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 ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and Franklin
Investors Securities Trust ("FIST"), a Massachusetts business trust with its
principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, 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, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇. 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 ▇▇▇▇ ▇▇▇.
(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
3
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,
4
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.
5
(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.
6
(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
7
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 Stradley, Ronon, ▇▇▇▇▇▇▇ & ▇▇▇▇▇,
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);
8
(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, Ronon,
▇▇▇▇▇▇▇ & Young, 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;
9
(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 Stradley, Ronon, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, 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;
10
(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
11
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 Franklin 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.
12
(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.
9
(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.
13
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 ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Secretary.
14. GOVERNING LAW.
This Agreement shall be governed by and carried out in accordance with the
laws of the State of Delaware.
14
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 ofFRANKLIN
FLOATING RATE DAILY ACCESS FUND
Attest:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By:/s/▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------- -----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Secretary Vice President
FRANKLIN FLOATING RATE TRUST
Attest:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By:/s/▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------- -----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Secretary Vice President
15
