FRANKLIN MUTUAL RECOVERY FUND
00 Xxxx X. Xxxxxxx Xxxx Xxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Franklin/Xxxxxxxxx Distributors, Inc.
Xxx Xxxxxxxx Xxxxxxx
Xxx Xxxxx, XX 00000-0000
Re: Distribution Agreement
Gentlemen:
We, Franklin Mutual Recovery Fund, (the "Fund") are a corporation
or statutory trust operating as a closed-end management investment company or
"mutual fund", which is registered under the Investment Company Act of 1940
(the "1940 Act") and whose shares are registered under the Securities Act of
1933 (the "1933 Act"). We desire to issue one or more series or classes of
our authorized but unissued shares of capital stock or beneficial interest
(the "Shares") to authorized persons in accordance with applicable Federal
and State securities laws. The Fund's Shares may be made available in one or
more separate series, each of which may have one or more classes.
You have informed us that your company is registered as a
broker-dealer under the provisions of the Securities Exchange Act of 1934 and
that your company is a member of the National Association of Securities
Dealers, Inc. You have indicated your desire to act as the exclusive selling
agent and distributor for the Shares. We have been authorized to execute and
deliver this Distribution Agreement ("Agreement") to you by a resolution of
our Board of Directors or Trustees ("Board") passed at a meeting at which a
majority of Board members, including a majority who are not otherwise
interested persons of the Fund and who are not interested persons of our
investment adviser, its related organizations or with you or your related
organizations, were present and voted in favor of the said resolution
approving this Agreement.
1. APPOINTMENT OF UNDERWRITER. Upon the execution of this Agreement
and in consideration of the agreements on your part herein expressed and upon
the terms and conditions set forth herein, we hereby appoint you as the
exclusive sales agent for our Shares and agree that we will deliver such
Shares as you may sell. You agree to use your best efforts to promote the
sale of Shares, but are not obligated to sell any specific number of Shares.
However, the Fund and each series retain the right to make direct
sales of its Shares without sales charges consistent with the terms of the
then current prospectus and statement of additional information and
applicable law, and to engage in other legally authorized transactions in its
Shares which do not involve the sale of Shares to the general public. Such
other transactions may include, without limitation, transactions between the
Fund or any series or class and its shareholders only, transactions involving
the reorganization of the Fund or any series, and transactions involving the
merger or combination of the Fund or any series with another corporation or
trust.
2. INDEPENDENT CONTRACTOR. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no
authority or power to obligate or bind us by your actions, conduct or
contracts except that you are authorized to promote the sale of Shares. You
may appoint sub-agents or distribute through dealers or otherwise as you may
determine from time to time, but this Agreement shall not be construed as
authorizing any dealer or other person to accept orders for sale or
repurchase on our behalf or otherwise act as our agent for any purpose.
3. OFFERING PRICE. Shares shall be offered for sale at a price
equivalent to the net asset value per share of that series and class plus any
applicable percentage of the public offering price as sales commission or as
otherwise set forth in our then current prospectus. On each business day on
which the New York Stock Exchange is open for business, we will furnish you
with the net asset value of the Shares of each available series and class
which shall be determined in accordance with our then effective prospectus.
All Shares will be sold in the manner set forth in our then effective
prospectus and statement of additional information, and in compliance with
applicable law.
4. COMPENSATION.
A. SALES COMMISSION. You shall be entitled to charge a sales
commission on the sale or redemption, as appropriate, of each series and
class of each Fund's Shares in the amount of any initial, deferred or
contingent deferred sales charge as set forth in our then effective
prospectus. You may allow any sub-agents or dealers such commissions or
discounts from and not exceeding the total sales commission as you shall deem
advisable, so long as any such commissions or discounts are set forth in our
current prospectus to the extent required by the applicable Federal and State
securities laws. You may also make payments to sub-agents or dealers from
your own resources, subject to the following conditions: (a) any such
payments shall not create any obligation for or recourse against the Fund or
any series or class, and (b) the terms and conditions of any such payments
are consistent with our prospectus and applicable federal and state
securities laws and are disclosed in our prospectus or statement of
additional information to the extent such laws may require.
B. DISTRIBUTION PLANS. YOU SHALL ALSO BE ENTITLED TO
COMPENSATION FOR YOUR SERVICES AS PROVIDED IN ANY DISTRIBUTION PLAN ADOPTED
AS TO ANY SERIES AND CLASS OF ANY FUND'S SHARES PURSUANT TO RULE 12B-1 UNDER
THE 1940 ACT.
THE COMPENSATION PROVIDED IN THE CLASS B DISTRIBUTION PLAN
APPLICABLE TO CLASS B SHARES (THE "CLASS B PLAN") IS DIVIDED INTO A
DISTRIBUTION FEE AND A SERVICE FEE, EACH OF WHICH FEES IS IN COMPENSATION FOR
DIFFERENT SERVICES TO BE RENDERED TO THE FUND. SUBJECT TO THE TERMINATION
PROVISIONS IN THE CLASS B PLAN, THE DISTRIBUTION FEE WITH RESPECT TO THE SALE
OF A CLASS B SHARE SHALL BE EARNED WHEN SUCH CLASS B SHARE IS SOLD AND SHALL
BE PAYABLE FROM TIME TO TIME AS PROVIDED IN THE CLASS B PLAN. THE
DISTRIBUTION FEE PAYABLE TO YOU AS PROVIDED IN THE CLASS B PLAN SHALL BE
PAYABLE WITHOUT OFFSET, DEFENSE OR COUNTERCLAIM (IT BEING UNDERSTOOD BY THE
PARTIES HERETO THAT NOTHING IN THIS SENTENCE SHALL BE DEEMED A WAIVER BY THE
FUND OF ANY CLAIM THE FUND MAY HAVE AGAINST YOU). YOU MAY DIRECT THE FUND TO
CAUSE OUR CUSTODIAN TO PAY SUCH DISTRIBUTION FEE TO LIGHTNING FINANCE COMPANY
LIMITED ("LFL") OR OTHER PERSONS PROVIDING FUNDS TO YOU TO COVER EXPENSES
REFERRED TO IN SECTION 2(A) OF THE CLASS B PLAN AND TO CAUSE OUR CUSTODIAN TO
PAY THE SERVICE FEE TO YOU TO COVER EXPENSES REFERRED TO IN SECTION 2(B) OF
THE CLASS B PLAN.
WE UNDERSTAND THAT YOU INTEND TO ASSIGN YOUR RIGHT TO RECEIVE
CERTAIN DISTRIBUTION FEES WITH RESPECT TO CLASS B SHARES TO LFL IN EXCHANGE
FOR FUNDS THAT YOU WILL USE TO COVER EXPENSES REFERRED TO IN SECTION 2(A) OF
THE CLASS B PLAN. IN RECOGNITION THAT WE WILL BENEFIT FROM YOUR ARRANGEMENT
WITH LFL, WE AGREE THAT, IN ADDITION TO THE PROVISIONS OF SECTION 7(III) OF
THE CLASS B PLAN, WE WILL NOT PAY TO ANY PERSON OR ENTITY, OTHER THAN LFL,
ANY SUCH ASSIGNED DISTRIBUTION FEES RELATED TO CLASS B SHARES SOLD BY YOU
PRIOR TO THE TERMINATION OF EITHER THE AGREEMENT OR THE CLASS B PLAN. WE
AGREE THAT THE PRECEDING SENTENCE SHALL SURVIVE TERMINATION OF THE AGREEMENT.
THE COMPENSATION PROVIDED IN THE CLASS C DISTRIBUTION PLAN
APPLICABLE TO CLASS C SHARES (THE "CLASS C PLAN") IS DIVIDED INTO A
DISTRIBUTION FEE AND A SERVICE FEE, EACH OF WHICH FEES IS IN COMPENSATION FOR
DIFFERENT SERVICES TO BE RENDERED TO THE FUND. SUBJECT TO THE TERMINATION
PROVISIONS IN THE CLASS C PLAN, THE DISTRIBUTION FEE WITH RESPECT TO THE SALE
OF A CLASS C SHARE SHALL BE EARNED WHEN SUCH CLASS C SHARE IS SOLD AND SHALL
BE PAYABLE FROM TIME TO TIME AS PROVIDED IN THE CLASS C PLAN SHALL BE PAYABLE
WITHOUT OFFSET, DEFENSE OR COUNTERCLAIM (IT BEING UNDERSTOOD BY THE PARTIES
HERETO THAT NOTHING IN THIS SENTENCE SHALL BE DEEMED A WAIVER BY THE FUND OF
ANY CLAIM THE FUND MAY HAVE AGAINST YOU). YOU MAY DIRECT THE FUND TO CAUSE
OUR CUSTODIAN TO PAY SUCH DISTRIBUTION FEE TO LIGHTNING FINANCE COMPANY
LIMITED ("LFL") OR OTHER PERSONS PROVIDING FUNDS TO YOU TO COVER EXPENSES
REFERRED TO IN SECTION 2(A) OF THE CLASS C PLAN AND TO CAUSE OUR CUSTODIAN TO
PAY THE SERVICE FEE TO YOU TO COVER EXPENSES REFERRED TO IN SECTION 2(B) OF
THE CLASS C PLAN.
WE UNDERSTAND THAT YOU INTEND TO ASSIGN YOUR RIGHT TO RECEIVE
CERTAIN DISTRIBUTION FEES WITH RESPECT TO CLASS C SHARES TO LFL IN EXCHANGE
FOR FUNDS THAT YOU WILL USE TO COVER EXPENSES REFERRED TO IN SECTION 2(A) OF
THE CLASS C PLAN. IN RECOGNITION THAT WE WILL BENEFIT FROM YOUR ARRANGEMENT
WITH LFL, WE AGREE THAT, IN ADDITION TO THE PROVISIONS OF SECTION 7(III) OF
THE CLASS C PLAN, WE WILL NOT PAY TO ANY PERSON OR ENTITY, OTHER THAN LFL,
ANY SUCH ASSIGNED DISTRIBUTION FEES RELATED TO CLASS C SHARES SOLD BY YOU
PRIOR TO THE TERMINATION OF EITHER THE AGREEMENT OR THE CLASS C PLAN. WE
AGREE THAT THE PRECEDING SENTENCE SHALL SURVIVE TERMINATION OF THE AGREEMENT.
C. WITH RESPECT TO THE SALES COMMISSION ON THE REDEMPTION OF
SHARES OF EACH SERIES AND CLASS OF FUND AS PROVIDED IN SUBSECTION 4.A. ABOVE,
WE WILL CAUSE OUR SHAREHOLDER SERVICES AGENT (THE "TRANSFER AGENT") TO
WITHHOLD FROM REDEMPTION PROCEEDS PAYABLE TO HOLDERS OF THE SHARES ALL
CONTINGENT DEFERRED SALES CHARGES PROPERLY PAYABLE BY SUCH HOLDERS IN
ACCORDANCE WITH THE TERMS OF OUR THEN CURRENT PROSPECTUSES AND STATEMENTS OF
ADDITIONAL INFORMATION (EACH SUCH SALES CHARGE, A "CDSC"). UPON RECEIPT OF
AN ORDER FOR REDEMPTION, THE TRANSFER AGENT SHALL DIRECT OUR CUSTODIAN TO
TRANSFER SUCH REDEMPTION PROCEEDS TO A GENERAL TRUST ACCOUNT. WE SHALL THEN
CAUSE THE TRANSFER AGENT TO PAY OVER TO YOU OR YOUR ASSIGNS FROM THE GENERAL
TRUST ACCOUNT SUCH CDSCS PROPERLY PAYABLE BY SUCH HOLDERS AS PROMPTLY AS
POSSIBLE AFTER THE SETTLEMENT DATE FOR EACH SUCH REDEMPTION OF SHARES. CDSCS
SHALL BE PAYABLE WITHOUT OFFSET, DEFENSE OR COUNTERCLAIM (IT BEING UNDERSTOOD
THAT NOTHING IN THIS SENTENCE SHALL BE DEEMED A WAIVER BY US OF ANY CLAIM WE
MAY HAVE AGAINST YOU.) YOU MAY DIRECT THAT THE CDSCS PAYABLE TO YOU BE PAID
TO ANY OTHER PERSON.
5. TERMS AND CONDITIONS OF SALES. Shares shall be offered for sale
only in those jurisdictions where they have been properly registered or are
exempt from registration, and only to those groups of people which the Board
may from time to time determine to be eligible to purchase such shares.
6. ORDERS AND PAYMENT FOR SHARES. Orders for Shares shall be directed
to the Fund's shareholder services agent, for acceptance on behalf of the
Fund. At or prior to the time of delivery of any of our Shares you will pay
or cause to be paid to the custodian of the Fund's assets, for our account,
an amount in cash equal to the net asset value of such Shares. Sales of
Shares shall be deemed to be made when and where accepted by the Fund's
shareholder services agent. The Fund's custodian and shareholder services
agent shall be identified in its prospectus.
7. PURCHASES FOR YOUR OWN ACCOUNT. You shall not purchase our Shares
for your own account for purposes of resale to the public, but you may
purchase Shares for your own investment account upon your written assurance
that the purchase is for investment purposes and that the Shares will not be
resold except through redemption by us.
8. SALE OF SHARES TO AFFILIATES. You may sell our Shares at net asset
value to certain of your and our affiliated persons pursuant to the
applicable provisions of the federal securities statutes and rules or
regulations thereunder (the "Rules and Regulations"), including Rule 22d-1
under the 1940 Act, as amended from time to time.
9. ALLOCATION OF EXPENSES. We will pay the expenses:
(a) Of the preparation of the audited and certified financial
statements of our company to be included in any Post-Effective
Amendments ("Amendments") to our Registration Statement under
the 1933 Act or 1940 Act, including the prospectus and
statement of additional information included therein;
(b) Of the preparation, including legal fees, and printing of all
Amendments or supplements filed with the Securities and
Exchange Commission, including the copies of the prospectuses
included in the Amendments and the first 10 copies of the
definitive prospectuses or supplements thereto, other than
those necessitated by your (including your "Parent's")
activities or Rules and Regulations related to your activities
where such Amendments or supplements result in expenses which
we would not otherwise have incurred;
(c) Of the preparation, printing and distribution of any reports
or communications which we send to our existing shareholders;
and
(d) Of filing and other fees to Federal and State securities
regulatory authorities necessary to continue offering our
Shares.
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any supplements
thereto and statements of additional information which are
necessary to continue to offer our Shares;
(b) Of the preparation, excluding legal fees, and printing of all
Amendments and supplements to our prospectuses and statements
of additional information if the Amendment or supplement
arises from your (including your "Parent's" activities or
Rules and Regulations related to your activities and those
expenses would not otherwise have been incurred by us;
(c) Of printing additional copies, for use by you as sales
literature, of reports or other communications which we have
prepared for distribution to our existing shareholders; and
(d) Incurred by you in advertising, promoting and selling our
Shares.
10. FURNISHING OF INFORMATION. We will furnish to you such information
with respect to each series and class of Shares, in such form and signed by
such of our officers as you may reasonably request, and we warrant that the
statements therein contained, when so signed, will be true and correct. We
will also furnish you with such information and will take such action as you
may reasonably request in order to qualify our Shares for sale to the public
under the Blue Sky Laws of jurisdictions in which you may wish to offer
them. We will furnish you with annual audited financial statements of our
books and accounts certified by independent public accountants, with
semi-annual financial statements prepared by us, with registration statements
and, from time to time, with such additional information regarding our
financial condition as you may reasonably request.
11. CONDUCT OF BUSINESS. Other than our currently effective
prospectus, you will not issue any sales material or statements except
literature or advertising which conforms to the requirements of Federal and
State securities laws and regulations and which have been filed, where
necessary, with the appropriate regulatory authorities. You will furnish us
with copies of all such materials prior to their use and no such material
shall be published if we shall reasonably and promptly object.
You shall comply with the applicable Federal and State laws and
regulations where our Shares are offered for sale and conduct your affairs
with us and with dealers, brokers or investors in accordance with the Conduct
Rules of the National Association of Securities Dealers, Inc.
12. REDEMPTION OR REPURCHASE WITHIN SEVEN DAYS. If Shares are tendered
to us for redemption or repurchase by us within seven business days after
your acceptance of the original purchase order for such Shares, you will
immediately refund to us the full sales commission (net of allowances to
dealers or brokers) allowed to you on the original sale, and will promptly,
upon receipt thereof, pay to us any refunds from dealers or brokers of the
balance of sales commissions reallowed by you. We shall notify you of such
tender for redemption within 10 days of the day on which notice of such
tender for redemption is received by us.
13. OTHER ACTIVITIES. Your services pursuant to this Agreement shall
not be deemed to be exclusive, and you may render similar services and act as
an underwriter, distributor or dealer for other investment companies in the
offering of their shares.
14. TERM OF AGREEMENT. This Agreement shall become effective on the
date of its execution, and shall remain in effect for a period of two (2)
years. The Agreement is renewable annually thereafter, with respect to the
Fund or, if the Fund has more than one series, with respect to each series,
for successive periods not to exceed one year (i) by a vote of (a) a majority
of the outstanding voting securities of the Fund or, if the Fund has more
than one series, of each series, or (b) by a vote of the Board, AND (ii) by a
vote of a majority of the members of the Board who are not parties to the
Agreement or interested persons of any parties to the Agreement (other than
as members of the Board), cast in person at a meeting called for the purpose
of voting on the Agreement.
This Agreement may at any time be terminated by the Fund or by any
series without the payment of any penalty, (i) either by vote of the Board or
by vote of a majority of the outstanding voting securities of the Fund or any
series on 90 days' written notice to you; or (ii) by you on 90 days' written
notice to the Fund; and shall immediately terminate with respect to the Fund
and each series in the event of its assignment.
15. SUSPENSION OF SALES. We reserve the right at all times to suspend
or limit the public offering of Shares upon two days' written notice to you.
16. MISCELLANEOUS. This Agreement shall be subject to the laws of the
State of California and shall be interpreted and construed to further promote
the operation of the Fund as a closed-end investment company. As used
herein, the terms "net asset value," "offering price," "investment company,"
"closed-end investment company," "principal underwriter," "interested person,"
"Parent," "affiliated person," and "majority of the outstanding voting
securities" shall have the meanings set forth in the 1933 Act or the 1940 Act
and the Rules and Regulations thereunder and the term "assignment" shall have
the meaning as set forth in the 1940 Act and the Rules and Regulations
thereunder.
Nothing herein shall be deemed to protect you against any liability
to us or to our securities holders to which you would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your reckless disregard
of your obligations and duties hereunder.
If the foregoing meets with your approval, please acknowledge your
acceptance by signing each of the enclosed copies, whereupon this will become
a binding agreement as of the date set forth below.
Very truly yours,
FRANKLIN MUTUAL RECOVERY FUND
By:____________________________
[NAME]
[TITLE]
Accepted:
FRANKLIN/XXXXXXXXX DISTRIBUTORS, INC.
By:_____________________________
[NAME]
[TITLE]
DATED:_______________
