<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FRANKLIN ELECTRONICS PUBLISHERS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
FRANKLIN ELECTRONICS PUBLISHERS, INC.
- --------------------------------------------------------------------------------
(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:
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Notes:
<PAGE>
FRANKLIN ELECTRONIC PUBLISHERS, INCORPORATED
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------
The annual meeting of shareholders of FRANKLIN ELECTRONIC PUBLISHERS,
INCORPORATED (the "Company"), a Pennsylvania corporation, will be held at the
offices of The Chase Manhattan Corporation, 270 Park Avenue, 11th Floor Room
A, New York, New York, on Wednesday, July 23, 1997, at 10:00 A.M., for the
following purposes:
(1) To elect ten directors of the Company to serve for a term of one
year;
(2) To ratify the appointment of auditors of the Company to serve until
the next annual meeting of shareholders; and
(3) To consider and act upon such other matters as may properly come
before the meeting.
Only shareholders of record at the close of business on June 13, 1997 are
entitled to vote at the meeting.
You are requested to fill in, date and sign the enclosed proxy, which is
solicited by the Board of Directors of the Company, and to mail it promptly in
the enclosed envelope.
By order of the Board of Directors,
GREGORY J. WINSKY,
Secretary
Burlington, New Jersey
June 23, 1997
<PAGE>
FRANKLIN ELECTRONIC PUBLISHERS, INCORPORATED
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
JULY 23, 1997
----------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of FRANKLIN ELECTRONIC PUBLISHERS,
INCORPORATED (the "Company") to be used at the annual meeting of shareholders
of the Company which will be held at the offices of The Chase Manhattan
Corporation, 270 Park Avenue, 11th Floor Room A, New York, New York, on
Wednesday, July 23, 1997, at 10:00 A.M., and at any adjournments thereof.
Shareholders who execute proxies retain the right to revoke them at any time
by notice in writing to the Secretary of the Company, by revocation in person
at the meeting or by presenting a later dated proxy. Unless so revoked, the
shares represented by proxies will be voted at the meeting. The shares
represented by the proxies solicited by the Board of Directors of the Company
will be voted in accordance with the directions given therein. Shareholders
vote at the meeting by casting ballots (in person or by proxy) which are
tabulated by a person who is appointed by the Board of Directors before the
meeting to serve as inspector of election at the meeting and who has executed
and verified an oath of office. Abstentions and broker "non-votes" are
included in the determination of the number of shares present at the meeting
for quorum purposes, but broker "non-votes" are not counted in the tabulations
of the votes cast on proposals presented to shareholders. A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting
power with respect to that item and has not received instructions from the
beneficial owner. There are no proposals at this meeting which involve broker
"non-votes."
The principal executive offices of the Company are located at One Franklin
Plaza, Burlington, New Jersey 08016-4907. The approximate date on which this
Proxy Statement and the enclosed form of proxy were first sent or given to
shareholders is June 27, 1997.
Shareholders of record at the close of business on June 13, 1997 will be
entitled to one vote for each share of common stock, no par value (the "Common
Stock"), of the Company then held. There were outstanding on such date
8,069,133 shares of Common Stock.
ELECTION OF DIRECTORS
Ten directors will be elected at the meeting for a term of one year and
until their respective successors shall have been elected and shall qualify.
The election of directors requires the affirmative vote of a plurality of the
shares of Common Stock present in person or by proxy at the meeting. EACH
PROXY RECEIVED WILL BE VOTED FOR THE ELECTION OF THE NOMINEES NAMED BELOW
UNLESS OTHERWISE SPECIFIED IN THE PROXY. At this time, the Board of Directors
of the Company knows of no reason why any nominee might be unable to serve.
There are no arrangements or understandings between any director or nominee
and any other person pursuant to which such person was selected as a director
or nominee, except that the Company has agreed, pursuant to the terms of the
employment agreement between the Company and Morton E. David, to nominate Mr.
David for election to the Board of Directors.
<PAGE>
<TABLE>
<CAPTION>
YEAR
BECAME A
NAME OF NOMINEE PRINCIPAL OCCUPATION AGE DIRECTOR
--------------- -------------------- --- --------
<C> <S> <C> <C>
Edward H. Cohen............. Partner, Rosenman & Colin LLP 58 1987
Morton E. David............. Chairman of the Board and
Co-Chief Executive Officer of the Company 60 1984
Bernard Goldstein........... Director, Broadview Associates, LLC. 66 1989
Leonard M. Lodish........... Professor of Marketing, Wharton School of
the University of Pennsylvania 53 1987
James Meister............... President and Chief Executive Officer,
Kings Supermarkets, Inc. 55 1996
Howard L. Morgan............ President, Arca Group, Inc. 51 1981
Jerry R. Schubel............ President, New England Aquarium 61 1991
James H. Simons............. Chairman of the Board, Renaissance
Technologies Corp. 59 1981
Michael R. Strange.......... Executive Vice President of the Company 49 1984
William H. Turner........... President and Co-Chief Executive Officer
of the Company 57 1994
</TABLE>
No family relationship exists between any director and executive officer of
the Company.
Mr. Cohen is, and for more than the past five years has been, a partner in
the New York City law firm of Rosenman & Colin LLP. Mr. Cohen is a director of
Phillips-Van Heusen Corporation, a manufacturer and marketer of apparel and
footwear. See "Certain Relationships and Related Transactions."
Mr. David joined the Company in May 1984 as Chairman of the Board of
Directors and Chief Executive Officer. He became Co-Chief Executive Officer
upon Mr. Turner's joining the Company on October 1, 1996.
Mr. Goldstein became a director of Broadview Associates, LLC, an investment
banking firm that provides services to the information technology industry, on
January 1, 1997. For more than the past five years he had been managing
director of Broadview. He is a director of Apple Computer, Inc., a diversified
computer company, SPSS, Inc., a statistical software firm, Enterprise Systems,
Inc., a provider of health care information services to hospitals, and Sungard
Data Systems, Inc., a company that provides disaster recovery and financial
information services. See "Certain Relationships and Related Transactions."
Mr. Lodish is the Samuel R. Harrell Professor of Marketing at the Wharton
School of the University of Pennsylvania. He has been a Professor of Marketing
since 1976, and was Chairman of the Marketing Department of the Wharton School
from 1984 to 1988 and 1992 to 1994. He is a director of Information Resources,
Inc., a marketing research and decision support systems firm, Walsh
International, a sales force automation provider, and J&J Snack Foods, Inc., a
producer and marketer of specialty foods.
Mr. Meister is, and for more than the past five years has been, President
and Chief Executive Officer of Kings Supermarkets, Inc., a food retailer.
2
<PAGE>
Mr. Morgan is, and for more than the past five years has been, President of
Arca Group, Inc., a consulting and investment management firm. He is a
director of Quarterdeck Corp., a software company, Unitronix Corp., a software
supplier, HDS Network Systems, Inc., a provider of network terminals, Cylink
Corp., a developer of software for secure communications, Segue Software,
Inc., a developer of automated software systems, Infonautics Corp., a provider
of online information, Kentek Information Systems, Inc., a manufacturer of
laser printers, and MetaCreations, Inc., a developer of computer graphics
software. See "Certain Relationships and Related Transactions."
Mr. Schubel became President and Chief Executive Officer of New England
Aquarium in 1994. From 1974 to 1994, Mr. Schubel was the Director of the
Marine Sciences Research Center of the State University of New York at
Stonybrook, New York.
Mr. Simons has been Chairman of the Board and President of Renaissance
Technologies Corp. since 1982. He is also Chairman of the Board, President and
the sole shareholder of Renaissance Ventures Ltd., an investment advisory
firm. Mr. Simons is a director of Numar Corp., a manufacturer of nuclear
magnetic resonance oil well logging tools, Kentek Information Systems, Inc.,
Cylink Corp. and Segue Software, Inc. See "Certain Relationships and Related
Transactions."
Mr. Strange has been Executive Vice President of the Company since 1985.
Mr. Turner has been President and Co-Chief Executive Officer of the Company
since October 1, 1996. Prior to joining the Company, he was Vice Chairman of
The Chase Manhattan Bank. For more than the prior thirty years, Mr. Turner
held a variety of positions at Chemical Banking Corporation prior to its
merger with Chase Manhattan Bank. Mr. Turner is a director of Standard Motor
Products, Inc. and The Park Avenue Bank, N.A.
The Board of Directors of the Company has two standing committees: an Audit
Committee, consisting of Messrs. Simons and Cohen, and a Stock Option and
Compensation Committee (the "Compensation Committee"), consisting of Messrs.
Simons, Goldstein and Morgan. The Audit Committee is charged with recommending
annually to the Board of Directors the independent auditors to be retained by
the Company, reviewing the audit plan with the auditors and reviewing the
results of the audit with the officers of the Company and its auditors. The
Audit Committee held one meeting during the fiscal year ended March 31, 1997.
The Compensation Committee is charged with administering the Company's 1988
Employee Stock Option Plan (the "Option Plan") and fixing the compensation,
including salaries and bonuses, of all officers of the Company. The
Compensation Committee held three meetings during the fiscal year ended March
31, 1997.
During the fiscal year ended March 31, 1997, there were four regularly
scheduled meetings of the Board of Directors and three special meetings. Each
of the directors attended at least 75 percent of the aggregate number of
meetings of the Board and of any Committees of the Board on which he serves.
The Company will consider for election to the Board of Directors a nominee
recommended by a shareholder if the recommendation is made in writing and
includes (i) the qualifications of the proposed nominee to serve on the Board
of Directors, (ii) the principal occupation and employment of the proposed
nominee during the past five years, (iii) each directorship currently held by
the proposed nominee and (iv) a statement that the proposed nominee has
consented to the nomination. The recommendation should be addressed to the
Secretary of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Common Stock as of June 13, 1997 by (i) all those known by the Company
to be the beneficial owners of more than five percent of the Common Stock,
(ii) all directors and nominees for director, (iii) each executive officer of
the
3
<PAGE>
Company named in the Summary Compensation Table on page 7 hereof and (iv) all
executive officers and directors of the Company as a group. Unless otherwise
indicated, each of the shareholders has sole voting and investment power with
respect to the shares listed as beneficially owned by such shareholder.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS
- ------------------------------------ ------------ ----------
<S> <C> <C>
Bermuda Trust Company Ltd., Trustee (1)............... 1,232,540 14%
Front Street
Hamilton, Bermuda
Morton E. David (2)................................... 408,801 5%
Franklin Electronic Publishers, Inc.
One Franklin Plaza
Burlington, New Jersey 08016
William H. Turner..................................... 68,000 *
Franklin Electronic Publishers, Inc.
One Franklin Plaza
Burlington, New Jersey 08016
James H. Simons (3)................................... 51,667 *
Renaissance Technologies Corp.
800 Third Avenue
New York, New York 10022
Michael R. Strange.................................... 51,556 *
Franklin Electronic Publishers, Inc.
One Franklin Plaza
Burlington, New Jersey 08016
Howard L. Morgan (4).................................. 48,250 *
Arca Group, Inc.
764 Mt. Moro Road
Villanova, Pennsylvania 19085
Leonard M. Lodish..................................... 39,000 *
The Wharton School
University of Pennsylvania
Philadelphia, Pennsylvania 19022
Bernard Goldstein..................................... 35,308 *
Broadview Associates, L.P.
1 Bridge Plaza
Ft. Lee, New Jersey 07024
Edward H. Cohen....................................... 34,045 *
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Jerry R. Schubel...................................... 33,047 *
New England Aquarium
Central Wharf
Boston, Massachusetts 02110
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS
- ------------------------------------ ------------ ----------
<S> <C> <C>
James Meister....................................... 3,000 *
Kings Supermarkets, Inc.
2 Dedrick Place
West Caldwell, New Jersey 07006
Gregory J. Winsky (5)............................... 59,293 *
Franklin Electronic Publishers, Inc.
One Franklin Plaza
Burlington, New Jersey 08016
Barry J. Lipsky..................................... 40,499 *
Franklin Electronic Publishers, Inc.
One Franklin Plaza
Burlington, New Jersey 08016
Michael Kemp........................................ 36,080 *
Franklin Electronic Publishers (UK) Ltd.
7 Windmill Business Village
Sunbury-on-Thames
Middlesex, TW16 7DY
United Kingdom
All executive officers and directors as a group (15
persons)........................................... 956,773 11%
</TABLE>
- --------
* less than 1%
(1) Held by Bermuda Trust Company Ltd. as trustee of a trust of which James H.
Simons and members of his immediate family are beneficiaries.
(2) Includes 86,602 shares owned by certain trusts for Mr. David's children
over which Mr. David has investment power and 2701 shares held by a trust
for Mr. David's benefit.
(3) Includes 16,954 shares held by or for the benefit of members of Mr.
Simons' immediate family, 5,701 shares held by the estate of one of Mr.
Simon's children of which estate Mr. Simon is administrator and 53 shares
held by Renaissance Ventures Ltd., of which Mr. Simons is the chairman and
sole shareholder.
(4) Includes 5,250 shares held for the benefit of Mr. Morgan's children.
(5) Includes 1,600 shares in trust for the benefit of Mr. Winsky's children.
The foregoing table also includes shares which the following directors have
the right to acquire within sixty days upon the exercise of options: Mr.
Turner, 45,000 shares; Mr. Strange, 36,081 shares; Mr. David, 33,000 shares;
Mr. Cohen, 28,959 shares; Mr. Simons, 28,959 shares; Mr. Goldstein, 18,959
shares; Mr. Schubel, 18,959 shares; Mr. Lodish, 14,000 shares; Mr. Morgan,
9,000 shares; and Mr. Meister, 3,000 shares. The foregoing table also includes
133,083 shares which all executive officers who are not directors, as a group,
have the right to acquire within sixty days upon the exercise of options.
Based upon a review of the filings furnished to the Company pursuant to Rule
16a-3(e) promulgated under the Securities Exchange Act of 1934 and on
representations from its executive officers and directors and persons who
beneficially own more than ten percent of the Common Stock, all filing
requirements of Section 16(a) of the Securities Exchange Act of 1934 were
complied with in a timely manner during the fiscal year ended March 31, 1997.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes all plan and non-plan compensation awarded
to, earned by, or paid to the Company's co-chief executive officers and its
four most highly compensated executive officers, other than the co-chief
executive officers (together, the "Named Executive Officers"), who were
serving as executive officers of the Company or one of its subsidiaries or
divisions during and at the end of the Company's last fiscal year, for
services rendered in all capacities to the Company and its subsidiaries for
each of the Company's last three fiscal years:
<TABLE>
<CAPTION>
ANNUAL LONG-TERM ALL OTHER
COMPENSATION COMPENSATION COMPENSATION
------------------------- ------------ ------------
AWARDS
OTHER ------------
ANNUAL SECURITIES
COMPEN- UNDERLYING
SALARY BONUS SATION OPTIONS
NAME AND PRINCIPAL POSITION YEAR $ $ $ # $
- --------------------------- ---- -------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Morton E. David(1)....... 1997 $550,000 $233,360 $15,039 25,000 $69,790
Chairman and Co-Chief 1996 550,000 363,478 34,985 100,000 65,570
Executive Officer 1995 500,000 284,000 34,785 0 68,050
William H. Turner(2)..... 1997 132,212 58,340 7,068 150,000 0
President and Co-Chief
Executive Officer
Michael Kemp(3).......... 1997 165,000 50,000 16,793 8,000 5,163
Managing Director 1996 158,969 80,000 9,795 8,000 5,637
Franklin Electronic 1995 147,160 75,000 14,936 19,000 5,600
Publishers (Europe) Ltd.
Barry J. Lipsky(4)....... 1997 160,000 75,000 0 6,000 0
Vice President 1996 160,000 55,000 0 5,000 0
1995 150,000 50,000 15,000 5,000 0
Michael R. Strange....... 1997 175,000 50,000 0 8,000 0
Executive Vice President 1996 175,000 70,000 0 8,000 0
1995 162,500 65,000 0 8,000 0
Gregory J. Winsky........ 1997 172,500 50,000 0 8,000 0
Senior Vice President 1996 172,500 70,000 0 6,000 0
1995 162,500 65,000 0 8,000 0
</TABLE>
- --------
(1) The Other Annual Compensation amounts represent payments made in
connection with relocation and automobiles. The All Other Compensation
amount for the 1995 fiscal year represents payment of insurance premiums
for life insurance and $56,000 accrued by the Company in respect of post-
retirement payments to be made to Mr. David pursuant to the terms of his
employment agreement. Such amount represents one-tenth of the $560,000
accrued by the Company in fiscal 1995 in respect of such payments for the
ten years of Mr. David's employment by the Company. The All Other
Compensation amount for the 1996 fiscal year represents payment of
insurance premiums for life insurance and $55,520 of pension accrual to be
made to Mr. David pursuant to the terms of his employment agreement. The
All Other Compensation amount for the 1997 fiscal year represents payment
of insurance premiums for life insurance and $59,740 of pension accrual to
be made to Mr. David pursuant to the terms of his employment agreement.
See "Employment Contracts, Termination of Employment and Change-In-Control
Arrangements."
(2) The Other Annual Compensation amount represents payments made in
connection with an automobile.
(3) The Other Annual Compensation amounts represent payments made in
connection with automobiles. The All Other Compensation amounts represent
payment of insurance premiums for life insurance and payments in
connection with retirement benefits.
(4) The Other Annual Compensation amount represents payments made in
connection with relocation.
6
<PAGE>
No stock appreciation rights, long-term restricted stock awards or long-term
incentive plan payouts (as defined in the proxy regulations of the Securities
and Exchange Commission) were awarded to, earned by, or paid to the Named
Executive Officers during any of the Company's last three fiscal years.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to grants of stock
options to purchase Common Stock pursuant to the Option Plan granted to the
Named Executive Officers during the fiscal year ended March 31, 1997. Certain
options identified below were subject to and were exchanged in a "like-value
exchange" program approved by the Board of Directors on August 29, 1996. See
"Like-Value Exchange of Stock Options."
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------
POTENTIAL
REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES EXERCISE EXPIRA- ----------------------
GRANTED(1) IN FISCAL PRICE TION 5% 10%
NAME # YEAR $/SH DATE $ $
- ---- ---------- ---------- -------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Morton E. David......... 25,000 7.7 17.75 7/12/06 279,072 707,223
William H. Turner....... 150,000 46.1 17.75 7/12/06 1,674,432 4,243,339
Michael Kemp............ 8,000 2.5 25.50 5/02/06 128,295 325,163
Barry J. Lipsky......... 6,000 1.8 25.50 5/02/06 96,225 243,843
Michael R. Strange...... 8,000 2.5 25.50 5/02/06 128,295 325,123
Gregory J. Winsky....... 8,000 2.5 25.50 5/02/06 128,295 325,123
All Shareholders(2)..... 59,560,448 150,937,870
</TABLE>
- --------
(1) Options with respect to one-third of the shares become exercisable on each
of the first, second and third anniversaries of the date of grant, except
for the option granted to Mr. Turner, which becomes exercixable as to one-
fourth of such shares on each of the first, second, third, and fourth
anniversaries of the date of grant.
(2) These figures were calculated assuming that the price of the 8,060,133
shares of Common Stock outstanding on March 31, 1997 increased from $11.75
per share at compound rates of 5% and 10% per year for ten years. The
purpose of including this information is to indicate the potential
realizable value at the assumed annual rates of stock price appreciation
for the option term for all of the Company's shareholders.
7
<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the value at
March 31, 1997 of unexercised stock options held by the Named Executive
Officers. None of the Named Executive Officers exercised any stock options
during the fiscal year ended March 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
AT FISCAL OPTIONS AT
YEAR-END(#) FISCAL YEAR-END ($)(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- -------------------------
<S> <C> <C>
Morton E. David............. 8,222/90,778 $0/0
William H. Turner........... 7,500/150,000 $750/0
Michael Kemp................ 24,640/16,680 $5,000/2,500
Barry J. Lipsky............. 16,813/9,427 $1,667/834
Michael R. Strange.......... 29,307/13,013 $50,167/1,334
Gregory J. Winsky........... 40,813/12,027 $95,167/1,334
</TABLE>
- --------
(1) Fair market value of securities underlying the options minus the exercise
price of the options at fiscal year end.
LIKE-VALUE EXCHANGE OF STOCK OPTIONS
On August 29, 1996, the Board of Directors approved a program allowing a
"like-value exchange" of certain options previously awarded to employees,
including the Named Executive Officers. Optionees were given the opportunity
to exchange options previously awarded with an option price of more than $19
per share for new options which had a value equal to the old options, but for
fewer shares, at the then current stock price of $14 per share and with the
same term as the remaining term of the old options.
This program was offered because the Common Stock had experienced
significant volatility over the past five years. Much of that volatility was
created by dramatic shifts in the consumer electronics industry as well as in
the investment community. The Board believed that options at exercise prices
significantly higher than current market prices no longer served as an
incentive to the optionees and, as a result, did not adequately focus the
optionees on the goal of increasing shareholder value as measured by the price
of the Common Stock.
All stock options have a value which is measured in terms of vesting period,
years elapsed and remaining in the option's ten year term, the option price at
issuance, the current market price of the underlying stock and the volatility
of the underlying stock over a period of years. The Black-Scholes model has
become generally accepted in the financial community as a proper means of
valuing a stock option at any point during its option life. The Company
calculated the relevant Black-Scholes values for both the options to be
exchanged and the new options and determined the exchange ratios for each of
the option grants included in the program. The exchange ratios were set such
that the new options had the same value as the exchanged options. The net
result is that the exercise price of the new options is lower than the
exercise price of the options exchanged, but the number of shares of Common
Stock underlying the options is reduced, while the term of the new options is
the same as the remaining term of the exchanged options. The Company should
incur no significant new costs in conjunction with the program, since the
overall value of the grants remained the same. The Board of Directors believed
that the reduced exercise price would create a more immediate positive
incentive to the optionees who
8
<PAGE>
agreed to the exchange. This was, and continues to be, especially important
during a period of transition for which continuity and intensified commitment
of management is essential. To support this incentive effect, the program
requires optionees to hold their new options at least six months after
exchange before exercising them irrespective of prior exercisability.
BOARD OF DIRECTORS
<TABLE>
<S> <C>
Edward H. Cohen Howard L. Morgan
Morton E. David Jerry R. Schubel
Bernard Goldstein James H. Simons
Leonard M. Lodish Michael R. Strange
James Meister William H. Turner
</TABLE>
The following table sets forth the details of all exchanges and repricings
of options held by any executive officer during the last ten completed fiscal
years, including those in connection with the 1996 like-value exchange.
10-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
NUMBER OF SECURITIES TERM
SECURITIES MARKET EXERCISE UNDERLYING OPTION
UNDERLYING PRICE OF PRICE AT OPTIONS REMAINING
DATE OF OPTIONS STOCK AT TIME OF AFTER AT DATE OF
EXCHANGE EXCHANGED TIME OF EXCHANGE NEW EXCHANGE EXCHANGE
OR OR EXCHANGE OR OR EXERCISE OR OR
NAME AND POSITION REPRICING REPRICED REPRICING REPRICING PRICE REPRICING REPRICING
- ----------------- --------- ---------- ----------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Morton E. David......... 8/29/96 100,000 $13.50 $27.75 $14.00 74,000 8 yrs.
Chairman and Co-Chief 5/29/90 25,000 $ 4.25 $12.50 $ 8.00 25,000 8 yrs.
Executive Officer 5/29/90 25,000 $ 4.25 $8.875 $ 8.00 25,000 9 yrs.
Michael Kemp............ 8/29/96 8,000 $13.50 $27.75 $14.00 5,920 8 yrs.
Managing Director 8/29/96 8,000 $13.50 $25.50 $14.00 6,400 9 yrs.
Franklin Electronic
Publishers (Europe)
Ltd.
Barry J. Lipsky......... 8/29/96 6,000 $13.50 $27.75 $14.00 4,800 8 yrs.
Vice President 8/29/96 6,000 $13.50 $25.50 $14.00 4,440 9 yrs.
5/29/90 10,000 $ 4.25 $12.50 $ 8.00 10,000 8 yrs.
5/29/90 9,000 $ 4.25 $8.875 $ 8.00 9,000 9 yrs.
Michael R. Strange...... 8/29/96 8,000 $13.50 $27.75 $14.00 5,920 8 yrs.
Executive Vice Presi-
dent 8/29/96 8,000 $13.50 $25.50 $14.00 6,400 9 yrs.
5/29/90 15,000 $ 4.25 $12.50 $ 8.00 15,000 8 yrs.
5/29/90 11,000 $ 4.25 $8.875 $ 8.00 11,000 9 yrs.
Gregory J. Winsky....... 8/29/96 6,000 $13.50 $27.75 $14.00 4,440 8 yrs.
Senior Vice President 8/29/96 8,000 $13.50 $25.50 $14.00 6,400 9 yrs.
5/29/90 12,000 $ 4.25 $12.50 $ 8.00 12,000 8 yrs.
5/29/90 9,000 $ 4.25 $8.875 $ 8.00 9,000 9 yrs.
Kenneth H. Lind......... 8/29/96 8,000 $13.50 $27.75 $14.00 5,920 8 yrs.
Vice President, Fi-
nance, 8/29/96 8,000 $13.50 $25.50 $14.00 6,400 9 yrs.
and Treasurer 5/29/90 12,000 $ 4.25 $12.50 $ 8.00 12,000 8 yrs.
5/29/90 9,000 $ 4.25 $8.875 $ 8.00 9,000 9 yrs.
Toni B. Tracy........... 8/29/96 5,000 $13.50 $27.50 $14.00 3,700 8 yrs.
Vice President 8/29/96 3,000 $13.50 $25.50 $14.00 2,400 9 yrs.
</TABLE>
9
<PAGE>
COMPENSATION OF DIRECTORS
Each director of the Company who is not an employee of the Company or any of
its subsidiaries receives, for his services as a director of the Company, an
annual grant of options under the Option Plan to purchase 3,000 shares of
Common Stock. No cash payment is made to any non-employee director of the
Company for service as a director nor do directors receive any fees from the
Company for attending meetings of the Board of Directors.
EMPLOYMENT CONTRACTS, TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has an employment agreement with Morton E. David (the
"Employment Agreement") which provides, among other things, for Mr. David's
continued employment as Co-Chief Executive Officer of the Company until March
2001. The Employment Agreement provides that Mr. David's annual salary shall
not be less than $550,000. The Employment Agreement also provides for payment
of an annual cash bonus to Mr. David of two percent of the Company's
consolidated pre-tax earnings. Upon expiration of the term (the "Employment
Term") of the Employment Agreement, the Company has agreed to retain Mr. David
as a consultant for a sixty month period at a monthly fee of $2,000.
Upon termination of the Employment Agreement due to Mr. David's injury or
illness, the Company is required to pay Mr. David his salary and an annual
bonus for the balance of the Employment Term; upon termination of the
Employment Agreement due to Mr. David's death, the Company is required to pay
to Mr. David's estate his salary and an annual bonus for the balance of the
Employment Term. If the Employment Agreement is terminated without cause by
the Company, the Company is required to make a lump sum payment to Mr. David
in an amount equal to his then current salary for the balance of the
Employment Term or for two years, whichever is less, and up to two times the
average bonus paid to Mr. David for the two fiscal years immediately preceding
the termination of the Employment Agreement. The Employment Agreement also
provides that Mr. David shall have the right to terminate the Employment
Agreement if he suffers a diminution in his authority in connection with his
employment by the Company; in such event, the Company is required to pay Mr.
David his salary and an annual bonus for the balance of the Employment Term.
The Employment Agreement includes a retirement plan pursuant to which the
Company will pay Mr. David an annual amount equal to $7,500 times the number
of years of service as defined under the Employment Agreement. Such amount
would be payable to either Mr. David or his beneficiaries on a monthly basis
after the end of the Employment Term; such payments are to be made until the
later to occur of Mr. David's death or the date that 120 monthly payments have
been made to Mr. David and/or his beneficiaries.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation Committee for the fiscal year ended March
31, 1997 were Bernard Goldstein, Howard Morgan and James Simons.
The investment banking firm of Broadview Associates, LLC, of which Mr.
Goldstein is a director, provided investment banking services to the Company
in prior years and may continue to provide such services to the Company in the
fiscal year ending March 31, 1998.
Mr. Morgan provided consulting services to the Company in the fiscal year
ended March 31, 1997 and may continue to provide such services to the Company
in the fiscal year ending March 31, 1998.
The investment advisory firm of Renaissance Technologies Inc., of which Mr.
Simons is Chairman of the Board and sole shareholder, provided certain
administrative services to the Company in the fiscal year ended March 31, 1997
and will continue to provide such services to the Company in the fiscal year
ending March 31, 1998.
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The responsibilities of the Compensation Committee include administering the
Option Plan and fixing the compensation, including salaries and bonuses, of
all officers of the Company.
Overall Policy
The Compensation Committee believes that the Company's officers have been
largely responsible for the Company's success. Based on this belief, the
Compensation Committee has structured the Company's compensation program (i)
to compensate its executive officers on an annual basis with a cash salary at
a sufficient level to retain and motivate these officers, (ii) to link a
portion of executive compensation to the Company's performance by means of
annual bonuses and (iii) to link a portion of executive compensation to
appreciation of the Company's stock price by means of stock options. The
objectives of this strategy are to attract and retain effective and highly
qualified executives, to motivate executives to achieve the goals inherent in
the Company's business strategy and to link executive and shareholder interest
through stock options.
Base Salaries
Annual base salaries for the officers are determined by evaluating the
performance of the individuals and their contributions to the performance of
the Company and are based on the recommendation of Messrs. David and Turner as
co-chief executive officers. Financial results, as well as non-financial
measures such as the magnitude of responsibility of the position, individual
experience, and the Compensation Committee's knowledge of compensation
practices for comparable positions at other companies are considered.
In establishing Mr. David's annual base salary of $550,000 for the fiscal
year ending March 31, 1998 (which amount was originally established in 1994 in
conjunction with the execution of the Employment Agreement), the Compensation
Committee took into account the Company's achievements in fiscal 1992 and
1993, and its assessment of Mr. David's individual performance, as well as
base salaries for chief executive officers at companies of comparable size and
complexity, both public and private, known to members of the Compensation
Committee. The Compensation Committee also took into account Mr. David's
contribution to the Company's growth and diversity and his future anticipated
contributions to the Company.
In connection with the execution of the Employment Agreement, the
Compensation Committee also awarded Mr. David a retirement plan pursuant to
which payments will be made to Mr. David upon his retirement. See "Employment
Contracts, Termination of Employment and Change-in-Control Arrangements."
The Company has not entered into a written employment agreement with William
H. Turner as Co-Chief Executive Offer and President of the Company. In July,
1996, Mr. Turner was elected President and Co-Chief Executive Officer
effective on October 1, 1996 and his salary was set by the Compensation
Committee of the Board of Directors at $275,000 per year. By resolution of the
Compensation Committee, bonus payments of one percent of the Company's net
earnings before taxes in connection with each year of his employment with the
Company were set aside for payment to Mr. Turner, which bonus was prorated to
0.5% of such amount for the Company's 1997 fiscal year to reflect Mr. Turner's
effective date of employment. At that time, Mr. Turner was granted an option
under the Company's Stock Option Plan to purchase 150,000 shares at $17.75 per
share vesting over four years at a rate of 37,500 per year with the
understanding that if Mr. Turner's employment is terminated by the Company
without cause on or before March 31, 1998, the vesting of such option shall
accelerate so that shares under option due to vest within thirteen months of
such termination shall vest immediately.
In establishing Mr. Turner's annual base salary of $275,000 for the fiscal
year ending March 31, 1998, the Compensation Committee took into account the
base salaries for Chief Executive Officers at companies of comparable size and
complexity, both public and private, known to members of the Compensation
Committee and Mr. Turner's future anticipated contributions to the Company.
11
<PAGE>
Bonus Plan
The Company's bonus plan provides incentives for all of the Company's
employees by tying profitability to an annual cash bonus distribution. In
part, the Company's bonus plan has been intended to focus the executives'
attention on short-term or annual business results and to award employees each
year based on their contributions to the profits of the Company. Six percent
of the Company's consolidated pre-tax earnings are set aside for distribution
under the bonus plan, in the form of cash bonuses, to employees other than Mr.
David (for whom an additional two percent of such earnings is set aside for
cash bonuses pursuant to the Employment Agreement). 1% of such sums have been
set aside for payment to Mr. Turner by resolution of the Company's Board of
Directors. The participants in the bonus plan and their level of participation
are determined by the Compensation Committee in its discretion, based on the
recommendation of Mr. David and Mr. Turner, and are based on an evaluation of
the performance, level of responsibility and leadership of the individual
executives in relation to corporate results.
Long-term Incentives
Under the Option Plan, stock options are granted to executives of the
Company. Stock options are designed to focus the executives' attention on
stock values and to align the interests of executives with those of the
shareholders. Stock options are customarily granted at prices equal to the
fair market value at the date of grant, are not exercisable until the first
anniversary of the date of grant and do not become fully exercisable until the
third anniversary of the date of grant. The options generally remain
exercisable during employment until the tenth anniversary of the date of
grant. This approach provides an incentive to executives to increase
shareholder value over the long term since the full benefit of the options
cannot be realized unless stock price appreciation occurs over a number of
years. Options are generally granted to Mr. David and Mr. Turner based on the
Compensation Committee's assessment of their individual performances and to
executive officers based on the recommendation of Mr. David and Mr. Turner.
COMPENSATION COMMITTEE
Bernard Goldstein
Howard L. Morgan
James H. Simons
12
<PAGE>
PERFORMANCE GRAPH
The following performance graph is a line graph comparing the yearly change
in the cumulative total shareholder return on the Common Stock against the
cumulative return of the Russell 3000 companies, and a line of business index
comprised of the Russell 3000 Publishing companies for the five fiscal years
ended March 31, 1997.
[GRAPH APPEARS HERE]
<TABLE>
<S> <C>
Value of $100.00 invested over five years:
Franklin Electronic Publishers Incorporated Common Stock............ $104.44
Russell 3000 companies.............................................. $208.08
Russell 3000 Publishing companies................................... $134.82
</TABLE>
SELECTION OF AUDITORS
The Audit Committee has recommended to the Board of Directors, and the Board
of Directors has selected, Feldman Radin & Co., P.C., independent auditors, as
auditors of the Company for the fiscal year ending March 31, 1998. Although
shareholder ratification of the Board of Directors' action in this respect is
not required, the Board considers it desirable for shareholders to pass upon
the selection of auditors and, if the shareholders disapprove of the
selection, intends to select other auditors for the fiscal year ending March
31, 1998.
It is expected that representatives of Feldman Radin & Co., P.C. will be
present at the meeting, will have an opportunity to make a statement if they
so desire and will be available to respond to appropriate questions from
shareholders.
The Board of Directors recommends a vote FOR ratification of the appointment
of the auditors. Proxies received in response to this solicitation will be
voted FOR the appointment of the auditors unless otherwise specified in the
proxy.
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The law firm of Rosenman & Colin LLP, of which Mr. Cohen is a partner, was
engaged as the Company's general outside counsel in the fiscal year ended
March 31, 1997 and will continue to be so engaged for the fiscal year ending
March 31, 1998. Payments for such services amounted to approximately $192,000
for the fiscal year ended March 31, 1997.
The investment banking firm of Broadview Associates, LLC, of which Mr.
Goldstein is a director, provided investment banking services to the Company
in prior years and may continue to provide such services to the Company. The
Company did not make any payments in connection with such services during the
fiscal year ended March 31, 1997.
Mr. Morgan provided consulting services to the Company in the fiscal year
ended March 31, 1997 and will continue to provide such services to the Company
in the fiscal year ending March 31, 1998. Payments for such services amounted
to approximately $15,400 for the fiscal year ended March 31, 1997.
The firm of Renaissance Technologies Inc., of which Mr. Simons is Chairman
of the Board and sole shareholder, provided certain administrative services to
the Company in the fiscal year ended March 31, 1997 and will continue to
provide such services to the Company in the fiscal year ending March 31, 1998.
Payments for such services amounted to approximately $2,800 for the fiscal
year ended March 31, 1997.
MISCELLANEOUS
Any proposal of an eligible shareholder intended to be presented at the next
annual meeting of share- holders must be received by the Company for inclusion
in its proxy statement and form of proxy relating to that meeting no later
than March 25, 1998.
The Board of Directors of the Company does not intend to present, and does
not have any reason to believe that others intend to present, any matter of
business at the meeting other than those set forth in the accompanying Notice
of Annual Meeting of Shareholders. However, if other matters properly come
before the meeting, it is the intention of the persons named in the enclosed
form of proxy to vote any proxies in accordance with their judgment.
The Company will bear the cost of preparing, assembling and mailing the
enclosed form of proxy, this Proxy Statement and other material which may be
sent to shareholders in connection with this solicitation. Solicitation may be
made by mail, telephone, telegraph and personal interview. The Company may
reimburse persons holding shares in their names or in the names of nominees
for their expense in sending proxies and proxy material to their principals.
Copies of the 1997 Annual Report to Shareholders, which includes the
Company's Annual Report to the Securities and Exchange Commission (Form 10-K),
are being mailed to shareholders simultaneously with this Proxy Statement.
By order of the Board of Directors,
GREGORY J. WINSKY
Secretary
Burlington, New Jersey
June 23, 1997
14
<PAGE>
FRANKLIN ELECTRONIC PUBLISHERS, INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
JULY 23, 1997
This Proxy Is Solicited On Behalf of the Board of Directors
The undersigned hereby appoints MORTON E. DAVID and GREGORY J. WINSKY, or
either of them, attorneys and proxies, with power of substitution and
revocation, to vote, as designated below, all shares of stock which the
undersigned is entitled to vote, with all powers which the undersigned would
possess if personally present, at the Annual Meeting of Shareholders (including
all adjournments thereof) of FRANKLIN ELECTRONIC PUBLISHERS, INCORPORATED to be
held on Wednesday, July 23, 1997 at 10:00 A.M. at the offices of The Chase
Manhattan Corporation, 270 Park Avenue, 11th Floor Room A, New York, New York.
The Board of Directors recommends a vote FOR proposals 1 and 2.
1. ELECTION OF DIRECTORS
____ FOR all nominees ____ WITHHOLD AUTHORITY
to vote for all nominees
Edward H. Cohen, Morton E. David, Bernard Goldstein, Leonard M. Lodish, James
Meister, Howard L. Morgan, Jerry R. Schubel, James H. Simons, Michael R. Strange
and William H. Turner.
Shareholders may withhold authority to vote for any nominee(s) by writing the
name of that nominee in the space provided below.
2. APPROVAL of the appointment of auditors as set forth in the accompanying
Proxy Statement.
___ FOR ___ AGAINST ___ ABSTAIN
<PAGE>
3. The proxy is authorized to transact such other business as may properly come
before the meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is given, this proxy
will be voted FOR items 1 and 2 and in the discretion of said proxy on any other
matter which may come before the meeting or any adjournments thereof.
Dated: _______________, 1997
-------------------------------
Print Name
-------------------------------
Signature
NOTE: When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, custodian, guardian or corporate
officer, please give your full title as such. If a corporation, please sign full
corporate name by authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
