SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
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 Sec. 240.14a-12
FRANKLIN CAPITAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
N/A
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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)(1) and 0-11.
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(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
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[ ] Fee paid previously with preliminary materials.
FRANKLIN CAPITAL CORPORATION
450 PARK AVENUE
NEW YORK, NEW YORK 10022
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 17, 2003
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The Annual Meeting of Stockholders of Franklin Capital Corporation (the
"Corporation") will be held on December 17, 2003 at 11:30 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 four (4) directors to hold office until the
next Annual Meeting of Stockholders and until their
successors have been duly elected and have qualified (two
(2) of whom are to be elected by the holders of Common
Stock and Preferred Stock, voting together as a class, and
two (2) of whom are to be elected solely by holders of
Preferred Stock);
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, 2003; 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 November 11, 2003 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, and Preferred 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
STEPHEN L. BROWN
CHAIRMAN
New York, New York
November 14, 2003
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 December 17, 2003, at 11:30 a.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 November 21, 2003.
RECENT DEVELOPMENTS
On October 8, 2003, Franklin sold to Sunshine Wireless 375,000 shares
of the common stock of Excelsior Radio Networks, Inc. for an aggregate purchase
price of $750,000, realizing a gain of $375,000, pursuant to a stock purchase
agreement between Sunshine and Franklin. Franklin has stock appreciation rights
on these common shares such that in the event that Excelsior is sold and the
purchaser of the common shares from Franklin receives more than $3.50 per share,
Franklin is entitled to receive 80% of the value greater than $3.50 per share.
After giving effect to the purchase of the common stock, Sunshine owns
approximately 63.6% and the Corporation owns 36.4% of the issued and outstanding
common stock, and voting power, of Excelsior. On a fully diluted basis, after
giving effect to the exercise of the outstanding warrants and the conversion of
Sunshine's outstanding preferred stock of Excelsior into common stock, the
Corporation owns approximately 13.8% of Excelsior. Franklin continues to
maintain a seat on the board of directors of Excelsior.
VOTING AND REVOCABILITY OF PROXIES
Stockholders who execute proxies may revoke them at any time before
they are voted, by delivering to Mr. Stephen L. Brown, Chairman of the
Corporation, at the offices of the Corporation at 450 Park Avenue, 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 in favor of (i) the election of the nominees for directors and (ii) 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 January 23, 2004.
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 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. Accompanying this Proxy Statement is a copy of the Corporation's
Annual Report. THE CORPORATION WILL FURNISH, WITHOUT CHARGE, ADDITIONAL COPIES
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 November 11, 2003, the record date for the
Meeting (the "Record Date"), the outstanding voting securities of the
Corporation consisted of 1,020,100 shares of Common Stock, each of which is
entitled to one vote, and 10,950 shares of Preferred Stock convertible into
Common 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 November 10, 2003. The following information
is based solely on a review by the Corporation of its capital stock transfer
records 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 161,854 15.8%
Stock of America
751 Broad Street
Newark, NJ 07102
2
Common Stephen L. Brown, Chairman 142,590(1) 14.0%
Stock c/o Franklin Capital Corporation
450 Park Avenue
New York, New York 10022
(1) Does not include 45,829 shares of Common Stock beneficially owned by Mr.
Brown's children. Mr. Brown disclaims beneficial ownership of all such
shares.
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 nominees and named executive officers
of the Corporation as a group, at the close of business on November 10, 2003.
NAME OF COMMON SHARES PREFERRED SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT BENEFICIALLY OWNED PERCENT
INTERESTED PERSONS(1)
Stephen L. Brown(2) 142,590 14.0% -- *
Hiram M. Lazar(3) 9,085 * 100 *
NON-INTERESTED PERSONS
Irving Levine(4) 46,375 4.5% 4,750 43.4%
David T. Lender 300 * 0 --
Laurence I. Foster -- -- 0 --
All officers and directors
as a group (5 persons) 198,350 19.4% 4,850 44.3%
*Less than 1%
(1) Within the meaning of the Investment Company Act of 1940 (the "1940
Act").
(2) Does not include 45,829 shares beneficially owned by Mr. Brown's
children. Mr. Brown disclaims beneficial ownership of all such shares.
(3) Includes options currently exercisable for 1,875 shares. Also includes
Preferred Stock owned convertible into 750 shares of Common Stock.
(4) Includes options currently exercisable for 6,250 shares. 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 beneficial owner of all
shares owned by Copley.
Set forth below is the dollar range of Common Stock beneficially owned
by each director or nominee as of November 10, 2003:
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NAME OF DIRECTOR DOLLAR RANGE OF EQUITY SECURITIES
OR NOMINEE BENEFICIALLY OWNED (1) (2)
INTERESTED PERSONS(3)
Stephen L. Brown over $100,000
NON-INTERESTED PERSONS
Irving Levine over $100,000
David T. Lender $1 - $10,000
Laurence I. Foster None
(1) Beneficial ownership has been determined in accordance with Rule
16a-1(a)(2) of the Securities Exchange Act of 1934.
(2) The Corporation has not provided information with respect to the
"Aggregate Dollar Range of Equity Securities in All Funds Overseen by
Director or Nominee in Family of Investment Companies" because it is
not part of a family of investment companies.
(3) Within the meaning of the 1940 Act.
ELECTION OF DIRECTORS
INFORMATION CONCERNING NOMINEES
At the Meeting, the Common Stockholders and Preferred Stockholders,
voting together, will elect two (2) 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 Stock Directors. Each of the four
(4) 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 November 11, 2003 is entitled
to one vote for each share of Common Stock and Preferred Stock registered in the
name of such 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 each nominee for election as a director of
the Corporation who is an "interested person" of the Corporation within the
meaning of the 1940 Act follows:
POSITION DIRECTOR
NAME AGE WITH THE CORPORATION SINCE
---- --- -------------------- -----
Stephen L. Brown 65 Chairman of the Board, 1986
Chief Executive Officer and Director
STEPHEN L. BROWN, Chairman of the Board, has been Chairman and Chief
Executive Officer since
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October 1986. Mr. Brown is an "interested person" of the Corporation within the
meaning of the 1940 Act by reason of his positions as Chairman and Chief
Executive Officer of the Corporation. 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) as well as a director of U.S. Energy Systems, Inc., an
independent producer of clean energy. Mr. Brown's address is c/o Franklin
Capital Corporation, 450 Park Avenue, New York, New York 10022.
Information with respect to each nominee for election as a
director of the Corporation who is not an "interested person" of the Corporation
within the meaning of the 1940 Act follows:
POSITION DIRECTOR
NAME AGE WITH THE CORPORATION SINCE
---- --- -------------------- -----
David T. Lender 51 Director 2000
Irving Levine* 82 Director 1990
Laurence I. Foster* 62 Director 2002
* Preferred Stock Director
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, in 2000 Mr.
Lender was a Managing Director in the Mergers and Acquisitions Group of
Rothschild, Inc. Mr. Lender's address is c/o Banc of America Securities LLC, 9
West 57th Street, New York, NY 10019.
IRVING LEVINE, a Preferred Stock 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 energy. Mr. Levine's address is c/o Copley Fund, Inc. 315
Pleasant Street, 5th Floor, Fall River, MA 02721.
LAURENCE I. FOSTER, a nominee for election as a Preferred Stock
Director of the Corporation, was a partner at KPMG until his retirement in May,
2000 when he joined Richard E. Eisner & Company LLP's New York City office as a
partner in the personal financial planning practice. In June, 2002 Mr. Foster
became an independent consultant. Mr. Foster holds the American Institute of
Certified Public Accountants "Personal Financial Specialist" (PFS) designation.
Mr. Foster is a member of the American Institute of Certified Public Accountants
where he is the Chairman on the PFS Credential Committee. Mr. Foster is also a
member of the New York State Society of Certified Public Accountants and the
former chairman of their Estate Planning Committee. Mr. Foster's address is 750
Third Avenue, New York, New York 10017.
EXECUTIVE OFFICERS
In addition to Mr. Stephen Brown, the following individual is an
executive officer of the Corporation:
HIRAM M. LAZAR, age 39. Mr. Lazar has been Chief Financial Officer of
the Corporation since January
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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 the three most highly paid executive officers whose
compensation exceeded $60,000 for the year ended December 31, 2002:
PENSION OR RETIREMENT
COMPENSATION BENEFITS ACCRUED TOTAL COMPENSATION
FROM THE AS PART OF FROM THE
NAME OF PERSON POSITION CORPORATION CORPORATION EXPENSES CORPORATION
INTERESTED PERSONS*
Stephen L. Brown Chairman and Chief
Executive Officer $450,000 $0 $450,000
Hiram M. Lazar Chief Financial Officer $133,750 $0 $133,750
NON-INTERESTED PERSONS
David T. Lender Director $ 500 $0 $ 500
Irving Levine Director $ 500 $0 $ 500
Laurence Foster Director $ 500 $0 $ 500
* Within the meaning of the 1940 Act.
With the exception of Mr. Stephen L. Brown, each director of the
Corporation received director's fees of $500 for 2002. During the year ended
December 31, 2002, the Corporation did not reimburse directors for certain
receipted expenses incurred in connection with the performance of their duties,
including attendance at Board and Committee meetings.
On July 26, 2002, the Board authorized an amendment to Stephen L.
Brown's Employment Agreement with the Corporation (as amended, the "Stephen
Brown Employment Agreement"). The Stephen Brown Employment Agreement will now
expire on December 31, 2004 ("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 Stephen Brown Employment Agreement.
The Stephen Brown Employment Agreement provides that Mr. Stephen L.
Brown will serve as the Chairman and Chief Executive Officer of the Corporation
and be responsible for the general management of the
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affairs of the Corporation, reporting directly to the Board. It also provides
that he will 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 receives compensation under the Stephen Brown
Employment Agreement in the form of base salary of $420,000. 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 Stephen Brown 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 Stephen Brown 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. Mr. Brown is also entitled
to severance pay in the event of termination without cause or by constructive
discharge equal to the remaining base salary payable under the Stephen Brown
Employment Agreement and provides for death benefits payable to his surviving
spouse equal to Mr. Brown's base salary for a period of one year.
In addition, on July 26, 2002 the Board authorized an amendment to
Stephen L. Brown's Severance Agreement (as amended, the "Stephen Brown Severance
Agreement"). Under the terms of the Stephen Brown Severance Agreement, Mr. Brown
is entitled to receive severance if following a change in control (as defined in
the Stephen Brown Severance Agreement) his employment is terminated by the
Corporation without cause or by the executive within one year of such change in
control. The amendment has increased the amount of the severance payment Mr.
Brown is entitled to receive upon the occurrence of such event from 1.5 to 2.5
times his 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 1940 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 January 18, 2000. No options were issued during
2001.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the year ended December 31, 2002, the Board met on nine
occasions and acted by unanimous written consent on one occasion.
The Audit Committee held three meetings during the year ended December
31, 2002. 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 as of
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December 31, 2002 were Messrs. Levine (Chairman), Lender and Foster.
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, 2002. The members of the Executive Committee
as of December 31, 2002 were Messrs. Brown, and Levine.
The Compensation Committee meets to consider compensation of executive
officers of the Corporation. The Compensation Committee did not meet during the
year ended December 31, 2002. The members of the Compensation Committee as of
December 31, 2002 were Messrs. Levine (Chairman) and Lender.
Each director attended at least 75% of the aggregate number of meetings
of the Board and of Board Committees on which he served. The Board determines
and appoints director nominees for election.
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, 2002. 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's responsibilities are set forth in the Audit
Committee Charter adopted by the Board. Each of the members of the Audit
Committee qualifies as an "independent" director under the applicable listing
standards of the American Stock Exchange.
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 recommended 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, 2002 for filing with the Commission. The Audit Committee also
recommends the selection of Ernst & Young to serve as independent accountants
for the year ending 2003.
Members of the Audit Committee as of December 31, 2002:
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Irving Levine
David T. Lender
Lawrence Foster
Mr. Lender resigned from the Audit Committee on May 14, 2003 following
the adoption of a policy by his employer which prohibits serving on audit
committees of public companies. As set forth in the Corporation's Audit
Committee Charter the Audit Committee must be composed of at least three
members. Due to Mr. Lender's resignation, the Audit Committee is currently
composed of only two members. The Board intends to fill this vacancy by
appointing a new member to the Board, which person would serve on the Audit
Committee as promptly as practicable.
BROKERAGE TRANSACTIONS
During the year ended December 31, 2002, the Corporation paid aggregate
brokerage commissions of approximately $3,000.
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
Franklin issued a $1,000,000 note as part of the purchase price of
Excelsior. This note was due February 28, 2002 with interest at 3.54% but has a
right of set-off against certain representations and warranties made by Winstar
Radio Networks, Inc.
On October 1, 2002, Franklin received 74,232 warrants to acquire shares
of Excelsior common stock at an exercise price of $1.20 per share for arranging
a refinancing of Excelsior debt.
Franklin entered into a services agreement with Excelsior whereby
Franklin provides Excelsior with certain services. Franklin receives a
management fee of not less than $15,000 per month as determined by Excelsior's
board. Additionally, Franklin's chief financial officer serves in that capacity
for Excelsior and his salary and benefits are allocated between Excelsior and
Franklin on an 80/20 basis. During the nine months ended September 30, 2003, and
2002, Franklin earned $135,000 and $330,000, respectively, in management fees
and was reimbursed $108,000 and $90,702, respectively, for salary and benefits
for Franklin's chief financial officer, which was recorded as a reduction of
expenses on Franklin.
Excelsior issued three notes to Dial Communications Group, LLC, each
with an initial aggregate principal amount of $460,000, in connection with the
acquisition of substantially all of the assets of Dial Communications Group,
Inc., and Dial Communications Group, LLC in April 2002. Each of the promissory
notes is convertible into shares of Franklin's common stock at a premium ranging
from 115% to 120% of the average closing prices of Franklin's common stock
during a specified pre and post closing measurement period. Excelsior has paid
to Franklin an amount equal to $300,000 in consideration of Franklin's
obligations in connection with any Franklin common stock that may be issued
pursuant to the terms of the promissory notes. For each share of common stock
Franklin is required to issue under the promissory notes, Franklin will receive
0.86 shares of common stock in Excelsior. The note holders have entered into
advanced discussions with Excelsior to amend the conversion feature so that the
notes would
9
become convertible into stock appreciation rights on Excelsior's common stock
rather than convertible into Franklin's common stock. It is expected that this
agreement will be signed after the filing of this proxy but prior to year-end.
If the agreement is not signed, then the note holders will continue to hold the
right to convert the notes into shares of Franklin's common stock.
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 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).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the Corporation's executive
officers and directors, and persons who beneficially own more than 10% of the
Common Stock, to file initial statements of beneficial ownership (Form 3), and
statements of changes in beneficial ownership (Form 4 or 5), of securities of
the Corporation with the Commission and the American Stock Exchange. Executive
officers, directors and greater than 10% stockholders also are required to
furnish the Corporation with copies of all forms that they file pursuant to
Section 16(a).
To the Corporation's knowledge, based solely on its review of the
copies of such forms received by it, or written representations from certain
reporting persons that no additional forms were required for those persons, the
Corporation believes that its executive officers, directors and greater than 10%
beneficial owners complied with the Section 16(a) filing requirements applicable
to them during 2002.
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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, 2003. The audit
services performed by Ernst & Young LLP for the year ended December 31, 2002
included an examination of the financial statements included in the 2002 Annual
Report to Stockholders.
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 2002 for the audit of the Corporation's annual
financial statements for 2002 and for the review of the financial statements
included in the Corporation's Forms 10-Q for 2002 were $115,000.
ALL OTHER FEES. Ernst & Young LLP billed $56,000 for 2002 for a
financial review of Form N-14 that was filed in conjunction with the terminated
merger with Change Technology Partners.
The Board recommends that stockholders vote "FOR" ratification of the
appointment of Ernst & Young LLP as independent auditors for the year ending
December 31, 2003.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2004 Annual
Meeting must be received in writing by the Corporation not later than April 1,
2004 in order to be considered for inclusion in the proxy statement relating to
such meeting, which the Corporation anticipates will be held in June 2004.
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
STEPHEN L. BROWN
SECRETARY
November 21, 2003
11
PROXY
FRANKLIN CAPITAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 17, 2003
The undersigned hereby appoints Stephen L. Brown and Hiram Lazar, 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")
and/or all the shares of Preferred Stock, par value $1.00 per share, of the
Corporation, as applicable, which are outstanding in the name of the undersigned
and which the undersigned would be entitled to vote as of November 11, 2003, 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, December 17, 2003 at 11:30 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 of the applicable 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)
o FOLD AND DETACH HERE o
Please mark
your votes as [X]
indicated in
this example
1. ELECTION OF DIRECTORS: 01. Stephen L. Brown,
02. David T. Lender (to be elected by holders
of Common Stock and Preferred Stock), 03.
Irving Levine, 04. Laurence I. Foster (to be
elected solely by Preferred Stockholders)
(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 WITHHOLDING
applicable nominees listed AUTHORITY to vote
(except as marked to the for all applicable
contrary on the line nominees listed
above) above
[ ] [ ]
FOR AGAINST ABSTAIN
2. Ratification of appointment of Ernst &
Young LLP to serve as independent auditors of [ ] [ ] [ ]
the Corporation for the fiscal year ending
December 31, 2003.
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).
THIS PROXY MAY BE REVOKED PRIOR TO ITS EXERCISE. PLEASE DATE, SIGN AND MAIL
PROXY CARD IN THE ENCLOSED ENVELOPE
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If you only own Common Stock of the Corporation, please sign on the line below
titled "Signature of Common Stockholder." If you only own Preferred Stock of the
Corporation, please sign on the line below titled "Signature of Preferred
Stockholder." If you own both Common Stock AND Preferred Stock, please sign both
lines.
Signature of Common Stockholder(s) Dated _______, 2003
------------------------
Signature of Preferred Stockholder(s) Dated _______, 2003
---------------------
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.
o FOLD AND DETACH HERE o