UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 21, 2005
FRANKLIN RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-9318 13-2670991
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
One Franklin Parkway, San Mateo, California 94403
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 312-3000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (See General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
FRANKLIN RESOURCES, INC. DEFERRED COMPENSATION ARRANGEMENT FOR DIRECTOR'S FEES
WITH SAMUEL ARMACOST
On January 21, 2005, Franklin Resources, Inc. (the "Company" or "Franklin")
entered into a Franklin Resources, Inc. Deferred Compensation Arrangement for
Director's Fees (the "Arrangement") with Samuel H. Armacost, one of the
Company's non-employee directors, pursuant to which Mr. Armacost has elected to
defer delivery of all annual and other stock grants that otherwise would have
been made to him as compensation for service as a director of the Company until
a future date.
Under the terms of the Arrangement, Mr. Armacost may make elections from time to
time to defer payment of some or all of his director's fees or annual or other
stock grants. Except with the initial election, which Mr. Armacost had to make
within 30 days of becoming eligible to participate under the Arrangement, any
future elections by Mr. Armacost must be made prior to the calendar year in
which Mr. Armacost earns the compensation, although Mr. Armacost may elect, at
any time, to change his distribution date(s), provided that certain conditions,
as set out in the Arrangement, with regard to the election and the payment of
distributions are met. The Company will allocate performance units for the
benefit of Mr. Armacost equivalent to all such deferred amounts. The performance
units constitute notional shares of common stock of the Company and are credited
with notional dividends at the same time, in the same form, and in equivalent
amounts as dividends that are payable from time to time on shares of common
stock of the Company. Any such notional dividends are reallocated to acquire
additional performance units for the benefit of Mr. Armacost equivalent to such
dividend amounts. Under the Arrangement, the value of such performance units, as
adjusted for losses or gains and notional dividends through the date of
distribution, shall be paid out in cash to Mr. Armacost on date(s) determined by
him, subject to certain exceptions as set out in the Arrangement. Mr. Armacost
may terminate his participation in the Arrangement at any time prior to December
31, 2005 with regard to any deferrals made prior to that time as well as any
future deferrals and, upon such termination, distribution of all of Mr.
Armacost's then deferred amounts shall be made in cash and shall occur as soon
as practicable. The Company may amend or suspend the Arrangement at any time and
for any reason, provided that no amendment of the Arrangement may adversely
affect Mr. Armacost's rights under the Arrangement without his prior written
consent. This brief description of the Arrangement is not intended to be
complete and is qualified in its entirety by reference to the full text of the
Arrangement, which is attached hereto as Exhibit 10.1 and incorporated herein by
reference.
FRANKLIN RESOURCES, INC. 2002 UNIVERSAL STOCK INCENTIVE PLAN, AS AMENDED AND
RESTATED
On January 25, 2005, the stockholders of the Company at the 2005 Annual Meeting
of Stockholders of the Company approved the amendment and restatement of the
Company's 2002 Universal Stock Incentive Plan (as amended and restated, the
"2002 Stock Plan"). The primary purposes of the amendment and restatement were
to (a) add additional performance measures applicable to the grant of awards
under the Company's 2002 Universal Stock Incentive Plan (the "Original Plan")
intended to qualify as "performance-based compensation" under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code") and (b) expand the
ability of the administrator of the Original Plan to adjust awards issued under
the plan in connection with various changes in the capitalization of the
Company.
The brief description of the 2002 Stock Plan set forth below is not intended to
be complete and is qualified in its entirety by reference to the full text of
the 2002 Stock Plan, which is attached hereto as Exhibit 10.2 and incorporated
herein by reference.
PURPOSE
-------
The 2002 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 align employees' interests with those of Franklin's
other stockholders through compensation that is based on Franklin's common
stock.
ADMINISTRATION OF THE 2002 STOCK PLAN
-------------------------------------
The Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee"), as the administrator of the 2002 Stock Plan,
determines and approves the grant of incentive stock options, non-qualified
stock options, stock appreciation rights, stock units, restricted stock,
restricted stock units and performance shares to employees. The Compensation
Committee will, with regard to each stock option, determine the number of shares
subject to the option, the manner and time of the option's exercise and vesting,
and the exercise price per share of stock subject to the option. The exercise
price for incentive stock options may not be less than 100% of the fair market
value of the common stock on the date the option is granted (or 110%, in the
case of an incentive stock option granted to any employee who owns stock
representing more than 10% of the combined voting power of Franklin or any
parent or subsidiary of Franklin). In the case of all other awards granted under
the 2002 Stock Plan, the exercise or purchase price shall be determined by the
Compensation Committee.
SHARES AUTHORIZED
-----------------
The 2002 Stock Plan authorizes 30,000,000 shares of common stock for issuance
under the 2002 Stock Plan.
ELIGIBILITY
-----------
Under the terms of the 2002 Stock Plan, any key executive or other employee of
Franklin or any of its subsidiaries is eligible to participate.
TERM OF AWARDS
--------------
The term of any incentive stock option may not be for more than ten years (or
five years in the case of an incentive stock option granted to any participant
who owns stock representing more than 10%
of the combined voting power of Franklin or any parent or subsidiary of the
Company). The term of all other awards shall be determined by the Compensation
Committee.
TRANSFERABILITY
---------------
An employee's rights under the 2002 Stock Plan may not be assigned, transferred,
pledged or otherwise disposed of, except by will or the laws of descent and
distribution.
PERFORMANCE BASED COMPENSATION
------------------------------
The maximum number of shares with respect to which options and stock
appreciation rights may be granted to a participant during a calendar year is
400,000 shares. The foregoing limitation shall be adjusted proportionately by
the Compensation Committee in connection with any change in Franklin's
capitalization due to a stock split, stock dividend or similar event affecting
the common stock of Franklin. Under Code Section 162(m) no deduction is allowed
in any taxable year of Franklin for compensation in excess of $1 million paid to
Franklin's chief executive officer and the four other most highly compensated
officers of Franklin. An exception to this rule applies to compensation that is
paid pursuant to a stock incentive plan approved by stockholders and that
specifies, among other things, the maximum number of shares with respect to
which options and stock appreciation rights may be granted to eligible
participants under such plan during a specified period. Compensation paid
pursuant to options or stock appreciation rights granted under such a plan and
with an exercise price equal to the fair market value of Franklin's common stock
on the date of grant is deemed to be inherently performance-based, since such
awards provide value to participants only if the stock price appreciates.
For awards of stock units, restricted stock, restricted stock units and
performance shares that are intended to be performance-based compensation under
Section 162(m) of the Code, the maximum number of shares subject to such awards
that may be granted to a participant during a calendar year is 1,000,000 shares
(regardless of when such shares are deliverable to the participant). In order
for such awards to qualify as performance-based compensation, the Compensation
Committee must establish a performance goal with respect to such award in
writing not later than 90 days after the commencement of the services to which
it relates and while the outcome is substantially uncertain. In addition, the
performance goal must be stated in terms of an objective formula or standard.
Under the 2002 Stock Plan, the Compensation Committee may use the following
performance criteria when granting performance-based awards: earnings per share;
pre-tax operating income; the value of Franklin stock (i.e., stock price);
annual revenue; budget comparisons; controllable profits; expense management;
improvements in capital structure; operating income; net income; net sales;
profit margins; profitability of an identifiable business unit or product;
return on investments; return on sales; return on stockholders' equity; total
return to stockholders; and performance of Franklin relative to a peer group of
companies on any of the foregoing measures. The performance criteria may be
applicable to Franklin and/or any of its individual business units and may
differ from participant to participant.
CHANGES IN CAPITALIZATION
-------------------------
The 2002 Stock Plan provides that subject to any required action by the
stockholders of Franklin, (a) the number and/or class of securities covered by
each outstanding award, (b) the price per share covered by each such outstanding
award, (c) the number and/or class of securities which have been authorized for
issuance under the 2002 Stock Plan but as to which no awards have yet been
granted or which have been returned to the 2002 Stock Plan upon cancellation or
expiration of an award, and (d) the maximum number of options, stock
appreciation rights, stock unit awards, restricted stock awards, restricted
stock unit awards and performance share awards which may be granted to any
participant 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 Franklin. Such adjustment will be made by the Compensation
Committee. The Compensation Committee may also make, in its discretion,
adjustments described in (a) - (d) above in the event of any distribution of
cash or other assets to stockholders other than an ordinary cash dividend.
In determining adjustments to be made, the Compensation Committee may take into
account such factors as it deems appropriate, including (i) the restrictions of
applicable law, (ii) the potential tax, accounting or other consequences of an
adjustment and (iii) the possibility that some participants might receive an
adjustment and a distribution or other unintended benefit, and in light of such
factors or circumstances may make adjustments that are not uniform or
proportionate among outstanding awards, modify vesting dates, defer the delivery
of stock certificates or make other equitable adjustments. Any such adjustments
to outstanding awards will be effected in a manner that precludes the
enlargement of rights and benefits under such awards. Any adjustments,
determinations or interpretations made by the Compensation Committee shall be
final, binding and conclusive.
AMENDMENT AND TERMINATION
-------------------------
The Board of Directors of Franklin may at any time terminate or amend the 2002
Stock Plan. However, no such termination may affect awards previously granted,
nor may an amendment make any change in any award 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.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
EXHIBIT NO. DESCRIPTION
----------- -----------
10.1 Franklin Resources, Inc. Deferred Compensation
Arrangement for Director's Fees, dated as of
of January 21, 2005, by and between Franklin
Resources, Inc. and Samuel H. Armacost.
10.2 Franklin Resources, Inc. 2002 Universal Stock
Incentive Plan (as amended and restated
December 16, 2004).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FRANKLIN RESOURCES, INC.
Date: January 27, 2005 /s/ Barbara J. Green
--------------------
Barbara J. Green
Vice President, Deputy General Counsel
and Secretary
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
10.1 Franklin Resources, Inc. Deferred Compensation
Arrangement for Director's Fees, dated as of January 21,
2005, by and between Franklin Resources, Inc. and Samuel
H. Armacost.
10.2 Franklin Resources, Inc. 2002 Universal Stock Incentive
Plan (as amended and restated December 16, 2004).