<PAGE> 1
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 18, 1996
[FRANKLIN QUEST LOGO]
You are cordially invited to attend the Annual Meeting of Shareholders
of Franklin Quest Co. (the "Company"), which will be held on Monday, November
18, 1996, at 10:00 a.m., at the Hyrum W. Smith Auditorium, 2200 West Parkway
Boulevard, Salt Lake City, Utah 84119 - 2331 (the "Annual Meeting"), for the
following purposes:
(i) To elect three directors of the Company, each to serve a term of
three years expiring at the annual meeting of shareholders of the
Company to be held in 1999 and until their respective successors
shall be duly elected and shall qualify;
(ii) To consider and vote upon a proposal to ratify the appointment of
Arthur Andersen LLP as independent auditor of the Company for the
fiscal year ending August 31, 1997; and
(iii) To transact such other business as may properly come before the
Annual Meeting or at any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on October 1,
1996, as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting and at any adjournment or
postponement thereof.
All shareholders are urged to attend the meeting.
By Order of the Board of Directors
/s/ Hyrum W. Smith
----------------------------------
Hyrum W. Smith
Chairman of the Board
October 18, 1996
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, TO
ASSURE THAT YOUR SHARES WILL BE REPRESENTED, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES
NO ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES. YOUR PROXY WILL NOT BE
USED IF YOU ARE PRESENT AT THE ANNUAL MEETING AND DESIRE TO VOTE YOUR SHARES
PERSONALLY.
<PAGE> 2
FRANKLIN QUEST CO.
2200 WEST PARKWAY BOULEVARD
SALT LAKE CITY, UTAH 84119 - 2331
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 18, 1996
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the shareholders of Franklin
Quest Co., a Utah corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company of proxies from holders of
outstanding shares of the Company's Common Stock, $0.05 par value per share (the
"Common Stock"), for use at the Annual Meeting of Shareholders of the Company to
be held on Monday, November 18, 1996, and at any adjournment or postponement
thereof (the "Annual Meeting"). This Proxy Statement, the Notice of Annual
Meeting of Shareholders and the accompanying form of proxy are first being
mailed to shareholders of the Company on or about October 18, 1996.
The Company will bear all costs and expenses relating to the
solicitation of proxies, including the costs of preparing, printing and mailing
to shareholders this Proxy Statement and accompanying materials. In addition to
the solicitation of proxies by use of the mails, the directors, officers and
employees of the Company, without receiving additional compensation therefor,
may solicit proxies personally or by telephone or telegram. Arrangements will be
made with brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of the shares of
Common Stock held by such persons, and the Company will reimburse such brokerage
firms, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in connection therewith.
VOTING
The Board of Directors has fixed the close of business on October 1,
1996, as the record date for determination of shareholders entitled to notice of
and to vote at the Annual Meeting (the "Record Date"). As of the Record Date,
there were issued and outstanding 20,024,631 shares of Common Stock. The holders
of record of the shares of Common Stock on the Record Date entitled to be voted
at the Annual Meeting are entitled to cast one vote per share on each matter
submitted to a vote at the Annual Meeting.
PROXIES
Shares of Common Stock which are entitled to be voted at the Annual
Meeting and which are represented by properly executed proxies will be voted in
accordance with the instructions indicated on such proxies. If no instructions
are indicated, such shares will be voted FOR the election of each of the three
director nominees, FOR the ratification of the appointment of Arthur Andersen
LLP as the independent auditor of the Company for the fiscal year ending August
31, 1997, and, in the discretion of the proxy holder, as to any other matters
which may properly come before the Annual Meeting. A shareholder who has
executed and returned a proxy may revoke it at any time prior to its exercise at
the Annual Meeting by executing and returning a proxy bearing a later date, by
filing with the Secretary of the Company, at the address set forth above, a
written notice of revocation bearing a later date than the proxy being revoked,
or by voting the Common Stock covered thereby in person at the Annual Meeting.
<PAGE> 3
VOTE REQUIRED
A majority of the votes entitled to be cast at the Annual Meeting is
required for a quorum at the Annual Meeting. Abstentions and broker non - votes
are counted for purposes of determining the presence or absence of a quorum for
the transaction of business. In the election of directors, the three nominees
receiving the highest number of votes will be elected. Accordingly, abstentions
and broker non - votes will not affect the outcome of the election. Approval of
other matters, including without limitation the ratification of the appointment
of Arthur Andersen LLP as independent auditor for the Company, which may
properly come before the meeting generally requires that the number of votes
cast in favor of the proposal exceed the number of votes cast in opposition.
Abstentions and broker non - votes will not affect the outcome of any such
matter. Holders of shares of Common Stock are entitled to one vote at the Annual
Meeting for each share of Common Stock held of record at the Record Date.
ELECTION OF DIRECTORS
At the Annual Meeting, three directors of the Company are to be elected
to serve three - year terms expiring at the annual meeting of shareholders to be
held in 1999 and until their successors shall be duly elected and qualified. If
any of the nominees should be unavailable to serve, which is not now
anticipated, the proxies solicited hereby will be voted for such other persons
as shall be designated by the present Board of Directors. The three nominees
receiving the highest number of votes at the Annual Meeting will be elected.
In addition to the directors to be elected at the Annual Meeting, the
directors named below will continue to serve their respective terms of office as
indicated. Arlen B. Crouch, Val John Christensen, James M. Beggs and Daniel P.
Howells are currently serving terms which expire at the annual meeting of the
Company's shareholders to be held in 1997. Jon H. Rowberry, Robert H. Daines,
Thomas H. Lenagh and E. J. "Jake" Garn are currently serving terms which expire
at the annual meeting of the Company's shareholders to be held in 1998. Brief
statements setting forth certain biographical information concerning each
nominee and continuing director appear below.
NOMINEES FOR ELECTION AS DIRECTORS
Certain information with respect to each nominee is set forth below.
HYRUM W. SMITH, 53, a co - founder of the Company, has served as a
director of the Company since December 1983 and has served as Chairman of the
Board of Directors since December 1986. Mr. Smith was Chief Executive Officer of
the Company from April 1991 to September 1996, a Senior Vice President of the
Company from December 1984 to April 1991, and a Vice President of the Company
from December 1983 to December 1984. He is also a director of SkyWest, Inc., a
Utah based regional airline, with a class of securities registered pursuant to
Section 12 of the Securities Act of 1934.
ROBERT F. BENNETT, 63, has been a director of the Company since October
1984, and served as Chairman of the Board from December 1984 to December 1986.
In November 1992, Mr. Bennett was elected a United States Senator from the State
of Utah. Mr. Bennett was the Chief Executive Officer of R. F. Bennett
Associates, a consulting firm which provided general business consulting
services to established businesses and entrepreneurial ventures, from July 1991
to November 1992. From November 1990 to April 1991, Mr. Bennett was Vice
Chairman of the Company. Mr. Bennett was President of the Company from October
1984 to January 1991 and served as Chief Executive Officer of the Company from
December 1986 to April 1991.
BEVERLY B. CAMPBELL, 65, has been a director of the Company since July
12, 1993. Mrs. Campbell is currently the Director of International Affairs for
The Church of Jesus Christ of Latter - day Saints, a position she has held since
November 1984. She is also a member of the Board of Directors of the National
Conference (formerly the National Conference of Christians and Jews).
2
<PAGE> 4
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE
Certain information with respect to continuing directors is set forth
below.
ARLEN B. CROUCH, 61, has been President and Chief Executive Officer of
the Company since January 1991 and September 1996, respectively. Mr. Crouch was
elected a director of the Company in December 1986 and served previously as a
director from December 1984 to February 1985. Mr. Crouch served as Chief
Operating Officer of the Company from July 1989 to September 1996 and as
Executive Vice President of the Company from July 1989 to January 1991. Prior to
joining the Company, Mr. Crouch was a First Vice President and Regional Director
of Merrill Lynch & Co., Inc., from 1981 to 1989, where he was responsible for
retail operations in the Southern California region. Mr. Crouch's term as a
director expires in 1997.
VAL JOHN CHRISTENSEN, 43, has been Secretary and General Counsel of the
Company since January 1990 and an Executive Vice President since March 1996. Mr.
Christensen was elected a director of the Company in July 1991. From January
1990 to March 1996, Mr. Christensen served as a Senior Vice President of the
Company. From March 1987 to November 1989, Mr. Christensen was engaged in the
private practice of law in the law firm of LeBoeuf, Lamb, Lieby & MacRae,
specializing in general business and business litigation matters. From 1983
until he joined the Company, Mr. Christensen acted as outside counsel to the
Company. Mr. Christensen's term as a director expires in 1997.
JAMES M. BEGGS, 70, has been a director of the Company since October
1987. Mr. Beggs is currently a senior partner of J. M. Beggs International,
which provides general consulting services to international businesses and start
- - - up companies, a position he has held since 1988. He is also a director of
Rotary Power, Inc., a publicly - held company which manufactures rotary power
engines. Mr. Beggs is Chairman Emeritus of SPACEHAB, Inc., which provides
services for experimental projects for space exploration. From 1987 to 1989, Mr.
Beggs was President of DGT, Inc., a privately held company located in Falls
Church, Virginia, which provides analytical services to government agencies. Mr.
Beggs served as the Administrator of NASA from 1981 to 1985. Mr. Beggs' term as
a director expires in 1997.
DANIEL P. HOWELLS, 55, has been a director of the Company since April
1992. Since October 1991, Mr. Howells has been the President and Chief Executive
Officer of Resorts USA, Inc. (formerly Rank Ahnert, Inc.), a recreational
development and hospitality company based in the Pocono mountains of
Pennsylvania. From 1985 until October 1991, Mr. Howells was an Executive Vice
President and General Manager of the Food and Services Management Division of
Marriott Corporation. From 1982 until 1985, Mr. Howells was President and Chief
Executive Officer of Six Flags Corporation, an operator of theme parks in the
United States. Mr. Howells' term as a director expires in 1997.
JON H. ROWBERRY, 49, was employed by the Company as Senior Vice
President, Treasurer and Chief Financial Officer of the Company since in
September 1995, was appointed as Executive Vice President in March 1996 and as
Chief Operating Officer of the Company in September 1996. From 1985 to 1995, he
was employed in several executive positions with Adia S.A., a Switzerland
domiciled international provider of personnel services and with Adia Services,
Inc., its U.S. subsidiary. He served as Chief Financial Officer of Adia
Services, Inc., from 1985 to 1992 and as Chief Financial Officer of Adia S.A.
from 1992 to 1994. From 1994 to 1995, he was Senior Vice President of Specialty
Brands and International Technology for Adia S.A. Mr. Rowberry is a Certified
Public Accountant. Mr. Rowberry's term as a director expires in 1998.
ROBERT H. DAINES, 61, has been a director of the Company since April
1990. Mr. Daines has been employed as a Professor of Business Management at
Brigham Young University, Provo, Utah, since 1959. Mr. Daines is also currently
engaged as a consultant with the Center for Executive Development in Cambridge,
Massachusetts. He is also a director of AT&T Universal Financial Corporation.
Mr. Daines' term as a director expires in 1998.
3
<PAGE> 5
THOMAS H. LENAGH, 73, has been a director of the Company since December
1986. Since 1978, Mr. Lenagh has served as a Financial Advisor to SCI Systems,
an electronic contract manufacturer located in Huntsville, Alabama. From 1983 to
1985, Mr. Lenagh was Chairman of the Board and Chief Executive Officer of
Systems Planning/Greiner Engineering, a design engineering firm. From 1965 to
1983, Mr. Lenagh was Treasurer of the Ford Foundation. Mr. Lenagh is also
currently a director of SCI Systems; CML Inc., a specialty retail firm; Gintel
Funds, an equity mutual fund; Adams Express, a closed - end mutual fund;
Clemente Global Fund, an international emerging growth fund; U.S. Life Co., a
life insurance company; Irvine Sensors, a high technology research and
development firm; ICN Pharmaceuticals, a broad - based pharmaceutical company;
and V - Band Corporation, a manufacturer of electronic key and digital switching
systems. Mr. Lenagh's term as a director expires in 1998.
E. J. "JAKE" GARN, 64, was elected to serve as a director of the
Company in January 1993. Mr. Garn has been Vice Chairman of Huntsman Chemical
Corporation since January 1993. From December 1974 to January 1993, Mr. Garn was
a United States Senator from the State of Utah. During his term in the Senate,
Mr. Garn served six years as Chairman of the Senate Banking, Housing and Urban
Affairs Committee and served on the Appropriations, Energy and Natural
Resources, and Senate Rules Committees. Prior to his election to the Senate, Mr.
Garn served as Mayor of Salt Lake City, Utah, from January 1972 to December
1974. Mr. Garn also currently serves as a director of Dean Witter Intercapital
and John Alden Financial Corporation and is a member of the Board of Trustees of
Intermountain Health Care. Mr. Garn's term as a director expires in 1998.
COMMITTEES, MEETINGS AND REPORTS
The Board of Directors has standing Executive, Audit and Compensation
Committees. The Executive Committee presently consists of Messrs. Smith, Crouch,
Rowberry and Christensen. The members of the Audit Committee are Messrs. Lenagh,
Garn and Daines. The Compensation Committee consists of Messrs. Bennett, Beggs
and Howells.
The Executive Committee met 32 times during the 1996 fiscal year. Its
functions are to oversee the day-to-day operations of the Company and to make
recommendations with respect thereto to the Board of Directors.
The Audit Committee met five times during the 1996 fiscal year. Its
functions are: (i) to review and approve the selection of, and all services
performed by, the Company's independent auditors; (ii) to review the Company's
internal controls and audit functions; and (iii) to review and report to the
Board of Directors with respect to the scope of audit procedures, accounting
practices and internal accounting and financial controls of the Company.
The Compensation Committee met four times during the 1996 fiscal year.
Its functions are: (i) to review, and make recommendations to the Board of
Directors regarding, the salaries, bonuses and other compensation of the
Company's Chairman of the Board and Chief Executive Officer; and (ii) to review
and administer any stock option, stock award plan and employee benefit plan or
arrangement established by the Board of Directors for the benefit of the
executive officers of the Company.
During the 1996 fiscal year, there were six meetings held by the Board
of Directors of the Company. All directors attended more than 75% of the Board
meetings except Mr. Bennett who attended 67% of the meetings. No director
attended fewer than 75% of the total number of meetings of the committees on
which he or she served.
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<PAGE> 6
DIRECTOR COMPENSATION
Except for Mr. Bennett, directors who are not employees of the Company
are paid a retainer of $1,000 for each quarter year of service as a director and
$2,000 for each board meeting attended and are reimbursed by the Company for
their out - of - pocket travel and related expenses incurred in attending all
board and committee meetings. Mr. Bennett receives no remuneration or
reimbursement of expenses for his service as a director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert F. Bennett, a member of the Compensation Committee, served as
President of the Company from October 1984 to January 1991 and as Chief
Executive Officer from December 1986 to April 1991.
EXECUTIVE OFFICERS
In addition to Messrs. Smith, Crouch, Rowberry and Christensen, certain
information is furnished with respect to the following executive officers of the
Company:
DON J. JOHNSON, 48, has been an Executive Vice President of Operations
since May 1996 responsible for the manufacturing, printing, packaging and
distribution of Franklin Quest's paper and binder products. From 1986 to 1996,
Mr. Johnson was employed by Valleylab, a division of Pfizer, Inc., a medical
manufacturing and distributing company in Denver, Colorado, as Director of
International Manufacturing and Distribution. Mr. Johnson has 26 years of
manufacturing and distribution management experience in both the U.S. and
international markets.
RICHARD L. SHIPLEY, 52, has been an Executive Vice President of
Training since March 1996 responsible for the Client Sales Group. Mr. Shipley
served as a Senior Vice President of the Company responsible for
acquisition/productivity from April 1994 to June 1995. From 1972 to 1994, Mr.
Shipley was President and Chief Executive Officer of Shipley Associates, which
provides training, consulting services and products designed to improve written
and oral business communication and presentation skills and which was acquired
by the Company in February 1994.
D. GORDON WILSON, 44, has been an Executive Vice President since March
1996 responsible for the Product and Marketing Group. Mr. Wilson served as a
Senior Vice President of the Company responsible for the retail stores division
and the marketing division since January 1995 and September 1995, respectively.
From 1989 to 1994, he was Group Vice President and General Merchandise Manager
of the home division of Fred Meyer, Inc., a regional store operation.
EXECUTIVE COMPENSATION
The compensation of Hyrum W. Smith, the Company's Chief Executive
Officer, and the four other most highly paid executive officers during the
fiscal year ended August 31, 1996, is shown on the following pages in three
tables and discussed in a report from the Compensation Committee of the Board of
Directors.
5
<PAGE> 7
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
----------------------------------- ----------------------
RESTRICTED
FISCAL OTHER ANNUAL STOCK OPTIONS ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS($)(2) SARS(#)(3) COMPENSATION(4)
----------------- ---- ------ ----- --------------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Hyrum W. Smith 1996 $263,738 $300,000 - $207,000 60,000 $3,800
Chairman of the Board and 1995 264,557 350,000 - 204,685 - 6,807
Chief Executive Officer 1994 264,812 310,000 - - - 3,556
Arlen B. Crouch 1996 232,200 300,000 57,867 207,000 60,000 3,800
President 1995 233,019 350,000 - 204,685 - 4,620
1994 233,899 310,000 - - 60,000 4,620
Jon H. Rowberry 1996 150,000 150,000 49,371 92,000 90,000 -
Chief Financial Officer 1995 12,500 12,500 - - - -
1994 - - - - - -
Val John Christensen 1996 155,400 125,000 - 57,500 40,000 3,800
Executive Vice President 1995 156,220 150,000 - 51,255 - 6,176
1994 150,224 135,000 - - 40,000 4,360
D. Gordon Wilson 1996 147,083 85,000 - 23,000 20,000 3,524
Executive Vice President 1995 108,441 45,000 - - 10,000 -
1994 - - - - - -
</TABLE>
- - ------
(1) Includes perquisites in those instances where such amounts exceed the
lesser of $50,000 or 10% of salary and bonus. The amount shown for Mr.
Crouch includes $39,996 for retirement benefits which are in addition to
benefits provided under the Company's benefit plans. The amount shown for
Mr. Rowberry includes $40,000 for reimbursement of moving expenses.
(2) Restricted stock awards vest in full, four years from the date of grant. No
vesting occurs prior to four years from grant. Holders of restricted shares
are entitled to receipt of any dividends paid. The number of shares granted
to each of the persons named in the foregoing table and the value of
restricted shareholdings at the end of the fiscal year is as follows:
<TABLE>
<CAPTION>
NUMBER VALUE AT
NAME OF SHARES AUGUST 31, 1996
---- --------- ---------------
<S> <C> <C>
Hyrum W. Smith ......................... 9,000 $164,250
Arlen B. Crouch ........................ 9,000 164,250
Jon H. Rowberry ........................ 4,000 73,000
Val John Christensen ................... 2,500 45,625
D. Gordon Wilson ....................... 1,000 18,250
</TABLE>
(3) Amounts shown reflect options granted to the named executive officers
pursuant to the Franklin 1992 Stock Incentive Plan. As of August 31, 1996,
the Company had not granted any stock appreciation rights.
(4) Amounts shown reflect contributions made by the Company for the benefit of
the named executive officers under the Franklin 401(k) Profit Sharing Plan.
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<PAGE> 8
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of stock options made
by the Company during the fiscal year ended August 31, 1996 to the five
individuals named in the preceding Summary Compensation Table. As of August 31,
1996, the Company had not granted any stock appreciation rights to the executive
officers named below.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
PERCENT OF ASSUMED ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR OPTION TERM
GRANTED TO EXERCISE (IN DOLLARS)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION ----------------------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
---- ------- ----------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Hyrum W. Smith ................ 60,000 7.2% $18.50 11/20/2005 $698,073 $1,769,054
Arlen B. Crouch ............... 60,000 7.2 18.50 11/20/2005 698,073 1,769,054
Jon H. Rowberry ............... 50,000 6.0 23.50 09/01/2005 738,951 1,872,647
40,000 4.8 18.50 11/20/2005 465,382 1,179,369
Val John Christensen .......... 40,000 4.8 18.50 11/20/2005 465,382 1,179,369
D. Gordon Wilson .............. 20,000 2.4 18.50 11/20/2005 232,691 589,685
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR
OPTION/SAR VALUES
The following table sets forth the number of shares of Common Stock
acquired during the fiscal year ended August 31, 1996, upon the exercise of
stock options, the value realized upon such exercise, the number of unexercised
stock options held on August 31, 1996, and the aggregate value of such options
held by the five individuals named in the Summary Compensation Table. This table
reflects options to acquire shares of Common Stock granted to the named
individuals by the Company and by certain affiliates of the Company. As of
August 31, 1996, the Company had not granted any stock appreciation rights to
any of the executive officers named below.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
NUMBER OF OPTIONS AT AUGUST 31, 1996 AUGUST 31, 1996 (2)
SHARES VALUE -------------------------- ----------------------------
ACQUIRED REALIZED ON
NAME ON EXERCISE EXERCISE(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Hyrum W. Smith ............... - - 115,000 75,000 $ 84,000 -
Arlen B. Crouch .............. - - 829,029 105,000 10,774,429 -
Jon H. Rowberry .............. - - - 90,000 - -
Val John Christensen ......... 30,000 762,279 149,000 70,000 1,106,230 -
D. Gordon Wilson ............. - - 2,500 27,500 - -
</TABLE>
- - -----------------
(1) Reflects the difference between the exercise price of the options exercised
and the market value of the Common Stock on the date of such exercise, as
reported by the New York Stock Exchange.
(2) Reflects the difference between the exercise price of the unexercised
options and the market value of the Common Stock on August 31, 1996. The
last sale price of the Common Stock on August 31, 1996, as reported by the
New York Stock Exchange, was $18.25 per share.
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<PAGE> 9
COMPENSATION COMMITTEE REPORT
This report was prepared by the Compensation Committee of the Board of
Directors (the "Committee"), which is composed of independent directors who are
not employees of the Company or its subsidiaries. The Committee has
responsibility for all compensation matters for the Company's Chief Executive
Officer and the Company's Chairman of the Board (the "Key Executives"). It also
has the responsibility of administering the Franklin 1992 Stock Incentive Plan
(the "Incentive Plan"). The amount of cash compensation for executive officers
other than the Key Executives is determined by the Key Executives. The Committee
determines the amount and compensation of non - cash compensation under the
Incentive Plan for all executive officers, including the Key Executives. The
current members of the Committee are Daniel P. Howells, who serves as Chairman,
Robert F. Bennett and James M. Beggs.
In determining the amount and composition of executive compensation for
the Key Executives ("Key Executive Compensation") and administering the Plan,
the Committee is guided by the following fundamental objectives: (1) attracting
and retaining outstanding executive officers; (2) facilitating the acquisition
by executives of options to acquire the Common Stock; and (3) ensuring that a
substantial portion of Key Executive Compensation is variable and is tied to
quantifiable short - term and long - term measures of the Company's performance.
These principles are discussed in more detail below.
KEY EXECUTIVE COMPENSATION. Since 1992 Key Executive Compensation has
consisted of annual salaries established pursuant to employment agreements and
additional compensation in the form of cash bonuses, stock options and
restricted stock awards as the Committee in its discretion awards to the Key
Executives. The annual salaries of the Key Executives are set at amounts that
are deemed competitive for executives with comparable ability and experience,
taking into account existing salaries with respect to executives in companies
comparable in size and complexity to the Company. Fiscal year - end cash
performance bonuses were awarded to the Key Executives in 1996 reflecting the
Committee's conclusion that the Key Executives played an integral role in the
Company's achievement of record sales and earnings in 1996.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. Mr. Smith's compensation for
1996 was determined pursuant to the principles described above and by the terms
of his employment agreement. The Committee concluded that Mr. Smith's annual
performance bonus for 1996 fairly and adequately compensates Mr. Smith for his
vision and leadership in developing and pursuing new markets for Franklin
products and services.
INCENTIVE STOCK OPTION PROGRAM. The Company believes it is essential
for all executive officers to receive Incentive Stock Options ("ISOs") under the
Incentive Plan, thereby aligning the long - term interests of executives with
those of stockholders. The Company adopted the Incentive Plan in 1992, charging
the Committee with responsibility for its administration. During the 1996 year
incentive stock options were granted to the Key Executives and other executive
officers who assumed additional management responsibilities. These ISOs
generally vest over a four year period and expire ten (10) years from the date
of grant. If an executive officer's employment terminates prior to applicable
vesting dates, the officer generally forfeits all ISOs that have not yet vested.
The Committee believes that the grant of these ISOs to executive officers is
highly desirable because it motivates these officers to continue their
employment with the Company and creates strong incentives to maximize the growth
and profitability of the Company.
As of August 31, 1996, executive officers held incentive stock options
to purchase an aggregate of 900,000 shares of Common Stock granted under the
direction of the Committee pursuant to the Incentive Plan since its inception in
1992.
OTHER COMPENSATION PLANS. The Company has a number of other broad -
based employee benefit plans in which executive officers participate on the same
terms as other employees meeting the eligibility requirements, subject to any
legal limitations on amounts that may be contributed to or benefits payable
under the plans. These include (i) the Company's cafeteria plan administered
pursuant to Section 325 of the Internal Revenue Code of 1986, as amended (the
"Code"); (ii) the Company's 401(k) Plan, pursuant to which the Company makes
matching
8
<PAGE> 10
contributions; and (iii) the Company's Employee Stock Purchase Plan implemented
and administered pursuant to Section 423 of the Code.
EXECUTIVE COMPENSATION PHILOSOPHY. The executive compensation program
has enabled the Company to attract, motivate and retain senior management by
providing a competitive total compensation opportunity based on performance.
Competitive base salaries that reflect each individual's level of responsibility
and annual variable performance - based cash incentive awards are important
elements of the Company's cash compensation philosophy. The Committee believes
its focus on ISOs not only aligns the interests of executive officers and
stockholders, but creates a competitive advantage for the Company as well. The
Committee believes the executive compensation program strikes an appropriate
balance between short and long - term performance objectives.
Respectfully submitted,
Daniel P. Howells
Robert F. Bennett
James M. Beggs
9
<PAGE> 11
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return, calculated on a dividend reinvested basis, from the effective date of
the Company's initial public offering (June 2, 1992) through August 31, 1996,
for the Common Stock, the S&P 600 SmallCap Index in which the Company is
included and the S&P Miscellaneous Industry Index, the index to which the
Company believes it would be assigned if it were included in the S&P 500. The
Company has been advised that the S&P Miscellaneous Industry Index includes ten
corporations, many of which, like the Company, are of a diversified nature.
[GRAPH NO. 1]
<TABLE>
<CAPTION>
Jun-92 Aug-92 Nov-92 Feb-93 May-93 Aug-93 Nov-93 Feb-94 May-94 Aug-94 Nov-94
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Franklin Quest 100.00 103.23 133.87 132.26 158.06 177.42 190.32 240.32 225.81 243.55 212.90
S&P Miscellaneous Index 100.00 103.34 109.69 116.54 120.11 128.42 125.16 125.82 124.80 133.41 125.85
S&P 600 100.00 96.11 111.82 115.52 121.77 130.35 132.74 140.38 129.66 135.00 127.89
<CAPTION>
Feb-95 May-95 Aug-95 Nov-95 Feb-96 May-96 Aug-96
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Franklin Quest 229.84 199.19 149.19 121.77 129.03 140.32 117.74
S&P Miscellaneous Index 133.94 143.03 146.88 155.11 161.85 172.08 167.65
S&P 600 134.46 142.43 165.23 167.45 176.16 197.18 187.30
</TABLE>
10
<PAGE> 12
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of October 1, 1996, with
respect to the beneficial ownership of shares of the Common Stock by each person
known by the Company to be the beneficial owner of more than 5% of the Common
Stock, by each director, by each executive officer named in the Summary
Compensation Table and by all directors and executive officers as a group.
Unless noted otherwise, each person named has sole voting and investment power
with respect to the shares indicated. The percentages set forth below have been
computed without taking into account treasury shares held by the Company and are
based on 20,024,631 shares of Common Stock outstanding as of October 1, 1996:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP AS OF
OCTOBER 1, 1996
--------------------------
NUMBER OF PERCENTAGE
SHARES OF CLASS
------ --------
<S> <C> <C>
Yacktman Capital Management ................. 1,866,700 9.3%
303 West Madison
Chicago, Illinois 60606
Hyrum W. Smith(1)(2)(3) ..................... 1,851,503 9.2
c/o Franklin Quest Co
2200 West Parkway Boulevard
Salt Lake City, Utah 84119 - 2331
Dennis R. Webb(1)(2)(3)(4) .................. 1,565,212 7.8
c/o Franklin Quest Co
2200 West Parkway Boulevard
Salt Lake City, Utah 84119 - 2331
Capital Research and Management ............. 1,350,000 6.7
333 South Hope Street
Los Angeles, California 90071
Wasatch Advisors ............................ 1,268,442 6.3
68 South Main Street
Salt Lake City, Utah 84101
Arlen B. Crouch(2)(3) ....................... 1,171,450 5.6
c/o Franklin Quest Co
2200 West Parkway Boulevard
Salt Lake City, Utah 84119 - 2331
KPM Investment Management ................... 1,068,200 5.3
10250 Regency Circle
Omaha, Nebraska 68114
Robert F. Bennett(5) ........................ 480,659 2.4
Val John Christensen(3) ..................... 253,030 1.3
Richard L. Shipley(3) ....................... 124,644 *
Robert H. Daines(6) ......................... 61,705 *
Jon H. Rowberry(3) .......................... 26,500 *
James M. Beggs(7) ........................... 13,000 *
Thomas H. Lenagh(3) ......................... 10,000 *
D. Gordon Wilson(3) ......................... 9,315 *
Daniel P. Howells(3) ........................ 9,000 *
Beverly B. Campbell ......................... 300 *
E. J. "Jake" Garn ........................... - *
All directors and executive officers
as a group 14 persons(1)(3) .............. 4,011,106 18.8%
</TABLE>
- - -------
* Less than 1%
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<PAGE> 13
(1) The share amounts indicated as beneficially owned are subject to options
granted to other directors, executive officers and key employees of the
Company by the following persons in the following amounts: Hyrum W. Smith,
183,825 shares, and Dennis R. Webb, 122,500 shares.
(2) The share amounts indicated for Hyrum W. Smith are owned of record by Hyrum
W. Smith as trustee of The Hyrum W. Smith Trust with respect to 776,393
shares; those indicated for Dennis R. Webb, by Dennis R. Webb as trustee of
The Lighthouse Foundation with respect to 32,500 shares; and those indicated
for Arlen B. Crouch by Arlen B. Crouch as Trustee of The Arlen B. Crouch
Trust and The Arlen B. Crouch Family Foundation with respect to 10,000
shares and 35,000 shares, respectively. Messrs. Smith, Webb, and Crouch are
the respective trustees of those trusts and foundations, having sole power
to vote and dispose of all shares held by the respective trusts and
foundations, and may be deemed to have beneficial ownership of such shares.
An additional 90,000 shares indicated for Arlen B. Crouch are held by Mr.
Crouch's wife as trustee of her trust and may be deemed to be beneficially
owned by Mr. Crouch.
(3) The share amounts indicated include shares subject to options currently
exercisable held by the following persons in the following amounts: Hyrum W.
Smith, 130,000 shares; Dennis R. Webb, 15,000 shares; Arlen B. Crouch,
844,029 shares; Val John Christensen, 159,000 shares; Thomas H. Lenagh,
9,000 shares; Daniel R. Howells, 9,000 shares; D. Gordon Wilson, 7,500
shares; Jon H. Rowberry, 22,500 shares; Richard L. Shipley, 120,000 shares;
and all executive officers and directors as a group, 1,301,029 shares.
(4) Dennis R. Webb was a director and Senior Vice President of the Company until
his resignation in 1993.
(5) The share amounts indicated for Robert F. Bennett include 3,810 shares owned
by Mr. Bennett's two daughters sharing the same household. All other shares
are owned of record by The Robert F. Bennett Asset Management Trust.
(6) The share amounts indicated for Robert H. Daines include 15,000 shares owned
by Tahoe Investments, L.L.C., a Utah limited liability company, of which Mr.
Daines is a member.
(7) The share amounts indicated for James M. Beggs include 2,000 shares held by
Mr. Beggs' wife.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of the Common Stock, to file with the Securities
Exchange Commission (the "Commission") initial reports of ownership and reports
of changes in ownership of the Common Stock and other securities which are
derivative of the Common Stock. Executive officers, directors and holders of
more than 10% of the Common Stock are required by Commission regulations to
furnish the Company with copies of all such reports they file. Based upon a
review of the copies of such forms received by the Company and information
furnished by the persons named below, the Company believes that all reports were
filed on a timely basis, except a statement of initial ownership on Form 3 for
Richard L. Shipley which was inadvertently filed late.
SELECTION OF AUDITOR
The Audit Committee of the Board of Directors has recommended, and the
Board of Directors has selected, the firm of Arthur Andersen LLP, independent
certified public accountants, to audit the financial statements of the Company
for the fiscal year ending August 31, 1997, subject to ratification by the
shareholders of the Company. The Board of Directors anticipates that one or more
representatives of Arthur Andersen LLP will be present at the Annual Meeting and
will have an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
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<PAGE> 14
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of
no other matters to be presented for action at the meeting. However, if any
further business should properly come before the meeting, the persons named as
proxies in the accompanying form will vote on such business in accordance with
their best judgment.
PROPOSALS OF SHAREHOLDERS
Proposals which shareholders intend to present at the annual meeting of
shareholders to be held in calendar year 1997 must be received by Val John
Christensen, Executive Vice President, Secretary and General Counsel of the
Company, at the Company's executive offices (2200 West Parkway Boulevard, Salt
Lake City, Utah 84119 - 2331) no later than May 15, 1997.
ADDITIONAL INFORMATION
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY PERSON FROM WHOM A PROXY
IS SOLICITED BY THE BOARD OF DIRECTORS, UPON THE WRITTEN REQUEST OF SUCH PERSON,
A COPY OF THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10 - K, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES THERETO (AS WELL AS EXHIBITS THERETO, IF
SPECIFICALLY REQUESTED), REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. WRITTEN REQUESTS FOR SUCH INFORMATION SHOULD BE DIRECTED TO FRANKLIN
QUEST CO., INVESTOR RELATIONS DEPARTMENT, 2200 WEST PARKWAY BOULEVARD, SALT LAKE
CITY, UTAH 84119 - 2331, ATTN: MR. RICHARD PUTNAM.
13
