Franklin Federal Tax-Free Income Fund One Franklin Parkway. San Mateo, California 94404-1906
Franklin Federal
Tax-Free Income Fund
Xxx Xxxxxxxx Xxxxxxx.
Xxx Xxxxx,
Xxxxxxxxxx 00000-0000
Franklin/Xxxxxxxxx Distributors, Inc.
Xxx Xxxxxxxx Xxxxxxx.
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Re: Distribution Agreement
Gentlemen:
We, Franklin Federal Tax-Free Income Fund, (the “Fund”) are a Delaware statutory trust operating as an open-end management investment company or “mutual fund”, which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) and whose shares are registered under the Securities Act of 1933, as amended (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 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 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,” “assignment, ”“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 the enclosed copy, whereupon this will become a binding agreement as of the date set forth below.
Very truly yours,
Franklin Federal Tax-Free Income Fund
By:
__________________________
Xxxxx
X. Xxxxxxxx
Vice President &
Secretary
Accepted:
Franklin/Xxxxxxxxx Distributors, Inc.
By:
_________________________
Xxxxx
X. Xxxxx
President
Dated
as of: September 1, 2007
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Distribution Agree FFTFIF.doc
