EXHIBIT 10.85
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FRANKLIN RESOURCES, INC.
AMENDED AND RESTATED ANNUAL INCENTIVE COMPENSATION PLAN
(amended and restated December 16, 2004)
(amended and restated December 11, 2003)
I. PURPOSE
Franklin Resources, Inc. (the "Company") hereby establishes the Amended and
Restated Annual Incentive Compensation Plan for Principals and Associates (as
hereinafter defined) to reward the contributions to the Company made by
Principals and Associates by providing them an opportunity to share in the
organization's annual performance results. Through these incentives, the Company
intends to attract, retain, and motivate eligible employees to achieve the
highest levels of performance results in the financial services business.
II. DEFINITIONS
When used in this plan document, the following words and phrases shall have
the following meanings:
2.1 "Associates' Pool" means the portion of the Award Pool allocated to
Incentive Awards for Associates.
2.2 "Award Pool" means the total dollars available for funding awards under
the Plan. The Award Pool is comprised of the Associates' Pool and the
Principals' Pool.
2.3 "Committee" means the Compensation Committee of the Board of Directors
of the Company as described in Section 9.1 below.
2.4 "Company" means Franklin Resources, Inc., a Delaware corporation, and
its subsidiaries.
2.5 "Incentive Award" means the actual current value of the award to a
Participant regardless of the form of the award, determined at the end of the
Plan Year.
2.6 "Option" means the grant of a right to purchase Stock at a specified
exercise price in recognition of and as a reward for the past efforts and
contributions of the Participant on behalf of the Company and one or more of its
subsidiaries, with the right to purchase such shares of Stock subject to the
completion of service by the Participant, as determined by the Committee.
2.7 "Participant" means all Principals and Associates who have been
determined by the Committee to be Participants, except employees who participate
in commission-based incentive plans or who are non-exempt employees.
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2.8 "Plan" means the Amended and Restated Annual Incentive Compensation
Plan for Principals and Associates as set forth in this document, as amended
from time to time.
2.9 "Pre-Tax Operating Income" (hereafter "PTOI") means the net operating
income of the Company, exclusive of passive income and calculated before
non-operating interest, taxes, extraordinary items and certain special items
(such as special compensation payouts on account of merger) and before the
accrual of Incentive Awards under the Plan and awards under the Company's 2004
Key Executive Incentive Compensation Plan or any successor plan.
2.10 "Plan Year" means the 12-month period beginning on the first day of
each fiscal year of the Company, currently October 1.
2.11 "Principals' Pool" means the portion of the Award Pool allocated to
Incentive Awards for Principals.
2.12 "Restricted Stock Award" means the grant of shares of Stock in
recognition of and as a reward for the past efforts and contributions of the
Participant on behalf of the Company and one or more of its subsidiaries, with
such shares of Stock subject to a risk of forfeiture or other restrictions that
will lapse based on the completion of service by the Participant, as determined
by the Committee.
2.13 "Restricted Stock Unit Award" means the grant of a right to receive
Stock upon the vesting of the units in recognition of and as a reward for the
past efforts and contributions of the Participant on behalf of the Company and
one or more of its subsidiaries, with such right to receive Stock subject to a
risk of forfeiture or other restrictions that will lapse based on the completion
of service by the Participant, as determined by the Committee.
2.14 "SAR" means the grant of a right 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 of Stock at the
time of exercise over (b) a specified exercise price, in recognition of and as a
reward for the past efforts and contributions of the Participant on behalf of
the Company and one or more of its subsidiaries, with the right to receive such
value in cash or Stock subject to the completion of service by the Participant,
as determined by the Committee.
2.15 "Stock" means Franklin Resources, Inc. common stock reserved for
issuance under the Franklin Resources, Inc. 2002 Universal Stock Incentive Plan
or successor equity compensation plan.
2.16 "Stock Unit Award" means the grant of a right to receive Stock upon
the vesting of the units in recognition of and as a reward for the past efforts
and contributions of the Participant on behalf of the Company and one or more of
its subsidiaries, with such right to receive Stock subject to a risk of
forfeiture or other restrictions that will lapse based on the completion of
service by the Participant, as determined by the Committee.
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2.17 "Target Award" means a potential bonus opportunity for a Participant
budgeted at the beginning of the Plan Year.
III. PARTICIPATION
3.1 All Principals and Associates employed by the Company at the beginning
of the Plan Year are eligible to be Participants during that Plan Year. The
Committee shall in its sole discretion determine annually which employees are
Principals. All other eligible exempt staff are Associates. The Committee may,
in its sole discretion, add exempt employees hired during a Plan Year as either
Principals or Associates and may adjust Target Awards for such persons based
upon such interim employment.
3.2 A non-exempt employee who becomes exempt during a Plan Year shall be
eligible for an Incentive Award from the Associates' Pool, in the Committee's
sole discretion.
3.3 A Participant who changes status (e.g., Associate to Principal) shall
continue in his former status for that Plan Year, unless otherwise determined by
the Committee.
3.4 A Participant's award will be based upon an evaluation of a
Participant's overall performance, including the successful accomplishment of
annual goals and objectives, as well as other performance factors. A Participant
who receives a formal performance appraisal and whose overall evaluation is at
less than the median level of performance relative to such Participant's peers
still remains eligible for an Incentive Award, but the award may be reduced,
even to zero. Participants on written warning may be eligible for an Incentive
Award at the sole discretion of the Committee, but the Award may be reduced,
even to zero.
IV. AWARD POOL FUNDING AND INDIVIDUAL AWARDS
4.1 For each Plan Year, the Committee shall
(a) Determine the percentage, not to exceed Twenty Percent (20%), if
any, of PTOI that will be allocated to the Award Pool at various levels of
Company performance measured by changes in PTOI from the prior year. The
Committee may also determine if in its opinion prevailing circumstance dictates,
that the Award Pool for particular identified groups of Principals and/or
Associates shall be based upon the PTOI of particular identified subsidiary or
subsidiaries of the Company. The determinations made by the Committee shall be
subject to approval of the Board of Directors of the Company;
(b) Determine the allocation of the Award Pool of the Company and any
identified subsidiary or subsidiaries of the Company as described in (a) above,
between the Associates' Pool(s) and the Principal's Pool(s);
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4.2 After consideration of recommendations made by management personnel,
the Committee shall generally determine the amount of Target Awards for
Participants under the Plan. The Committee may, in its sole discretion, advise
Participants of particular Target Awards or ranges of Target Awards at any time
during the Plan Year.
4.3 The actual amounts allocated to the Award Pool(s) shall be determined
after the end of each Plan Year, based upon actual Company performance and PTOI.
4.4 Actual Incentive Awards are determined following the end of each Plan
Year. Actual Incentive Awards will vary from the Target Awards depending on the
PTOI allocated to the Award Pool and a Participant's individual performance.
4.5 The Principals' Pool will be allocated among any or all Principals on
the basis of a Participant's individual performance and based upon the
accomplishment of such Participant's goals and objectives for the Plan Year. No
Principals are guaranteed a payout from the Principals' Pool.
4.6 The Associates' Pool will be allocated among any or all Associates on
the basis of the Participant's individual performance and based upon the
accomplishment of such Participant's goals and objectives for the Plan Year. No
Associates are guaranteed a payout from the Associates' Pool.
4.7 To promote the highest levels of individual performance, there is no
minimum or maximum which applies to individual Incentive Awards of any
Participant. Amounts not allocated as awards do not carry over to the next Plan
Year, and may be used for distribution as incentive compensation to employees
who are not Participants in the Plan.
4.8 Notwithstanding a Participant's individual performance and anything to
the contrary in this Plan, the Committee may, in its sole discretion, increase
or decrease (even to zero) the Incentive Award payable to a Participant.
V. PAYMENT OF ANNUAL AWARDS
5.1 Incentive Awards may, in the Committee's discretion, be paid in the
following time and manner:
(a) Incentive Awards may be paid in cash or in a combination of cash
and grants of Stock, Options, SARs, Stock Unit Awards, Restricted Stock Awards
and Restricted Stock Unit Awards under the 2002 Universal Stock Incentive Plan
or successor equity compensation plan, and shares of investment companies in the
Franklin Templeton funds, subject to restrictions and vesting determined by the
Committee to be appropriate. Incentive Awards paid in Stock, Options, SARs,
Stock Unit Awards, Restricted Stock Awards and Restricted Stock Unit Awards
under the 2002 Universal Stock Incentive Plan or successor equity compensation
plan shall also be subject to the limit on the maximum number of shares that may
be issued under such plan and any additional limitations on
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the maximum number of shares that may be awarded to any individual in any fiscal
or calendar year under such plan.
(b) At least 25% of the Incentive Award will be paid in cash at such
time after the end of the Plan Year as determined by the Committee. The balance
(if any) of the cash portion of an Incentive Award shall be paid at such later
time and in such manner as the Committee determines. Participants shall be
notified in writing as to the date and time of payment of any such deferred
portion of the Incentive Award.
(c) Stock, Options, SARs, Stock Unit Awards, Restricted Stock Awards and
Restricted Stock Unit Awards awarded as part of an Incentive Award shall be
distributed at such time after the end of the Plan Year as determined by the
Committee. The number of shares of Stock or Units subject to such awards as well
as the other terms of such awards shall be determined by the Committee in
accordance with the 2002 Universal Stock Incentive Plan or successor equity
compensation plan.
VI. PAYMENT IN EVENT OF DEATH, DISABILITY, LEAVE OF ABSENCE OR RETIREMENT
6.1 Death of Participant
A Participant who dies is entitled to a pro-rated Incentive Award based on
performance up to the last day worked. Payment shall be made in cash in a single
payment as soon as practical following the end of the Plan Year in which death
occurred. If the Participant dies following the end of a Plan Year but before
Incentive Awards for that year have been paid, the Participant's full Incentive
Award shall be paid in cash in a single payment when it would otherwise have
been paid. Payment of Incentive Awards on account of death shall be paid to the
person designated by the Participant as beneficiary under this Plan. If there is
no such designation or the designated beneficiary fails to survive the
Participant, payment shall be made to the Participant's spouse or if there is
none, the Participant's estate. Notwithstanding the foregoing provisions of this
Section 6.1 with respect to the payment of Incentive Awards, the Committee, in
its sole discretion, may (a) pay the Participant's full Incentive Award (or any
greater amount) or (b) decrease (even to zero) the Participant's Incentive
Award.
6.2 Disability
A Participant who ceases to be an employee on account of permanent and
total disability as a result of which the Participant shall be eligible for
payments under Company long term disability insurance policies, shall be
entitled to receive a pro-rated Incentive Award based on performance up to the
last day worked. Payment shall be made in cash in a single installment as soon
as practical following the end of the fiscal year in which employment
terminated. Notwithstanding the foregoing provisions of this Section 6.2 with
respect to the payment of Incentive Awards, the Committee, in its sole
discretion, may (a) pay the Participant's full Incentive Award (or any greater
amount) or (b) decrease (even to zero) the Participant's Incentive Award.
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6.3 Leave of Absence
The Committee, in its sole discretion, shall determine Incentive Awards, if
any, to be paid to Participants on leave of absence for any portion of the Plan
Year.
6.4 Retirement
A Participant who retires during the Plan Year is eligible to receive a
pro-rated Incentive Award based on performance to the date of retirement in cash
in a single payment as soon as practical following the end of the fiscal year in
which the Participant retires. A Participant has "retired" for purposes of this
Plan if he terminates employment with the Company after reaching age 55 with at
least 10 years of service to the Company, including service to any entity that
is acquired by the Company. Notwithstanding the foregoing provisions of this
Section 6.4 with respect to the payment of Incentive Awards, the Committee, in
its sole discretion, may (a) pay the Participant's full Incentive Award (or any
greater amount) or (b) decrease (even to zero) the Participant's Incentive
Award.
VII. PAYMENT IN EVENT OF TERMINATION OF EMPLOYMENT
7.1 Involuntary Termination of Employment
(a) If a Participant's employment is terminated by the Company as a
result of the Company's dissatisfaction with the job related activities of the
Participant or conviction of the Participant of a felony, the Participant shall
forfeit any rights to any unpaid Incentive Awards under the Plan.
Notwithstanding the foregoing, the Committee, in its sole discretion, may (i)
pay the Participant a pro-rated Incentive Award based upon performance during
the Plan Year to the date of termination or (ii) pay the Participant's full
Incentive Award (or any greater amount).
(b) If a Participant's employment is terminated for reasons other than
those described in 7.1(a) above, the Committee, in its sole discretion, may (i)
pay the Participant a pro-rated Incentive Award based upon performance during
the Plan Year to the date of termination or (ii) pay the Participant's full
Incentive Award (or any greater amount).
7.2 Voluntary Termination of Employment
If a Participant voluntarily resigns from employment at the Company, no
Incentive Awards will be paid. The Participant shall forfeit the right to any
Incentive Awards for the current performance year. Notwithstanding the
foregoing, the Committee, in its sole discretion, may (a) pay the Participant a
pro-rated Incentive Award based upon performance during the Plan Year to the
date of termination or (b) pay the Participant's full Incentive Award (or any
greater amount).
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VIII. AMENDMENT OR TERMINATION
8.1 Amendment.
The Committee reserves the right in its discretion to amend this Plan at
any time in whole or in part, provided, however, that no amendment shall result
in the forfeiture of any Participant's Incentive Awards earned as of the end of
the fiscal year immediately preceding the date the Committee adopts the
amendment.
8.2 Termination.
The Committee may terminate the Plan at any time. Termination shall not
result in the forfeiture of any Participant's Incentive Awards which have been
determined but not yet paid.
IX. ADMINISTRATION
9.1 Administration of the Plan.
This Plan shall be adopted by the shareholders of Franklin Resources, Inc.
and administered by the Compensation Committee of the Board of Directors of
Franklin Resources, Inc.
(a) The Committee shall meet at such times and places and upon such
notice as the chairperson determines in consultation with the other Committee
members. A majority of the Committee shall constitute a quorum. Any acts by the
Committee may be taken at any meeting at which a quorum is present and shall be
by majority vote of those members entitled to vote. Additionally, any acts
reduced to writing or approved in writing by all the members of the Committee
shall be valid acts of the Committee.
(b) Among the administrative responsibilities of the Committee shall
be the determination of Principals and Associates, Target Awards and Incentive
Awards. This may be accomplished by adopting specific methods of determining the
Awards which are then administered by other management personnel of the Company.
(c) The Committee shall have the sole authority, in its absolute
discretion, to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan, to construe and
interpret the Plan, the rules and regulations, and any instruments evidencing
Incentive Awards and to make all other determinations deemed necessary or
advisable for the administration of the Plan. All decisions, determinations, and
interpretations of the Committee shall be binding on all Participants.
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(d) The Plan is intended to meet the requirements of the rules
promulgated by the Securities and Exchange Commission under Section 16(b) of the
Securities Exchange Act of 1934 and shall be administered and construed
accordingly.
9.2 Non-alienation of Benefits.
No benefit under this Plan may be sold, assigned, transferred, conveyed,
hypothecated, encumbered, anticipated, or otherwise disposed of, and any attempt
to do so shall be void. No such benefit shall, prior to receipt thereof by a
Participant, be in any manner subject to the debts, contracts, liabilities,
engagements, or torts of such Participant.
9.3 No Limitation of Rights.
Nothing in this Plan shall be construed to limit in any way the Company's
general personnel policies and procedures particularly with respect to the right
of the Company to terminate a Participant's employment at any time for any
reason whatsoever with or without cause; nor shall it be evidence of any
agreement or understanding, express or implied, that the Company (a) will employ
a Participant in any particular position, (b) will ensure participation in any
incentive programs, or (c) will grant any awards for such programs.
9.4 Applicable Law.
The provisions of the Plan shall be governed by and construed in accordance
with the laws of the State of California, with the exception of California's
conflict of laws provisions.
9.5 Mandatory Arbitration.
As part of this Plan, the Company is implementing an alternative dispute
resolution procedure for its employees. In the event there is any dispute
arising out of the following: unlawful harassment; discrimination and
termination of employment with the Company, which the parties are unable to
resolve through direct discussion or mediation, regardless of the kind or type
of dispute, the Participant and the Company agree to submit all such disputes
exclusively to final and binding arbitration pursuant to the provisions of the
Federal Arbitration Act, or, if inapplicable, the provisions of applicable state
law, or any successor or replacement statutes, upon a request submitted in
writing to the Human Resources Department within the applicable statutory limits
or the statute of limitations. Any failure to timely request arbitration shall
constitute a waiver of all rights to raise any claims in any forum arising out
of any dispute that was subject to arbitration. The limitations period set forth
in this paragraph shall not be subject to tolling, equitable or otherwise. Any
agreement to arbitrate disputes contained in a securities registration
application shall take precedence over this agreement. All substantive rights
guaranteed under the statutes are still recognized through arbitration, and
arbitration is merely a substituted forum for dispute resolutions.
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This Plan was originally approved by the stockholders of the Company on January
19, 1994. The stockholders of the Company approved an amendment of the Plan on
January 24, 1995. The Board approved an amendment and restatement of the Plan on
December 11, 2003 to (a) provide that up to 20% of PTOI may be allocated to the
Award Pool by the Committee and (b) give broad discretion to the Committee in
determining the amount of Incentive Awards payable to Participants in the Plan,
which amendment and restatement was approved by the stockholders of the Company
on January 29, 2004. The Board approved an amendment and restatement of the Plan
on December 16, 2004 to provide that Incentive Awards may be paid in Options,
SARs, Stock Unit Awards and Restricted Stock Unit Awards, which amendment and
restatement is not subject to the approval of the stockholders of the Company.
FRANKLIN RESOURCES, INC.
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