<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FRANKLIN CAPITAL CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
FRANKLIN CAPITAL CORPORATION
450 Park Avenue
New York, New York 10022
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 7, 2000
The Annual Meeting of Stockholders of Franklin Capital Corporation (the
"Corporation") will be held on June 7, 2000 at 10 o'clock a.m., New York Time,
at the offices of Weil, Gotshal and Manges, LLP, 767 Fifth Avenue, 25th Floor,
New York, New York 10153 for the following purposes:
1. To elect five (5) directors to hold office until the next
Annual Meeting of Stockholders and until their successors have been
duly elected and have qualified;
2. To ratify the appointment by the Board of Directors of
Ernst & Young LLP to serve as independent auditors for the fiscal year
ending December 31, 2000; and
3. To consider and transact such other business as may
properly come before the meeting or any adjournment or postponement
thereof.
The Board has fixed the close of business on April 21, 2000 as the
record date for the determination of the stockholders entitled to notice of, and
to vote at, the meeting or any adjournment or postponement thereof. Each
stockholder is entitled to one vote for each share of Common Stock, $1.00 par
value, held on the record date.
If you cannot attend the meeting, please sign and return the enclosed
proxy card as soon as possible in order that you may be represented at the
meeting. If you attend the meeting, you may vote in person even though you have
sent in a proxy.
By Order of the Board of Directors
SPENCER L. BROWN
Secretary
New York, New York
April 28, 2000
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FRANKLIN CAPITAL CORPORATION
450 Park Avenue
New York, New York 10022
PROXY STATEMENT
Solicitation of Proxies
This Proxy Statement is furnished by the Board of Directors of Franklin
Capital Corporation, a Delaware corporation (the "Corporation", or "Franklin"),
in connection with the solicitation by the Corporation of proxies for use at the
Annual Meeting of Stockholders (the "Meeting") to be held on June 7, 2000, at 10
o'clock a.m., New York Time, at the offices of Weil, Gotshal and Manges, LLP,
767 Fifth Avenue, 25th Floor, New York, New York 10153.
Voting and Revocability of Proxies
Stockholders who execute proxies may revoke them at any time before
they are voted, by delivering to Mr. Spencer L. Brown, Secretary of the
Corporation, at the offices of the Corporation at 450 Park Avenue, 10th Floor,
New York, New York, 10022, before the ballot is cast, either an instrument
revoking the proxy or a duly executed proxy bearing a later date, or by
attending the Meeting and voting in person. A proxy, when executed and not so
revoked, will be voted in accordance with the specifications contained therein.
If no contrary specification is indicated on the proxy, the shares represented
thereby will be voted for the election of the five (5) nominees for directors
and in favor of the ratification of the appointment of Ernst & Young LLP as the
Corporation's independent auditors.
In the event that the persons named as proxies propose one or more
adjournments to permit further solicitation with respect to any proposal to be
voted upon at the Meeting, any such adjournments would require the affirmative
vote of a majority of the shares present in person or by proxy at the session of
the Meeting to be adjourned. The proxyholders will vote in favor of such an
adjournment with respect to those proxies which instruct them to vote in favor
of such proposal (including proxies which have no contrary specification with
respect to such proposal), and will vote against such an adjournment with
respect to those proxies which instruct them to vote against or abstain from
voting with respect to such proposal. No adjournment will be for any period
later than July 6, 2000.
Except as stated specifically and except with respect to the election
of directors, which is by plurality of votes cast, each of the matters being
submitted to stockholder vote pursuant to the Notice of Annual Meeting will be
approved if a quorum is present in person or by proxy and a majority of the
votes cast on a particular matter are cast in favor of that matter.
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<PAGE>
Expenses of Solicitation of Proxies
The solicitation will be made by the Corporation and all expenses will
be borne by the Corporation. The solicitation will be conducted by mail, except
that in a limited number of instances proxies may be solicited by directors,
officers and other employees of the Corporation personally, by telephone or by
facsimile. This proxy statement and form of proxy are first being sent to
stockholders on or about May 5, 2000. THE CORPORATION WILL FURNISH, WITHOUT
CHARGE, A COPY OF THE ANNUAL REPORT TO ANY STOCKHOLDER UPON REQUEST IN WRITING
ADDRESSED TO "FRANKLIN CAPITAL CORPORATION, 450 PARK AVENUE, NEW YORK, NEW YORK
10022, ATTENTION: STOCKHOLDER RELATIONS" OR BY CALLING COLLECT TO (212)
486-2323.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Outstanding Shares and Voting Rights
At the close of business on April 21, 2000, the record date for the
Meeting (the "Record Date"), the outstanding voting securities of the
Corporation consisted of 719,088 shares of Common Stock, each of which is
entitled to one vote and 16,450 shares of Convertible Preferred Stock, each of
which is entitled to one vote.
Principal Stockholders
The following table sets forth certain information with respect to the
holdings of any person, including any "group" as that term is defined in Section
13(d)(3) of the Securities Exchange Act of 1934 (as amended, the "1934 Act") who
was known to the Corporation to be the "beneficial owner", as defined in Rule
13(d)(3) under the 1934 Act, of more than 5% of the outstanding Common Stock at
the close of business on March 31, 2000. The following information is based
solely on a review by the Corporation of the Common Stock transfer records of
the Corporation and on publicly available filings made with the Securities and
Exchange Commission (the "Commission") by or on behalf of stockholders of the
Corporation.
<TABLE>
<CAPTION>
Title Name and Address Amount and Nature of Percent
of Class of Beneficial Owner Beneficial Ownership of Class
<S> <C> <C> <C>
Common The Prudential Insurance Company 141,038 19.3%
Stock of America
751 Broad Street
Newark, NJ 07102
Common Stephen L. Brown, Chairman 107,835(1) 14.4%
Stock c/o Franklin Capital Corporation
450 Park Avenue
New York, New York 10022
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
Common Kuby Gottlieb Special Value Fund 49,600(2) 6.7%
Stock 500 West Madison Avenue, 27th Floor
Chicago, IL 60661
</TABLE>
(1) Does not include 5,023 shares owned by Mr. Brown's children
and does not include 29,050 shares owned by Spencer L. Brown,
Secretary of the Corporation, including options for 19,375
shares. Mr. Brown disclaims beneficial ownership of such
shares. Includes options for 5,000 shares exercisable on
January 27, 1998, options for 5,000 shares exercisable on
January 27, 1999, options for 1,875 shares exercisable on
March 18, 1999, options for 625 shares exercisable on December
9, 1999, and options for 6,875 shares exercisable on January
27, 2000.
(2) Includes preferred stock owned convertible into 20,000 shares
of common stock.
Security Ownership of Management
The following table sets forth certain information with respect to the
Common Stock beneficially owned, as defined in Rule 13(d)(3) under the 1934 Act,
by each director of the Corporation, each nominee for director, each named
executive officer and by all directors and named executive officers of the
Corporation as a group, at the close of business on March 31, 2000. Except as
otherwise indicated, each of the persons named in the table below as
beneficially owning the shares set forth therein has sole voting power and sole
investment power with respect to such shares.
<TABLE>
<CAPTION>
Name of Beneficial Common Shares Preferred Shares
Beneficial Owner Beneficially Owned Percent Beneficially Owned Percent
<S> <C> <C> <C> <C>
Stephen L. Brown(1) 107,835 14.4% -- *
Peter D. Gottlieb(2) 52,100 6.9% 4,000 24.3%
Spencer L. Brown(3) 29,050 3.9% 250 1.5%
Irving Levine(4) 28,417 3.8% 4,750 28.9%
Miles L. Berger(5) 11,667 1.6% -- *
Jonathan A. Marshall(6) 10,967 1.5% 500 3.0%
Hiram M. Lazar(7) 6,875 * 100 *
Michael P. Rolnick(5) 2,067 * -- *
David T. Lender -- * -- *
All officers and directors
as a group (9 persons) 248,978 30.1% 9,600 58.4%
</TABLE>
* Less than 1%
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<PAGE>
(1) Does not include 5,023 shares owned by Mr. Brown's children
and does not include 29,050 shares owned by Spencer L. Brown.
See (3) below. Mr. Brown disclaims beneficial ownership of
such shares. Includes options for 5,000 shares exercisable on
January 27, 1998, options for 5,000 shares exercisable on
January 27, 1999, options for 1,875 shares exercisable on
March 18, 1999, options for 625 shares exercisable on December
9, 1999, and options for 6,875 shares exercisable on January
27, 2000.
(2) Includes 29,600 shares of common stock and preferred stock
convertible into 20,000 shares of common stock owned by Kuby
Gottlieb Special Value Fund ("KGSV") and 2,500 shares of
common stock owned by Kuby Gottlieb Investments ("KGI"). Mr.
Gottlieb may be a controlling person of KGSV and KGI due to
his position as portfolio manager. Therefore Mr. Gottlieb may
be deemed to be a beneficial owner of all shares owned by KGSV
and KGI.
(3) Includes options for 5,000 shares exercisable on January 27,
1998, 5,000 shares exercisable on January 27, 1999 and 1,875
shares exercisable on March 18, 1999, options for 625 shares
exercisable on December 9, 1999, and options for 6,875 shares
exercisable on January 27, 2000. Also includes preferred stock
owned convertible into 1,250 shares of common stock.
(4) Includes options for 1,667 shares exercisable on February 14,
2000. Also includes preferred stock convertible into 23,750
shares of common stock owned by Copley Fund, Inc. ("Copley").
Mr. Levine may be a controlling person of Copley due to his
position as Chairman and Chief Executive Officer. Therefore,
Mr. Levine may be deemed to be a beneficial owner of all
shares owned by Copley.
(5) Includes options for 1,667 shares exercisable on February 14,
2000.
(6) Includes options for 1,667 shares exercisable on February 14,
2000. Also includes preferred stock owned convertible into
2,500 shares of common stock.
(7) Includes options for 1,250 shares exercisable on March 18,
1999, options for 625 shares exercisable on December 9, 1999,
options for 1,250 shares exercisable on January 27, 2000, and
options for 625 shares exercisable March 1, 2000. Also
includes preferred stock owned convertible into 500 shares of
common stock.
ELECTION OF DIRECTORS
Information Concerning Nominees
At the Meeting, the Common Stockholders and Preferred Stockholders,
voting together, will elect five (5) directors. In addition the holders of the
Preferred Stock, voting separately as a class will elect two directors. Each of
the seven directors will hold office until the next Annual Meeting of
Stockholders and until their respective successors have been elected and
qualified. Each stockholder of record at the close of business on
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<PAGE>
April 21, 2000 is entitled to one vote for each share of Common Stock registered
in the name of each stockholder on the books of the Corporation.
The term of the present directors of the Corporation expires when their
respective successors have been duly elected and qualified.
Information with respect to the nominees for election as directors of
the Corporation follows:
<TABLE>
<CAPTION>
Position Director
Name Age with the Corporation Since
<S> <C> <C> <C>
Stephen L. Brown* 61 Chairman of the Board, 1986
Chief Executive Officer and Director
Miles L. Berger 69 Director 1996
Irving Levine** 78 Director 1990
Jonathan A. Marshall 61 Director 1987
Michael P. Rolnick 34 Director 1998
Peter D. Gottlieb** 32 Director 2000
David T. Lender 47 Director 2000
</TABLE>
* Mr. Brown is an "interested person" of the Corporation within the
meaning of the Investment Company Act of 1940 (as amended, the "1940
Act") by reason of his position as Chairman and Chief Executive Officer
of the Corporation.
** Preferred Director
Stephen L. Brown, Chairman of the Board of Directors of the
Corporation, has been Chairman and Chief Executive Officer since October 1986.
Prior to joining Franklin, Mr. Brown was Chairman of S.L. Brown & Company, Inc.,
a private investment firm. Mr. Brown is a director of Copley Financial Services
Corporation (advisor to Copley Fund, Inc., a mutual fund), Avery Communications,
Inc., a holding company in the telecommunications industry, eMattress.com, a
startup Internet retailer and TradingNews, Inc., a provider of investment
information over the Internet.
Miles L. Berger, a director of the Corporation, is Chairman of the
Board of Mid Town Banc Corp, Chicago, and Berger Management Services LLC.
Additionally Mr. Berger serves as a board member of Innkeepers USA Trust and
Universal Health Realty Income Trust.
Peter D. Gottlieb, a preferred director of the Corporation, is
Vice-President of Investments at First Albany Corporation and is a Portfolio
Manager for First Albany Asst Management. Mr. Gottlieb serves as a director of
Midwest Bank & Trust and Gottlieb Health Services. Additionally, Mr. Gottlieb
serves as Treasurer of STEP, Inc.
6
<PAGE>
David T. Lender, a director of the Corporation, is Managing Director at
Banc of America Securities, LLC where he specializes in mergers and
acquisitions. Prior to joining Banc of America Securities, LLC, Mr. Lender was a
Managing Director in the Mergers and Acquisitions Group of Rothschild, Inc.
Irving Levine, a preferred director of the Corporation, has been
Chairman of the Board and President of Copley Fund, Inc., a mutual fund, since
1978 and Chairman and Treasurer of Stuffco International, Inc., a ladies handbag
processor and chain store operator, since 1978. Mr. Levine is also President and
a director of Copley Financial Services Corporation (advisor to Copley Fund,
Inc.).
Jonathan A. Marshall, a director of the Corporation, is a Senior
Partner in the law firm of Pennie & Edmonds and has been a member of that firm
since 1974. He is a member of the Bar of the State of New York and is admitted
to practice before the United States Supreme Court and the United States Patent
and Trademark Office.
Michael P. Rolnick, a director of the Corporation, is a General Partner
at ComVentures, a venture capital firm that invests in early stage Internet and
communications companies. Mr. Rolnick is responsible for private equity
investments and managing portfolio companies. Prior to joining ComVentures, Mr.
Rolnick was Vice President for New Ventures at E* Trade Group Inc.
Executive Officers
In addition to Mr. Stephen Brown, the following individuals are
executive officers of the Corporation:
Spencer L. Brown, age 34. Mr. Brown has been Senior Vice President of
the Corporation since November 1995, Secretary of the Corporation since October
1994 and was Vice President from August 1994 to November 1995. Mr. Brown is a
director of Avery Communications and eMattress.com. Mr. Brown is the son of Mr.
Stephen L. Brown, the Chairman and Chief Executive Officer of the Corporation.
Hiram M. Lazar, age 35. Mr. Lazar has been Chief Financial Officer of
the Corporation since January 1999. From June 1992 to January 1999, Mr. Lazar
was Vice-President of Finance and Compliance and Corporate Controller of
Lebenthal & Co., Inc. a regional full-service brokerage firm.
The term of office of the executive officers of the Corporation expires
at the meeting of the Board of Directors when their respective successors have
been elected and have qualified. The Corporation anticipates that each such
officer will be re-elected at the meeting of the Board of Directors to be held
immediately after the Annual Meeting of Stockholders.
Performance Graph
The rules of the Securities and Exchange Commission ("SEC") require the
Corporation to provide a line graph covering at least the
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<PAGE>
last five fiscal years and comparing the yearly percentage change in the
Corporation's total shareholder return on Common Stock with the cumulative total
return of a broad equity index assuming reinvestment of dividends and the
cumulative total return, assuming reinvestment of dividends, of a published
industry or line-of-business index; peer issuers selected in good faith; or
issuers with similar market capitalization. The graph below compares the
cumulative total five year return of the Corporation's Common Stock with that of
the American Stock Market Index (U.S. Companies) and with the American Stock
Exchange issues (U.S. Companies) listed in SIC Codes 6700-6799, which
encompasses holding and other investment companies.
Comparison of Five-Year Cumulative Total Returns
Performance Graph for Franklin Capital Corporation
Prepared by the Center for Research in Security Prices
Including Data from 12/30/94 through 12/31/99
Date Company Market Peer
Index Index Index
12/30/94 100 100 100
1/31/95 116.031 102.689 102.555
2/28/95 116.794 106.023 105.676
3/31/95 114.504 107.505 101.987
4/28/95 120.611 110.107 102.42
5/31/95 117.557 113.214 104.229
6/30/95 126.718 115.894 106.103
7/31/95 126.718 121.937 109.442
8/31/95 107.634 125.089 112.366
9/29/95 123.664 127.631 115.877
10/31/95 141.221 122.733 114.907
11/30/95 143.511 126.348 115.795
12/29/95 135.729 128.68 118.574
1/31/96 130.702 128.797 122.321
2/29/96 127.351 130.914 124.756
3/29/96 134.891 132.123 124.82
4/30/96 145.783 136.708 125.511
5/31/96 147.459 141.245 125.382
6/28/96 149.972 133.384 126.877
7/31/96 145.783 123.001 121.453
8/30/96 151.648 126.603 126.011
9/30/96 151.648 130.069 126.458
10/31/96 149.972 127.478 125.992
11/29/96 149.496 132.734 129.985
12/31/96 148.579 130.729 132.015
1/31/97 144.91 133.783 137.375
2/28/97 146.745 136.239 139.617
3/31/97 139.407 129.568 135.937
4/30/97 142.159 125.748 136.181
5/30/97 135.739 138.387 141.801
6/30/97 135.739 143.181 147.826
7/31/97 159.747 149.259 152.068
8/29/97 149.604 150.962 150.572
9/30/97 149.604 163.144 159.101
10/31/97 157.211 157.464 157.187
11/28/97 140.729 157.325 161.772
12/31/97 131.854 163.521 166.219
1/30/98 139.461 160.655 167.23
2/27/98 117.908 170.561 170.414
3/31/98 139.461 180.635 176.468
4/30/98 161.014 182.836 175.821
5/29/98 164.818 174.999 171.919
6/30/98 161.014 179.605 173.305
7/31/98 163.55 177.032 172.09
8/31/98 129.319 142.024 147.503
9/30/98 121.712 152.749 163.507
10/30/98 101.426 159.981 171.067
11/30/98 106.498 165.719 179.059
12/31/98 106.498 175.437 176.942
1/29/99 115.373 183.256 176.064
2/26/99 98.891 179.232 171.836
3/31/99 121.712 179.251 171.939
4/30/99 141.997 194.936 180.948
5/28/99 131.854 197.881 183.28
6/30/99 117.908 202.445 193.097
7/30/99 114.105 199.072 182.104
8/31/99 103.962 193.406 171.94
9/30/99 109.033 196.398 172.196
10/29/99 111.569 196.828 171.481
11/30/99 172.425 209.949 173.618
12/31/99 207.924 224.583 202.792
Remuneration of Directors and Officers
The following table sets forth information with respect to all cash
remuneration paid or accrued by the Corporation for services by the
Corporation's directors and three most highly paid executive officers whose
compensation exceeded $60,000 for the year ended December 31, 1999:
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<PAGE>
Aggregate Pension or Retirement
Compensation Benefits Accrued
From the as part of
Name of Person Position Corporation Corporation Expenses
- -------------- -------- ----------- --------------------
Stephen L. Brown Chairman and Chief
Executive Officer $ 420,000 $0
Spencer L. Brown Senior Vice President
and Secretary $ 181,250 $0
Hiram M. Lazar Chief Financial Officer $ 117,917 $0
Miles L. Berger Director $ 12,000 $0
Irving Levine Director $ 12,000 $0
Jonathan A. Marshall Director $ 12,000 $0
Michael P. Rolnick Director $ 12,000 $0
In l999, Stephen L. Brown was employed under a contract with the
Corporation at a base salary of $390,000 per annum. The initial term of such
employment contract expired on December 31, l995 and is automatically extended
from year to year thereafter unless the Corporation elects not to extend the
term. In compliance with the terms of a settlement ((the "Settlement") see
below, "Certain Litigation") entered into between the Corporation and a former
director, Mr. Brown's base salary was reduced to $350,000, effective January 1,
l998. This provision of the Settlement expires on November 18, 2000. Mr. Brown
received a performance bonus of $70,000 for 1999. Pursuant to the Settlement,
upon becoming a BDC, the Corporation agreed, that directors' annual fees for all
meetings of the Board of Directors shall not exceed in the aggregate a total of
$12,000 per year, although such directors may also receive incentive
compensation, see below, "Compensation Pursuant to Plans". With the exception of
Mr. Brown, each director of the Corporation received director's fees of $12,000
for l999. During the year ended December 31, l999, the Corporation reimbursed
directors for certain receipted expenses incurred in connection with the
performance of their duties, including attendance at Board and Committee
meetings, in the aggregate amount of $850. Mr. Brown received no such
reimbursement.
Compensation Pursuant to Plans
On September 10, 1997, the Corporation's stockholders approved two
Stock Option Plans: a Stock Incentive Plan ("SIP") to be offered to the
Corporation's consultants, officers and employees (including any officer or
employee who is also a director of the Corporation) and a Non-Statutory Stock
Option Plan ("SOP") to be offered to the Corporation's "outside " directors,
i.e., those directors who are not also officers or employees of the Corporation.
75,000 shares of the Corporation's Common Stock have been reserved for issuance
under these plans, of which 45,000 shares have been reserved for the SIP and
30,000 shares have been reserved for the SOP. Shares subject to options that
terminate or expire prior to exercise will be available for future grants under
the Plans.
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The SIP is administered by the Corporation's Board of Directors. The
Board has the authority, among other rights, to select the participants to whom
awards may be granted, determine the types of awards to be granted, and
determine the vesting terms and other conditions of an award to a SIP
participant. The SIP permits the Committee to grant participants options to
purchase Common Stock (including incentive stock options within the meaning of
Section 422 of the Internal Revenue Code ("ISOs") or "non-statutory stock
options" ("non-ISOs")), stock appreciation rights, restricted stock and tax
offset bonuses.
On January 27, 1998, the Corporation granted 15,000 options each to
Stephen L. Brown, Spencer L. Brown, and John Greenbaum under the SIP. The strike
price of the options was $7.00 per share, which represented the closing price of
Franklin's Common Stock as reported by the American Stock Exchange on that date.
One-third of the options granted vested immediately; another one-third vested
one year from the date of issuance; and the final one-third vested two years
after the date of issuance. The options expire after ten years. On December 31,
1998, John Greenbaum resigned from the Corporation and forfeited 10,000 options
upon resignation and an additional 5,000 options three months after resignation.
Ten thousand of these options were reissued on March 18, 1999 as follows, 3,750
each to Stephen L. Brown and Spencer L. Brown, and 2,500 to Hiram M. Lazar at a
strike price of $5.75 per share, which represented the closing price of
Franklin's Common Stock as reported by the American Stock Exchange on that date.
These options will expire as originally issued. One-half of the reissued options
vested immediately, and one-half will vest on January 27, 2000. 3,750 of the
remaining forfeited options were reissued on December 9, 1999 as follows, 1,250
each to Stephen L. Brown, Spencer L. Brown and Hiram M. Lazar at a strike price
of $9.00 per share, which represented the closing price of Franklin's Common
Stock as reported by the American Stock Exchange on that date. These options
will expire as originally issued. One-half of the reissued options vested
immediately, and one-half will vest on December 9, 2000. The remaining 1,250
forfeited options were reissued on March 1, 2000 to Hiram M. Lazar at a strike
price of $21.00 per share, which represented the closing price of Franklin's
Common Stock as reported by the American Stock Exchange on that date. These
options will expire as originally issued. One-half of the reissued options
vested immediately, and one-half will vest on March 1, 2001.
The SOP is also administered by the Board of Directors. Only non-ISOs
can be granted under the SOP. The Board granted all non-management directors
5,000 options each. Because the issuance of options to "outside" directors is
not permitted under the Act without an exemptive order by the Commission, the
issuance of options under the SOP was conditioned upon the granting of such
order. The order was granted by the Commission on February 14, 2000, and 20,000
options were granted as follows, 5,000 each to Miles L. Berger, Irving Levine,
Jonathan A. Marshall and Michael P. Rolnick at a strike price of $17.25 per
share, which represented the closing price of Franklin's Common Stock as
reported by the American Stock Exchange on that date. One-third of the options
granted vested immediately; another one-third vest one year from the date of
issuance; and the final one-third vest two years after the date of issuance. The
options expire after ten years. The remaining 10,000 options will be granted as
follows, 1,250 each to Miles L. Berger, Irving Levine, Jonathan A. Marshall and
Michael P. Rolnick during 2000 if reelected at the 1999 annual meeting and 1,250
each to Miles L. Berger, Irving Levine, Jonathan A. Marshall and Michael P.
Rolnick during 2001 if reelected at the 2000 annual meeting.
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Committees and Meetings of the Board of Directors
During the year ended December 31, 1999, the Board of Directors met on
5 occasions and acted by unanimous written consent on one occasion.
The Audit Committee held one meeting during the year ended December 31,
1999. The Audit Committee meets with the Corporation's independent auditors to
review the Corporation's financial statements and the adequacy of internal
controls and accounting systems. The members of the Audit Committee are Messrs.
Levine (Chairman), Marshall and Berger.
The Executive Committee meets between meetings of the Board of
Directors. The Executive Committee generally may exercise the authority of the
Board of Directors and may approve financings not to exceed $500,000. The
Executive Committee met once during the year ended December 31, 1999. The
members of the Executive Committee are Messrs. Brown,* Marshall and Levine.
*Interested Person.
The Compensation Committee meets to consider compensation of executive
officers of the Corporation. The Compensation Committee met twice during the
year ended December 31, 1999. The members of the Compensation Committee are
Messrs. Marshall (Chairman) and Levine.
Each director attended at least 75% of the aggregate number of meetings
of the Board of Directors and of Board Committees on which he served. There is
no Nominating Committee.
Brokerage Transactions
During the year ended December 31, 1999, the Corporation paid aggregate
brokerage commissions of approximately $45,000.
Brokers are selected by the Corporation's Board of Directors, whose
primary considerations are the cost and efficiency of execution of brokerage
orders. No person acting on behalf of the Corporation is authorized to pay a
brokerage commission to a broker in excess of that which another broker might
have charged for effecting the same transaction in recognition of the value of
research services provided by the broker.
Investment Advisor
The Corporation does not engage the services of an investment advisor,
principal underwriter or administrator.
11
<PAGE>
Affiliated Transactions
In January 1999, Franklin formed eCom Capital Corporation ("eCom"), a
wholly owned subsidiary of Franklin, for the purposes of investing in Internet
related ventures. On January 25, 1999, e.com invested a total of $387,500 into
eMattress.com Inc. ("eMattress"), consisting of $175,000 worth of Franklin
Common Stock (20,046 shares from treasury stock valued at the Net Asset Value on
the date of the transaction) and $212,500 in cash. Franklin received preferred
stock convertible into a 50% equity interest in eMattress. eMattress is a retail
internet mattress company that was founded in 1998. Messrs. Stephen L. Brown and
Spencer L. Brown were elected to serve on the eMattress Board of Directors.
In August 1999, Franklin invested an additional $87,500 in eCom.
Pursuant to this transaction, eMattress was merged into eCom and 19,044 shares
of Franklin Common Stock were returned to Franklin's treasury. The surviving
entity, eMattress.com is a Delaware corporation. In November 1999, Franklin
invested an additional $75,000 into eMattress and as result of this transaction,
on December 31, 1999, Franklin owned 87.2% of eMattress.
Certain Litigation
Pursuant to terms of the Settlement related to a complaint filed by a
former director of Franklin in the United States District Court for the Southern
District of New York that was approved by the District Court on September 11,
1997, the Board of Directors declared on July 18, 1997 a $3.25 special dividend
to stockholders of record of the Corporation's Common Stock as of July 28, 1997.
Additionally, the Corporation paid legal fees of $75,000 to the plaintiff's
counsel.
Under the terms of the Settlement, upon the Corporation becoming a BDC,
for three years thereafter: (a) each director's annual fees for all meetings of
the Board or Directors and its committees actually attended, including
consulting fees, shall not exceed in the aggregate a total of $12,000 per year,
but such directors may receive incentive compensation, as determined in and
subject to the absolute discretion of the Board of Directors and provided that
such incentive compensation is permissible under the Act; and (b) the base
salary for Stephen Brown shall not exceed $350,000 per year, but, during those
three years, Mr. Brown also may receive such additional incentive compensation,
as determined by and subject to the absolute discretion of the Board of
Directors, as is permissible under the Act. These provisions of the Settlement
expire on November 18, 2000.
Recommendation of the Board of Directors
The Board of Directors recommends that stockholders vote "FOR" the
persons named on the accompanying proxy card, the non-preferred directors, to
serve as directors until the next Annual Meeting of Stockholders and until their
respective successors have been duly elected and have qualified. Under Delaware
law, directors are elected by a plurality of the votes of the shares present in
person or represented by proxy and entitled to vote in the election of
directors.
All nominees have consented to stand for election and to serve if
elected. If any nominee should be unable to serve in such position, an event not
presently anticipated, the proxies voted for such a person, if any,
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<PAGE>
as shall be designated by the Board of Directors to replace any such nominee,
unless the Board of Directors reduces the number of directors constituting the
whole Board.
In the absence of contrary instructions, the Corporation intends to
vote all proxies "FOR" the election of the five (5) nominees listed above as
Directors of the Corporation. In tallying the vote, abstentions and broker
non-votes will be considered to be shares of Common Stock present at the
Meeting, but not voting in favor of the election of the nominees (i.e., they
will have the same legal affect as a vote "against" the election of the
nominees).
PROPOSAL TO APPROVE SELECTION OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP as the
Corporation's independent auditors for the fiscal year ending December 31, 2000.
The audit services performed by Ernst & Young LLP for the year ended December
31, 1999 included an examination of the financial statements included in the
1999 Annual Report to Stockholders. Ernst & Young LLP also performed certain tax
and special consulting services.
Ernst & Young LLP has advised the Corporation that it has neither any
direct nor any material indirect financial interest in the Corporation. It is
expected that a representative of Ernst & Young LLP will be present at the
Meeting and will have an opportunity to make a statement if he desires to do so
and to respond to appropriate questions.
The Board of Directors recommends that stockholders vote "FOR"
ratification of the appointment of Ernst & Young LLP as independent auditors for
the year ending December 31, 2000.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting must be received in writing by the Corporation not later than April 15,
2001 in order to be considered for inclusion in the proxy statement relating to
such meeting, which the Corporation anticipates will be held in June 2001.
OTHER MATTERS
The Board of Directors does not know of any other matters that may
properly be brought, and which are likely to be brought, before the Meeting.
However, should other matters be properly brought before the Meeting, the
persons named on the enclosed proxy or their substitutes will vote in accordance
with their best judgment on such matters.
By Order of the Board of Directors
SPENCER L. BROWN
Secretary
April 28, 2000
<PAGE>
FRANKLIN CAPITAL CORPORATION PROXY
This Proxy Is Solicited on Behalf of the Board of Directors
Proxy for Annual Meeting of Shareholders
June 7, 2000
The undersigned hereby appoints Stephen L. Brown and Jonathan A. Marshall, or
either of them, as attorneys and proxies to vote all the shares of common stock,
par value $1.00 per share, of Franklin Capital Corporation (the "Corporation"),
which are outstanding in the name of the undersigned and which the undersigned
would be entitled to vote as of April 21, 2000, at the Annual Meeting of
Stockholders of the Corporation (the "Meeting"), to be held at the offices of
Weil, Gotshal & Manges, LLP, 767 Fifth Avenue, 25th Floor, New York, New York,
on Wednesday, June 7, 2000, at 10 o'clock a.m., New York Time, and at any or all
adjournments or postponements thereof; and the undersigned hereby instructs and
authorizes said attorneys to vote as indicated on the reverse side.
The shares represented hereby will be voted in accordance with the
instructions contained on the reverse side. If no instructions are given the
shares will be voted FOR the election of all five nominees in item 1 and FOR
item 2 below, each of said items being more fully described in the Notice of
Meeting and accompanying Proxy Statement, receipt of which is hereby
acknowledged. In the event of any proposed adjournment of the Meeting to permit
further solicitation of proxies with respect to any proposal listed below,
shares will be voted FOR adjournment with respect to such proposal if they were
to be voted FOR such proposal (including if there were no specifications), and
AGAINST adjournment with respect thereto if such shares were to be voted AGAINST
or to have ABSTAINED from voting with respect to such proposal.
(Continued and to be signed on reverse side)
FOLD AND DETACH HERE
<PAGE>
Please mark /X/
your votes as
indicated in
this example
1. ELECTION OF DIRECTORS: Stephen L. Brown, Miles L. Berger, David T. Lender,
Jonathan A. Marshall, Michael P. Rolnick (Instructions: To withhold authority
to vote for any individual nominee, write that nominee's name on the line
provided below.)
- --------------------------------------------------------------------------------
FOR the election of all nominees listed (except as marked to the contrary on the
line above) / /
WITHHOLDING AUTHORITY to vote for all nominees listed above / /
2. Ratification of appointment of Ernst & Young LLP to serve as independent
auditors of the Corporation for the fiscal year ending December 31, 2000.
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion, on such other matters as may properly come before the
Meeting (other than adjournments with respect to any proposal as described on
reverse).
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY MAY BE REVOKED PRIOR TO ITS EXERCISE. PLEASE DATE, SIGN AND MAIL
PROXY CARD IN THE ENCLOSED ENVELOPE
Signatures of Stockholder(s) Dated , 2000
--------------------------- --------------
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
