SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
Franklin Capital Corporation
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(Name of Registrant as Specified In Its Charter)
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(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)(4) 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:
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4) Date Filed:
________________________________________________________________________________
FRANKLIN CAPITAL CORPORATION
450 PARK AVENUE
NEW YORK, NEW YORK 10022
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 11, 2001
The Annual Meeting of Stockholders of Franklin Capital Corporation (the
"Corporation") will be held on October 11, 2001 at 2 o'clock p.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 four (4) 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 the
Corporation (the "Board") of Ernst & Young LLP to serve as independent
auditors for the fiscal year ending December 31, 2001; 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 September 10, 2001 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
September 13, 2001
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 ("the Board")
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
October 11, 2001, at 2 o'clock p.m., New York Time, at the offices of Weil,
Gotshal and Manges, LLP, 767 Fifth Avenue, 25th Floor, New York, New York 10153.
This proxy statement and form of proxy are first being sent to stockholders on
or about September 25, 2001.
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 four (4) 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 November 12, 2001.
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. In tallying
the vote, abstentions and broker non-votes will be considered to be shares of
Common Stock or Preferred 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).
EXPENSES OF SOLICITATION OF PROXIES
The solicitation will be made by the Corporation and all expenses will be
borne by the Corporation. The
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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. 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 September 10, 2001, the record date for the
Meeting (the "Record Date"), the outstanding voting securities of the
Corporation consisted of 1,076,000 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 August 31, 2001. 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.
TITLE NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
Common The Prudential Insurance Company 211,557 19.7%
Stock of America
751 Broad Street
Newark, NJ 07102
Common Stephen L. Brown, Chairman 138,059(1) 12.8%
Stock c/o Franklin Capital Corporation
450 Park Avenue
New York, New York 10022
Common Kuby Gottlieb Special Value Fund 68,900(2) 6.4%
Stock 500 West Madison Avenue, 27th Floor
Chicago, IL 60661
(1) Does not include 5,023 shares owned by Mr. Brown's children and does not
include 33,044 shares owned by Spencer L. Brown, Secretary of the
Corporation. Mr. Brown disclaims beneficial ownership
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of such shares.
(2) Includes preferred stock owned convertible into 30,000 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 August 31, 2001. 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.
COMMON SHARES PREFERRED SHARES
NAME OF BENEFICIAL BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED PERCENT OWNED PERCENT
Stephen L. Brown(1) 138,059 12.8% -- *
Peter D. Gottlieb(2) 77,400 7.0% 4,500 27.4%
Irving Levine(3) 46,375 4.2% 4,750 28.9%
Spencer L. Brown(4) 33,044 3.1% 250 1.5%
Jonathan A. Marshall(5) 20,200 1.9% 500 3.0%
Hiram M. Lazar(6) 8,148 * 100 *
Michael P. Rolnick(7) 7,250 * -- *
David T. Lender 300 * -- *
All officers and directors
as a group (8 persons) 330,776 28.2% 10,100 61.4%
*Less than 1%
(1) Does not include 5,023 shares owned by Mr. Brown's children and does not
include 33,044 shares owned by Spencer L. Brown. See (4) below. Mr. Brown
disclaims beneficial ownership of such shares.
(2) Includes 38,900 shares of common stock and preferred stock convertible into
30,000 shares of common stock owned by Kuby Gottlieb Special Value Fund
("KGSV") and 3,750 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 2,500 shares exercisable on February 14, 2000, options
for 625 shares exercisable on June 7, 2000, options for 2,500 shares
exercisable on February 14, 2001, and options for 625 shares exercisable on
June 7, 2001. Also includes preferred stock convertible into 33,750 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
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beneficial owner of all shares owned by Copley.
(4) Also includes preferred stock owned convertible into 1,875 shares of common
stock.
(5) Includes options for 2,500 shares exercisable on February 14, 2000, options
for 625 shares exercisable on June 7, 2000, options for 2,500 shares
exercisable on February 14, 2001, and options for 625 shares exercisable on
June 7, 2001. Also includes preferred stock owned convertible into 3,750
shares of common stock.
(6) Includes options for 937 shares exercisable on March 1, 2000 and options
for 938 shares exercisable on March 1, 2001. Also includes preferred stock
owned convertible into 750 shares of common stock.
(7) Includes options for 2,500 shares exercisable on February 14, 2000, options
for 625 shares exercisable on June 7, 2000, options for 2,500 shares
exercisable on February 14, 2001, and options for 625 shares exercisable on
June 7, 2001.
ELECTION OF DIRECTORS
INFORMATION CONCERNING NOMINEES
At the Meeting, the Common Stockholders and Preferred Stockholders, voting
together, will elect four (4) directors. In addition the holders of the
Preferred Stock, voting separately as a class will elect two (2) directors who
will thereafter be designated as the Preferred Directors. Each of the six (6)
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 September 10, 2001 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:
POSITION DIRECTOR
NAME AGE WITH THE CORPORATION SINCE
---- --- -------------------- -----
Stephen L. Brown* 63 Chairman of the Board, 1986
Chief Executive Officer
and Director
Irving Levine** 79 Director 1990
Jonathan A. Marshall 62 Director 1987
Michael P. Rolnick 36 Director 1998
Peter D. Gottlieb** 34 Director 2000
David T. Lender 48 Director 2000
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* 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, 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).
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.
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.) as well as a director of U.S. Energy Systems, Inc. an independent producer
of clean efficient energy for growing energy markets.
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:
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SPENCER L. BROWN, age 36. 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 the son
of Mr. Stephen L. Brown, the Chairman and Chief Executive Officer of the
Corporation.
HIRAM M. LAZAR, age 37. 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.
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, 2000:
PENSION OR
RETIREMENT
BENEFITS
AGGREGATE ACCRUED AS
COMPENSATION PART OF
FROM THE CORPORATION
NAME OF PERSON POSITION CORPORATION EXPENSES
Stephen L. Brown Chairman and Chief
Executive Officer $475,000 $6,000
Spencer L. Brown Senior Vice President
and Secretary $240,000 $6,000
Hiram M. Lazar Chief Financial Officer $135,000 $4,050
Miles L. Berger Director $ 12,000 $0
Peter D. Gottlieb Director $ 12,000 $0
David T. Lender Director $ 12,000 $0
Irving Levine Director $ 12,000 $0
Jonathan A. Marshall Director $ 12,000 $0
Michael P. Rolnick Director $ 12,000 $0
With the exception of Mr. Brown, each director of the Corporation received
director's fees of $12,000 for 2000. During the year ended December 31, 2000,
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 $1,981. Mr. Brown received no
such reimbursement.
On May 1, 2000, Stephen L. Brown signed an Employment Agreement with the
Corporation ("the Employee Agreement"), which superseded an agreement that was
to expire on December 31, 2000. The
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Employee Agreement expires on December 31, 2003, ("the Term"). The Term will
automatically renew from year to year thereafter, unless the Corporation
notifies Mr. Brown not less than 120 days prior to the end of any Term in
writing that the Corporation will not be renewing the Employee Agreement.
During the period of employment, Mr. Stephen L. Brown shall serve as the
Chairman and Chief Executive Officer of the Corporation; be responsible for the
general management of the affairs of the Corporation, reporting directly to the
Board, serve as a member of the Board for the period of which he is and shall
from time to time be elected or reelected.
Mr. Stephen L. Brown is to receive compensation under the Employment
Agreement in the form of base salary of $420,000 beginning January 1, 2001. In
addition, the Board may increase such salary at its discretion from time to
time. Mr. Brown is also entitled to be paid bonuses as the Board determines in
its sole discretion. Under the Employment Agreement, the Corporation furnishes
Mr. Brown with an automobile and reimburses him for certain expenses related to
such automobile. In addition, Mr. Brown is reimbursed for expenses related to
membership in a club to be used primarily for business purposes. Mr. Brown is
entitled under the Employment Agreement to participate in any employee benefit
plans or programs and to receive all benefits, perquisites and emoluments for
which salaried employees are eligible.
Under the Employment Agreement, Mr. Stephen L. Brown is entitled to
severance pay in the event of termination without cause or by constructive
discharge equal to the remaining base salary payable under the Employment
Agreement and provides for death benefits payable to the surviving spouse equal
to Mr. Brown's base salary for a period of one year.
In addition, Mr. Stephen L. Brown and the Corporation entered into a
Severance Agreement ("the Severance Agreement") on May 1, 2000. Under the
Severance Agreement Mr. Brown is entitled to receive severance if following a
change in control as defined in the Severance Agreement his employment is
terminated by the Corporation without cause or by the executive within one year
of such change in control, the individual shall be entitled to receive
compensation in a lump sum payment equal to 1.5 times the individual's average
compensation over the past five years.
On May 1, 2000, Spencer L. Brown signed an Employment Agreement with the
Corporation ("the Employee Agreement"). The Employee Agreement expires on
December 31, 2003, ("the Term"). The Term will automatically renew from year to
year thereafter, unless the Corporation notifies Mr. Brown not less than 120
days prior to the end of any Term in writing that the Corporation will not be
renewing the Employee Agreement.
During the period of employment, Mr. Spencer L. Brown shall serve as the
Senior Vice-President and Secretary of the Corporation reporting to the Chairman
and the Board and serve as a member of the Board for the period of which he is
and shall from time to time be elected or reelected.
Mr. Spencer L. Brown is to receive compensation under his Employment
Agreement in the form of base salary of $225,000 beginning May 1, 2000. In
addition, the Board may increase such salary at its discretion from time to
time. Mr. Brown is also entitled to be paid bonuses as the Board determines in
its sole discretion.
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Under the Employment Agreement, the Corporation is to reimburse Mr. Brown for
expenses related to the use of an automobile and for expenses related to
membership in club to be used primarily for business purposes. Mr. Brown is
entitled under the Employment Agreement to participate in any employee benefit
plans or programs and to receive all benefits, perquisites and emoluments for
which salaried employees are eligible.
Under the Employment Agreement, Mr. Spencer L. Brown is entitled to
severance pay in the event of termination without cause or by constructive
discharge equal to the remaining base salary payable under the Employment
Agreement and provides for death benefits payable to the surviving spouse equal
to Mr. Brown's base salary for a period of one year.
In addition, Mr. Spencer L. Brown and the Corporation entered into a
Severance Agreement ("the Severance Agreement") on May 1, 2000. Under the
Severance Agreement Mr. Brown is entitled to receive severance if following a
change in control as defined in the Severance Agreement his employment is
terminated by the Corporation without cause or by the executive within one year
of such change in control, the individual shall be entitled to receive
compensation in a lump sum payment equal to 1.5 times the individual's average
compensation over the past five years.
COMPENSATION PURSUANT TO PLANS
On September 9, 1997, Franklin'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 Franklin. 112,500 shares of
the Corporation's Common Stock have been reserved for issuance under these
plans, of which 67,500 shares have been reserved for the SIP and 45,000 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.
Because the issuance of options to "outside" directors is not permitted under
the Act without an exemptive order by the Securities and Exchange Commission,
the issuance of options under the SOP was conditioned upon the granting of such
order. The order was granted by the Commission on January 18, 2000.
On January 27, 1998, 67,500 options were granted to three eligible officers
of the Corporation under the SIP. The strike price of the options was $4.67 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, one of the eligible
officers resigned from the Corporation and forfeited 15,000 options upon
resignation and an additional 7,500 options three months after resignation.
7,500 of these options were reissued on March 18, 1999 to three eligible
officers of the Corporation at a strike price of $3.83 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 vested
on January 27, 2000. 5,625 of the remaining forfeited options were reissued on
December 9, 1999 to three eligible officers of the Corporation at a strike price
of $6.00 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 vested on December 9, 2000. The remaining 1,875 of
forfeited options were reissued on March 1, 2000, to one eligible officer of the
Corporation at a strike price of $14.00 per share, which represented the closing
price of Franklin's Common Stock as reported by the
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American Stock Exchange on that date. These options will expire as originally
issued. One-half of the reissued options vested immediately, and one-half vested
on March 1, 2001.
On February 14, 2000, 30,000 options were granted under the SOP to four
eligible "outside" directors. The strike price of the options was $11.50 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. On June 7, 2000, 7,500 options were granted
under the SOP to four eligible "outside" directors. The strike price of the
options was $9.67 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.
On May 9, 2000, one of Franklin's officers exercised 29,062 options
resulting in a non-cash charge to compensation expense of $197,188. On September
11, 2000, one of Franklin's officers exercised 29,062 options resulting in a
non-cash charge to compensation expense of $129,317. On December 21, 2000, three
of Franklin's officers exercised 7,501 options resulting in a non-cash charge to
compensation expense of $23,139.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the year ended December 31, 2000, the Board 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,
2000. 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. The Executive
Committee generally may exercise the authority of the Board and may approve
financings not to exceed $500,000. The Executive Committee did not meet during
the year ended December 31, 2000. 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, 2000. 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 and of Board Committees on which he served. There is no Nominating
Committee.
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AUDIT COMMITTEE REPORT
The Audit Committee reviewed and discussed with management the
Corporation's audited financial statements as of and for the year ended December
31, 2000. The Audit Committee also discussed with the independent accountants
the matters required to be discussed by Statement on Auditing Standards No. 61,
COMMUNICATION WITH AUDIT COMMITTEES, as amended, by the Auditing Standards Board
of the American Institute of Certified Public Accountants.
The Audit Committee received and reviewed the written disclosures and the
letter from the independent accountants required by Independence Standard No. 1,
INDEPENDENCE DISCUSSIONS WITH AUDIT COMMITTEES, as amended, by the Independence
Standards Board, and have discussed with the accountants the accountants'
independence. The Audit Committee considered whether the provisions of
non-financial audit services were compatible with Ernst & Young LLP's
independence in performing financial audit services.
Based on the reviews and discussions referred to above, the Audit Committee
recommends to the Board that the financial statements referred to above be
included in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2000 for filing with the Commission. The Audit Committee also
recommends the selection of Ernst & Young to serve as independent accountants
for the year ending 2001.
BROKERAGE TRANSACTIONS
During the year ended December 31, 2000, the Corporation paid aggregate
brokerage commissions of approximately $35,100.
Brokers are selected by the Board, 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.
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, eCom invested a total of $387,500 in
eMattress.com Inc. ("eMattress"), consisting of $175,000 worth of Franklin
common stock (30,069 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. Two officers of
Franklin were elected to serve on the five member 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 28,566 shares of
Franklin common stock were returned to Franklin's
10
treasury. The surviving entity, eMattress.com is a Delaware corporation. In
November 1999, Franklin invested an additional $75,000 into eMattress and as a
result of this transaction, on December 31, 1999, Franklin owned 87.2% of
eMattress. During 2000 eMattress ceased operations and has legally dissolved.
Franklin has written off its entire investment including a loan of $56,311 that
was determined to be non-collectible.
During the year ended December 31, 2000, Franklin sold 202,000 shares of
Avery Communications for total proceeds of $379,527 realizing a gain of
$161,531. At December 31, 2000, Franklin owned 9.32% of Avery Communications on
a fully diluted basis, and 16.1% of Avery Communications on a primary basis.
On February 1, 2001, Franklin sold to Avery Communications 1,183,938 shares
of common stock and 350,000 shares of preferred stock of Avery Communications
for $1,557,617 plus accrued interest on the preferred stock for a realized gain
net of expenses of $137,759. As part of the sale Franklin retained the right to
receive 1,533,938 shares of Primal a wholly owned subsidiary of Avery
Communications. On February 13, 2001, Primal announced that Avery Communications
had completed a spin-off of Primal and Franklin received 1,533,938 fully
registered and marketable shares of Primal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board recommends that stockholders vote "FOR" the persons named herein
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, as shall be
designated by the Board to replace any such nominee, unless the Board 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 six (6) 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 or Preferred 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).
11
PROPOSAL TO APPROVE SELECTION OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
The Board has appointed Ernst & Young LLP as the Corporation's independent
auditors for the fiscal year ending December 31, 2001. The audit services
performed by Ernst & Young LLP for the year ended December 31, 2000 included an
examination of the financial statements included in the 2000 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.
AUDIT FEES. The aggregate fees billed for professional services rendered by
Ernst & Young LLP for 2000 for the audit of the Corporation's annual financial
statements for 2000 and for the review of the financial statements included in
the Corporation's Forms 10-Q for 2000 were $108,300.
ALL OTHER FEES. There were no other fees billed by Ernst & Young LLP for
2000.
The Board 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 2001 Annual
Meeting must be received in writing by the Corporation not later than August 5,
2002 in order to be considered for inclusion in the proxy statement relating to
such meeting, which the Corporation anticipates will be held in September 2002.
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
September 13, 2001
12
FRANKLIN CAPITAL CORPORATION PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 11, 2001
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 September 10, 2001, 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 Thursday, October 11, 2001 at two o'clock p.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 four nominees in item 1 and FOR
items 2 and 3 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)
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o FOLD AND DETACH HERE o
Please mark ------
your votes as | X |
indicated in | |
this example ------
FOR AGAINST ABSTAIN
---- ---- ----
1. ELECTION OF DIRECTORS: 01. Stephen L. Brown, 2. Ratification of appointment of Ernst & Young | | | | | |
02. David T. Lender, 03. Jonathan A. LLP to serve as independent auditors of the | | | | | |
Marshall, 04. Michael P. Rolnick Corporation for the fiscal year ending ---- ---- ----
(Instructions: To withhold authority to vote December 31, 2001.
for any individual nominee, write that
nominee's name on the line provided below.
1. Election of directors: 01. Stephen L.
Brown, 02. David T. Lender, 03. Jonathan A.
Marshall, 04. Michael P. Rolnick
(Instructions: To withhold authority to vote
for any individual nominee, write that
nominee's name on the line provided below.
----------------------------------------------- 3. In their discretion, on such other matters ---- ---- ----
FOR THE ELECTION OF WITHHOLDING AUTHORITY as may properly come before the meeting | | | | | |
ALL NOMINEES LISTED TO VOTE FOR (other than adjournments with respect to any | | | | | |
(EXCEPT AS MARKED TO ALL NOMINEES proposal as described on reverse). ---- ---- ----
THE CONTRARY ON THE LISTED
LINE ABOVE) ABOVE
---- ----
| | | |
| | | |
---- ----
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________________, 2001
Please sign 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.
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o FOLD AND DETACH HERE o