CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 ss. 240.14a-11(c) or ss. 240.14a-12
...................The Franklin Holding Corporation (Delaware)..................
(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)(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):
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[ ] 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:
712523.1
THE FRANKLIN HOLDING CORPORATION (Delaware)
450 Park Avenue
New York, New York 10022
--------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 16, 1998
-------
The Annual Meeting of Stockholders of The Franklin Holding Corporation
(Delaware) will be held on June 16, 1998 at 11 o'clock a.m., New York Time, at
the offices of Battle Fowler LLP, 7th Floor, 75 East 55th Street, New York, New
York, for the following purposes:
1. To elect six (6) directors to hold office until the next
Annual Meeting of Stockholders and until their successors have been
duly elected and have qualified;
2. To consider and act upon a proposal to amend the Company's
Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), to change the name of the Company to "Franklin Capital
Corporation";
3. 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, 1998; and
4. 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 May 1, 1998 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.
709681.4
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
May 1, 1998
709681.4
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THE FRANKLIN HOLDING CORPORATION (Delaware)
450 Park Avenue
New York, New York 10022
-------
PROXY STATEMENT
Solicitation of Proxies
This Proxy Statement is furnished by the Board of Directors of The
Franklin Holding Corporation (Delaware), a Delaware corporation (the
"Corporation"), 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 16, 1998, at 11 o'clock a.m., New York Time, at the offices of Battle
Fowler LLP, 7th Floor, 75 East 55th Street, New York, New York.
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 (i) for the election of the six (6) nominees for
directors, (ii) in favor of the proposal to amend the Company's Certificate of
Incorporation, as amended (the "Certificate of Incorporation"), to change the
name of the Company to Franklin Capital Corporation, and (iii) 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 June 30, 1998.
709681.4
3
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.
Expenses of Solicitation of Proxies
The expenses of solicitation 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 telecopier. In addition, the
Corporation has retained D.F. King & Co., Inc. to solicit proxies. The
Corporation estimates that the fees of D.F. King & Co., Inc. for solicitation
will not exceed $5,000.00. This proxy statement and form of proxy are first
being sent to stockholders on or about May 18, 1998. THE CORPORATION WILL
FURNISH, WITHOUT CHARGE, A COPY OF THE ANNUAL REPORT AND MOST RECENT SEMI-ANNUAL
REPORT TO STOCKHOLDERS TO ANY STOCKHOLDER UPON REQUEST IN WRITING ADDRESSED TO
"THE FRANKLIN HOLDING CORPORATION (DELAWARE), 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 May 1, 1998, the record date for the
Meeting, the outstanding voting securities of the Corporation consisted of
801,198 shares of 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 May 1, 1998. 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.
709681.4
4
Amount and Nature
Name and Address of of Beneficial
Title of Class Beneficial Owner Ownership Percent of Class
- -------------- ---------------- --------- ----------------
Common Stephen L. Brown, Chairman 249,238(1) 31.1%
Stock c/o The Franklin Holding
Corporation (Delaware)
450 Park Avenue
New York, New York 10022
(1) Includes the 25,000 shares of Common Stock owned by S.L. Brown &
Company, Inc. ("SLB & Co., Inc."). The Corporation has been notified
that on June 30, 1997, the Board of Directors of SLB & Co., Inc.
entered into, and the stockholders of SLB & Co., Inc. approved, a plan
of dissolution of SLB & Co., Inc. Mr. Brown has, subject to certain
limitations, voting and investment power over the voting securities
owned by SLB & Co., Inc. and is Chairman of SLB & Co., Inc. Also
includes 117,936 shares of Common Stock owned by certain stockholders
of SLB & Co., Inc., for which Mr. Brown has an irrevocable proxy
through no later than July 1, 1998. Does not include 1,250 shares of
Common Stock owned by Mr. Brown's children. Mr. Brown disclaims
beneficial ownership of 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 named executive officers of the
Corporation as a group, at the close of business on May 1, 1998. 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.
709681.4
5
Name of Beneficial Owner Amount Beneficially
of Class Owned Percent
-------- ----- -------
Stephen L. Brown 249,238(1) 31.1%
Jeffrey J. Steiner 31,481(2) 3.9%
Carl D. Glickman 30,981(3) 3.9%
Miles L. Berger 10,000 1.2%
Jonathan A. Marshall 5,900 *
John Greenbaum 4,600(4) *
Spencer L. Brown 5,526(5) *
Irving Levine 3,000 *
Stephen J. Mayer 0 *
All officers and directors as a group 286,932(6) 35.8%
(9 persons)
*Less than 1%
(1) Includes 25,000 shares of Common Stock owned by SLB & Co., Inc., over
which Mr. Brown has, subject to certain limitations, voting and
investment power. Also includes 117,936 shares of Common Stock owned by
certain stockholders of SLB & Co., Inc. for which Mr. Brown has an
irrevocable proxy through no later than July 1, 1998. Does not include
1,250 shares of Common Stock owned by Mr. Brown's children. Mr. Brown
disclaims beneficial ownership of such shares.
(2) Includes 30,981 shares of Common Stock owned by Primrose Associates,
Inc., a corporation controlled by Mr. Steiner. Of those shares, 26,228
are subject to an irrevocable proxy given to Stephen L. Brown through
no later than July 1, 1998. Does not include 25,000 shares of Common
Stock owned by SLB & Co., Inc. Mr. Steiner is an indirect stockholder
of SLB & Co., Inc. and disclaims beneficial ownership of such shares.
(3) Includes 26,228 shares of Common Stock owned by Mr. Glickman that are
subject to an irrevocable proxy given to Stephen L. Brown through no
later than July 1, 1998. Does not include 25,000 shares of Common Stock
owned by SLB & Co., Inc. Mr. Glickman is a direct stockholder of SLB &
Co., Inc. and disclaims beneficial ownership of such shares.
709681.4
6
(4) Ownership is through Greenbaum Brothers Partnership, in which Mr.
Greenbaum has a 33% general partnership interest.
(5) Includes 1,338 shares of Common Stock owned by Spencer L. Brown that
are subject to an irrevocable proxy given to Stephen L. Brown through
no later than July 1, 1998. Does not include 25,000 shares of Common
Stock owned by SLB & Co., Inc. Spencer Brown is a direct stockholder of
SLB & Co., Inc. and disclaims beneficial ownership of such shares.
(6) Includes 53,794 shares of Common Stock owned by other officers and
directors that are subject to an irrevocable proxy given to Stephen L.
Brown through no later than July 1, 1998.
ELECTION OF DIRECTORS
Information Concerning Nominees
At the Meeting, the stockholders will elect six (6) directors,
constituting the entire Board of Directors, to 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 May 1,
1998 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 at the
Meeting when their respective successors have been duly elected and qualified.
709681.4
7
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* 59 Chairman of the Board, 1986
- ----------------- -- ---------------------- ----
Chief Executive Officer and
Director
Miles L. Berger 67 Director 1996
Carl D. Glickman* 71 Director 1986
Irving Levine 76 Director 1990
Jonathan A. Marshall 59 Director 1987
Michael P. Rolnick 32 Nominee for Director -
* 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 and his beneficial ownership of shares of Common
Stock of the Corporation owned by SLB & Co., Inc. Mr. Glickman is an
"interested person" by reason of his position as a director of The Bear
Stearns Companies Inc., an "affiliated person" (within the meaning of
the 1940 Act) of Bear, Stearns & Co. Inc., a registered broker-dealer.
Stephen L. Brown, Chairman of the Board of Directors of the
Corporation, has been Chairman and Chief Executive Officer since October 1986.
Since June 1984, Mr. Brown has been Chairman of SLB & Co., Inc., a private
investment firm. Mr. Brown is a director of Copley Financial Services
Corporation (advisor to Copley Fund, Inc., a mutual fund) and Avery
Communications Inc., a holding company in the telecommunications industry
("Avery").
Miles L. Berger, a director of the Corporation, has been Vice Chairman
of the Board of Heitman Financial Ltd., a real estate service company, for more
than the past five years. Mr. Berger is also Chairman of the Board of Mid Town
Bank, Chicago, and a director of Innkeepers USA Trust, a Maryland real estate
investment trust.
Carl D. Glickman, a director of the Corporation, has been President of
The Glickman Organization, a real estate investment firm, for more than the past
five years. Mr. Glickman is a director of The Bear Stearns Companies Inc.,
Alliance Tyre & Rubber Co., Andal Corp.,
709681.4
8
Continental Health Affiliates, Inc., Infu Tech, Inc., Jerusalem Economics Corp.,
LTD, Lexington Growth Properties, Office Max, Inc. and SLB & Co., Inc.
Irving Levine, a 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.), and a
director of Rexnord Holdings, 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 is currently Vice President for New Ventures at E*
Trade Group Inc. In this capacity, he is responsible for the company's corporate
development activities including mergers and acquisitions, private equity
investments, and Corporate Strategy. Prior to working at E* Trade, Mr. Rolnick
was an Associate at Montgomery Securities. From 1994-1997, he was a manager at
Braxton Associates, a consulting group, and from 1993-1994 he was an analyst at
Philip Morris Incorporated.
Executive Officers
In addition to Mr. Stephen L. Brown, the following individuals are
executive officers of the Corporation:
Spencer L. Brown, Age 32. 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. From September
1993 to July 1994, Mr. Brown was an attorney with the firm of Wilson, Elser,
Moskowitz, Edelman & Dicker and from September 1991 to September 1993 he was an
attorney with the firm of Weil, Gotshal & Manges LLP. Mr. Brown is also a
director of Avery. Mr. Brown is the son of Mr. Stephen L. Brown, the Chairman
and Chief Executive Officer of the Corporation.
John Greenbaum, Age 47. Chief Financial Officer and Treasurer of the
Corporation since March 1996. Mr. Greenbaum was a director of the Corporation
from 1992 to 1998. Mr. Greenbaum acted as principal of Digital Media Group, a
venture capital firm, from October 1994 through March 1996. From March 1988 to
September 1994 he was Vice President of the Corporation and from May 1992 to
September 1994 acted as Secretary of the Corporation. Mr. Greenbaum is also a
director of Avery.
709681.4
9
Stephen J. Mayer, Age 45. Mr. Mayer has been Vice President and
Controller of the Corporation since December 1994. From April 1994 to October
1994 Mr. Mayer was Chief Financial Officer of Biltmore Mortgage Corp. From
February 1992 to April 1994 he was Vice President and Controller of Midcoast
Mortgage Corp.
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 (a stand-alone investment
company) 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, 1997:
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 $390,000 $9,500
Spencer L. Brown Senior Vice President
and Secretary $120,000 $8,050
Miles L. Berger Director $16,500 $0
Carl D. Glickman Director $43,500 $0
John Greenbaum Chief Financial
Officer, Treasurer
and Director $120,000 $6,900
Irving Levine Director $16,500 $0
Jonathan A. Marshall Director $16,500 $0
Jeffrey J. Steiner Director $16,500 $0
In 1997, Mr. Stephen 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, 1995 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 Stipulation of
709681.4
10
Settlement (the "Settlement") entered into between the Corporation and the
plaintiff on July 14, 1997, Mr. Brown's base salary was reduced to $350,000,
effective January 1, 1998. Each director of the Corporation, other than those
directors who are also officers of the Corporation, received director's fees of
$16,500 in 1997. Mr. Glickman, as Chairman of the Executive Committee of the
Board of Directors, as well as serving as a Director of Excelsior Communications
Corporation, received a fee of $27,000, in addition to his fee as a director of
the Corporation. Pursuant to the Settlement, upon Franklin becoming a BDC, the
Corporation agreed that directors' annual fees for all meetings of the Board
would not exceed in the aggregate a total of $12,000 per year, although such
directors could also receive incentive compensation. In 1998, each director will
receive fees of $6,000. In addition, subject to approval by the Commission of an
application for exemptive relief to permit the Corporation to issue options to
the non-management directors, each director will receive 5,000 options to
purchase the Corporation's Common Stock at a price of no less than the closing
price of Franklin Holding's Common Stock on the date such options are issued.
(See "Compensation Pursuant to Plans" below.) It is anticipated that Mr.
Glickman will receive an additional 5,000 options for a total of 10,000 options,
for his service as Chairman of the Executive Committee. During the year ended
December 31, 1997, the Corporation reimbursed directors, other than directors
who are also officers, 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 $12,130. Messrs. Brown and
Greenbaum received no such reimbursement.
Compensation Pursuant to Plans
As of December 31, 1997, Franklin Holding had a contributory retirement
plan (the "Plan") covering all employees. Contributions to the Plan were
invested in Franklin Holding's Common Stock and/or a selected group of mutual
funds. Contributions for the year ended December 31, 1997, 1996, and 1995 were
$27,093, $21,163, and $25,070 respectively, and are included in salaries and
employee benefits as stated in the Corporation's financial statements under
Statements of Operations. The Plan was terminated in January 1998 and all funds
were distributed to the participating employees.
At the 1997 Meeting of Shareholders, the stockholders of the
Corporation approved a proposal to adopt certain stock option plans for
management and the Corporation's Board of Directors. The stock option plans (the
"Plans") approved by the shareholders provided that the aggregate number of
shares of Common Stock reserved for issuance under the Plans was 75,000, of
which 45,000 were to be reserved for issuance to management and 30,000 shares
were to be reserved for the Corporation's directors. In December 1997, the Board
granted 15,000 options each to Stephen L. Brown, the Corporation's Chairman,
John Greenbaum, the Corporation's Chief Financial Officer, and Spencer L. Brown,
the Corporation's Senior Vice President. These options were issued on January
27, 1998 at a stock price of $7.00, which was the closing price of Franklin
Holding's Common Stock on the American Stock Exchange
709681.4
11
on January 27, 1998. Subject to approval by the Commission of an application for
exemptive relief to permit the Corporation to issue options to the
non-management directors, the Board also approved the grant to each of the
non-management directors 5000 options each. Mr. Carl D. Glickman was granted a
total of 10,000 options as Chairman of the Executive Committee. The Corporation
does not know of any reason why the Commission would not approve such
application, however, no options shall be issued to the non-management directors
until the Corporation receives such exemptive relief.
Committees and Meetings of the Board of Directors
During the year ended December 31, 1997, the Board of Directors met on
nine occasions and did not act without a meeting by unanimous written consent.
The Audit Committee held two meetings during the year ended December 31,
1997. 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 held one meeting during the year ended December 31, 1997.
The members of the Executive Committee are Messrs. Glickman (Chairman)*, Brown*
and Marshall.
* Interested Person.
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, 1997. The members of the Compensation Committee are
Messrs. Marshall (Chairman) and Levine.
Each director, with the exception of Mr. Steiner, 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, 1997, the Corporation paid aggregate
brokerage commissions of approximately $21,000, $1,925 of which was paid to
Bear, Stearns & Co. Inc. ("Bear Stearns"). Mr. Glickman is a director of Bear
Stearns' parent company.
709681.4
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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.
Affiliated Transactions
TRANSACTIONS WITH CONTROLLED AFFILIATES
On July 3, 1997, the Boards of Directors of the Company and Excelsior
authorized the dissolution and subsequent liquidation of Excelsior. Upon its
liquidation, after satisfying any liabilities and subject to applicable law, all
of its assets were transferred to the Corporation in 1997. As of June 30, 1997,
Excelsior had total assets of approximately $3.6 million consisting primarily of
cash, cash equivalents (including marketable securities) and receivables and
total liabilities of approximately $1,700.
On May 30, 1997, the Corporation made an additional investment of
$2,500,000 in Avery. The investment partially consisted of a $1,000,000 loan,
represented by a note with a maturity of three years that earns interest at the
rate of 10.0% per annum. The first year's interest payment of $100,000 was made
at the time the loan was made. In additional consideration for this loan, Avery
issued to the Corporation as of May 30, 1997 warrants to purchase 666,666 shares
of common stock of Avery at $1.50 per share. These warrants are immediately
exercisable and expire five years from the date of issuance. The remainder of
the $1,500,000 investment purchased 7.5 units in Avery. Each unit consists of
133,333 shares of common stock of Avery and 200,000 shares of Avery's Series D
preferred stock. The Series D preferred stock earns a dividend of 10.0% per
annum payable quarterly and is convertible into 100,000 shares of Avery's common
stock. This transaction, coupled with the Corporation's previous investment in
common stock and Series E preferred stock of Avery, results in the Corporation
owning in excess of 25% of Avery's outstanding voting stock on a fully diluted
basis. In connection with such investment, Messrs. Stephen L. Brown, Spencer L.
Brown and John Greenbaum were appointed to Avery's six person Board of Directors
and Mr. Stephen L. Brown was appointed as the Vice Chairman of Avery's Board of
Directors.
709681.4
13
For the years ended December 31, 1997 and 1996, the Corporation's income
from controlled affiliates consisted of a management fee of $750,000 from
Excelsior in each such year. The Corporation did not receive interest income,
net of related expenses, in either year.
Certain Litigation
In March 1995, a complaint was filed in the United States District Court
for the Southern District of New York by a former director of Franklin Holding.
On July 14, 1997, the parties entered into a Stipulation of Settlement (the
"Settlement"). The Settlement was approved by the District Court on September
11, 1997. Pursuant to the terms of the Settlement, the Board of Directors
declared a $3.25 special dividend to stockholders of record of the Corporation's
Common Stock as of July 28, 1997. In addition, the Corporation paid certain
legal fees to the plaintiff's counsel.
The Corporation is a plaintiff in an action brought against National
Union Fire Insurance Company of Pittsburgh, PA ("National Union") in the Supreme
Court of the State of New York. The action seeks reimbursement of $1,000,000 for
fees and expenses incurred in connection with certain shareholder litigation
brought against Franklin and its directors. National Union filed a motion to
dismiss the complaint, which the Corporations opposed. The motion is pending
before the court.
Recommendation of the Board of Directors
The Board of Directors 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 will be voted for such a person, if any, 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 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 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).
709681.4
14
PROPOSAL TO AMEND COMPANY' S CERTIFICATE OF
INCORPORATION TO CHANGE NAME OF THE CORPORATION TO
"FRANKLIN CAPITAL CORPORATION"
The Board of Directors believes that it is advisable to amend Article
First of the Certificate of Incorporation to change the name of the Corporation
to "Franklin Capital Corporation" (the "Name Change Amendment"). Accordingly, on
April 29, 1998, the Board of Directors adopted a resolution approving the Name
Change Amendment and directing that the Name Change Amendment be presented to
the stockholders at the Meeting for their approval. If approved by the
stockholders, the first paragraph of Article First would be amended to read in
its entirety as follows:
"First: The name of the Corporation is Franklin Capital Corporation"
In September 1997, the stockholders of Franklin approved a proposal that
the Company be regulated under the Investment Company Act of 1940, as amended,
as a business development company ("BDC"). As a BDC, the Corporation's objective
is to achieve capital appreciation through long-term investments in businesses
believed to have favorable growth potential.
The Board of Directors believes that the new name more accurately
identifies the Corporation with its new strategic focus and that the new name
will assist the Corporation in establishing a presence in the financial
community. Management believes the name change can be accomplished at minimal
expense.
If the Name Change Amendment is approved by the stockholders, it will
become effective upon the filing of a Certificate of Amendment, in accordance
with the provisions of the Delaware General Corporation Law (The "DGCL").
Recommendation of the Board of Directors
The Board of Directors recommends that the stockholders vote "FOR" the
approval of the proposal to amend the Corporation's Certificate of Incorporation
to change the name of the Corporation to "Franklin Capital Corporation." In the
absence of contrary instructions, the Corporation intends to vote all proxies
"FOR" such proposal. In tallying the vote, abstentions and broker non-votes will
be considered shares of Common Stock present at the Meeting, but not voting in
favor of this proposal (i.e., they will be counted as votes "against" the
proposal).
709681.4
15
PROPOSAL TO APPROVE SELECTION OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
The Audit Committee has recommended and the Board of Directors of the
Corporation has approved, subject to stockholder approval of this proposal, the
selection of Ernst & Young LLP as the independent auditors for the Corporation
for the year ending December 31, 1998. Ernst & Young LLP will succeed Arthur
Anderson LLP as the Corporation's independent auditors. There were no
disagreements between management of the Corporation and Arthur Anderson LLP,
however, management believes that the Corporation will benefit from the change
of independent auditors.
Ernst & Young LLP have 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. It is also expected that a
representative of Arthur Anderson LLP will be present at the meeting to answer
any 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, 1998. In the absence of contrary instructions, the
Corporation intends to vote all proxies "FOR" such proposal. In tallying the
vote, abstentions and broker non-votes will be considered shares of Common Stock
present at the Meeting, but not voting in favor of this proposal (i.e., they
will be counted as votes "against" the proposal).
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting must be received in writing by the Corporation not later than March 31,
1999 in order to be considered for inclusion in the proxy statement relating to
such meeting, which the Corporation anticipates will be held in June 1999.
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
May 1, 1998
709681.4
16
THE FRANKLIN HOLDING CORPORATION (DELAWARE) PROXY
This Proxy is Solicited on Behalf of the Board of Directors
Proxy for Annual Meeting of Shareholders
June 16, 1998
The undersigned hereby appoints Stephen L. Brown and Carl D.
Glickman, or either of them, as attorneys and proxies to vote all the shares of
common stock, par value $1.00 per share, of The Franklin Holding Corporation
(Delaware) (the "Corporation"), which are outstanding in the name of the
undersigned and which the undersigned would be entitled to vote as of May 1,
1998, at the Annual Meeting of Stockholders of the Corporation (the "Meeting"),
to be held at the offices of Battle Fowler LLP, 75 East 55th Street, 7th Floor,
New York, New York, on Tuesday, June 16, 1988, at 11 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 six 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)
# FOLD AND DETACH HERE #
711980.1
Please mark|X|
your vote as
indicated in
the example
FOR the election of all WITHHOLDING
nominees listed to the AUTHORITY to vote
right (except as marked for all nominees
to the contrary below) listed to the right
/ / / / 1. ELECTION OF DIRECTORS: Stephen L. Brown, Miles L. Berger, Carl D. Glickman,
Irving Levine, 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 AGAINST ABSTAIN ____________________________________________________
/ / / / / / 2. Proposal for the Corporation to amend its Certificate of Incorporation to change
the Corporation's name to "Franklin Capital Corporation".
/ / / / / / 3. Ratification of appointment of Ernst & Young LLP to serve as independent auditors
of the Corporation for the fiscal year ending December 31, 1998.
4. 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.
Signatures of Stockholder(s) __________________________________ Dated ________,
1998 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.
711980.1