the transactions contemplated herein.
(f) FTI Trust on behalf of FTI Fund is not a party to or obligated under any
provision of its Declaration of Trust or By-laws, or any contract or any other
commitment or obligation, and is not subject to any order or decree, that would
be violated by its execution of or performance under this Plan. FTI Trust has
furnished Franklin Trust with copies or descriptions of all material agreements
or other arrangements to which FTI Fund is a party. FTI Fund has no material
contracts or other commitments (other than this Plan or agreements for the
purchase of securities entered into in the ordinary course of business and
consistent with its obligations under this Plan) which will not be terminated by
FTI Fund in accordance with their terms at or prior to the Closing Date.
(g) FTI Trust has elected to treat FTI Fund as a RIC for federal income tax
purposes under Part I of Subchapter M of the Code, FTI Fund is a "fund" as
defined in Section 851(g)(2) of the Code, FTI Fund has qualified as a RIC for
each taxable year since its inception and will qualify as a RIC as of the
Closing Date, and consummation of the transactions contemplated by the Plan will
not cause it to fail to be qualified as a RIC as of the Closing Date.
(h) FTI Fund is not under jurisdiction of a Court in a Title 11 or similar case
within the meaning of Section 368(a)(3)(A) of the Code.
(i) FTI Fund does not have any unamortized or unpaid organization fees or
expenses.
(j) The Prospectus of FTI Fund, dated March 31, 2001, and the corresponding
Statement of Additional Information, dated March 31, 2001, do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and any amended,
revised, or new prospectus or statement of additional information of FTI Fund or
any supplement thereto, that is hereafter filed with the SEC (copies of which
documents shall be provided to Franklin Trust promptly after such filing), shall
not contain any untrue statement of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(k) FTI Fund does not have any known liabilities, costs or expenses of a
material amount, contingent or otherwise, other than those reflected in the
financial statements referred to in Section 5(c) hereof and those incurred in
the ordinary course of business as an investment company since the dates of
those financial statements. On the Closing Date, FTI Trust shall advise Franklin
Trust in writing of all FTI Fund's known liabilities, contingent or otherwise,
whether or not incurred in the ordinary course of business, existing or accrued
at such time.
(l) Since November 30, 2001, there has not been any material adverse change in
FTI Fund's financial condition, assets, liabilities, or business other than
changes occurring in the ordinary course of its business.
(m) No consent, approval, authorization, or order of any court or governmental
authority is required for the consummation by FTI Fund or FTI Trust of the
transactions contemplated by this Plan, except as may be required under the
federal or state securities laws or the rules and regulations thereunder.
(n) The information to be furnished by FTI Trust or FTI Fund for use in
preparing the Form N-14 Registration Statement referred to in Section 7(g)
hereof, and the Combined Proxy Statement/Prospectus to be included in the Form
N-14 Registration Statement, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby, shall be
accurate and complete and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable thereto.
(o) There has not been nor will there be any intercorporate indebtedness
existing between FTI Fund and Franklin Fund that was issued, acquired or will be
settled at a discount.
(p) There is no plan or intention of FTI Fund shareholders who individually own
5% or more of shares of FTI Fund and, to the best knowledge of FTI Fund's
management, there is no plan or intention of the remaining FTI Fund shareholders
to sell, exchange or otherwise dispose of a number of shares of Franklin Fund
received in the reorganization that would reduce the FTI Fund shareholders'
ownership of Franklin Fund shares to a number of shares having a value, as of
the closing date of the reorganization, of less than 50% of the value of all of
the formerly outstanding FTI shares as of the same date. For purposes of this
representation, FTI Fund shares exchanged for cash or other property will be
treated as outstanding FTI Fund shares on the closing date of the
reorganization. Moreover, FTI Fund shares and Franklin Fund shares held by FTI
Fund shareholders sold, redeemed, or disposed of prior to or subsequent to the
closing date of the reorganization will be considered in making this
representation.
(q) Prior to the Closing Date of the reorganization, FTI Fund will not dispose
of and/or acquire any assets in order to satisfy the investment objective of
Franklin Fund or for any other reason, or otherwise change its historic
investment policies, except for acquisitions and dispositions made in the
ordinary course of its business as a RIC.
(r) As of the Closing Date, FTI Fund will not have outstanding any warrants,
options, convertible securities, or any other type of rights pursuant to which
any person could acquire shares of FTI Fund, except for the right of investors
to acquire its shares at net asset value in the normal course of its business as
an open-end diversified management investment company operating under the 1940
Act.
(s) Throughout the five year period ending on the Closing Date, FTI Fund will
have conducted its historic business within the meaning of Section 1.368-1(d) of
the Income Tax Regulations under the Code ("Treasury Regulations").
6. REPRESENTATIONS AND WARRANTIES BY FTI TRUST AND FRANKLIN TRUST.
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FTI Trust, on behalf of FTI Fund, and Franklin Trust, on behalf of
Franklin Fund, each represents and warrants to the other that:
(a) The statement of assets and liabilities to be furnished by it as of 4:00
p.m. Eastern time on the Closing Date for the purpose of determining the number
of Franklin Fund Shares to be issued pursuant to Section 1 of this Plan, will
accurately reflect each Fund's Net Assets and outstanding shares of beneficial
interest, as of such date, in conformity with generally accepted accounting
principles applied on a consistent basis.
(b) At the Closing, it will have good and marketable title to all of the
securities and other assets shown on the statement of assets and liabilities
referred to in (a) above, free and clear of all liens or encumbrances of any
nature whatsoever, except such imperfections of title or encumbrances as do not
materially detract from the value or use of the assets subject thereto, or
materially affect title thereto.
(c) Except as disclosed in its currently effective prospectus relating to FTI
Fund, in the case of FTI Trust, and Franklin Fund, in the case of Franklin
Trust, there is no material suit, judicial action, or legal or administrative
proceeding pending or threatened against it. Neither Franklin Trust nor FTI
Trust are a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and adversely
affects Franklin Fund's or FTI Fund's business or their ability to consummate
the transactions herein contemplated.
(d) There are no known actual or proposed deficiency assessments with respect to
any taxes payable by it.
(e) The execution, delivery, and performance of this Plan have been duly
authorized by all necessary action of its Board of Trustees, and this Plan,
subject to the approval of FTI Fund's shareholders in the case of FTI Trust,
constitutes a valid and binding obligation enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization
arrangement, moratorium, and other similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(f) It anticipates that consummation of this Plan will not cause FTI Fund, in
the case of FTI Trust, and Franklin Fund, in the case of Franklin Trust, to fail
to conform to the requirements of Subchapter M of the Code for federal income
taxation qualification as a RIC at the end of its fiscal year.
7. COVENANTS OF FTI TRUST AND FRANKLIN TRUST.
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(a) FTI Trust, on behalf of FTI Fund, and Franklin Trust, on behalf of Franklin
Fund, each covenant to operate their respective businesses as presently
conducted between the date hereof and the Closing, it being understood that such
ordinary course of business will include customary dividends and distributions
and any other distribution necessary or desirable to minimize federal income or
excise taxes.
(b) FTI Trust, on behalf of FTI Fund, undertakes that it will not acquire
Franklin Fund Shares for the purpose of making distributions thereof to anyone
other than FTI Fund's shareholders.
(c) FTI Trust, on behalf of FTI Fund, undertakes that, if this Plan is
consummated, it will liquidate and dissolve FTI Fund.
(d) FTI Trust, on behalf of FTI Fund, and Franklin Trust, on behalf of Franklin
Fund, each agree that, by the Closing, all of their Federal and other tax
returns and reports required by law to be filed on or before such date shall
have been filed, and all Federal and other taxes shown as due on said returns
shall have either been paid or adequate liability reserves shall have been
provided for the payment of such taxes, and to the best of their knowledge no
such tax return is currently under audit and no tax deficiency or liability has
been asserted with respect to such tax returns or reports by the Internal
Revenue Service or any state or local tax authority.
(e) At the Closing, FTI Trust, on behalf of FTI Fund, will provide Franklin Fund
a copy of the shareholder ledger accounts, certified by FTI Fund's transfer
agent or its President to the best of its or his knowledge and belief, for all
the shareholders of record of FTI Fund Shares as of 4:00 p.m. Eastern time on
the Closing Date who are to become shareholders of Franklin Fund as a result of
the transfer of assets that is the subject of this Plan.
(f) The Board of Trustees of FTI Trust shall call and FTI Trust shall hold, a
Special Meeting of FTI Fund's shareholders to consider and vote upon this Plan
(the "Special Meeting") and FTI Trust shall take all other actions reasonably
necessary to obtain approval of the transactions contemplated herein. FTI Trust
agrees to mail to each shareholder of record of FTI Fund entitled to vote at the
Special Meeting at which action on this Plan is to be considered, in sufficient
time to comply with requirements as to notice thereof, a combined Prospectus and
Proxy Statement that complies in all material respects with the applicable
provisions of Section 14(a) of the 1934 Act, as amended, and Section 20(a) of
the 1940 Act, and the rules and regulations, respectively, thereunder.
(g) Franklin Trust will file with the U.S. Securities and Exchange Commission a
registration statement on Form N-14 under the 1933 Act relating to Franklin Fund
Shares issuable hereunder ("Registration Statement"), and will use its best
efforts to provide that the Registration Statement becomes effective as promptly
as is practicable. At the time it becomes effective, the Registration Statement
will (i) comply in all material respects with the applicable provisions of the
1933 Act, and the rules and regulations promulgated thereunder; and (ii) not
contain any untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. At the time the Registration Statement becomes effective, at the
time of the Special Meeting, and at the Closing Date, the prospectus and
statement of additional information included in the Registration Statement will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(h) Subject to the provisions of this Plan, Franklin Trust and FTI Trust each
shall take, or cause to be taken, all action, and do or cause to be done, all
things reasonably necessary, proper or advisable to consummate the transactions
contemplated by this Plan.
(i) FTI Trust shall furnish to Franklin Trust on the Closing Date a Statement of
Assets and Liabilities of FTI Fund as of the Closing Date, which statement shall
be prepared in accordance with GAAP consistently applied and shall be certified
by FTI Fund's Treasurer or Assistant Treasurer. As promptly as practicable, but
in any case, within forty-five (45) days after the Closing Date, FTI Trust shall
furnish to Franklin Trust, in such form as is reasonably satisfactory to
Franklin Trust, a statement of the earnings and profits of FTI Fund for federal
income tax purposes, and of any capital loss carryovers and other items that
will be carried over to Franklin Fund as a result of Section 381 of the Code,
which statement shall be certified by FTI Fund's Treasurer or Assistant
Treasurer. FTI Trust covenants that FTI Fund has no earnings and profits that
were accumulated by it or any acquired entity during a taxable year when it or
such entity did not qualify as a RIC under the Code, or, if it has such earnings
and profits, it shall distribute them to its shareholders prior to the Closing
Date.
(j) FTI Trust shall deliver to Franklin Trust at the Closing Date confirmation
or other adequate evidence as to the tax costs and holding periods of the assets
and property of FTI Fund transferred to Franklin Trust in accordance with the
terms of this Plan.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY FTI TRUST AND FRANKLIN TRUST.
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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 Plan of Reorganization contemplated hereby shall have
been adopted and approved by the appropriate action of the shareholders of FTI
Fund at an annual or special meeting or any adjournment thereof.
(e) That a distribution or distributions shall have been declared for FTI Fund
prior to the Closing Date that, together with all previous distributions, shall
have the effect of distributing to its shareholders (i) all of its ordinary
income and all of its capital gain net income, if any, for the period from the
close of its last fiscal year to 4:00 p.m. Eastern time on the Closing Date; and
(ii) any undistributed ordinary income and capital gain net income from any
period to the extent not otherwise declared for distribution. Capital gain net
income has the meaning given such term by Section 1222(9) of the Code.
(f) That all required consents of other parties and all other consents, orders,
and permits of federal, state and local regulatory authorities (including those
of the SEC and of state Blue Sky securities authorities, including any necessary
"no-action" positions or exemptive orders from such federal and state
authorities) to permit consummation of the transaction contemplated hereby shall
have been obtained, except where failure to obtain any such consent, order, or
permit would not involve a risk of material adverse effect on the assets and
properties of FTI Fund or Franklin Fund.
(g) That there shall be delivered to FTI Trust, on behalf of FTI Fund, and
Franklin Trust, on behalf of Franklin Fund an opinion, from Messrs. Stradley,
Ronon, Xxxxxxx & Xxxxx, LLP, counsel to Franklin Trust, to the effect that,
provided the acquisition contemplated hereby is carried out in accordance with
this Plan and based upon certificates of the officers of FTI Trust and Franklin
Trust with regard to matters of fact:
(1) The acquisition by Franklin Fund of substantially all the assets of FTI
Fund as provided for herein in exchange for Franklin Fund Shares followed
by the distribution by FTI Fund to its shareholders of Franklin Fund
Shares in complete liquidation of FTI Fund will qualify as a
reorganization within the meaning of Section 368(a)(1) of the Code, and
FTI Fund and Franklin Fund will each be a "party to the reorganization"
within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by FTI Fund upon the transfer of
substantially all of its assets to Franklin Fund in exchange solely for
voting shares of Franklin Fund (Sections 361(a) and 357(a) of the Code).
No opinion, however, will be expressed as to whether any accrued market
discount will be required to be recognized as ordinary income pursuant to
Section 1276 of the Code;
(3) No gain or loss will be recognized by Franklin Fund upon the receipt by it
of substantially all of the assets of FTI Fund in exchange solely for
voting shares of Franklin Fund (Section 1032(a) of the Code);
(4) No gain or loss will be recognized by FTI Fund upon the distribution of
Franklin Fund Shares to its shareholders in liquidation of FTI Fund (in
pursuance of the Plan) (Section 361(c)(1) of the Code);
(5) The basis of the assets of FTI Fund received by Franklin Fund will be the
same as the basis of such assets to FTI Fund immediately prior to the
reorganization (Section 362(b) of the Code);
(6) The holding period of the assets of FTI Fund received by Franklin Fund
will include the period during which such assets were held by FTI Fund
(Section 1223(2) of the Code);
(7) No gain or loss will be recognized to the shareholders of FTI Fund upon
the exchange of their shares in FTI Fund for voting shares of Franklin
Fund including fractional shares to which they may be entitled (Section
354(a) of the Code);
(8) The basis of Franklin Fund Shares received by the shareholders of FTI Fund
shall be the same as the basis of the FTI Fund Shares exchanged therefor
(Section 358(a)(1) of the Code);
(9) The holding period of Franklin Fund Shares received by shareholders of FTI
Fund (including fractional shares to which they may be entitled) will
include the holding period of the FTI Fund Shares surrendered in exchange
therefor, provided that the FTI Fund Shares were held as a capital asset
on the effective date of the exchange (Section 1223(1) of the Code); and
(10) Franklin Fund will succeed to and take into account as of the date of the
transfer (as defined in Section 1.381(b)-1(b) of the Treasury Regulations)
the items of FTI Fund described in Section 381(c) of the Code, subject to
the conditions and limitations specified in Sections 381, 382, 383 and 384
of the Code and the Treasury Regulations.
(h) That there shall be delivered to Franklin Trust on behalf of Franklin Fund
an opinion in form and substance satisfactory to it from Messrs. Xxxxxxx Xxxxx
Xxxxxxx & Xxxxxxxxx, LLP, counsel to FTI Trust on behalf of FTI Fund, to the
effect that, subject in all respects to the effects of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and other laws now or
hereafter affecting generally the enforcement of creditors' rights:
(1) FTI Fund is a series of FTI Trust and is a validly existing business trust
in good standing under the laws of The Commonwealth of Massachusetts;
(2) FTI Trust is authorized to issue an unlimited number of shares of
beneficial interest, without par value, of FTI Fund. One class of shares
of FTI Fund has been designated as FTI Fund Shares, and an unlimited
number of shares of beneficial interest of FTI Trust has been allocated to
FTI Fund Shares. Assuming that the initial shares of beneficial interest
of FTI Fund were issued in accordance with the 1940 Act and the
Declaration of Trust and By-laws of FTI Trust, and that all other
outstanding shares of FTI Fund were sold, issued and paid for in
accordance with the terms of FTI Fund's prospectus in effect at the time
of such sales, each such outstanding share is fully paid, non-assessable,
freely transferable and has full voting rights;
(3) FTI Fund is an open-end investment company of the management type
registered as such under the 1940 Act;
(4) Except as disclosed in FTI Fund's currently effective prospectus, such
counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against FTI Fund, the
unfavorable outcome of which would materially and adversely affect FTI
Trust or FTI Fund;
(5) The execution and delivery of this Plan and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary trust action on the part of FTI Trust on behalf of FTI Fund; and
(6) Neither the execution, delivery, nor performance of this Plan by FTI Trust
on behalf of FTI Fund violates any provision of its Declaration of Trust
or By-laws, or the provisions of any agreement or other instrument filed
by FTI Trust as an exhibit to its Registration Statement on Form N-1A;
this Plan is the legal, valid and binding obligation of FTI Trust on
behalf of FTI Fund and is enforceable against FTI Trust on behalf of FTI
Fund in accordance with its terms.
In giving the opinions set forth above, this counsel may state that it is
relying on certificates of the officers of FTI Trust with regard to matters of
fact, and certain certifications and written statements of governmental
officials with respect to the good standing of FTI Trust.
(i) That there shall be delivered to FTI Trust on behalf of FTI Fund an opinion
in form and substance satisfactory to it from Messrs. Stradley, Ronon, Xxxxxxx &
Young, LLP, counsel to Franklin Trust on behalf of Franklin Fund, to the effect
that, subject in all respects to the effects of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other laws now or
hereafter affecting generally the enforcement of creditors' rights:
(1) Franklin Fund is a series of Franklin Trust and is a validly existing
business trust in good standing under the laws of The Commonwealth of
Massachusetts;
(2) Franklin Trust is authorized to issue an unlimited number of shares of
beneficial interest, par value $0.01 per share of Franklin Fund. Franklin
Fund is further divided into five (5) classes of shares of which Franklin
Fund Shares is one, and an unlimited number of shares of beneficial
interest, par value $0.01 per share, have been allocated and designated to
Franklin Fund Shares. Assuming that the initial shares of beneficial
interest of Franklin Fund were issued in accordance with the 1940 Act, and
the Declaration of Trust and the By-laws of Franklin Trust, and that all
other outstanding shares of Franklin Fund were sold, issued and paid for
in accordance with the terms of Franklin Fund's prospectus in effect at
the time of such sales, each such outstanding share of Franklin Fund is
fully paid, non-assessable, freely transferable and has full voting
rights;
(3) Franklin Fund is an open-end investment company of the management type
registered as such under the 1940 Act;
(4) Except as disclosed in Franklin Fund's currently effective prospectus,
such counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against Franklin Fund, the
unfavorable outcome of which would materially and adversely affect
Franklin Trust or Franklin Fund;
(5) Franklin Fund Shares to be issued pursuant to the terms of this Plan have
been duly authorized and, when issued and delivered as provided in this
Plan, will have been validly issued and fully paid and will be
non-assessable by Franklin Trust on behalf of Franklin Fund;
(6) The execution and delivery of this Plan and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary trust action on the part of Franklin Trust on behalf of Franklin
Fund;
(7) Neither the execution, delivery, nor performance of this Plan by Franklin
Trust on behalf of Franklin Fund violates any provision of its Declaration
of Trust or By-laws, or the provisions of any agreement or other
instrument filed by Franklin Trust as an exhibit to its Registration
Statement on Form N-1A; this Plan is the legal, valid and binding
obligation of Franklin Trust on behalf of Franklin Fund and is enforceable
against Franklin Trust on behalf of Franklin Fund in accordance with its
terms; and
(8) The registration statement of Franklin Trust, of which the prospectus
dated March 1, 2002 of Franklin Fund 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 Franklin Trust with regard to matters
of fact, and certain certifications and written statements of governmental
officials with respect to the good standing of Franklin Trust.
(j) That FTI Fund shall have received a certificate from the President and
Secretary of Franklin Trust on behalf of Franklin Fund to the effect that the
statements contained in the Prospectus, at the time the Prospectus became
effective, at the date of the signing of this Plan, and at the Closing, did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(k) That Franklin Trust's Registration Statement with respect to Franklin Fund
Shares to be delivered to FTI Fund's shareholders in accordance with this Plan
shall have become effective, and no stop order suspending the effectiveness of
the Registration Statement or any amendment or supplement thereto, shall have
been issued prior to the Closing Date or shall be in effect at Closing, and no
proceedings for the issuance of such an order shall be pending or threatened on
that date.
(l) That Franklin Fund Shares to be delivered hereunder shall be eligible for
sale with each state commission or agency with which such eligibility is
required in order to permit Franklin Fund Shares lawfully to be delivered to
each holder of FTI Fund Shares.
(m) That, at the Closing, there shall be transferred to Franklin Trust on behalf
of Franklin Fund, aggregate Net Assets of FTI Fund comprising at least 90% in
fair market value of the total net assets and 70% of the fair market value of
the total gross assets recorded on the books of FTI Fund on the Closing Date.
(n) That there be delivered to Franklin Trust on behalf of Franklin Fund
information concerning the tax basis of FTI Fund in all securities transferred
to Franklin Fund, together with shareholder information including the names,
addresses, and taxpayer identification numbers of the shareholders of FTI Fund
as of the Closing Date, the number of shares held by each shareholder, the
dividend reinvestment elections applicable to each shareholder, and the backup
withholding and nonresident alien withholding certifications, notices or records
on file with FTI Fund respect to each shareholder.
9. BROKERAGE FEES AND EXPENSES.
---------------------------
(a) FTI Trust on behalf of FTI Fund and Franklin Trust on behalf of Franklin
Fund each represents and warrants to the other that there are no broker or
finders' fees payable by it in connection with the transactions provided for
herein.
(b) The expenses of entering into and carrying out the provisions of this Plan
shall be borne one-quarter by Franklin Fund, one-quarter by FTI Fund, and
one-quarter by Franklin Advisers, Inc. and one-quarter by Fiduciary
International, Inc.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
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(a) Anything contained in this Plan to the contrary notwithstanding, this Plan
may be terminated and the Plan of Reorganization abandoned at any time (whether
before or after approval thereof by the shareholders of FTI Fund) prior to the
Closing, or the Closing may be postponed as follows:
(1) by mutual consent of FTI Trust on behalf of FTI Fund and Franklin Trust
on behalf of Franklin Fund;
(2) by Franklin Trust on behalf of Franklin Fund if any condition of its
obligations set forth in Section 8 has not been fulfilled or waived and it
reasonably appears that such condition or obligation will not or cannot be
met; or
(3) by FTI Trust on behalf of FTI Fund if any conditions of its obligations
set forth in Section 8 has not been fulfilled or waived and it reasonably
appears that such condition or obligation will not or cannot be met.
An election by Franklin Trust or FTI Trust to terminate this Plan and to
abandon the Plan of Reorganization shall be exercised respectively, by the Board
of Trustees of either Franklin Trust or FTI Trust.
(b) If the transactions contemplated by this Plan have not been consummated by
November 30, 2002, the Plan shall automatically terminate on that date, unless a
later date is agreed to by both Franklin Trust and FTI Trust.
(c) In the event of termination of this Plan pursuant to the provisions hereof,
the same shall become void and have no further effect, and neither FTI Trust,
Franklin Trust, FTI Fund nor Franklin Fund, nor their trustees, officers, or
agents or the shareholders of FTI Fund or Franklin Fund shall have any liability
in respect of this Plan, but all expenses incidental to the preparation and
carrying out of this Plan shall be paid as provided in Section 9(b) hereof.
(d) At any time prior to the Closing, any of the terms or conditions of this
Plan may be waived by the party who is entitled to the benefit thereof by action
taken by that party's Board of Trustees 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 Plan on the Closing Date, and
neither FTI Trust nor Franklin 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. This provision shall not
protect any officer, trustee, agent or shareholder of FTI Trust or Franklin
Trust against any liability to the entity for which that officer, trustee, agent
or shareholder so acts or to its shareholders to which that officer, trustee,
agent or shareholder would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties in
the conduct of such office.
(f) If any order or orders of the U.S. Securities and Exchange Commission with
respect to this Plan shall be issued prior to the Closing and shall impose any
terms or conditions that are determined by action of the Board of Trustees of
FTI Trust, on behalf of FTI Fund, or Franklin Trust, on behalf of Franklin Fund,
to be acceptable, such terms and conditions shall be binding as if a part of
this Plan without further vote or approval of the shareholders of FTI Fund,
unless such terms and conditions shall result in a change in the method of
computing the number of Franklin Fund Shares to be issued to FTI Fund in which
event, unless such terms and conditions shall have been included in the proxy
solicitation material furnished to the shareholders of FTI Fund prior to the
meeting at which the transactions contemplated by this Plan shall have been
approved, this Plan shall not be consummated and shall terminate unless FTI
Trust shall promptly call a special meeting of the shareholders of FTI Fund at
which such conditions so imposed shall be submitted for approval.
11. INDEMNIFICATION.
---------------
(a) Franklin Trust, on behalf of Franklin Fund, shall indemnify, defend and hold
harmless FTI Fund, FTI Trust, its Board of Trustees, officers, employees and
agents (collectively "Acquired Fund Indemnified Parties") against all losses,
claims, demands, liabilities and expenses (net of any insurance coverage or
enforceable indemnification agreement for such amounts), including reasonable
legal and other expenses incurred in defending third party claims, actions,
suits or proceedings, whether or not resulting in any liability to such Acquired
Fund Indemnified Parties, including amounts paid by any one or more of the
Acquired Fund Indemnified Parties in a compromise or settlement of any such
claim, action, suit or proceeding, or threatened third party claim, suit, action
or proceeding made with the consent of Franklin Trust and Franklin Fund, arising
from any untrue statement or alleged untrue statement of a material fact
contained in the Form N-14 Registration Statement, as filed and in effect with
the SEC or any application prepared by Franklin Trust and Franklin Fund with any
state regulatory agency in connection with the transactions contemplated by this
Plan under the securities laws thereof ("Application"); or which arises out of
or is based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that Franklin Trust and Franklin Fund shall
only be liable in such case to the extent that any such loss, claim, demand,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission about Franklin Trust
and/or Franklin Fund or the transactions contemplated by this Plan made in the
Form N-14 Registration Statement or any Application.
(b) After the Closing Date, Franklin Trust, on behalf of Franklin Fund, shall
also indemnify and hold harmless FTI Funds' Board of Trustees and officers
(collectively, "Acquired Fund Covered Persons") against all losses, claims,
demands, liabilities and expenses, including reasonable legal and other expenses
incurred in defending third party claims, actions, suits or proceedings, whether
or not resulting in any liability to such Acquired Fund Covered Person,
including amounts paid by any one or more of the Acquired Fund Covered Persons
in a compromise or settlement of any such claim, suit, action or proceeding, or
threatened third party claim, suit, action or proceeding made with the consent
of Franklin Trust, on behalf of Franklin Fund, to the extent such Acquired Fund
Covered Person is, or would have been, entitled to indemnification by FTI Trust
prior to the Closing Date pursuant to FTI Trust's Declaration of Trust and
By-Laws.
(c) FTI Trust, on behalf of FTI Fund, until the time of FTI Fund's liquidation,
shall indemnify, defend, and hold harmless Franklin Fund, Franklin Trust, its
Board of Trustees, officers, employees and agents ("Acquiring Fund Indemnified
Parties") against all losses, claims, demands, liabilities, and expenses,
including reasonable legal and other expenses incurred in defending third party
claims, actions, suits or proceedings, whether or not resulting in any liability
to such Acquiring Fund Indemnified Parties, including amounts paid by any one or
more of the Acquiring Fund Indemnified Parties in a compromise or settlement of
any such claim, suit, action, or proceeding, made with the consent of FTI Trust,
arising from any untrue statement or alleged untrue statement of a material fact
contained in the Form N-14 Registration Statement, as filed and in effect with
the SEC or any application; or which arises out of or is based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that FTI Trust and FTI Fund shall only be liable in such case to the
extent that any such loss, claim, demand, liability or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission about FTI Trust and/or FTI Fund or the transactions
contemplated by this Plan made in the Form N-14 Registration Statement or any
Application.
(d) A party seeking indemnification hereunder is hereinafter called the
"Indemnified Party" and the party from whom the indemnified party is seeking
indemnification hereunder is hereinafter called the "Indemnifying Party." Each
Indemnified Party shall notify the Indemnifying Party in writing within ten (10)
days of the receipt by one or more of the Indemnified Parties of any notice of
legal process of any suit brought against or claim made against such Indemnified
Party as to any matters covered by this Section 11, but the failure to notify
the Indemnifying Party shall not relieve the Indemnifying Party from any
liability which it may have to any Indemnified Party otherwise than under this
Section 11. The Indemnifying Party shall be entitled to participate at its own
expense in the defense of any claim, action, suit, or proceeding covered by this
Section 11, or, if it so elects, to assume at its own expense, the defense
thereof with counsel satisfactory to the Indemnified Parties; provided, however,
if the defendants in any such action include both the Indemnifying Party and any
Indemnified Party and the Indemnified Party shall have reasonably concluded that
there may be legal defenses available to it which are different from or
additional to those available to the Indemnifying Party, the Indemnified Party
shall have the right to select separate counsel to assume such legal defense and
to otherwise participate in the defense of such action on behalf of such
Indemnified Party.
Upon receipt of notice from the Indemnifying Party to the
Indemnified Parties of the election by the Indemnifying Party to assume the
defense of such action, the Indemnifying Party shall not be liable to such
Indemnified Parties under this Section 11 for any legal or other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof unless (i) the Indemnified Parties shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the
provision of the immediately preceding sentence (it being understood, however,
that the Indemnifying Parties shall not be liable for the expenses of more than
one separate counsel); (ii) the Indemnifying Parties do not employ counsel
reasonably satisfactory to the Indemnified Parties to represent the Indemnified
Parties within a reasonable amount of time after notice of commencement of the
action; or (iii) the Indemnifying Parties have authorized the employment of
counsel for the Indemnified Parties at its expense.
(e) This Section 11 shall survive the termination of this Plan.
12. LIABILITY OF FRANKLIN TRUST AND FTI TRUST.
-----------------------------------------
(a) Each party acknowledges and agrees that all obligations of Franklin Trust
under this Plan are binding only with respect to Franklin Fund; that any
liability of Franklin Trust under this Plan with respect to Franklin Trust, or
in connection with the transactions contemplated herein with respect to Franklin
Fund, shall be discharged only out of the assets of Franklin Fund; that no other
series of Franklin Trust shall be liable with respect to this Plan or in
connection with the transactions contemplated herein; and that neither FTI Trust
nor FTI Fund shall seek satisfaction of any such obligation or liability from
the shareholders of Franklin Trust, the trustees, officers, employees or agents
of Franklin Trust, or any of them.
(b) Each party acknowledges and agrees that all obligations of FTI Trust under
this Plan are binding only with respect to FTI Fund; that any liability of FTI
Trust under this Plan with respect to FTI Fund, or in connection with the
transactions contemplated herein with respect to FTI Fund, shall be discharged
only out of the assets of FTI Fund; that no other series of FTI Trust shall be
liable with respect to this Plan or in connection with the transactions
contemplated herein; and that neither Franklin Trust nor Franklin Fund shall
seek satisfaction of any such obligation or liability from the shareholders of
FTI Trust, the trustees, officers, employees or agents of FTI Trust, or any of
them.
13. ENTIRE AGREEMENT AND AMENDMENTS.
-------------------------------
This Plan embodies the entire agreement between the parties and there are
no agreements, understandings, restrictions, or warranties relating to the
transactions contemplated by this Plan other than those set forth herein or
herein provided for. This Plan may be amended only by mutual consent of the
parties in writing. Neither this Plan nor any interest herein may be assigned
without the prior written consent of the other party.
14. COUNTERPARTS.
------------
This Plan may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts together shall
constitute but one instrument.
15. NOTICES.
-------
Any notice, report, or demand required or permitted by any provision of
this Plan shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage prepaid, addressed to Franklin
Investors Securities Trust , at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx
00000, Attention: Secretary, or FTI Funds, at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx,
Xxxxxxxxxx 00000, Attention: Secretary, as the case may be.
16. GOVERNING LAW.
-------------
This Plan shall be governed by and carried out in accordance with the laws
of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, FTI Trust, on behalf of FTI Fund, and Franklin Trust, on
behalf of Franklin Fund, have each caused this Plan to be executed on its behalf
by its duly authorized officers, all as of the date and year first-above
written.
FRANKLIN INVESTORS SECURITIES TRUST, ON
BEHALF OF
FRANKLIN TOTAL RETURN FUND
Attest:
/s/Xxxxxx X. Xxxxxxx By:/s/ Xxxxx X. Xxxx
--------------------- -----------------
Xxxxxx X. Xxxxxxx Xxxxx X. Xxxx
Secretary Vice President
FTI FUNDS,
ON BEHALF OF
FTI BOND FUND
Attest:
/s/Xxxxxx X. Xxxxxxx By:/s/Xxxxx X. Xxxx
------------------------------ ----------------
Xxxxxx X. Xxxxxxx Xxxxx X. Xxxx
Secretary Vice President
