FRANKLIN INVESTORS SECURITIES TRUST
000 Xxxxxxxx Xxxxxx Xxxx.
Xxx Xxxxx, Xxxxxxxxxx 00000
Franklin/Xxxxxxxxx Distributors, Inc.
000 Xxxxxxx Xxxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000-0000
Re: Amended and Restated Distribution Agreement
Gentlemen:
We, FRANKLIN INVESTORS SECURITIES TRUST, (the "Fund") are a
corporation or business trust operating as an open-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.
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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
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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:
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(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
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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
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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 an open-end investment company. This Agreement
shall supersede all Distribution Agreements and Amendments previously in effect
between the parties. As used herein, the terms "net asset value," "offering
price," "investment company," "open-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 INVESTORS SECURITIES TRUST
By: /s/Xxxxx X. Xxxx
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Xxxxx X. Xxxx
Vice President &
Assistant Secretary
Accepted:
FRANKLIN/XXXXXXXXX DISTRIBUTORS, INC.
By: /s/Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Senior Vice President
Dated as of: October 31, 2000
