2004 KEY EXECUTIVE INCENTIVE COMPENSATION PLAN

AMENDED AND RESTATED ANNUAL INCENTIVE COMPENSATION PLAN

Exhibit 10.3

 

FRANKLIN RESOURCES, INC.

2004 KEY EXECUTIVE INCENTIVE COMPENSATION PLAN

 

SECTION 1

ESTABLISHMENT AND PURPOSE

 

1.1 Purpose. Franklin Resources, Inc. has established this Franklin Resources, Inc. 2004 Key Executive Incentive Compensation Plan (the “Plan”). The Plan is intended to increase stockholder value and the success of the Company (as defined below) by motivating key employees (a) to perform to the best of their abilities and (b) to achieve the Company’s objectives. The Plan’s goals are to be achieved by providing such key employees with incentive awards based on the achievement of goals relating to performance of the Company and its individual business units. The Plan is intended to qualify as performance-based compensation under Section 162(m) of the Code (as defined below).

 

1.2 Effective Date. The Plan became effective as of December 11, 2003, following approval by a majority of the shares of common stock of Franklin Resources, Inc. which were present in person or by proxy and entitled to vote at the 2004 annual meeting of stockholders. As long as the Plan remains in effect, it shall be resubmitted to stockholders of Franklin Resources, Inc. as necessary to enable the Plan to continue to qualify as performance-based compensation under Section 162(m) of the Code (as defined below).

 

SECTION 2

DEFINITIONS

 

The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:

 

2.1 “Actual Award” means, as to any Plan Year, the actual award (if any) payable to a Participant for the Plan Year. Actual Award is determined by the Payout Formula for the Plan Year, subject to the Committee’s authority under Section 3.6 to reduce the award otherwise determined by the Payout Formula.

 

2.2 “Award Pool” means the total dollars (if any) designated to fund Actual Awards payable for any Plan Year.

 

2.3 “Base Salary” means as to any Plan Year, 100% of the Participant’s annualized salary rate on the last day of the Plan Year. Such Base Salary shall be before both (a) deductions for taxes or benefits, and (b) deferrals of compensation pursuant to Company-sponsored plans.

 

2.4 “Beneficiary” means the person(s) or entity(ies) designated to receive payment of an Actual Award in the event of a Participant’s death in accordance with Section 4.5 of the Plan. The Beneficiary designation shall be effective when it is submitted in writing to and acknowledged by the Committee during the Participant’s lifetime on a Beneficiary designation form provided by the Committee. The submission of a new Beneficiary designation form shall cancel all prior Beneficiary designations.

 

2.5 “Board” means the Board of Directors of Franklin Resources, Inc.

 

2.6 “Code” means the Internal Revenue Code of 1986, as amended. Reference to a specific Section of the Code shall include such Section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such Section or regulation.

 

 

 

 

2.7 “Committee” means the committee appointed by the Board to administer the Plan. The Committee shall consist of no fewer than two members of the Board. The members of the Committee shall be appointed by, and serve at the pleasure of, the Board. Each member of the Committee shall qualify as an “outside director” under Code Section 162(m). Notwithstanding the foregoing, the failure of a Committee member to qualify as an “outside director” shall not invalidate the payment of any Actual Award under the Plan.

 

2.8 “Company” means Franklin Resources, Inc., a Delaware corporation, and its subsidiaries.

 

2.9 “Determination Date” means, as to any Plan Year, (a) the first day of the Plan Year, or (b) if later, the latest date possible which will not jeopardize the Plan’s qualification as performance-based compensation under Code Section 162(m).

 

2.10 “Disability” means a permanent and total disability determined in accordance with uniform and nondiscriminatory standards adopted by the Committee from time to time.

 

2.11 “Maximum Award” means, as to any Participant for any Plan Year, ten million dollars ($10,000,000). The Maximum Award is the maximum amount which may be paid to a Participant for any Plan Year.

 

2.12 “Participant” means, as to any Plan Year, a key employee who has been selected by the Committee for participation in the Plan for that Plan Year.

 

2.13 “Payout Formula” means, as to any Plan Year, the formula or payout matrix established by the Committee pursuant to Section 3.5, below, in order to determine the Actual Awards (if any) to be paid to Participants. The formula or matrix may differ from Participant to Participant.

 

2.14 “Performance Goals” means the goal(s) (or combined goal(s)) determined by the Committee (in its discretion) to be applicable to a Participant for a Plan Year. As determined by the Committee, the Performance Goals applicable to each Participant shall provide for a targeted level or levels of achievement using one or more of the following measures: (a) annual revenue; (b) budget comparisons; (c) Company stock price; (d) controllable profits; (e) Company earnings per share; (f) expense management; (g) improvements in capital structure; (h) net income; (i) net sales; (j) pre-tax operating income; (k) profit margins; (l) profitability of an identifiable business unit or product; (m) return on investments; (n) return on sales; (o) return on stockholders’ equity; (p) total return to stockholders; and (q) performance of the Company relative to a peer group of companies on any of the foregoing measures. The Performance Goals may be applicable to the Company and/or any of its individual business units and may differ from Participant to Participant.

 

2.15 “Plan Year” means the fiscal year of the Company ending in 2004 and each succeeding fiscal year of the Company.

 

2.16 “Retirement” means retirement from service to the Company after reaching age fifty-five (55) with at least ten (10) years of service to Franklin Resources, Inc. or a subsidiary of Franklin Resources, Inc., including service to any entity that is acquired by Franklin Resources, Inc. or a subsidiary of Franklin Resources, Inc.

 

2.17 “Target Award” means the target award payable under the Plan to a Participant for the Plan Year as determined by the Committee in accordance with Section 3.4 and expressed either (a) as a percentage of his or her Base Salary or (b) as a percentage of the Award Pool.

 

 

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SECTION 3

SELECTION OF PARTICIPANTS AND DETERMINATION OF AWARDS

 

3.1 Selection of Participants. On or prior to the Determination Date, the Committee, in its sole discretion, shall select the key employees who shall be Participants for the Plan Year. In selecting Participants, the Committee shall choose employees who are likely to have a significant impact on the performance of the Company. Participation in the Plan is in the sole discretion of the Committee, and on a Plan Year by Plan Year basis. Accordingly, an employee who is a Participant for a given Plan Year in no way is guaranteed or assured of being selected for participation in any subsequent Plan Year or Plan Years.

 

3.2 Determination of Award Pool. On or prior to the Determination Date, the Committee may in its sole discretion establish an Award Pool for any Plan Year.

 

3.3 Determination of Performance Goals. On or prior to the Determination Date, the Committee, in its sole discretion, shall establish the Performance Goals for each Participant for the Plan Year. Such Performance Goals shall be set forth in writing.

 

3.4 Determination of Target Awards. On or prior to the Determination Date, the Committee, in its sole discretion, shall establish a Target Award for each Participant. Each Participant’s Target Award shall be determined by the Committee in its sole discretion, and each Target Award shall be set forth in writing.

 

3.5 Determination of Payout Formula or Payout Formulae. On or prior to the Determination Date, the Committee, in its sole discretion, shall establish a Payout Formula or Payout Formulae for purposes of determining the Actual Award (if any) payable to each Participant. Each Payout Formula shall (a) be in writing, (b) be based on a comparison of actual performance to the Performance Goals, (c) provide for the payment of a Participant’s Target Award if the Performance Goals for the Plan Year are achieved, and (d) provide for an Actual Award greater than or less than the Participant’s Target Award, depending upon the extent to which actual performance exceeds or falls below the Performance Goals. Notwithstanding the preceding, no participant’s Actual Award under the Plan may exceed the Maximum Award.

 

3.6 Determination of Actual Awards. After the end of each Plan Year, the Committee shall certify in writing the extent to which the Performance Goals applicable to each Participant for the Plan Year were achieved or exceeded. The Actual Award for each Participant shall be determined by applying the Payout Formula to the level of actual performance which has been certified by the Committee. Notwithstanding any contrary provision of the Plan, the Committee, in its sole discretion, may eliminate or reduce the Actual Award payable to any Participant below that which otherwise would be payable under the Payout Formula.

 

3.7 Termination Prior to the Date the Actual Award for the Plan Year is Paid. If a Participant terminates employment with the Company for any reason after the end of the applicable Plan Year but prior to the date the Actual Award for such Plan Year is paid, the Participant shall be entitled to the payment of the Actual Award for the Plan Year subject to reduction or elimination under Section 3.6 based on the circumstances surrounding such termination of employment.

 

3.8 Termination Prior to End of the Plan Year for Reasons other than Death, Disability or Retirement. If a Participant terminates employment with the Company prior to the end of the applicable Plan Year for any reason other than death, Disability or Retirement, the Committee shall reduce the Participant’s Actual Award proportionately based on the date of termination (and subject to further reduction or elimination under Section 3.6 based on the circumstances surrounding such termination of employment).

 

3.9 Termination Prior to the End of the Plan Year Due to Death, Disability or Retirement. If a Participant terminates employment with the Company prior to the end of the applicable Plan Year due to death, Disability or Retirement, the Participant (or in the case of the Participant’s death, the person who

 

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acquired the right to payment of the Actual Award pursuant to Section 4.5) shall be entitled to the payment of the Actual Award for the Plan Year subject to reduction or elimination under Section 3.6.

 

3.10 Leave of Absence. If a Participant is on a leave of absence at any time during a Plan Year, the Committee may reduce his or her Actual Award proportionately based on the duration of the leave of absence (and subject to further reduction or elimination under Section 3.6).

 

SECTION 4

PAYMENT OF AWARDS

 

4.1 Right to Receive Payment. Each Actual Award that may become payable under the Plan shall be paid solely from the general assets of the Company. Nothing in this Plan shall be construed to create a trust or to establish or evidence any Participant’s claim of any right other than as an unsecured general creditor with respect to any payment to which he or she may be entitled.

 

4.2 Timing of Payment. Payment of each Actual Award shall be made within the period ending on the later to occur of the date that is two and a half (2 1/2) calendar months from the end of (i) a Participant’s tax year that includes the applicable date during which the Award was earned, or (ii) the Plan Year that includes the applicable date during which the Award was earned.

 

4.3 Form of Payment. Each Actual Award normally shall be paid in cash (or its equivalent) in a single lump sum. However, the Committee, in its sole discretion, may declare any Actual Award, in whole or in part, payable in the form of a stock bonus granted under the Franklin Resources, Inc. 2002 Universal Stock Incentive Plan (the “2002 Plan”) or successor equity compensation plan (subject to the limit on the maximum number of shares that may be issued under the 2002 Plan or successor equity compensation plan and any additional limitations on the maximum number of shares that may be awarded to any individual in any fiscal or calendar year under the 2002 Plan or successor equity compensation plan, as applicable). The number of shares granted shall be determined by dividing (i) the cash amount of all or such portion of the Actual Award to be paid as a stock bonus, by (ii) the fair market value of a share of common stock of Franklin Resources, Inc. on the date that the cash payment of the Actual Award otherwise would have been made. For this purpose, “fair market value” shall be defined as provided in the 2002 Plan or successor equity compensation plan. Any shares issued pursuant to a stock bonus granted under the 2002 Plan or successor equity compensation plan may be either fully vested or subject to vesting.

 

4.4 Other Deferral of Actual Awards. The Committee may establish one or more programs under the Plan to permit selected Participants the opportunity to elect to defer receipt of Actual Awards. The Committee may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts so deferred, and such other terms, conditions, rules and procedures that the Committee deems advisable for the administration of any such deferral program.

 

4.5 Payment in the Event of Death. If a Participant dies prior to the payment of an Actual Award earned by him or her for a prior Plan Year, the Actual Award shall be paid to the Participant’s Beneficiary. If a Participant fails to designate a Beneficiary or if each person designated as a Beneficiary predeceases the Participant or dies prior to payment of an Actual Award, then the Committee shall direct the payment of such Actual Award to the Participant’s estate.

 

SECTION 5

ADMINISTRATION

 

5.1 Committee is the Administrator. The Plan shall be administered by the Committee.

 

 

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5.2 Committee Authority. The Committee shall have all discretion and authority necessary or appropriate to administer the Plan and to interpret the provisions of the Plan, consistent with qualification of the Plan as performance-based compensation under Code Section 162(m). Any determination, decision or action of the Committee in connection with the construction, interpretation, administration or application of the Plan shall be final, conclusive, and binding upon all persons, and shall be given the maximum deference permitted by law.

 

5.3 Tax Withholding. The Company shall withhold all applicable taxes from any payment, including any non-U.S., federal, state, and local taxes.

 

SECTION 6

GENERAL PROVISION

 

6.1 Nonassignability. A Participant shall have no right to assign or transfer any interest under this Plan.

 

6.2 No Effect on Employment. The establishment and subsequent operation of the Plan, including eligibility as a Participant, shall not be construed as conferring any legal or other rights upon any Participant for the continuation of his or her employment for any Plan Year or any other period. Generally, employment with the Company is on an at will basis only. Except as may be provided in an employment contract with the Participant, the Company expressly reserves the right, which may be exercised at any time and without regard to when during a Plan Year such exercise occurs, to terminate any Participant’s employment without cause, and to treat him or her without regard to the effect which such treatment might have upon him or her as a Participant.

 

6.3 No Individual Liability. No member of the Committee or the Board, or any officer of the Company, shall be liable for any determination, decision or action made in good faith with respect to the Plan or any award under the Plan.

 

6.4 Severability; Governing Law. If any provision of the Plan is found to be invalid or unenforceable, such provision shall not affect the other provisions of the Plan, and the Plan shall be construed in all respects as if such invalid provision has been omitted. 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.

 

6.5 Affiliates of the Company. Requirements referring to employment with the Company or payment of awards may, in the Committee’s discretion, be performed through the Company or any affiliate of the Company.

 

6.6 Application of Code Section 409A. Notwithstanding any other provision of this Plan to the contrary, the Company, in its sole discretion and without Participant consent, may amend or modify the Plan in any manner to provide for the application and effects of Section 409A of the Code (relating to deferred compensation arrangements) and any related regulatory or administrative guidance issued by the Internal Revenue Service. The Company shall have the authority to delay the payment of any benefits described under the Plan to the extent it deems necessary or appropriate to comply with Section 409A(a)(2)(B)(i) of the Code (relating to payments made to certain “key employees” of certain publicly-traded companies) and in such event, any such payments to which a Participant would otherwise be entitled during the six (6) month period immediately following his or her separation from service will be paid on the first business day following the expiration of such six (6) month period.

 

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SECTION 7

AMENDMENT AND TERMINATION

 

7.1 Amendment and Termination. The Board may amend or terminate the Plan at any time and for any reason; provided, however, that if and to the extent required to ensure the Plan’s qualification under Code Section 162(m), any such amendment shall be subject to stockholder approval.

 

Last amended as of December 13, 2006.

 

 

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Exhibit 10.2

 

FRANKLIN RESOURCES, INC.

 

AMENDED AND RESTATED ANNUAL INCENTIVE COMPENSATION PLAN

(amended and restated December 13, 2006)

(amended and restated December 16, 2005)

(amended and restated September 22, 2005)

(amended and restated December 16, 2004)

(amended and restated December 11, 2003)

 

I. PURPOSE

 

Franklin Resources, Inc. has established this Amended and Restated Annual Incentive Compensation Plan for Principals and Associates (as hereinafter defined) to reward the contributions to the Company (as hereinafter defined) 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 Incentive Awards under the Plan for an applicable Plan Year. 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 Franklin Resources, Inc. as described in Section 9.1 below.

 

2.4  “Company” means Franklin Resources, Inc., a Delaware corporation, and its direct and indirect subsidiaries.

 

2.5  “Incentive Award” means the actual current value of an award to a Participant, regardless of the form of the award, determined by the Committee during or following the end of the Plan Year, as applicable.

 

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, 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.

 

2.8  “Plan” means the Amended and Restated Annual Incentive Compensation Plan 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 a 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.

 

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, 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, 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, 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, with such right to receive Stock not 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.

 

2.17 “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 may, in its sole discretion and if appropriate, determine annually if, and if so, which, employees are Principals. All eligible exempt staff not determined as Principals 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) during a Plan Year shall continue in his former status for that Plan Year, unless otherwise determined by the Committee.

 

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3.4 A Participant’s Incentive 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 Incentive 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 Incentive 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 may be subject to review and approval by the Board of Directors of Franklin Resources, Inc. if the Board of Directors, in its sole discretion, deems such review and approval to be appropriate.

 

(b) Determine, if appropriate, 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 Principals’ Pool(s).

 

4.2 After consideration of recommendations made by management personnel, the Committee may 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, the Associates’ Pool(s) and/or the Principals’ Pool(s) may be determined and/or revised at any time during or after the end of each Plan Year, based upon actual or projected Company performance and PTOI.

 

4.4 Actual Incentive Awards may be determined during or following the end of each Plan Year. The amount of any Incentive Awards determined and paid prior to the end of a Plan Year shall be credited against the Award Pool for such Plan Year so that the net amount remaining in the Award Pool is available for Incentive Awards determined and paid after the end of such Plan Year. Actual Incentive Awards may vary from the Target Awards depending on the PTOI allocated or projected to be allocated to the Award Pool and a Participant’s individual performance.

 

4.5 The Principals’ Pool, if any, 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 a 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 Incentive 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.

 

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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 Investments funds, subject to restrictions and vesting, if any, 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 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 during or 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, Restricted Stock Unit Awards and shares of investment companies in the Franklin Templeton Investments funds awarded as part of an Incentive Award shall be distributed at such time during or after the end of the Plan Year as determined by the Committee. The number of shares of Stock, units or shares of investment companies in the Franklin Templeton Investments funds subject to such Incentive Awards as well as the other terms of such Incentive Awards shall be determined by the Committee and, if applicable, in accordance with the 2002 Universal Stock Incentive Plan or successor equity compensation plan.

 

(d) Notwithstanding the foregoing, the payment of any Incentive Awards determined by the Committee to provide for a “deferral of compensation” (within the meaning of Section 1.409A-1(b) of the proposed Treasury regulations under the Internal Revenue Code of 1986, as amended (the “Code”), and any successor thereto) shall be completed no later than two and one-half (2½) months following the end of the calendar year in which such Incentive Awards are earned.

 

5.2 Application of Code Section 409A.

 

Notwithstanding any other provision of this Plan to the contrary, the Company, in its sole discretion and without Participant consent, may amend or modify the Plan in any manner to provide for the application and effects of Section 409A of the Code (relating to deferred compensation arrangements) and any related regulatory or administrative guidance issued by the Internal Revenue Service. The Company shall have the authority to delay the payment of any benefits described under the Plan to the extent it deems necessary or appropriate to comply with Section 409A(a)(2)(B)(i) of the Code (relating to payments made to certain “key employees” of certain publicly-traded companies) and in such event, any such payments to which a Participant would otherwise be entitled during the six (6) month period immediately following his or her separation from service will be paid on the first business day following the expiration of such six (6) month period.

 

 

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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 during or 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 an Incentive Award for that year has 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 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 during or 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.

 

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 during or 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).

 

 

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(b) If a Participant’s employment is terminated for reasons other than those described in Sections 6 and 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 during the Plan Year, 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).

 

VIII. AMENDMENT OR TERMINATION

 

8.1 Amendment.

 

The Committee reserves the right in its discretion to amend this Plan or any Incentive Award(s) at any time in whole or in part, provided, however, that no amendment shall result in the forfeiture or cancellation of any Participant’s Incentive Award(s) earned as of the end of the fiscal year immediately preceding the date the Committee adopts the amendment, unless otherwise agreed to by the affected Participant(s).

 

8.2 Termination.

 

The Committee may terminate the Plan at any time. Termination shall not result in the forfeiture or cancellation of any Participant’s Incentive Award(s) which have been determined but not yet paid, unless otherwise agreed to by the affected Participant(s).

 

IX. ADMINISTRATION

 

9.1 Administration of the Plan.

 

This Plan has been adopted by the stockholders of Franklin Resources, Inc. and shall be administered by the Committee.

 

(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, if any, and Associates, Target Awards, if applicable, and Incentive Awards. This may be accomplished by adopting specific methods of determining the Target Awards and/or Incentive Awards which are then administered by 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, as amended, 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 Delaware, with the exception of Delaware’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 unlawful harassment, discrimination or 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 Section 9.5. All substantive rights guaranteed under the statutes are still recognized through arbitration, and arbitration is merely a substituted forum for dispute resolutions.

 

* * *

 

This Plan was originally approved by the stockholders of Franklin Resources, Inc. on January 19, 1994. The stockholders of Franklin Resources, Inc. approved an amendment of the Plan on January 24, 1995. The Board of Directors of Franklin Resources, Inc. 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 Franklin Resources, Inc. on January 29, 2004. The Board of Directors of Franklin Resources, Inc. 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 was not subject to the approval of the stockholders of Franklin Resources, Inc. The Board of

 

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Directors of Franklin Resources, Inc. approved an amendment and restatement of the Plan on September 22, 2005 principally to (a) provide that the allocation of actual amounts to the Award Pool, Associates’ Pool(s) and/or Principals’ Pool(s) for a Plan Year and the determination and payment of actual Incentive Awards for a Plan Year may be made in advance of the completion of such Plan Year and (b) make various conforming and other technical changes to the Plan, which amendment and restatement was not subject to the approval of the stockholders of Franklin Resources, Inc. The Board of Directors of Franklin Resources, Inc. approved an amendment and restatement of the Plan on December 16, 2005 principally to change the governing law of the Plan to Delaware, which amendment and restatement was not subject to the approval of the stockholders of Franklin Resources, Inc. The Board of Directors of Franklin Resources, Inc. approved an amendment and restatement of the Plan on December 13, 2006 principally to make clarifying and technical changes to the Plan, which amendment and restatement was not subject to the approval of the stockholders of Franklin Resources, Inc.

 

FRANKLIN RESOURCES, INC.

 

 

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