SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
FRANKLIN RESOURCES, INC.
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)and 0-11.
1) Title of each class of securities to which transaction applies:
..............................................................
2) Aggregate number of securities to which transaction applies:
..............................................................
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
..............................................................
4) Proposed maximum aggregate value of transaction:
..............................................................
5) Total fee paid:
..............................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed: [ ]
FRANKLIN RESOURCES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholder:
The Board of Directors of Franklin Resources, Inc. invites you to attend
the Annual Meeting of Stockholders. The meeting will be held at 10:00
A.M., Pacific Standard Time, on January 25, 2001 in our principal
executive offices located at 777 Mariners Island Boulevard, San Mateo,
California 94404 U.S.A.
At this meeting, we will ask you to consider and vote on:
1. Electing nine (9) Directors to the Board of Directors. Each
Director will hold office until the next Annual Meeting of
Stockholders or until that person's successor is elected and
qualified;
2. Ratifying the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for the current fiscal year
ending September 30, 2001; and
3. Ratifying and approving the Amended and Restated 1998 Universal
Stock Incentive Plan.
We will also transact such other business that may be raised at the Annual
Meeting or any adjournments or postponements of the Annual Meeting.
You must own shares at the close of business on December 1, 2000 to be
entitled to receive notice of, and to vote on, all matters presented at
the meeting. Your vote is very important. Even if you think that you will
attend the meeting, we ask you to please return the proxy card. You can
vote by telephone, over the Internet, or by using the proxy card that is
enclosed.
Thank you for your participation in the Annual Meeting.
Leslie M. Kratter
Secretary
December 18, 2000
San Mateo, California, U.S.A.
PLEASE VOTE BY TELEPHONE OR USING THE INTERNET AS INSTRUCTED ON THE
ENCLOSED PROXY CARD OR COMPLETE, SIGN AND RETURN THE PROXY CARD IN THE
ENCLOSED ENVELOPE.
2
TABLE OF CONTENTS
SECTION PAGE
NOTICE OF ANNUAL MEETING COVER PAGE
PROXY STATEMENT 4
VOTING INFORMATION 4
PROPOSAL 1: ELECTION OF DIRECTORS 6
DIRECTOR BIOGRAPHIES 6
BOARD AND COMMITTEE MEETINGS 8
PRINCIPAL HOLDERS OF VOTING SECURITIES 9
SECURITY OWNERSHIP OF MANAGEMENT 10
EXECUTIVE COMPENSATION 12
SUMMARY COMPENSATION TABLE 12
OPTION GRANTS IN LAST FISCAL YEAR 15
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR 16
COMPENSATION COMMITTEE REPORT 17
EMPLOYMENT CONTRACTS 19
AUDIT COMMITTEE REPORT 20
PERFORMANCE GRAPH 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 23
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE 25
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS 25
PROPOSAL 3: RATIFICATION AND APPROVAL OF THE AMENDED
AND RESTATED 1998 UNIVERSAL STOCK INCENTIVE PLAN 26
STOCKHOLDER PROPOSALS 30
EXHIBIT A: AUDIT COMMITTEE CHARTER 34
EXHIBIT B: AMENDED AND RESTATED 1998 UNIVERSAL
STOCK INCENTIVE PLAN 37
3
FRANKLIN RESOURCES, INC.
777 MARINERS ISLAND BLVD.
SAN MATEO, CALIFORNIA 94404
PROXY STATEMENT
DECEMBER 18, 2000
This Proxy Statement and the accompanying Notice of Annual Meeting are furnished
in connection with the solicitation by the Board of Directors of Franklin
Resources, Inc., a Delaware corporation ("Franklin" or the "Company"), of the
accompanying proxy, to be voted at the Annual Meeting of stockholders to be held
at the offices of Franklin, 777 Mariners Island Boulevard, San Mateo, California
U.S.A., on January 25, 2001, at 10:00 A.M., Pacific Standard Time. We expect
that this Proxy Statement and the enclosed proxy will be mailed on or about
December 18, 2000 to each stockholder entitled to vote.
VOTING INFORMATION
WHO CAN VOTE?
You may vote if you were a stockholder of record and owned shares at the close
of business on December 1, 2000 (the "Record Date"). You are entitled to one
vote for each share owned on that date on each matter presented at the meeting.
As of the Record Date, Franklin had 243,618,404 shares outstanding.
HOW MANY VOTES DO YOU NEED TO HOLD THE MEETING?
In order to take any action at the Annual Meeting, a majority of Franklin's
outstanding shares as of the record date must be present at the meeting. This is
called a quorum.
WHO COUNTS THE VOTES?
The Bank of New York will count the votes.
WHAT IS A PROXY?
A "proxy" allows someone else (the "proxy holder") to vote your shares on your
behalf. The Franklin Board of Directors is asking you to allow the people named
on the proxy card (Charles B. Johnson, the C.E.O.; Harmon E. Burns, the Vice
Chairman; and Leslie M. Kratter, the Secretary) to vote your shares at the
Annual Meeting.
HOW DO I VOTE BY PROXY?
Whether you hold shares directly as a stockholder of record or beneficially in
street name, you may vote without attending the meeting. You may vote by
granting a proxy or, for shares held in street name, by submitting voting
instructions to your stockbroker or nominee. In most cases you will be able to
do this by telephone, using the Internet or by mail. Please see your proxy card
or the information your bank, broker, or other holder of record provided you for
more information on these options.
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CAN I CHANGE OR REVOKE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. You can change or revoke your proxy by telephone, using the Internet,
or by mail, at any time before the Annual Meeting.
CAN I VOTE IN PERSON AT THE ANNUAL MEETING INSTEAD OF VOTING BY PROXY?
Yes. However, we encourage you to complete and return the enclosed proxy
card to ensure that your shares are represented and voted.
HOW ARE VOTES COUNTED?
To be counted as "represented", either a proxy card must have been returned for
those shares, or the stockholder must be present at the meeting. The New York
Stock Exchange (the "NYSE") allows brokers to cast votes for some routine
proposals, such as electing Directors and ratifying accountants, even if you do
not return your proxy card. Therefore, if you hold shares in a brokerage
account, but you do not return your proxy card, your broker can still vote your
shares. Abstentions and broker "non-votes" are counted as present and entitled
to vote for purposes of determining a quorum. A broker "non-vote" occurs when a
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power for that
particular item and has not received instructions from the beneficial owner.
WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE PROPOSALS?
For the election of Directors, a plurality of the votes cast is required. This
means that the nine (9) candidates who receive the most votes will be elected to
the nine (9) available memberships on the Board. An affirmative vote of a
majority of shares represented at the Annual Meeting is required to approve the
appointment of PricewaterhouseCoopers LLP. An affirmative vote of a majority of
shares represented at the Annual Meeting is required to approve the ratification
and approval of the Amended and Restated 1998 Universal Stock Incentive Plan.
Abstentions and broker "non-votes" are not counted for purposes of election of
Directors or approving the other matters. Abstentions have the practical effect
of a vote "against" the matter; in contrast, a broker "non-vote" has the
practical effect of reducing the aggregate number of "for" votes required to
pass the matter
Unless you indicate otherwise on your proxy card, the persons named as your
proxy holders on the proxy card will vote your shares FOR all the nominees for
Directors, FOR the approval of the appointment of PricewaterhouseCoopers LLP and
FOR the ratification and approval of the Amended and Restated 1998 Universal
Stock Incentive Plan.
WHO PAYS FOR THIS PROXY SOLICITATION?
Your proxy is solicited by the Board of Directors of Franklin. Franklin pays the
cost of soliciting your proxy and reimburses brokerage costs and other fees for
forwarding proxy materials to you.
5
PROPOSAL 1: ELECTION OF DIRECTORS
The following nine (9) persons are nominated for election as members of the
Board of Directors of Franklin Resources, Inc. If elected, each Director will
serve until the next Annual Meeting of Stockholders or until that person's
successor is elected and qualified. Unless you mark "Exceptions" on your proxy
card to withhold authority to vote for one or all of these Directors, the
persons named as proxy holders intend to vote for each of these nominees. Listed
below are the names, ages, and principal occupations of the Director nominees
for the past five years.
CHARLES B. JOHNSON
AGE 67
DIRECTOR SINCE 1969
Chairman of the Board, Chief Executive Officer, Member - Office of the Chairman
and Director of the Company; officer and/or Director of many other Company
subsidiaries; officer and/or Director or trustee of 49 of the investment
companies in the Franklin Templeton group of funds.
RUPERT H. JOHNSON, JR.
AGE 60
DIRECTOR SINCE 1969
Vice Chairman, Member - Office of the Chairman and Director of the Company;
officer and/or Director of many other Company subsidiaries; officer and/or
Director or trustee of 52 of the investment companies in the Franklin Templeton
group of funds.
LOUIS E. WOODWORTH
AGE 67
DIRECTOR SINCE 1981
Private investor. President, Alpine Corp., a private investment company.
HARRY O. KLINE
AGE 73
DIRECTOR SINCE 1990
Private investor. Vice President and Regional Sales Manager of
Franklin/Templeton Distributors, Inc. from 1980 to 1990. Over 48 years
experience in the mutual fund industry.
HARMON E. BURNS
AGE 55
DIRECTOR SINCE 1991
Vice Chairman, Member - Office of the Chairman and Director of the Company;
officer and/or Director of many other Company subsidiaries; officer and/or
Director or trustee of 52 of the investment companies in the Franklin Templeton
group of funds.
6
PETER M. SACERDOTE
AGE 63
DIRECTOR SINCE 1993
Advisory Director and Chairman of the Investment Committee of Goldman, Sachs
& Co. (investment banking) and G.S. Capital Partners, L.P. (merchant banking
fund). Director, Qualcomm, Inc. and AMF Bowling, Inc. Formerly a general
partner and then a limited partner of the Goldman Sachs Group, L.P.
CHARLES E. JOHNSON
AGE 44
DIRECTOR SINCE 1993
President, Member - Office of the President, and Director of the Company;
officer and/or Director of many other Company subsidiaries; officer and/or
Director or trustee of 33 of the investment companies in the Franklin Templeton
group of funds.
JAMES A. MCCARTHY
AGE 65
DIRECTOR SINCE 1997
Private investor. From 1993 to 1995, Chairman of Merrill Lynch & Co. Investor
Client Coverage Groups; formerly, Senior Vice President of Merrill Lynch and
Director, Global Institutional Sales. Total of 35 years experience with Merrill
Lynch.
ANNE M. TATLOCK
AGE 61
Chairman of the Board and Chief Executive Officer of Fiduciary Trust Company
International. Director, Fiduciary Trust Company International, American
General Corp., Fortune Brands, Inc., and Merck & Co., Inc.
FAMILY RELATIONS Charles B. Johnson and Rupert H. Johnson, Jr. are
brothers. Peter M. Sacerdote is a brother-in-law of Charles B. Johnson and
Rupert H. Johnson, Jr. Charles E. Johnson is the son of Charles B. Johnson
and the nephew of Rupert H. Johnson, Jr. and Peter M. Sacerdote.
PAYMENTS TO DIRECTORS Directors who were not Franklin officers were paid $7,500
per quarter, plus $3,000 per meeting attended, during the last fiscal year. An
additional $1,500 per committee meeting attended is paid to Directors who serve
on Board committees. In addition, the Company has a policy of reimbursing
certain health insurance coverage for a Director or Director emeritus (described
below), who is retired from other employment and is not otherwise eligible for
group health coverage under Franklin's group health plan or any other company's
health plan. Franklin will reimburse the cost of health insurance coverage
comparable to that provided to other Franklin employees. During the fiscal year
ended September 30, 2000, Louis E. Woodworth, a Director, was reimbursed $5,364
for health insurance expenses, and Harry O. Kline, a Director, was reimbursed
$4,284 for health insurance expenses.
7
DEFERRED DIRECTOR FEES Franklin also allows Directors to defer payment of their
Directors' fees, and to treat the deferred amounts as hypothetical investments
in Franklin common stock. Upon termination, the number of shares of stock that
the Director hypothetically purchased are added together, and Franklin must pay
the Director an amount equal to the value of the hypothetical investment,
including dividend reinvestment. Either Franklin or the individual Director can
terminate the fee deferral with ninety (90) days notice. During the 2000 fiscal
year, Louis E. Woodworth elected to defer his Directors' fees. As of September
30, 2000, the amount accrued for Mr. Woodworth's benefit pursuant to the
deferral policy, based upon the price of $44.43 per share on that day, was
$574,046.85. The amount that Mr. Woodworth actually receives for the
hypothetical investment, however, will depend on the closing price of Franklin's
common stock on the NYSE on the day that his deferral plan terminates.
DIRECTORS EMERITUS The Board of Directors has adopted a policy that when a
Director reaches the age of 75, and is not otherwise a Franklin officer or
employee, the Director will retire and will not stand for re-election. The
retired Director is then eligible to serve as a Director emeritus, without
voting authority. The Board of Directors determines the amount and type of
compensation and benefits that a Director emeritus is entitled to receive. The
Director emeritus provides services to the Board of Directors as may be mutually
determined between the Director emeritus and the Board of Directors from time to
time. Currently, a Director emeritus receives compensation equal to the
compensation paid to a Director who attends each meeting of the Board. During
the fiscal year ended September 30, 2000, Dr. Judson R. Grosvenor served as a
Director emeritus and received the compensation and benefits described above
under "Payments to Directors".
BOARD AND COMMITTEE MEETINGS The Board of Directors held five (5) meetings (not
including committee meetings) during the fiscal year ended September 30, 2000.
Except for F. Warren Hellman, who had resigned as a Director during the fiscal
year ended September 30, 2000, each active Director attended at least eighty
percent (80%) of the aggregate number of meetings held by the Board. The Board
has an Audit Committee and a Compensation Committee, but does not have a
nominating committee.
The Compensation Committee consists of Messrs. Woodworth (Chairman), Sacerdote
and McCarthy. The Compensation Committee reviews and sets compensation for the
Chief Executive Officer, determines the general policies and guidelines for
compensating other executive officers, and performs other duties as assigned
from time to time by the Board. This committee also administers the 1998
Universal Stock Incentive Plan (the "1998 Stock Plan") and the 1994 Amended
Annual Incentive Compensation Plan (the "Incentive Plan"). The Compensation
Committee met three (3) times during the 2000 fiscal year.
8
PRINCIPAL HOLDERS OF VOTING SECURITIES
As of December 1, 2000, Franklin knows of the following persons who beneficially
own more than five percent (5%) of Franklin's total outstanding common stock:
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER(a) BENEFICIAL OWNERSHIP(b) VOTING SECURITIES
Charles B. Johnson 46,868,502(c) 19.24%
Rupert H. Johnson, Jr. 38,188,286(d) 15.68%
R. Martin Wiskemann 22,087,724(e) 9.07%
(a) The addresses of Messrs. C. B. Johnson, R. H. Johnson, Jr. and R. M.
Wiskemann are: c/o Franklin Resources, Inc., 777 Mariners Island Boulevard,
San Mateo, CA 94404 U.S.A.
(b) Includes 7,353 shares for Mr. C. B. Johnson and 22,687 shares for R. H.
Johnson, Jr., in each case, which may be purchased pursuant to currently
exercisable options.
(c) Includes 39,103,061 shares held directly. Also includes 3,963,675
shares held in an IRA account and 3,000,000 shares held in a limited
partnership for all of which Mr. C. B. Johnson holds sole voting and
investment power. Also includes approximately 6,447 shares which represent
a pro-rata number of shares equivalent to Mr. C. B. Johnson's percentage of
ownership of the holdings of the Franklin Templeton Profit Sharing 401(k)
Plan, (the "Profit Sharing Plan") as of September 30, 2000. Mr. C. B.
Johnson disclaims any beneficial ownership of such shares. Also includes
787,966 shares of which Mr. C. B. Johnson disclaims beneficial ownership,
held by a private foundation of which Mr. C. B. Johnson is a trustee.
(d) Includes 35,577,727 shares held directly and 2,205,245 shares held in
an IRA account for which Mr. R. H. Johnson, Jr. holds sole voting and
investment power. Also includes approximately 5,421 shares which represent
a pro-rata number of shares equivalent to Mr. R. H. Johnson, Jr.'s
percentage of ownership of the holdings of the Profit Sharing Plan as of
September 30, 2000. Mr. R. H. Johnson, Jr. disclaims any beneficial
ownership of such shares. Also includes 373,834 shares of which Mr. R. H.
Johnson, Jr. disclaims beneficial ownership, held by a private foundation
of which Mr. R. H. Johnson, Jr. is a trustee. Also includes 3,372 shares
held by a member of Mr. R. H. Johnson Jr.'s immediate family, of which Mr.
R. H. Johnson, Jr. disclaims beneficial ownership.
(e) Includes 20,883,474 shares held directly and 1,065,680 shares held in
an IRA account for which Mr. R. M. Wiskemann holds sole voting and
investment power. Also includes a total of 844 shares of unvested
restricted stock under the 1998 Stock Plan. Also includes 137,726 shares of
which Mr. R. M. Wiskemann disclaims beneficial ownership, held by a private
foundation, of which Mr. R. M. Wiskemann is a trustee.
9
SECURITY OWNERSHIP OF MANAGEMENT
The following table lists the common stock beneficially owned by each Director,
each executive officer named in the Summary Compensation Table, each nominee for
Director and all Directors, nominees and executive officers as a group. The
stock holdings are listed as of December 1, 2000:
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP PERCENT OF CLASS
Harmon E. Burns 1,869,296(a) *
Martin L. Flanagan 634,151(b) *
Allen J. Gula, Jr. 44,640(c) *
Charles B. Johnson 46,868,502(d) 19.24%
Charles E. Johnson 330,330(e) *
Gregory E. Johnson 459,408(f) *
Rupert H. Johnson, Jr. 38,188,286(g) 15.68%
Harry O. Kline 3,000 *
James A. McCarthy 5,000 *
Peter M. Sacerdote 25,000 *
Anne M. Tatlock 0(h) *
Louis E. Woodworth 1,954,928(i) *
Directors, Director
Nominees and
Executive Officers as a
Group (consisting of
19 persons) 91,385,215(j) 37.51%
* Represents less than 1% of class
(a) Includes 1,263,800 shares held directly and 500,002 shares held in an
IRA account for which Mr. H. E. Burns holds sole voting and investment
power. Also includes 22,687 shares, which may be purchased pursuant to
currently exercisable options. Also includes 77,998 shares of which Mr. H.
E. Burns disclaims beneficial ownership, held by a private foundation of
which Mr. H. E. Burns is a trustee. Also includes approximately 4,809
shares which represent a pro-rata number of shares equivalent to Mr. H. E.
Burns' percentage of ownership of the holdings of the Profit Sharing Plan,
as of September 30, 2000. Mr. H. E. Burns disclaims any beneficial
ownership of such shares.
(b) Includes 606,328 shares held directly for which Mr. M. L. Flanagan
holds sole voting and investment power. Also includes 27,224 shares, which
may be purchased pursuant to currently exercisable options. Also includes
approximately 599 shares which represent a pro-rata number of shares
equivalent to Mr. M. L. Flanagan's percentage of ownership of the holdings
of the Profit Sharing Plan, as of September 30, 2000. Mr. M. L. Flanagan
disclaims any beneficial ownership of such shares.
10
(c) Includes 6,825 shares held directly for which Mr. A. J. Gula, Jr. holds
sole voting and investment power. Also includes 16,667 shares, which may be
purchased pursuant to currently exercisable options. Also includes a total
of 21,148 shares of unvested restricted stock granted in September 1999
under the 1998 Stock Plan.
(d) See footnotes (b) and (c) under "Principal Holders of Voting
Securities."
(e) Includes 296,869 shares held directly for which Mr. C. E. Johnson holds
sole voting and investment power. Also includes 27,224 shares, which may be
purchased pursuant to currently exercisable options. Also includes 6,237
shares held by members of Mr. C. E. Johnson's immediate family, of which
Mr. C. E. Johnson disclaims beneficial ownership.
(f) Includes 421,448 shares held directly for which Mr. G. E. Johnson holds
sole voting and investment power. Also includes 25,422 shares, which may be
purchased pursuant to currently exercisable options. Also includes 12,538
shares held by members of Mr. G. E. Johnson's immediate family, of which
Mr. G. E. Johnson disclaims beneficial ownership.
(g) See footnotes (b) and (d) under "Principal Holders of Voting
Securities."
(h) Does not include shares Ms. Tatlock may receive upon completion of the
transaction under an Agreement and Plan of Share Acquisition that Franklin
entered into with Fiduciary Trust Company International on October 25, 2000
(the "Fiduciary Acquisition Agreement"), which will be a minimum of 388,666
and a maximum of 475,038 shares of Franklin, as determined under an
exchange ratio set forth in the Fiduciary Acquisition Agreement.
(i) Includes 1,121,840 shares held directly and 613,088 shares held in an
IRA account for which Mr. L. E. Woodworth holds sole voting and investment
power. Also includes 220,000 shares held by a member of Mr. L. E.
Woodworth's immediate family, of which he disclaims beneficial ownership.
Does not include any hypothetical shares described under "Proposal 1:
Election of Directors - Deferring Director Fees."
(j) Includes 170,494 additional shares, which may be purchased pursuant to
currently exercisable options. Does not include any shares of restricted
stock granted during the 2000 fiscal year, but not yet issued as of
December 1, 2000 under incentive compensation arrangements described above.
11
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table provides certain summary information paid by Franklin to
Franklin's Chief Executive Officer and the next four most highly compensated
executive officers for fiscal years ended September 30, 2000, 1999, and 1998.
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
Restricted Securities All Other
Fiscal Other Annual Stock Underlying Compensation
Name and Principal Position Year Salary Bonus(a) Compensation Awards Options (j)
- ------------------------------------------------------------------------------------------------------------------------------------
Charles B. Johnson, 2000 $594,637 $ 0 $80,433(c) $ 0 22,059(g) $ 14,722
Chairman of the Board, Chief 1999 $596,922 $ 460,000 $67,537(c) $ 0 23,000(h) $ 15,017
Executive Officer 1998 $609,832 $ 460,000 $57,133(c) $ 0 0 $ 14,014
Martin L. Flanagan, 2000 $782,677 $1,000,000 $ - $ 0 81,671(g) $ 14,722
President, Member - 1999 $788,847 $ 552,000 $ - $ 0 82,800(h) $ 15,017
Office of the 1998 $803,412 $ 552,000 $ - $ 0 0 $ 14,014
President
Allen J. Gula, Jr., 2000 $657,455 $ 812,683(b) $290,732(d) $ 0 0 $215,722(k)
President, Member - 1999 $ 56,667 $ - $ - $1,140,009(f) 50,000(i) $ -
Office of the President 1998 $ - $ - $ - $ 0 0 $ -
Charles E. Johnson, 2000 $782,677 $ 552,333 $602,566(e) $ 0 81,671(g) $ 15,722
President, Member - 1999 $788,847 $ 552,000 $ - $ 0 82,800(h) $ 16,017
Office of the President 1998 $803,253 $ 552,000 $ - $ 0 0 $ 15,014
Gregory E. Johnson, 2000 $680,997 $ 552,333 $ - $ 0 76,264(g) $ 14,722
President, Member - 1999 $381,927 $ 360,000 $ - $ 0 50,000(h) $ 14,822
Office of the President 1998 $393,231 $ 260,155 $ - $ 0 0 $ 14,533
- ------------------------------------------------------------------------------------------------------------------------------------
12
(a) Includes bonuses earned in the 2000 fiscal year and paid in the 2001 fiscal
year.
(b) Includes payment of a one time sign-on bonus of $260,000 to Mr. A. J. Gula,
Jr. in October of 1999.
(c) Includes $75,715, $62,016 and $48,109 representing personal use of the
Company aircraft by Mr. C. B. Johnson for 2000, 1999 and 1998,
respectively, valued using the Standard Industry Fare formula provided for
by Internal Revenue Code regulations.
(d) Includes the payment of $100,000 in the 2000 fiscal year in connection with
a housing supplement of $8,333, which Franklin is obligated to pay Mr. A.
J. Gula, Jr. on a monthly and continuing basis during his employment with
the Company, and other payments for household and other expenses in
connection with Mr. A. J. Gula, Jr.'s relocation from Ohio to California.
See also Certain Relationships and Related Transactions.
(e) Includes a one time payment of $599,391 in connection with Mr. C. E.
Johnson's relocation from Florida to California.
(f) Represents the value on date of grant of shares of restricted stock granted
by the Compensation Committee to Mr. A. J. Gula, Jr. as of September 15,
1999, vested or vesting in approximately equal installments on each of
August 31, 2000, August 31, 2001 and August 30, 2002. Based upon the
closing price on the NYSE on September 30, 2000 of $44.43, the value of the
unvested restricted stock holdings of Mr. A. J. Gula, Jr. was $760,006.
(g) Represents options that were granted on November 17, 1999 with an exercise
price of $32.875, which was the closing price on the NYSE on the date of
the grant. These options expire on September 28, 2007 and are subject to
continued employment and become exercisable in approximately three equal
increments on September 29, 2000, September 28, 2001, and September 30,
2002.
(h) Represents grants of five year options to purchase shares of common stock
(the "Five Year Options"). The Five Year Options were granted on October
23, 1998 and have an exercise price of $33.25, the closing price on the
NYSE on that date. On September 30, 2003, any unvested portion of the
option will automatically become exercisable. In addition, if at any time
after September 28, 2000 and prior to September 30, 2003 the price of the
Company's stock is equal to or greater than $66.50 per share during any
consecutive 30 day trading period, 100% of the option will become
immediately exercisable until December 31, 2003 (the "Expiration Date").
However, no shares will vest and the recipient cannot exercise any part of
the option until after September 28, 2000. The vesting may also be
accelerated based upon the compounded annual growth rate of the Company's
stock measured from the price on the grant date (the "Growth Rate") as
follows:
13
ONE-THIRD EXERCISABLE: On or after September 28, 2001 but before
September 30, 2003, if the Growth Rate is equal to or greater than 15%
but less than 20% during any consecutive 30 day trading period, 33.3% of
the original grant will become exercisable on or after September 28,
2001 and a second 33.3% will become exercisable on or after September
30, 2002 with the remainder exercisable on or after September 30, 2003
until the Expiration Date.
ONE-HALF EXERCISABLE: On or after September 28, 2001 and prior to
September 30, 2003, if the Growth Rate is equal to or greater than 20%
but less than 25% during any consecutive 30 day trading period, 50% of
the original grant will become exercisable on or after September 28,
2001 and the remainder shall become exercisable on or after September
30, 2002 until the Expiration Date.
FULL EXERCISABILITY: On or after September 30, 2001 and prior to
September 30, 2003, if the Growth Rate is equal to or greater than 25%
during any consecutive 30 day trading period, 100% of the original grant
will become immediately exercisable until the Expiration Date.
(i) Represents grants of options to purchase shares of common stock that expire
on April 15, 2008. The options were granted to Mr. A. J. Gula, Jr. on
September 15, 1999 with an exercise price of $30.875 per share, which was
the closing price on the NYSE on the date of the grant. The option is
subject to continued employment and becomes exercisable in three equal
increments on August 31, 2000, August 31, 2001 and August 30, 2002.
(j) Represents Company contributions to the combined Profit Sharing/401(k)
Plan.
(k) Includes a contribution of $200,000 made by Franklin and received by Mr. A.
J. Gula, Jr. in the 2000 fiscal year under a Supplemental Executive
Retirement Plan. See also Certain Relationships and Related Transactions.
14
During the last fiscal year, options were granted to the Named Executive
Officers as indicated in the table below. No Stock Appreciation Rights were
awarded.
OPTION GRANTS IN LAST FISCAL YEAR
ENDED SEPTEMBER 30, 2000
- ------------------------------------------------------------------------------------------------------------
Potential
Realizable Value at Assumed Annual
Rates
Of Stock Price Appreciation for
Option Term (c)
- ------------------------------------------------------------------------------------------------------------
Individual Grants
- ------------------------------------------------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options Exercise
Options Granted to or Base
Granted(a) Employees in Price Expiration
(#) Fiscal Year (b) ($/Share) Date
Name 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------
Charles B. 22,059 2.0% $32.875 9/28/07 $337,742 $805,766
Johnson
- ------------------------------------------------------------------------------------------------------------
Martin L. 81,671 7.4% $32.875 9/28/07 $1,250,453 $2,983,258
Flanagan
- ------------------------------------------------------------------------------------------------------------
Charles E. 81,671 7.4% $32.875 9/28/07 $1,250,453 $2,983,258
Johnson
- ------------------------------------------------------------------------------------------------------------
Gregory E. 76,264 6.9% $32.875 9/28/07 $1,167,667 $2,785,752
Johnson
- ------------------------------------------------------------------------------------------------------------
Allen J. 0 0 - - - -
Gula, Jr.
- ------------------------------------------------------------------------------------------------------------
(a) Represents options granted November 17, 1999 which vest over 3 years. See
footnote (g) to the Summary Compensation Table.
(b) Represents the percentage granted to each Named Executive Officer of the
total options awarded to employees of 1,107,756 shares in the 2000 fiscal
year.
(c) We are required by the Securities and Exchange Commission to use a 5% and
10% assumed rate of appreciation over the applicable option term. This does
not represent our estimate or projection of the future common stock price.
If Franklin's common stock does not appreciate in value from the grant
price, the Named Executive Officers will receive no benefit from the
options.
15
- -------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-The-Money Options at
Name Year-End Fiscal Year-End
Exercisable/Unexercisable Exercisable/Unexercisable
(a) (b)
- --------------------------------------------------------------------------------
Charles B. Johnson 7,353/37,706 $84,964/$427,068
Martin L. Flanagan 27,224/137,247 $314,573/$1,554,839
Charles E. Johnson 27,224/137,247 $314,573/$1,554,839
Gregory E. Johnson 25,422/100,842 $293,751/$1,146,479
Allen J. Gula, Jr. 16,667/33,333 $225,921/$451,829
- --------------------------------------------------------------------------------
(a) The Named Executive Officers did not exercise any options during the 2000
fiscal year.
(b) Based on the closing price of Franklin's common stock on the NYSE on
September 30, 2000 of $44.43 per share.
16
COMPENSATION COMMITTEE REPORT
GENERAL GOALS OF BONUSES AND STOCK AWARDS The Compensation Committee believes
that the opportunity to earn incentive compensation motivates employees,
including executive officers, to achieve improved results. Moreover, awarding
incentive compensation in the form of Company stock aligns the interests of
management with the interests of stockholders, and further encourages management
to focus on the Company's long range growth and development. Franklin's
compensation program for executive officers (including the Chief Executive
Officer) has over the last three years consisted primarily of salary and annual
incentive bonuses based upon individual and Company performance.
BONUS AWARDS The Company generally uses a combination of two employee benefit
plans to award bonuses to employees: the 1994 Amended Annual Incentive
Compensation Plan (the "Incentive Plan") and the 1998 Universal Stock Incentive
Plan (the "1998 Stock Plan"). The overall bonus pool is determined pursuant to
the Incentive Plan, which allows for both cash and stock awards to Company
employees, including executive officers and the Chief Executive Officer. The
stock component of an award is then granted through the 1998 Stock Plan (which
replaced the previous Universal Stock Plan). As a general matter, the size of
the award pool available for bonus payments is a percentage of the Company's
pre-tax operating income, which consists of net operating income, exclusive of
passive income and calculated before interest, taxes, and extraordinary items,
and after accrual of awards under the Incentive Plan. In determining the
percentage of the pre-tax operating income that will go into the award pool, the
Compensation Committee considers a variety of factors including the performance
of the Company's stock compared to the indices set forth in the performance
graph included in this Proxy Statement and the increase or decrease in market
price of the Company's common stock.
In setting the general award pool for the 2000 fiscal year, the Compensation
Committee considered the 23.1% increase in pre-tax operating income between
fiscal year 1999 and fiscal year 2000 as well as the 80.2% increase in the
Company's pre-tax operating income over the last five (5) fiscal years. The
committee also considered the 45.4% overall increase in the value of the
Company's stock from the beginning of fiscal 2000 to the end of fiscal 2000. In
addition, the committee considered the generally very low unemployment rates in
the geographic regions where the majority of the Company's personnel are
employed and the continued demand for qualified employees in the financial
services industry.
The committee considered all of the above factors, but no specific weighting was
given to any particular factor in determining the percentage of pre-tax
operating income allocated to the award pool.
In its review of individual compensation, and, in particular, in determining the
amount and form of actual awards under the Incentive Plan for the Chief
Executive Officer and the other executive officers, the Compensation Committee
considered amounts paid to executive officers in prior years as salary, bonus
and other compensation, the Company's overall performance during the prior five
(5) fiscal years, and its future objectives and challenges. Although the
committee considered a number of different individual and Company performance
factors, no specific weighting was given to any such factor.
17
SALARIES OF NAMED EXECUTIVE OFFICERS In January 2000, the salary of Mr. G.
E. Johnson, was increased one hundred seven percent (107%) in connection with
Mr. G. E. Johnson's promotion to the Office of the President. Except for Mr.
G. E. Johnson, the other Named Executive Officers (as defined below), who
generally receive a pay raise on January 1st of each year, did not receive
any salary increase on January 1, 2000. The Compensation Committee intends
to review the possibility of salary increases or decreases for the Named
Executive Officers in January 2001 based upon several considerations,
including the Company's performance, general economic conditions and changes
in their responsibilities.
BONUSES AND FISCAL 2000 STOCK OPTIONS The Company's senior management,
including Messrs. C. B. Johnson, R. H. Johnson, Jr., M. L. Flanagan, C. E.
Johnson, A. J. Gula, Jr., and G. E. Johnson (together, the "Named Executive
Officers"), previously received their annual bonuses in the form of cash and
restricted stock vesting over three years, based on continued employment. No
restricted stock award was made to the Named Executive Officers for fiscal
2000. Only the cash portion of their annual incentive bonuses, awarded
pursuant to the Incentive Plan, was paid for this prior fiscal year. During
fiscal 2000, however, the Compensation Committee made stock option awards
under the 1998 Stock Plan to the Named Executive Officers and to certain
other executives and employees. Franklin has engaged a consulting firm to
work with the Compensation Committee to review the increased use of stock
option awards as an additional incentive to eligible employees whose present
and potential contributions are important to the success of the Company. The
proposed Amended and Restated 1998 Universal Stock Incentive Plan, as further
described under Proposal 3 below, increases the number of shares of the
Company's stock available to make such additional awards.
FISCAL 2000 BONUS AWARDS For fiscal 2000, the Committee again awarded year-end
cash bonuses to certain Named Executive Officers as shown in the Summary
Compensation Table. Other employees, including other executive officers, were
awarded bonuses consisting of cash and restricted stock. Those individuals were
subsequently given the opportunity to change part of their fiscal 2000 annual
restricted stock award to an option grant; with three option grant shares
received instead of one restricted stock award share. The bonuses awarded
traditionally had consisted of a combination of sixty percent (60%) cash and
forty percent (40%) restricted stock to a number of other Company employees. In
fiscal 2000, the Compensation Committee changed the percentage to a combination
of sixty-five (65%) percent cash and thirty-five percent (35%) restricted stock.
Certain Company employees, who made over $1.0 million dollars, were awarded
bonuses consisting of forty percent (40%) cash and sixty percent (60%)
restricted stock.
SPECIAL BONUS CONSIDERATIONS FOR CEO The Committee reviews the participation
of Mr. C. B. Johnson in the Company's Incentive Plan annually, and has
determined that he will continue to participate. Bonuses paid to Mr. C. B.
Johnson depend upon both his performance and that of the Company. The
Compensation Committee has also taken into account Mr. C. B. Johnson's
position as a principal stockholder of the Company, and the dividends
received on those holdings, in determining his compensation and bonus.
Because of his large share holdings, Mr. C. B. Johnson is also materially
impacted by changes in the Company's stock price. Therefore, the
Compensation Committee does not feel that stock-related bonuses should be a
significant component of Mr. C. B. Johnson's compensation and has
historically awarded bonuses to him primarily in cash. The Compensation
Committee notes Mr. C. B. Johnson's compensation is significantly lower than
that received by CEOs of comparable companies. The Committee decided not to
grant Mr. C. B. Johnson a cash bonus award, but did grant a stock option
award during fiscal 2000.
18
OTHER BENEFITS Executive officers also participate in a combined Profit
Sharing/401(k) Plan and are entitled to receive medical, life and disability
insurance coverage and other corporate benefits available to most employees of
the Company. Contributions to the Company's Profit Sharing Plan are determined
by the Board, which takes into consideration the profitability of the Company.
COMPENSATION TAX CONSIDERATIONS Section 162(m), which limits the deductibility
by the Company of certain executive compensation for federal income tax
purposes, applied for the first time to the Company in the fiscal year ended
September 30, 1995. The 1998 Stock Plan is drafted to comply with Section 162(m)
and the options granted thereunder are qualified performance-based incentive
stock awards intended to be deductible within the limitations of Section 162(m).
Failure to comply with the requirements of Section 162(m) may limit the
Company's ability to take tax deductions for compensation paid to each Named
Executive Officer in excess of $1.0 million. While the Company will endeavor to
comply with Section 162(m) in the future to take advantage of potential tax
benefits, the Company may make awards that do not comply with Section 162(m) if
it believes that the awards were commensurate with the performance of the
covered employees and were necessary and appropriate to meet competitive
requirements.
Respectfully Submitted:
COMPENSATION COMMITTEE
Louis E. Woodworth, Chairman
Peter M. Sacerdote
James A. McCarthy
EMPLOYMENT CONTRACTS Mr. Charles B. Johnson has an employment contract with
the Company pursuant to which the Company is obligated, in the event of Mr.
C. B. Johnson's death or permanent disability, to pay one year's salary to
his estate. Under the contract, Mr. C. B. Johnson is employed as the
Chairman of the Board, Chief Executive Officer, and Member - Office of the
Chairman at a salary determined from time to time by the Board of Directors,
which has assigned the review of Mr. C. B. Johnson's compensation
arrangements to the Compensation Committee.
19
AUDIT COMMITTEE REPORT
Notwithstanding anything to the contrary set forth in any of Franklin's previous
or future filings under the Securities Act of 1933 or the Securities Exchange
Act of 1934 that might incorporate future filings made by Franklin under those
statutes, the following report shall not be deemed to be incorporated by
reference into any prior filings nor future filings made by Franklin under those
statutes.
MEMBERSHIP AND ROLE OF THE AUDIT COMMITTEE The Audit Committee consists of Louis
E. Woodworth, James A McCarthy and Harry O. Kline. Each of the members of the
Audit Committee is independent as defined under the NYSE rules. The Audit
Committee operates under a written charter adopted by the Board of Directors,
which is included in this Proxy Statement as Exhibit A.
The primary purpose of the Audit Committee is to assist the Board of Directors
in fulfilling its responsibility to oversee the Company's financial reporting
activities. The committee meets with the Company's independent accountants and
reviews the scope of their audit, report and recommendations. The Audit
Committee also recommends to the Board of Directors the selection of the
Company's independent accountants. The committee met four (4) times during
fiscal 2000.
REVIEW OF THE COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 2000 The Audit Committee has reviewed and discussed the audited
financial statements of Franklin for the fiscal year ended September 30, 2000
with Franklin's management. The Audit Committee has discussed with
PricewaterhouseCoopers LLP, Franklin's independent accountants, the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
The Audit Committee has also received the written disclosures and the letter
from PricewaterhouseCoopers LLP required by Independence Standards Board
Standard No. 1 (Independence Discussion with Audit Committees) and the Audit
Committee has discussed the independence of PricewaterhouseCoopers LLP with that
firm.
Based on the Audit Committee's review and discussions noted above, the Audit
Committee recommended to the Board of Directors that Franklin's audited
financial statements be included in Franklin's Annual Report on Form 10-K for
the fiscal year ended September 30, 2000 for filing with the SEC.
Respectfully Submitted:
AUDIT COMMITTEE
Louis E. Woodworth, Chairman
Harry O. Kline
James A. McCarthy
20
PERFORMANCE GRAPH
The following performance graph compares the performance of an investment in
Franklin's common stock for the last five (5) fiscal years to that of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"), an index to
which the Company was added in April 1998, and to the Standard & Poor's
Financial Index (the "S&P Financial"). The S&P 500 consists of 500 stocks chosen
for market size, liquidity, and industry group representation. It is a
market-value weighted index (stock price times number of shares outstanding),
with each stock's weight in the index proportionate to its market value. The S&P
500 is one of the most widely used benchmarks of U.S. equity performance. The
S&P Financial is a capitalization-weighted index of the stocks of approximately
70 companies that are in the S&P 500 and whose primary business is in a
sub-sector of the financial industry. It is designed to measure the performance
of the financial sector of the S&P 500. The graph assumes that the value of the
investment in the Company's common stock and each index was $100 on September
30, 1995 and that all dividends were reinvested.
21
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG
FY95
Franklin
Resources: $100.00 $88.07 $91.76 $87.42 $93.06 $100.00 $98.92 $99.35 $102.82 $105.86 $97.18 $103.25
S&P 500: $100.00 $99.50 $103.59 $105.39 $108.83 $109.59 $110.45 $111.94 $114.49 $114.75 $109.50 $111.56
Fin. Index $100.00 $96.85 $103.59 $104.45 $109.66 $111.50 $112.57 $110.32 $112.47 $113.48 $110.91 $114.41
FY96
Franklin
Resources: $115.18 $122.34 $124.08 $118.66 $141.87 $152.28 $132.76 $153.90 $168.55 $188.88 $221.10 $201.41
S&P 500: $117.61 $120.68 $129.54 $126.75 $134.52 $135.32 $129.55 $137.12 $145.15 $151.46 $163.29 $153.91
Fin. Index $122.00 $130.83 $143.15 $137.72 $148.83 $154.44 $143.23 $153.23 $160.14 $168.77 $188.57 $174.30
FY97
Franklin
Resources: $242.41 $233.95 $233.95 $226.30 $233.20 $265.51 $278.53 $279.83 $254.45 $281.13 $226.79 $167.90
S&P 500: $162.09 $156.50 $163.48 $166.05 $167.74 $179.56 $188.52 $190.23 $186.65 $194.01 $191.76 $163.80
Fin. Index $188.12 $183.89 $190.95 $200.22 $194.24 $212.22 $224.04 $227.39 $221.68 $230.66 $230.37 $177.04
FY98
Franklin
Resources: $155.53 $196.86 $222.56 $166.59 $174.40 $165.62 $146.42 $208.24 $226.46 $211.50 $198.48 $187.09
S&P 500: $174.02 $188.00 $199.11 $210.34 $218.96 $211.89 $220.11 $228.47 $222.76 $234.89 $227.36 $225.94
Fin. Index $180.31 $201.74 $215.35 $219.40 $223.75 $226.43 $234.70 $250.28 $236.12 $245.51 $229.92 $219.10
FY99
Franklin
Resources: $159.11 $182.21 $163.67 $166.92 $185.79 $141.54 $174.08 $167.90 $156.18 $158.13 $186.77 $197.83
S&P 500: $219.49 $233.21 $237.66 $251.41 $238.61 $233.81 $256.43 $248.53 $243.08 $248.90 $244.83 $259.69
Fin. Index $207.16 $240.91 $229.16 $224.20 $216.64 $193.09 $228.13 $220.71 $235.14 $220.90 $243.32 $265.85
FY00
Franklin
Resources $231.31
S&P 500 $245.81
Fin. Index $272.09
22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the time that Franklin acquired substantially all of the assets of
Templeton, Galbraith & Hansberger Ltd. ("Templeton") in 1992, Templeton
loaned Mr. M. L. Flanagan monies secured by a deed of trust on Mr. M. L.
Flanagan's then residence in Nassau, Bahamas. Such loan is still outstanding
to a subsidiary of the Company and bears interest at the annual rate of
5.98%. The largest aggregate amount outstanding during the 2000 fiscal year
was $425,491. As of December 1, 2000, $400,061 was outstanding under the
loan.
In June 1995, prior to the time that Mr. Kenneth A. Lewis became an executive
officer of Franklin, in connection with his relocation from Florida to
California, Franklin made a loan to Mr. K. A. Lewis, secured by a deed of trust
on his residence. The largest amount outstanding on the loan, which bears
interest at the annual rate of 5%, during the 2000 fiscal year was $484,677 and
as of December 1, 2000, $473,603 was outstanding.
In October 1997, prior to the time that Mr. Charles R. Sims became an executive
officer of Franklin, in connection with his relocation from Canada to
California, Franklin made two loans to Mr. Sims, one of which is secured by a
deed of trust on his residence and bears interest at the annual rate of 5%. The
largest amount outstanding on the first loan during the 2000 fiscal year was
$631,634 and as of December 1, 2000, $619,307 was outstanding. The largest
amount outstanding on the second loan during the 2000 fiscal year was $56,667
and as of December 1, 2000, there was no outstanding amount due on this loan,
which is non-interest bearing. The second loan was forgivable by the Company in
equal installments over a three (3) year period on the first three anniversary
dates of Mr. Sims' transfer to California. One-third of the second loan was
forgiven in October 1998, in October 1999 and in October 2000.
In August, 1999, Mr. Allen J. Gula, Jr. became an executive officer of
Franklin and in connection with his relocation from Ohio to California,
during the 2000 fiscal year, Franklin incurred costs of $919,138 related to
the purchase of Mr. A. J. Gula Jr.'s residence in Ohio, which was determined
through negotiations between Mr. A. J. Gula, Jr. and Charles B. Johnson, the
Chief Executive Officer of Franklin. In May 2000, Franklin provided Mr. A.
J. Gula, Jr. with a line of credit for up to $2,000,000 in connection with
his relocation from Ohio to California. The line of credit is secured by a
deed of trust on the property where Mr. A. J. Gula, Jr.'s residence is to be
constructed. Mr. A. J. Gula, Jr. is entitled to draw against the line of
credit over a two year period with monthly interest only payments during such
period, and after two (2) years from the anniversary date of the loan, the
outstanding balance of the line of credit will become a 28 year fully
amortized loan (collectively, the "Loan"). Any outstanding balance on the
Loan will bear interest at the annual rate of 6%. The largest amount drawn
and outstanding on the Loan during the 2000 fiscal year was $925,000 and as
of December 1, 2000, $925,000 was outstanding. The total amount of $500,000
of the Loan is forgivable by the Company in equal installments of $100,000
over a five (5) year period, contingent upon Mr. A. J. Gula, Jr.'s continued
employment. In addition, pursuant to a Change of Control Agreement dated
August 1, 2000, Mr. A. J. Gula, Jr. is eligible to receive, if his employment
is terminated within one year following a change of control of Franklin,
other than for cause, disability or death or by the executive after a
reduction of base salary or mandatory relocation (as defined in such
agreement), an amount equal to two and one-half times his annual base salary,
plus average annual incentive compensation (as defined), the acceleration of
23
vesting for all options held and the continuation of health benefits for a
limited time. If Mr. A. J. Gula, Jr., other than for cause, voluntarily
terminates his employment within a certain period (as defined) following a
change of control, Mr. A. J. Gula, Jr. is eligible to receive an amount equal
to his one year's base salary, plus similar other compensation and benefits
as described above.
During the 2000 fiscal year, certain executive officers were holders of credit
cards issued by Franklin Templeton Bank & Trust, F.S.B. upon substantially the
same terms as those prevailing at the time for comparable cards issued to other
Franklin Templeton Bank & Trust, F.S.B. customers.
On December 28, 1999, Franklin purchased 14,968 shares of Franklin common
stock from Mr. Harmon E. Burns at a price of $31.50 per share. On November
24, 1999, the Company purchased 100,000 shares of Franklin's common stock
from the IRA of Mr. C. B. Johnson and 40,000 shares of stock from the IRA of
Mr. R. M. Wiskemann at a price of $33.75 per share. On August 31, 2000, the
Company purchased 3,749 shares of Franklin's Common Stock from Mr. A. J.
Gula, Jr. at a price of $38.09 per share. Each purchase was made at the
closing stock's price on the NYSE on that date and was ratified by the Board
of Directors. Each director who had shares repurchased by Franklin abstained
from voting on the ratification of such Director's sale to Franklin.
On October 2, 2000, Franklin purchased 557 shares from Ms. Barbara Green, 754
shares from Ms. Donna S. Ikeda, 2,008 shares from Mr. Leslie M. Kratter, 1,765
from Mr. Murray L. Simpson, and 787 shares from Mr. Charles R. Sims, each an
executive officer of Franklin. These purchases (and similar purchases from other
employees on the same terms and conditions) were made to pay taxes due in
connection with the vesting of restricted stock awards and were ratified by
Franklin's Board of Directors. Each share was purchased at the price of $44.22
per share, representing the price at which the stock vested, which is the
average of the high and low price of the Company's stock on the NYSE on that
date.
On January 31, 2000, Franklin purchased 36.09 shares from Ms. Barbara Green,
25.98 shares from Ms. Donna Ikeda and 57.71 shares from Mr. Leslie M. Kratter,
each an executive officer with the Company. Each share was purchased by Franklin
at a price of $35.56 per share representing the price at which Franklin provided
matching grants on such date to such executives under the Employee Stock
Incentive Plan ("ESIP"), which is the average of the high and low price of
Franklin's stock on the NYSE on that date.
On August 1, 2000, the Company purchased 42.62 shares from Ms. Donna Ikeda and
95.77 shares from Mr. Leslie M. Kratter, each an executive officer with
Franklin. Each share was purchased by Franklin at a price of $35.50 per share
representing the price at which Franklin provided matching grants on such date
to such executives under the ESIP, which is the average of the high and low
price of the common stock of Franklin on the NYSE on that date.
These purchases (and similar purchases from other employees on the same terms
and conditions) were made to pay taxes due in connection with the matching
grants under the ESIP and were ratified by the Franklin Board of Directors.
24
EMPLOYMENT AGREEMENTS RELATED TO FIDUCIARY ACQUISITION
On October 25, 2000, Franklin entered into the Fiduciary Acquisition
Agreement providing for the acquisition by Franklin of all of the outstanding
shares of common stock of Fiduciary. The acquisition will be accomplished by
way of the exchange of shares of common stock of Franklin for shares of
Fiduciary. Under the Fiduciary Acquisition Agreement Franklin and Fiduciary
have agreed, upon completion of the transaction, to enter into a five-year
employment agreement with Ms. Anne M. Tatlock, the Chairman and Chief
Executive Officer of Fiduciary. Additionally, under the terms of the
Fiduciary Acquisition Agreement, upon consummation of the transaction,
Franklin is required to appoint Ms. A. M. Tatlock as a member of Franklin's
Board of Directors. The Board of Directors has decided to nominate Ms. A. M.
Tatlock as a member of Franklin's Board at the Annual Meeting of Franklin
scheduled on January 25, 2001.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires officers,
Directors and persons who own more than 10% of Franklin's common stock to file
reports of ownership and changes in ownership with the SEC. During the fiscal
year ended September 30, 2000, William J. Lippman, a Senior Vice President,
inadvertently filed a late transaction report for a transaction on Form 4
reporting the sale of 5,000 shares in September, 2000, and Deborah R. Gatzek, a
former Senior Vice President, inadvertently filed a late transaction report for
a transaction on Form 4 reporting the sale of 827 shares in December, 1999 to
pay taxes in connection with the vesting of restricted shares. This information
is based upon review of the copies of such forms received or written
representations from the individuals required to make Section 16(a) reports on
the Company's stock.
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP as independent
accountants to audit the books and accounts of Franklin for its current fiscal
year ending September 30, 2001. PricewaterhouseCoopers LLP has no direct or
indirect financial interest in Franklin. During the fiscal year ended September
30, 2000, PricewaterhouseCoopers LLP rendered opinions on the financial
statements of Franklin and its subsidiaries, as well as the open-end and
closed-end investment companies managed and advised by the Company's
subsidiaries. In addition, PricewaterhouseCoopers LLP provides tax consulting
services for Franklin, and its management consulting group has provided advice
and assistance on several organizational and information systems initiatives.
The Board of Directors recommends ratification of the appointment. The proxy
holders intend to vote to ratify PricewaterhouseCoopers LLP as the Company's
auditors. The voting requirements for this proposal are described above under
"Voting Information". We do not expect that a representative of the accountants
will be present at the Annual Meeting.
25
PROPOSAL 3: RATIFICATION AND APPROVAL OF THE
AMENDED AND RESTATED UNIVERSAL STOCK INCENTIVE PLAN
Franklin's stockholders are being asked to act upon a proposal to approve the
action of the Board of Director's amending and restating the 1998 Universal
Stock Incentive Plan (the "1998 Stock Plan"). The existing 1998 Stock Plan was
adopted by the Board of Directors on October 17, 1998 and approved by the
stockholders in January of 1999. Under the existing 1998 Stock Plan, nearly all
of the shares available for issuance under the 1998 Stock Plan, have been used.
As of November 30, 2000, approximately 1,180,000 shares remained available for
grant under the 1998 Stock Plan. Management intends to recommend additional
grants to the Compensation Committee at its next scheduled meeting which will
use a significant portion of the remaining balance of the 1,180,000 shares. The
proposed amendments to the existing 1998 Stock Plan increase the number of
shares authorized under the 1998 Stock Plan by an additional 10,000,000 shares
and make other technical amendments.
The Board of Directors ratified and approved the Amended and Restated 1998
Universal Stock Incentive Plan (the "Amended 1998 Stock Plan") on October 28,
2000. Ratification and approval of the Amended 1998 Stock Plan requires the
affirmative vote of a majority of the holders of the outstanding shares of
common stock voting on the proposal. It is the intention of the persons named as
proxy holders to vote to ratify and approve the Amended 1998 Stock Plan. If
stockholder approval is not received, the Amended 1998 Stock Plan will be
terminated.
GENERAL DESCRIPTION OF THE AMENDED 1998 STOCK PLAN
The following summary describes the material features of the proposed Amended
1998 Stock Plan, but is not intended to be complete and is qualified in its
entirety by reference to the Amended and Restated 1998 Stock Incentive Plan, a
copy of which is attached as Exhibit "B". The locations of proposed deletions
are indicated by carats "^" and proposed additions are indicated as bracketed.
Capitalized terms not otherwise defined are used as set forth in the Amended
1998 Stock Plan.
PURPOSE. The Amended Stock Plan is intended to (i) attract and retain persons
eligible to participate in the plan; (ii) motivate employees, by means of
appropriate incentives, to achieve long-range performance goals; (iii) provide
incentive compensation opportunities that are competitive with those of other
similar companies; and (iv) further identify employees' interests with those of
Franklin's other stockholders through compensation that is based on Franklin's
Common Stock.
ADMINISTRATION OF AMENDED 1998 STOCK PLAN. The Compensation Committee, as the
administrator of the Amended 1998 Stock Plan, determines and approves the grant
of options and restricted stock awards to employees.
SHARES AUTHORIZED. The Amended 1998 Stock Plan authorizes the increase in the
number of shares reserved for issuance from 10,000,000 shares to 20,000,000
shares of Common Stock.
26
ELIGIBILITY AND PARTICIPATION. As of December 1, 2000, approximately 6,500
employees were eligible to participate in the Amended 1998 Stock Plan. Under the
terms of the plan, any key executive or other employee of Franklin or any of its
subsidiaries is eligible to participate.
TRANSFERABILITY. An employee's rights under the Amended 1998 Stock Plan may not
be assigned, transferred, pledged or otherwise disposed of, except by will or
the laws of descent and distribution.
AMENDMENT AND TERMINATION. The Board of Directors of Franklin may at any time
terminate or amend the Amended 1998 Stock Plan. However, no such termination may
affect options previously granted, nor may an amendment make any change in any
option previously granted which adversely affects the rights of any participant.
In addition, to the extent necessary to comply with securities and tax laws,
Franklin will obtain stockholder approval of such termination or such
amendments. A participant's rights under the Amended 1998 Stock Plan terminate
upon termination of such participant's employment.
FEDERAL INCOME TAX CONSEQUENCES. The following discussion summarizes certain tax
considerations for participants and certain tax effects to Franklin. The
statements in the following paragraphs of the principal U.S. federal income tax
consequences of benefits under the Amended 1998 Stock Plan are based on
statutory authority and judicial and administrative interpretations, as of the
date of this Proxy Statement, which are subject to change at any time (possibly
with retroactive effect). The law is technical and complex, and the discussion
below represents only a general summary.
INCENTIVE STOCK OPTIONS. Incentive stock options ("ISO") granted under the
Amended 1998 Stock Plan are intended to meet the definitional requirements of
Section 422(b) of the Code for "incentive stock options." An employee who
receives an ISO does not recognize any taxable income upon the grant of such
ISO. Similarly, the exercise of an ISO generally does not give rise to federal
income tax to the employee, provided that (i) the federal "alternative minimum
tax," which depends on the employee's particular tax situation, does not apply
and (ii) the employee is employed by Franklin from the date of the grant of the
option until three months prior to the exercise thereof, except where such
employment terminates by reason of disability (where the three month period is
extended to six months) or death (where this requirement does not apply). If any
employee exercises an ISO after the requisite periods referred to in clause (ii)
above, the ISO will be treated as an NSO (as defined below) and will be subject
to the rules set forth below under the caption "Non-Qualified Stock Options and
Stock Appreciation Rights."
Further, if after exercising an ISO, an employee disposes of the Common Stock so
acquired more than two years from the date of grant and more than one year from
the date of transfer of the Common Stock pursuant to the exercise of such ISO
(the "applicable holding period"), the employee will generally recognize capital
gain or loss equal to the difference, if any, between the amount received for
the shares and the exercise price. If, however, any employee does not hold the
shares so acquired for the applicable holding period - thereby making a
"disqualifying disposition" - the employee would recognize ordinary income equal
to the excess of the fair market value of the shares at the time the ISO was
exercised over the exercise price and the balance, if any, would generally be
treated as capital gain. If the disqualifying disposition is a sale or exchange
that would permit a loss to be recognized under the Code (were a loss in fact to
27
be realized), and the sales proceeds are less than the fair market value of the
shares on the date of exercise, the employee's ordinary income therefrom would
be limited to the gain (if any) realized on the sale.
An employee who exercises an ISO by delivering Common Stock previously acquired
pursuant to the exercise of another ISO is treated as making a "disqualifying
disposition" of such Common Stock if such shares are delivered before the
expiration of their applicable holding period. Upon the exercise of an ISO with
previously-acquired shares as to which no disqualifying disposition occurs,
despite some uncertainty, it appears that the employee would not recognize gain
or loss with respect to such previously-acquired shares. Franklin will not be
allowed a federal income tax deduction upon the grant or exercise of an ISO or
the disposition, after the applicable holding period, of the Common Stock
acquired upon exercise of an ISO. In the event of a disqualifying disposition,
Franklin generally will be entitled to a deduction in an amount equal to the
ordinary income included by the employee, provided that such amount constitutes
an ordinary and necessary business expense to Franklin and is reasonable and the
limitations of Section 162(m) of the Code (discussed below) do not apply.
NON-QUALIFIED STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. Non-qualified stock
options ("NSO") granted under the Amended 1998 Stock Plan are options that do
not qualify as ISOs. An employee who receives an NSO or Stock Appreciation Right
("SAR") will not recognize any taxable income upon the grant of such NSO or SAR.
However, the employee generally will recognize ordinary income upon exercise of
an NSO in an amount equal to the excess of the fair market value of the shares
of Common Stock at the time of exercise over the exercise price. Similarly, upon
the receipt of cash or shares pursuant to the exercise of an SAR, the individual
generally will recognize ordinary income in an amount equal to the sum of the
cash and the fair market value of the shares received.
As a result of Section 16(b) of the Exchange Act, under certain circumstances,
the timing of income recognition may be deferred (generally for up to six months
following the grant of an NSO or SAR (the "Deferral Period")) for any individual
who is an executive officer or Director of Franklin or a beneficial owner of
more than ten percent (10%) of any class of equity securities of Franklin.
Absent a Section 83(b) election (as described below under "Restricted Stock
Awards"), recognition of income by the individual will be deferred until the
expiration of the Deferral Period, if any. The ordinary income recognized with
respect to the receipt of shares or cash upon exercise of an NSO or an SAR will
be subject to both wage withholding and other employment taxes.
In addition to the customary methods of satisfying the withholding tax
liabilities that arise upon the exercise an SAR for shares or upon the exercise
of an NSO, Franklin may satisfy the liability in whole or in part by withholding
shares of Common Stock from those that otherwise would be issuable to the
individual or by the employee tendering other shares owned by him or her, valued
at their fair market value as of the date that the tax withholding obligation
arises. A federal income tax deduction generally will be allowed to Franklin in
an amount equal to the ordinary income included by the individual with respect
to his or her NSO or SAR, provided that such amount constitutes an ordinary and
necessary business expense to Franklin and is reasonable and the limitations of
Section 162(m) of the Code do not apply. If an individual exercises an NSO by
delivering shares of Common Stock, other than shares previously acquired
28
pursuant to the exercise of an ISO which is treated as a "disqualifying
disposition" as described above, the individual will not recognize gain or loss
with respect to the exchange of such shares, even if their then fair market
value is different from the individual's tax basis. The individual, however,
will be taxed as described above with respect to the exercise of the NSO as if
he or she had paid the exercise paid in cash, and the Company likewise generally
will be entitles to an equivalent tax deduction.
RESTRICTED STOCK AWARDS. Restricted Stock Awards granted by Franklin fall within
the Code's guidelines for awards that are restricted as to transferability or
subject to a substantial risk of forfeiture - absent a written election pursuant
to Section 83(b) of the Code filed with the Internal Revenue Service within 30
days after the date of transfer of such shares pursuant to the award (a "Section
83(b) election") - an individual will recognize ordinary income at the earlier
of the time at which (i) the shares become transferable or (ii) the restrictions
that impose a substantial risk of forfeiture of such shares lapse, in an amount
equal to the excess of the fair market value (on such date) of such shares over
the price paid for the award, if any. If a Section 83(b) election is made, the
individual will recognize ordinary income, as of the transfer date, in an amount
equal to the excess of the fair market value of the Common Stock as of that date
over the price paid for such award, if any. The ordinary income recognized with
respect to the receipt of cash, shares of Common Stock or other property under
the Amended 1998 Stock Plan will be subject to both wage withholding and other
employment taxes. Franklin generally will be allowed a deduction for federal
income tax purposes in an amount equal to the ordinary income recognized by the
employee, provided that such amount constitutes an ordinary and necessary
business expense and is reasonable and the limitations of Section 162(m) of the
Code do not apply.
DIVIDENDS AND DIVIDEND EQUIVALENTS. To the extent benefits under the Amended
1998 Stock Plan earn dividends or dividend equivalents, whether paid currently
or credited to an account established under the Amended 1998 Stock Plan, an
individual generally will recognize ordinary income with respect to such
dividends or dividend equivalents.
CERTAIN LIMITATIONS ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION. With certain
exceptions, Section 162(m) of the Code denies a deduction to publicly held
corporations for compensation paid to the Named Executive Officers in excess of
$1 million per executive per taxable year (including any deduction with respect
to the exercise of an NSO or SAR or the disqualifying disposition of stock
purchased pursuant to an ISO). One such exception applies to certain
performance-based compensation provided that such compensation has been approved
by stockholders in a separate vote and certain other requirements are met. If
approved by its stockholders, Franklin believes that future grants under the
Amended 1998 Stock Plan should qualify for the performance-based compensation
exception to Section 162(m) of the Code.
29
STOCKHOLDER PROPOSALS
Any stockholder intending to present any proposal in accordance with Rule 14a-8
under the Securities Exchange Act of 1934 for consideration at Franklin's next
Annual Meeting in 2002 must, in addition to meeting other applicable
requirements, mail such proposal to: Leslie M. Kratter, Secretary, Franklin
Resources, Inc., 777 Mariners Island Blvd., 7th Floor, San Mateo, CA 94404. The
proposal must be submitted in the form required by the Securities and Exchange
Commission rules and regulations.
Stockholder proposals in accordance with Rule 14a-8 must be received by Franklin
at the address above no later than August 19, 2001. The Company may exercise
discretionary voting authority under proxies solicited by it for the 2002 Annual
Meeting of Stockholders if it receives notice of a proposed non-Rule 14a-8
stockholder action after November 3, 2001.
THE ANNUAL REPORT
Franklin's Annual Report for the fiscal year ended September 30, 2000, including
financial statements, has been sent, or is being sent together with this Proxy
Statement, and is available for viewing on the Internet, to all stockholders as
of the record date. We are legally required to send you this information to help
you decide how to vote your proxy. Please read it carefully. However, the
financial statements and the Annual Report do not legally form any part of this
proxy soliciting material.
30
FRANKLIN RESOURCES, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
With this proxy, the stockholder signing below appoints Charles B.
Johnson, Harmon E. Burns, and Leslie M. Kratter (the "proxy holders"), or any
one of them, as the stockholder's proxies with full power of substitution. The
stockholder appoints the proxy holders collectively and as individuals, to vote
all the stockholder's shares of Franklin Resources, Inc. ("Franklin") common
stock at the Annual Meeting of Stockholders, and at any and all adjournments or
postponements of the meeting, on the matters set forth on the reverse side of
this card. The Annual Meeting of Stockholders will be held at Franklin's offices
at 777 Mariners Island Boulevard, San Mateo, California, U.S.A. at 10:00 a.m.,
Pacific Standard Time, on January 25, 2001.
THE BOARD OF DIRECTORS HAS SOLICITED THIS PROXY AND IT WILL BE VOTED AS
SPECIFIED ON THIS PROXY CARD ON THE FOLLOWING PROPOSALS PROPOSED BY FRANKLIN. IF
YOU DO NOT MARK ANY VOTES OR ABSTENTIONS, THIS PROXY WILL BE VOTED FOR THE
NOMINEES TO THE BOARD OF DIRECTORS, FOR RATIFYING PRICEWATERHOUSECOOPERS LLP AS
THE ACCOUNTANTS AND FOR RATIFYING AND APPROVING THE AMENDED AND RESTATED 1998
UNIVERSAL STOCK INCENTIVE PLAN. IF ANY OTHER MATTERS COME BEFORE THE MEETING TO
BE VOTED ON, THE PROXY HOLDERS NAMED IN THIS PROXY WILL VOTE, ACT AND CONSENT ON
THOSE MATTERS IN ACCORDANCE WITH THE VIEWS OF MANAGEMENT.
31
FRANKLIN RESOURCES, INC.
Two New Ways to Vote
VOTE BY INTERNET OR TELEPHONE
24 hours a Day - 7 Days a Week
Save your Company Money - It's Fast and Convenient
TELEPHONE
1-800-408-4778
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, and then follow the simple directions.
or
INTERNET
http://proxy.shareholder.com/ben
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the website. You will be prompted to enter your control number, located
in the box below, to create an electronic ballot.
or
MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided. Make sure the pre-printed address shows through the envelope
window. PLEASE DO NOT MAIL ADDITIONAL CARDS IN THE RETURN ENVELOPE. The return
envelopes are mechanically opened and additional cards may be accidentally
destroyed.
Your telephone or Internet vote authorizes the proxy holders named in this proxy
to vote your shares in the same manner as if you marked, signed and returned the
proxy card.
- ---------------------------------------------------------------------------
If you have submitted your proxy by telephone or the Internet there is no need
for you to mail back your proxy.
- ---------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING!
CALL TOLL-FREE TO VOTE. IT'S FAST AND CONVENIENT
1-800-480-4778
- ---------------------------------------------------------------------------
CONTROL NUMBER FOR
TELEPHONE/INTERNET VOTING
- ---------------------------------------------------------------------------
DETACH PROXY CARD HERE IF YOU ARE NOT
VOTING BY TELEPHONE OR INTERNET
- -
- --------------------------------------------------------------------------------
32
1. Election of Directors: FOR all nine (9) nominees listed below. ____
WITHHOLD AUTHORITY to vote for all nine (9) nominees listed below. ____
* EXCEPTIONS ____
Nominees: Harmon E. Burns, Charles B. Johnson, Charles E. Johnson,
Rupert H. Johnson, Jr., Harry O. Kline, James A. McCarthy, Peter M. Sacerdote,
Anne M. Tatlock, Louis E. Woodworth.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box above and write that nominee's name in the space
provided below.)
*EXCEPTIONS_____________________________________________________
2. Ratification of PricewaterhouseCoopers LLP as independent accountants for
the fiscal year ending September 30, 2001.
FOR___ AGAINST___ ABSTAIN___
3. Ratification and approval of the Amended and Restated 1998 Universal Stock
Incentive Plan.
FOR___ AGAINST___ ABSTAIN___
4. In their discretion, the proxy holders are authorized to vote on other
business matters that are properly brought at the meeting, or any meeting
adjournments or postponements.
Change of Address and/or Comments: _______________________________________
__________________________________________________________________________
Please Sign, Date and Return this Proxy Card Promptly Using the Enclosed
Envelope. No Postage is Required.
Note: Please sign exactly as your name appears on the proxy. If signing
for estates, trusts or corporations, title or capacity should be stated.
If shares are held jointly, each holder must sign.
Dated:____________________, ____
- -----------------
Signature
- -----------------
Signature
Votes must be indicated in blue or black ink.
33
EXHIBIT A
AUDIT COMMITTEE CHARTER
FRANKLIN RESOURCES, INC.
JUNE 6, 2000
PURPOSE
The Audit Committee (the "Committee") is a committee appointed by the Board of
Directors of Franklin Resources, Inc. (the "Company"). Its primary purpose is to
assist the Board of Directors (the "Board") in fulfilling its responsibility to
oversee the Company's financial reporting activities. The Committee shall review
the processes by which material financial reports and other material financial
information is provided by the Company to governmental or regulatory bodies, the
public or other users thereof as well as the Company's systems of internal
accounting and financial controls and the annual independent audit of the
Company's financial statements.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities and personnel of the Company and the power to retain outside counsel,
auditors or other experts for this purpose. The Board and the Committee are in
place to represent the Company's shareholders; accordingly, the Company's
independent outside auditors are ultimately accountable to the Board and the
Committee.
The Committee shall review the adequacy of this Charter on an annual basis.
MEMBERSHIP
The Committee shall be comprised of not less than three members of the Board.
The Committee's composition shall meet the requirements of the rules relating to
audit committees established from time to time by the New York Stock Exchange as
well as the regulatory requirements of any other applicable governmental or
self-regulatory organization.
Accordingly, all of the members will be Directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
2. Who are financially literate or who become financially literate within a
reasonable period of time after appointment to the Committee. In addition, at
least one member of the Committee will have accounting or related financial
management expertise, as the Board interprets such qualification in its
business judgment.
34
KEY RESPONSIBILITIES
The Committee's job is one of oversight. While the Board is cognizant of its
overall responsibilities to the shareholders of the Company, the Board also
recognizes that the Company's management is responsible for preparing the
Company's financial statements and that the Company's independent outside
auditors are responsible for auditing those financial statements. Additionally,
the Board recognizes that financial management including the Company's internal
audit staff, as well as the independent outside auditors, have more time,
knowledge and more detailed information on the Company than do Committee
members. Consequently, in carrying out its oversight responsibilities, the
Committee is not providing any expert or special assurance as to the Company's
financial statements or any professional certification as to the outside or
internal auditor's work. The Committee shall not be obligated to resolve
disagreements, if any, between management and the Company's independent auditors
or to assure compliance with laws and regulations.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
1. The Committee shall review with management and the independent outside
auditors the audited financial statements to be included in the Company's
Annual Report on Form 10-K (or the Annual Report to Shareholders if
distributed prior to the filing of Form 10-K) and review and consider with
the independent outside auditors the matters required to be discussed by
Statement of Auditing Standards ("SAS") Nos. 61, as may be modified or
supplemented from time to time.
2. As a whole, or through the Committee chair, the Committee shall either
telephonically or in person review with the independent outside auditors the
Company's interim financial results to be included in the Company's quarterly
reports to be filed with Securities and Exchange Commission and the matters
required to be discussed by SAS Nos. 61, as may be modified or supplemented
from time to time; which review shall occur prior to the Company's filing of
the Form 10-Q.
3. The Committee shall discuss with management and the independent outside
auditors the quality and adequacy of the Company's internal controls.
4. The Committee shall also:
(a) request from the independent outside auditors annually, a formal
written statement delineating all relationships between the auditor
and the Company consistent with Independence Standards Board Standard
Number 1;
(b) actively engage in a dialogue with the independent outside auditors
with respect to any such disclosed relationships and their impact on
the outside auditor's independence;
(c) recommend that the Board take appropriate action in response to the
outside auditor's report to satisfy itself of the auditor's
independence;
35
(d) provide any certifications, recommendations, disclosures and reports
that may be required by the New York Stock Exchange, the Securities
and Exchange Commission or other regulatory organization; and
(e) consider such other matters regarding the Company's financial affairs,
its control environment and the internal and independent audits of the
Company as the Committee, in its discretion, may determine to be
advisable.
5. The Committee, subject to any action that may be taken by the full Board,
shall have the ultimate authority and responsibility to select (or nominate
for shareholder approval), evaluate and, where appropriate, replace the
independent outside auditors.
36
EXHIBIT B
AMENDED AND RESTATED 1998 UNIVERSAL STOCK INCENTIVE PLAN
1. GENERAL
1.1 PURPOSE. The Franklin Resources, Inc. [Amended and Restated] 1998
Universal Stock Incentive Plan (the "[Amended] Plan") has been established by
Franklin Resources, Inc., a Delaware corporation (the "Company") to (i) attract
and retain persons eligible to participate in the ^[Amended Plan]; (ii) motivate
Employees, by means of appropriate incentives, to achieve long-range performance
goals; (iii) provide incentive compensation opportunities that are competitive
with those of other similar companies; and (iv) further identify Employees'
interests with those of the Company's other stockholders through compensation
that is based on the Company's common stock; and thereby promote the long-term
financial interest of the Company and the Subsidiaries.^
1.2 PARTICIPATION. Subject to the terms and conditions of the ^[Amended
Plan], the Committee shall determine and designate, from time to time, from
among the Eligible Employees, those persons who will be granted one or more
Awards under the ^[Amended Plan]. An Eligible Employee who receives an Award
shall be a "Participant" under the ^[Amended Plan]. In the discretion of the
Committee, an Employee may be granted any Award permitted under the provisions
of the ^[Amended Plan], and more than one Award may be granted to a Participant.
Awards may be granted as alternatives to or replacement of awards outstanding
under the ^[Amended Plan], or any other plan or arrangement of the Company or a
Subsidiary (including a plan or arrangement of a business or entity, all or a
portion of which is acquired by the Company or a Subsidiary).
1.3 OPERATION, ADMINISTRATION, AND DEFINITIONS. The operation and
administration of the ^[Amended Plan], including the Awards made under the
^[Amended Plan], shall be subject to the provisions of Section 4 (relating to
operation and administration). Capitalized terms in the ^[Amended Plan] shall be
defined as set forth in the ^[Amended Plan] (including the definition provisions
of Section 8 of the ^[Amended Plan]).
1.4 STOCK SUBJECT TO ^[AMENDED PLAN]; SHARE COUNTING. Subject to the
provisions of [this Section 1.4 and] Section 6.1 of the ^[Amended Plan], the
maximum aggregate number of shares which may be [delivered pursuant to Options
granted under the Plan is] ^ [20,000,000]^. The shares may be authorized, but
unissued, or reacquired Common Stock.
(a) To the extent any Shares covered by an Award are not delivered to
a Participant or beneficiary because the Award is forfeited or canceled, or the
Shares are not delivered because the Award is settled in cash ^[,such Shares]
shall not be deemed to have been delivered for purposes of determining the
maximum number of Shares available for delivery [pursuant to Awards granted]
under the ^[Amended Plan].
37
(b) If the exercise price of any Option granted under the Plan is
satisfied by tendering Shares to the Company (by either actual delivery or by
attestation), only the number of Shares issued net of the Shares tendered shall
be deemed delivered for purposes of determining the maximum number of Shares
available for delivery ^[pursuant to Awards (other than Options) granted under
the Plan].
(c) Subject to adjustment under Section 6.1, (i) the maximum number
of shares that may be granted to any one individual pursuant to Section 2
(relating to Options and SARs) shall be 250,000 Shares during any
one-calendar-year period and (ii) the maximum number of Shares that may be
granted to any one individual subject to Section 3 (relating to Stock Unit
Awards, Restricted Stock Awards, Restricted Stock Unit Awards and Performance
Share Awards) ^ shall be 1,000,000 Shares during any one-calendar-year period
(regardless of when such ^[Shares] are deliverable).
2. OPTIONS AND SARS
2.1 OPTIONS.
(a) An Option is a grant of rights to purchase Shares at an Exercise
Price established by the Committee. Options granted under this Section 2 may be
either Incentive Stock Options ("ISO") or Nonstatutory Stock Options ("NSO"), as
determined in the discretion of the Committee.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be automatically treated as Nonstatutory
Stock Options. For purposes of this paragraph 2[.1](b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the original date the
Option with respect to such Shares is granted.
(c) The term of each Option shall be the term stated in the Option
Agreement; provided, however, that in the case of any Incentive Stock Option,
the term shall be no more than ten (10) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement. However, in the
case of an Incentive Stock Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
(d) The date of grant of an Option shall, for all purposes, be the
date on which the Committee makes the determination granting such Option, or
such other date as is determined by the Board. Notice of the determination shall
be given to each Employee to whom an Option is so granted within a reasonable
time after the date of such grant.
38
2.2 STOCK APPRECIATION RIGHTS. A "Stock Appreciation Right" ("SAR") is a
grant of rights to receive, in cash or Stock (as determined by the Committee),
value equal to (or otherwise based on) the excess of: (a) the Fair Market Value
of a specified number of Shares at the time of exercise; over (b) an Exercise
Price established by the Committee.
2.3 EXERCISE PRICE. The Exercise Price of each Option and SAR shall be
established by the Committee or shall be determined by a method established by
the Committee at the time the Option or SAR is granted; provided that:
(a) In the case of an ISO,
(i) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(ii) granted to any Employee, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
2.4 TIME AND MANNER OF EXERCISE. Options and SARs shall be
exercisable in accordance with such terms and conditions and during such periods
as may be established by the Committee; subject to the following terms regarding
Options:
(a) TERMINATION OF EMPLOYMENT. In the event of termination of an
Optionee's Continuous Status as an Employee with the Company, such Optionee may,
but only within ninety (90) days after the date of such termination (or such
other period as is set out by the Committee in the Option Agreement, but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent that Optionee was
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(b) DISABILITY OF OPTIONEE. Notwithstanding the provisions of
paragraph 2.4(a) above, in the event of termination of an Optionee's Continuous
Status as an Employee as a result of disability (as determined by the Board in
accordance with the policies of the Company), Optionee may, but only within six
(6) months from the date of such termination (or such other period as is set out
by the Committee in the Option Agreement, but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(c) DEATH OF OPTIONEE. In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months following the
date of death (or such other period as is set out by the Committee in the Option
Agreement, but in no event later than the expiration date of the term of such
39
Option as set forth in the Option Agreement), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent the Optionee was entitled to exercise the Option at the
date of death. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate.
2.5 PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price of an
Option shall be subject to the following:
(a) The full Exercise Price for Shares purchased upon the exercise of
any Option shall be paid at the time of such exercise (except that, in the case
of an exercise arrangement approved by the Committee and described in paragraph
2.5(b), payment may be made as soon as practicable after the exercise).
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Committee (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (i) cash, (ii)
check, (iii) other Shares (by delivery of certificates or attestation) which (x)
either have been owned by the Optionee for more than six months on the date of
surrender or were not acquired, directly or indirectly, from the Company, and
(y) have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised, (iv)
delivery of authorization for the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised, (v) delivery of a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds required to
pay the exercise price, (vi) irrevocably authorizing a third party to sell
Shares (or a sufficient portion of the shares) acquired upon exercise of the
Option and remit to the Company a sufficient portion of the sale proceeds to pay
the entire Exercise Price and any tax withholding resulting from such exercise,
(vii) any combination of the foregoing methods of payment, (viii) or such other
consideration and method of payment for the issuance of Shares to the extent
permitted under Applicable Laws.
2.6 SETTLEMENT OF AWARD. Shares delivered pursuant to the exercise of an
Option or SAR shall be subject to such conditions, restrictions and
contingencies as the Committee may establish in the applicable Award Agreement
at the time of grant. Settlement of SARs may be made in Shares (valued at their
Fair Market Value at the time of exercise), in cash, or in a combination
thereof, as determined in the discretion of the Committee. The Committee, in its
discretion, may impose such conditions, restrictions and contingencies with
respect to Shares acquired pursuant to the exercise of an Option or an SAR as
the Committee determines to be desirable.
40
3. OTHER STOCK AWARDS
3.1 DEFINITIONS.
(a) A "Stock Unit" Award is the grant of a right to receive Shares
in the future.
(b) A "Performance Share" Award is a grant of a right to receive
Shares or Stock Units which is contingent on the achievement of performance or
other objectives during a specified period.
(c) A "Restricted Stock" Award is a grant of Shares, and a
"Restricted Stock Unit" Award is the grant of a right to receive Shares in the
future, with such Shares or right to future delivery of such Shares subject to a
risk of forfeiture or other restrictions that will lapse upon the achievement of
one or more goals relating to completion of service by the Employee, or
achievement of performance or other objectives, as determined by the Committee.
3.2 RESTRICTIONS ON STOCK AWARDS. Each Stock Unit Award, Restricted
Stock Award, Restricted Stock Unit Award and Performance Share Award shall be
subject to the following:
(a) Any such Award shall be subject to such conditions, restrictions
and contingencies as the Committee shall determine.
(b) The Committee may designate whether any such Award being granted
to any Employee are intended to be "performance-based compensation" as that term
is used in Section 162(m) of the Code. Any such Awards designated as intended to
be "performance-based compensation" shall be conditioned on the achievement of
one or more Performance Measures. The Performance Measures that may be used by
the Committee for such Awards shall be based on any one or more of the criteria
attached hereto on Attachment I, as selected by the Committee. For Awards
intended to be "performance-based compensation," the grant of the Awards and the
establishment of the Performance Measures shall be made during the period
required under Section 162(m) of the Code and shall be subject to the individual
share limit set out in Section 1.4(b)(ii) above.
4. OPERATION AND ADMINISTRATION
4.1 EFFECTIVE DATE. Subject to the approval of the stockholders of the
Company at the Company's ^[2000] annual meeting of its stockholders, the
^[Amended Plan] shall be effective as of October ^[28], ^[2000] (the "Effective
Date"); provided, however, that to the extent that Awards are granted under the
^[Amended Plan] prior to its approval by stockholders, the Awards shall be
contingent on approval of the ^[Amended Plan] by the stockholders of the Company
at such annual meeting. The ^[Amended Plan] shall be unlimited in duration and,
in the event of ^[Amended Plan] termination, shall remain in effect as long as
any Awards under it are outstanding; provided, however, that, to the extent
required by the Code, no ISO may be granted under the ^[Amended Plan] on a date
that is more than ten years from the date the ^[Amended Plan] is adopted or, if
earlier, the date the ^[Amended Plan] is approved by stockholders.
41
4.2 GENERAL RESTRICTIONS. Delivery of Shares or other amounts under
the ^[Amended Plan] shall be subject to the following:
(a) Notwithstanding any other provision of the ^[Amended Plan], the
Company shall have no liability to deliver any Shares under the ^[Amended Plan]
or make any other distribution of benefits under the ^[Amended Plan] unless such
delivery or distribution would comply with all applicable laws (including,
without limitation, the requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange or similar entity.
(b) To the extent that the ^[Amended Plan] provides for issuance of
stock certificates to reflect the issuance of Shares, the issuance may be
effected on a non-certificated basis, to the extent not prohibited by applicable
law or the applicable rules of any stock exchange.
4.3 TAX WITHHOLDING. All distributions under the ^[Amended Plan] are
subject to withholding of all applicable taxes, and the Committee may condition
the delivery of any shares or other benefits under the ^[Amended Plan] on
satisfaction of the applicable withholding obligations. The Committee, in its
discretion, and subject to such requirements as the Committee may impose prior
to the occurrence of such withholding, may permit such withholding obligations
to be satisfied through cash payment by the Employee, through the surrender of
Shares which the Employee already owns, or through the surrender of Shares to
which the Employee is otherwise entitled under the ^[Amended Plan, provided;
however, that in either case only the number of Shares sufficient to satisfy the
Company's minimum required tax withholding obligations may be surrendered to the
Company].
4.4 USE OF SHARES. Subject to the overall limitation on the number of
Shares that may be delivered under the ^[Amended Plan], the Committee may use
available Shares as the form of payment for compensation, grants or rights
earned or due under any other compensation plans or arrangements of the Company
or a Subsidiary, including the plans and arrangements of the Company or a
Subsidiary assumed in business combinations.
4.5 DIVIDENDS AND DIVIDEND EQUIVALENTS. An Award (including without
limitation an Option or SAR Award) may provide the Employee with the right to
receive dividend payments or dividend equivalent payments with respect to Stock
subject to the Award (both before and after the Stock subject to the Award is
earned, vested, or acquired), which payments may be either made currently or
credited to an account for the Employee, and may be settled in cash or Stock as
determined by the Committee. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in Shares, may be subject to
such conditions, restrictions and contingencies as the Committee shall
establish, including the reinvestment of such credited amounts in Stock
equivalents.
4.6 PAYMENTS. Awards may be settled through cash payments, the delivery of
Shares, the granting of replacement Awards, or combination thereof as the
Committee shall determine. Any Award settlement, including payment deferrals,
may be subject to such conditions, restrictions and contingencies as the
Committee shall determine. The Committee may permit or require the deferral of
42
any Award payment, subject to such rules and procedures as it may establish,
which may include provisions for the payment or crediting of interest, or
dividend equivalents, including converting such credits into deferred Stock
equivalents. Each Subsidiary shall be liable for payment of cash due under the
^[Amended Plan] with respect to any Employee to the extent that such benefits
are attributable to the services rendered for that Subsidiary by the Employee.
Any disputes relating to liability of a Subsidiary for cash payments shall be
resolved by the Committee.
4.7 TRANSFERABILITY. Unless specifically provided by the Committee in the
Award Agreement, Awards under the ^[Amended Plan] are nontransferable except as
designated by the Employee by will or by the laws of descent and distribution.
4.8 FORM AND TIME OF ELECTIONS. Unless otherwise specified herein, each
election required or permitted to be made by any Employee or other person
entitled to benefits under the ^[Amended Plan], and any permitted modification,
or revocation thereof, shall be in writing filed with the Committee at such
times, in such form, and subject to such restrictions and limitations, not
inconsistent with the terms of the ^[Amended Plan], as the Committee shall
require.
4.9 AGREEMENT WITH COMPANY. An Award under the ^[Amended Plan] shall be
subject to such terms and conditions, not inconsistent with the ^[Amended Plan],
as the Committee shall, in its sole discretion, prescribe. The terms and
conditions of any Award to any Employee shall be reflected in such form of
written document as is determined by the Committee. A copy of such document
shall be provided to the Employee, and the Committee may, but need not require
that the Employee shall sign a copy of such document. Such document is referred
to in the ^[Amended Plan] as an "Award Agreement" regardless of whether any
Employee signature is required.
4.10 ACTION BY COMPANY OR SUBSIDIARY. Any action required or permitted to
be taken by the Company or any Parent or Subsidiary shall be by resolution of
its Board of Directors, or by action of one or more members of the Board
(including a committee of the Board) who are duly authorized to act for the
Board, or (except to the extent prohibited by applicable law or applicable rules
of any stock exchange) by a duly authorized officer of such company.
4.11 GENDER AND NUMBER. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
4.12 LIMITATION OF IMPLIED RIGHTS.
(a) Neither a Participant nor any other person shall, by reason of
participation in the ^[Amended Plan], acquire any right in or title to any
assets, funds or property of the Company or any Parent or Subsidiary whatsoever,
including, without limitation, any specific funds, assets, or other property
which the Company or any Parent or Subsidiary, in their sole discretion, may set
aside in anticipation of a liability under the ^[Amended Plan]. A Participant
shall have only a contractual right to the Stock or amounts, if any, payable
under the ^[Amended Plan], unsecured by any assets of the Company or any Parent
43
or Subsidiary, and nothing contained in the ^[Amended Plan] shall constitute a
guarantee that the assets of the Company or any Parent or Subsidiary shall be
sufficient to pay any benefits to any person.
(b) The ^[Amended Plan] does not constitute a contract of employment,
and selection as a Participant will not give any participating employee the
right to be retained in the employ of the Company or any Subsidiary, nor any
right or claim to any benefit under the ^[Amended Plan], unless such right or
claim has specifically accrued under the terms of the ^[Amended Plan]. Except as
otherwise provided in the ^[Amended Plan], no Award under the ^[Amended Plan]
shall confer upon the holder thereof any rights as a stockholder of the Company
prior to the date on which the individual fulfills all conditions for receipt of
such rights.
5. COMMITTEE
5.1 COMMITTEE. The authority to control and manage the operation and
administration of the ^[Amended Plan] shall be vested in a committee (the
"Committee") in accordance with this Section 5. The Committee shall be selected
by the Board, and shall ^[be comprised unless otherwise determined by the
Board,] solely of [not less than] two ^ members [who shall be "outside"
Directors within the meaning of Treasury Regulation Section 1.162-27(e)(3) under
Section 162(m) of the Code,] of the Board and, with respect to Awards granted
subject to Section 162(m) of the Code, the Committee shall be composed of two or
more members of the Board who are not employees of the Company. If the Committee
does not exist, or for any other reason determined by the Board, the Board may
take any action under the ^[Amended Plan] that would otherwise be the
responsibility of the Committee.
5.2 POWERS OF COMMITTEE. The Committee's administration of the
^[Amended Plan] shall be subject to the following:
(a) Subject to the provisions of the ^[Amended Plan], the Committee
will have the authority and discretion to select from among the Eligible
Employees those persons who shall receive Awards, to determine the time or times
of receipt, to determine the types of Awards and the number of shares covered by
the Awards, to establish the terms, conditions, performance criteria (except
that for purposes of Section 162(m) of the Code, performance measures shall be
based on one or more of the criteria set out on Attachment I hereto),
restrictions, and other provisions of such Awards, and (subject to the
restrictions imposed by Section 8 hereof) to cancel or suspend Awards.
(b) To the extent that the Committee determines that the restrictions
imposed by the ^[Amended Plan] preclude the achievement of the material purposes
of the Awards in jurisdictions outside the United States, the Committee will
have the authority and discretion to modify those restrictions as the Committee
determines to be necessary or appropriate to conform to applicable requirements
or practices of jurisdictions outside of the United States.
(c) The Committee will have the authority and discretion to interpret
the ^[Amended Plan], to establish, amend, and rescind any rules and regulations
relating to the ^[Amended Plan], to determine the terms and provisions of any
44
Award Agreement made pursuant to the ^[Amended Plan], and to make all other
determinations that may be necessary or advisable for the administration of the
^[Amended Plan].
(d) Any interpretation of the ^[Amended Plan] by the Committee and
any decision made by it under the ^[Amended Plan] is final and binding on all
persons.
(e) In controlling and managing the operation and administration of
the ^[Amended Plan], the Committee shall take action in a manner that conforms
to the articles and by-laws of the Company, and applicable state corporate law.
5.3 DELEGATION BY COMMITTEE. Except to the extent prohibited by Applicable
Law or the applicable rules of a stock exchange, the Committee may allocate all
or any portion of its responsibilities and powers to any one or more of its
members and may delegate all or any part of its ^[administrative duties] to any
person or persons selected by it. Any such allocation or delegation may be
revoked by the Committee at any time.
5.4 INFORMATION TO BE FURNISHED TO COMMITTEE. The Company and its Parent
and Subsidiaries shall furnish the Committee with such data and information as
it determines may be required for it to discharge its duties. The records of the
Company and its Parent and Subsidiaries as to an Employee's employment,
termination of employment, leave of absence, reemployment and compensation shall
be conclusive on all persons unless determined to be incorrect. Employees and
other persons entitled to benefits under the ^[Amended Plan] must furnish the
Committee such evidence, data or information as the Committee considers
desirable to carry out the terms of the ^[Amended Plan].
45
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR CORPORATE
TRANSACTION
6.1 CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Award, ^[the price per share of Common Stock covered by each
such outstanding Award,] the number of shares of Common Stock which have been
authorized for issuance under the ^[Amended Plan] but as to which no Awards have
yet been granted or which have been returned to the ^[Amended Plan] upon
cancellation or expiration of an Award, ^[and the maximum number of Options,
SARs, Stock Unit Awards, Restricted Stock Awards, Restricted Stock Units Awards
and Performance Share Awards which may be granted to any Employee in any
one-calendar-year period] shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of Shares of any class, or securities convertible into
Shares of any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock subject to
an Award.
6.2 TRANSACTIONS. In the event of the proposed dissolution or liquidation
of the Company or of a merger or corporate combination (a "Transaction") in
which the successor corporation does not agree to assume the Award or substitute
an equivalent Award, the Committee shall make a determination (subject to
Section 7 below) as to the equitable treatment of outstanding Awards under the
^[Amended Plan] and shall notify Participants of such treatment no later than
ten (10) days prior to such proposed Transaction. To the extent it has not been
previously exercised, an Award will terminate immediately prior to the
consummation of such proposed Transaction.
7. AMENDMENT AND TERMINATION
^The Board may, at any time, amend or terminate the ^[Amended Plan], provided
that no amendment or termination may, in the absence of written consent to the
change by the affected Employee (or, if the Employee is not then living, the
affected beneficiary), adversely affect the rights of any Employee or
beneficiary under any Award granted under the ^[Amended Plan] prior to the date
such amendment is adopted by the Board; provided that adjustments pursuant to
subject to Section 6.2 shall in no event be deemed to have an adverse affect on
any Award.
8. DEFINED TERMS
In addition to the other definitions contained herein, the following
definitions shall apply:
46
(a) APPLICABLE LAW means the corporate, securities and tax laws
(including, without limitation, the Delaware corporate law, the Exchange Act,
the Securities Act of 1933 and the Code) applicable to the establishment and
administration of an employee stock incentive plans.
(b) AWARD. The term "Award" shall mean any award or benefit granted under
the ^[Amended Plan], including, without limitation, the grant of Options, SARs,
Stock Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards and
Performance Share Awards.
(c) BOARD. The term "Board" shall mean the Board of Directors of the
Company.
(d) CODE. The term "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include reference to any
successor provision of the Code.
[(e) COMMON STOCK shall mean the common stock, par value, $.10 per share,
of the Company.]
^[(f)] CONTINUOUS STATUS AS AN EMPLOYEE means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) sick leave, military leave or any other leave of absence
approved by the Board, provided that such leave is for a period of not more than
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (ii) in the case of transfers
between locations of the Company or between the Company, its Subsidiaries or its
successor.
^[(g)] ELIGIBLE EMPLOYEE. The term "Eligible Employee" shall mean any key
executive or other employee of the Company, its Parent or Subsidiary. An Award
may be granted to an employee, in connection with hiring, retention or
otherwise, prior to the date the employee first performs services for the
Company or its Parent or Subsidiaries, provided that such Awards shall not
become vested prior to the date the employee first performs such services.
^[(h)] EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
^[(i)] FAIR MARKET VALUE. For purposes of determining the "Fair
Market Value" of a share of Stock granted pursuant to Section 2 as of any
date, the following rules shall apply:
(i) If the principal market for the Stock is the New York Stock
Exchange ("NYSE"), then the "Fair Market Value" as of that date shall be the
closing price of the stock on the NYSE composite tape on that date as reported
in the Wall Street Journal for such date;
(ii) If the principal market for the Stock is the another national
securities exchange or the NASDAQ stock market, then the "Fair Market Value" as
of that date shall be the mean between the lowest and highest reported composite
sale prices of the Stock on that date on such exchange for such date;
47
(iii)If sale prices are not available or if the principal market for
the Stock is not the NYSE or another national securities exchange and the Stock
is not quoted on the NASDAQ stock market, the average between the highest bid
and lowest asked prices for the Stock on such day as reported on the NASDAQ OTC
Bulletin Board Service or by the National Quotation Bureau, Incorporated or a
comparable service.
(iv) If the day is not a business day, and as a result, paragraphs
(i), (ii) and (iii) next above are inapplicable, the Fair Market Value of the
Stock shall be determined as of the last preceding business day. If paragraphs
(i), (ii) and (iii) next above are otherwise inapplicable, then the Fair Market
Value of the Stock shall be determined in good faith by the Committee.
^[(j)] INCENTIVE STOCK OPTION means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
^[(k)] NONSTATUTORY STOCK OPTION means an Option not intended to qualify
as an Incentive Stock Option.
^[(l)] OPTIONEE means an Employee who receives an Option.
^[(m)] PARENT means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
^[(n)] SHARE means a share of the Common Stock, as adjusted in accordance
with Section 6 of the ^[Amended Plan].
^[(o)] STOCK. The term "Stock" shall mean shares of ^[Common Stock]
of the Company.
^[(p)] SUBSIDIARIES. The term "Subsidiary" means any Company during any
period in which it is a "subsidiary corporation" (as that term is defined in
Code section 424(f)) with respect to the Company.
48
ATTACHMENT I
PERFORMANCE CRITERIA
The Committee shall grant performance-based compensation Awards tied to
one or more of the following business criteria:
1. Changes in earnings per share
2. Changes in pre-tax operating income
3. Changes in value of stock (i.e., stock price)
^
49