EXHIBIT 10.5
FRANKLIN CAPITAL CORPORATION
STOCK OPTION AND RESTRICTED STOCK PLAN
1. PURPOSE OF THE PLAN
The purpose of this Stock Option and Restricted Stock Plan (this "Plan") is
to advance the interests of Franklin Capital Corporation (the "Company") and its
subsidiaries by providing to key employees of the Company and its subsidiaries
who have substantial responsibility for the direction and management of the
Company, as well as certain directors and consultants of the Company, additional
incentives, to the extent permitted by law, to exert their best efforts on
behalf of the Company, to increase their proprietary interest in the success of
the Company, to reward outstanding performance and to provide a means to attract
and retain persons of outstanding ability to the service of the Company. It is
recognized that the Company cannot attract or retain these individuals without
this compensation. Options granted under this Plan may qualify as incentive
stock options ("ISOs"), as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
2. ADMINISTRATION
This Plan shall be administered by a committee (the "Committee") comprised
of at least two (2) members of the Company's Board of Directors ("Board") who
each shall (a) be a "non-employee director," as defined in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, unless
administration of the Plan by "non-employee directors" is not then required for
transactions under the Plan to be exempt from the requirements of Rule 16b, and
(b) be an "outside director" as defined under Section 162(m) of the Code, unless
the action taken pursuant to the Plan is not required to be taken by "outside
directors" to qualify for tax deductibility under Section 162(m) of the Code.
The Committee shall interpret this Plan and, to the extent and in the manner
contemplated herein, shall exercise the discretion reserved to it hereunder. The
Committee may prescribe, amend and rescind rules and regulations relating to
this Plan and to make all other determinations necessary for its administration.
The decision of the Committee on any interpretation of this Plan or
administration hereof, if in compliance with the provisions of the Act and
regulations promulgated thereunder, shall be final and binding with respect to
the Company, any optionee or any person claiming to have rights as, or on behalf
of, any optionee.
3. SHARES SUBJECT TO THE PLAN
The shares subject to option and the other provisions of this Plan shall be
shares of the Company's common stock, par value $1.00 per share ("shares").
Subject to the provisions hereof concerning adjustment, the total number of
shares that may be purchased upon the exercise or surrender of stock options
granted under this Plan shall not exceed twenty-five percent (25%) of the total
number of shares authorized and outstanding on the date the Plan is adopted
REDUCED BY the number of shares with respect to which restricted stock is
awarded. The total number of shares that may be awarded as restricted shares
under this Plan shall not exceed ten percent (10%) of the total number of shares
authorized and outstanding on the date the Plan is adopted. Any shares that are
authorized for issuance pursuant to the exercise of options may be issued upon
the exercise of ISOs. In the event any option shall cease to be exercisable in
whole or in part for any reason, the shares which were covered by such option,
but as to which the option had not been exercised, shall again be available
under this Plan. Similarly, any shares that were granted pursuant to an award of
restricted stock under this Plan but that are forfeited pursuant to the terms of
the Plan or an award agreement shall again be available under this Plan. In
addition, shares not delivered to participants in connection with the cashless
exercise of an option shall again be available under this Plan. Shares may be
made available from authorized, un-issued or reacquired stock or partly from
each.
4. PARTICIPANTS
(A) KEY EMPLOYEES, DIRECTORS AND CONSULTANTS. The Committee shall determine
and designate from time to time those key employees, directors and consultants
(to the extent permissible under the Investment Company Act of 1940) of the
Company and its subsidiaries who shall be eligible to participate in this Plan.
The Committee shall also determine the number of shares to be offered from time
to time to each participant, either pursuant to an option or pursuant to an
award of restricted stock, or both. In making these determinations, the
Committee shall take into account the past service of each such key employee,
director or consultant to the Company and its subsidiaries, the present and
potential contributions of such key employee, director or consultant to the
success of the Company and its subsidiaries and such other factors as the
Committee shall deem relevant in connection with accomplishing the purposes of
this Plan. The agreement documenting the award of any option or restricted stock
granted pursuant to this Plan shall contain such terms and conditions as the
Committee shall deem advisable, including but not limited to being vested or
exercisable, as the case may be, only in such installments as the Committee may
determine.
(B) AWARD AGREEMENTS. All options and restricted stock granted under the
Plan will be evidenced by an agreement. Agreements evidencing awards made to
different participants or at different times need not contain similar
provisions. Options that are intended to be ISOs will be designated as such; any
option not so designated will be treated as a nonqualified stock option.
5. OPTION PRICE
Each agreement representing an award of options shall state the price at
which the subject option may be exercised, which shall not be less than the
current fair market value of the shares at the date of issuance of an option,
provided, however, that the exercise price of any option that is intended to be
an ISO and that is granted to a holder of 10% or more of the Company's shares
shall not be less than 110% of such current fair market value. For purposes of
this Plan, the fair market value of any Share as of any date shall be the
average of the high and low trading prices of the shares on that date.
6. OPTION PERIOD
Each agreement representing an award of options shall state the period or
periods of time at and within which the subject option may be exercised, in
whole or in part, by the optionee, which shall be such period or periods as may
be determined by the Committee, provided, however, that the option period shall
not exceed ten years from the date of issuance of the option and, in the case of
an option that is intended to be an ISO and that is granted to a holder of 10%
or more of the Company's shares, shall not exceed five years. Unless
specifically provided otherwise in an agreement evidencing the award of options,
any option awarded to a participant shall become exercisable over four years,
with 25% of the option becoming exercisable on each of the first four
anniversaries of the date of the award.
7. PAYMENT FOR SHARES
Full payment for shares purchased pursuant to an option shall be made at the
time of exercising the option in whole or in part. Payment of the purchase price
shall be made in cash (including check, bank draft or money order), unless the
Company provides to any or all participants the ability to effect a cashless
exercise of his or her options.
8. RESTRICTED STOCK
Each agreement representing an award of restricted stock shall state the
number of shares subject to the award and the terms and conditions pursuant to
which the recipient of the award shall acquire a nonforfeitable right to the
shares awarded as restricted stock. Unless specifically provided otherwise in an
agreement evidencing the award of restricted stock, a participant shall acquire
a nonforfeitable right to the shares subject to the award over four years, with
25% of the restricted stock becoming vested on each of the first four
anniversaries of the date of the award, and shares that are not vested upon a
participant's termination of employment with, or cessation of providing services
to, the Company shall be forfeited.
9. TRANSFERABILITY OF OPTIONS AND RESTRICTED STOCK
Options and restricted stock shall not be transferable other than to the
spouse or lineal descendants (including adopted children) of the participant,
any trust for the benefit of the participant or the benefit of the spouse or
lineal descendants (including adopted children) of the participant, or the
guardian or conservator of the participant ("Permitted Transferees").
10. TERMINATION OF OPTIONS AND RESTRICTED STOCK AWARDS
All rights to exercise options shall terminate sixty days after any optionee
ceases to be a director of the Company or a key employee or consultant of the
Company and any of its subsidiaries, and no options will vest after an
optionee's termination date. Notwithstanding the foregoing, however, if an
optionee's service as a director of the Company or key employee or consultant
terminates as a result of the optionee's death or his total and permanent
disability, the optionee or the executors or administrators or legatees or
distributees of the estate, as the case may be and to the extent they are
Permitted Transferees, shall have the right, from time to time within one year
after the optionee's total and permanent disability or death and prior to the
expiration of the term of the option, to exercise any portion of the option not
previously exercised, in whole or in part, as provided in the respective
agreement evidencing the award of the options. A participant's rights to shares
awarded as restricted stock shall, under all circumstances, be set forth in the
agreement evidencing the award of restricted stock.
11. EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN
Subject to any required action by the shareholders of the Company and the
provisions of applicable corporate law, the number of shares represented by the
unexercised portion of an option, the number of shares that has been authorized
or reserved for issuance hereunder, and the number of Shares covered by any
applicable vesting schedule hereunder, as well as the exercise price for a share
represented by the unexercised portion of an option, shall be proportionately
adjusted for (a) a division, combination or reclassification of any of the
shares of common stock of the Company or (b) a dividend payable in shares of
common stock of the Company.
12. GENERAL RESTRICTION
Each award shall be subject to the requirement that, if at any time the
Board shall determine, at its discretion, that the listing, registration or
qualification of the shares subject to such option upon any securities exchange
or under any state or federal law, or the consent or approval of any government
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such award or the issue or purchase of the shares
thereunder, such option may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
Subject to the limitations of paragraph 6, no option shall expire during any
period when exercise of such option has been prohibited by the Board, but shall
be extended for such further period so as to afford the optionee a reasonable
opportunity to exercise his option.
13. MISCELLANEOUS PROVISIONS
(A) No optionee shall have rights as a shareholder with respect to shares
covered by his option until the date of exercise of his option.
(B) The granting of any award under the Plan shall not impose upon the
Company any obligation to appoint or to continue to appoint as a director, key
employee or consultant any participant, and the right of the Company and its
subsidiaries to terminate the employment of any key employee or other employee
or consultant, or service of any director, shall not be diminished or affected
by reason of the fact that an award has been made under the Plan to such
participant.
(C) Awards under the Plan shall be evidenced by award agreements in such
form and subject to the terms and conditions of this Plan as the Committee shall
approve from time to time, consistent with the provisions of this Plan. Such
award agreements may contain such other provisions, as the Committee in its
discretion may deem advisable. In the case of any discrepancy between the terms
of the Plan and the terms of any award agreement, the Plan provisions shall
control.
(D) The aggregate fair market value (determined as of the date of issuance
of an option) of the Shares with respect to which an option, or portion thereof,
intended to be an ISO is exercisable for the first time by any optionee during
any calendar year (under all incentive stock option plans of the Company and
subsidiary corporations) shall not exceed $100,000.
(E) All awards under this Plan shall be made within ten years from the
earlier of the date of adoption of this Plan (or any amendment thereto requiring
shareholder approval pursuant to the Code) or the date this Plan (or any
amendment thereto requiring shareholder approval pursuant to the Code) is
approved by the shareholders of the Company.
(F) A leave of absence granted to an employee does not constitute an
interruption in continuous employment for purposes of this Plan as long as the
leave of absence does not extend beyond one year.
(G) Any notices given in writing shall be deemed given if delivered in
person or by certified mail; if given to the Company addressed to Corporate
Secretary, Franklin Capital Corporation, 100 Wilshire Boulevard, Suite 1500,
Santa Monica, California 90401; and, if to an optionee, in care of the optionee
at his or her last known address.
(H) This Plan and all actions taken by those acting under this Plan shall be
governed by the substantive laws of Delaware without regard to any rules
regarding conflict-of-law or choice-of-law.
(I) All costs and expenses incurred in the operation and administration of
this Plan shall be borne by the Company.
14. AMENDMENT AND TERMINATION
The Board may modify, revise or terminate this Plan at any time and from
time to time, subject to such supermajority voting requirements as may be
contained in the Company's certificate of incorporation or by-laws. While the
Board may seek shareholder approval of an action modifying a provision of the
Plan where it is determined that such shareholder approval is advisable under
the provisions of applicable law, the Board of Directors shall be permitted to
make any modification or revision to any provision of this Plan without
shareholder approval. This Plan shall terminate when all Shares reserved for
issuance hereunder have been issued upon the exercise of options and all
restricted stock awards have fully vested , or by action of the Board of
Directors pursuant to this paragraph, whichever shall first occur.
15. EFFECTIVE DATE OF THE PLAN
The Plan shall become effective upon the latest to occur of (1) adoption by
the Board, and (2) approval of this Plan by the shareholders of the Company.