SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
[X] Definitive proxy statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FRANKLIN CREDIT MANAGEMENT CORPORATION
(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)(1) 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:
(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:
(4) Date filed:
FRANKLIN CREDIT MANAGEMENT CORPORATION
Six Harrison Street
New York, New York 10013
April 18, 2002
To Our Stockholders:
You are cordially invited to attend the 2002 Annual Meeting of
Stockholders of Franklin Credit Management Corporation (the "Company"), which
will be held at the corporate offices of the Company, located at Six Harrison
Street, Sixth Floor, New York, New York, on Thursday, May 9, 2002, at 10:00
A.M., Eastern Daylight Time.
The Notice of Annual Meeting and Proxy Statement covering the formal
business to be conducted at the Annual Meeting follow this letter and are
accompanied by the Company's Annual Report for the fiscal year ended December
31, 2001.
We hope you will attend the Annual Meeting in person. Whether or not
you plan to attend, please complete, sign, date and return the enclosed proxy
promptly in the accompanying reply envelope to assure that your shares are
represented at the meeting.
Sincerely yours,
THOMAS J. AXON
Chairman
- 2 -
FRANKLIN CREDIT MANAGEMENT CORPORATION
SIX HARRISON STREET
NEW YORK, NEW YORK 10013
(212) 925-8745
-------------------------
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 2002
-------------------------
Notice is hereby given that the Annual Meeting of Stockholders of
Franklin Credit Management Corporation (the "Company") will be held at the
corporate offices of the Company, located at Six Harrison Street, Sixth Floor,
New York, New York, at 10:00 A.M., Eastern Daylight Time, on Thursday, May 9,
2002 for the following purposes:
1. to elect nine directors to the Company's Board of
Directors;
2. to ratify the appointment of Deloitte & Touche as the
Company's independent public auditors for the fiscal
year ending December 31, 2002; and
3. to transact such other business as may be properly
brought before the meeting and any adjournment or
postponement thereof.
The Board of Directors unanimously recommends that you vote FOR the
election of all nine nominees as Directors and FOR the approval of the
appointment of the independent public auditors.
Stockholders of record at the close of business on April 18, 2002 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournment or
postponement thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE REPLY ENVELOPE
PROVIDED WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. STOCKHOLDERS
ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF THEY HAVE RETURNED A
PROXY. BY PROMPTLY RETURNING YOUR PROXY, YOU WILL GREATLY ASSIST US IN PREPARING
FOR THE ANNUAL MEETING.
By Order of the Board of Directors,
THOMAS J. AXON
Chairman
New York, New York
April 18, 2002
- 3 -
FRANKLIN CREDIT MANAGEMENT CORPORATION
SIX HARRISON STREET
NEW YORK, NEW YORK 10013
(212) 925-8745
-------------------------
PROXY STATEMENT FOR
2002 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 2002
-------------------------
GENERAL INFORMATION
This Proxy Statement and the enclosed form of proxy are being
furnished, commencing on or about April 18, 2002, in connection with the
solicitation of proxies in the enclosed form by the Board of Directors of
Franklin Credit Management Corporation, a Delaware corporation (the "Company"),
for use at the Annual Meeting of Stockholders ("Stockholders") of the Company
(the "Annual Meeting"). The Annual Meeting will be held at the corporate offices
of the Company, located at Six Harrison Street, Sixth Floor, New York, New York,
at 10:00 A.M., Eastern Daylight Time, on Thursday, May 9, 2002, and at any
adjournment or postponement thereof, for the purposes set forth in the foregoing
Notice of 2002 Annual Meeting of Stockholders.
The annual report of the Company, containing financial statements of
the Company as of December 31, 2001, and for the year then ended (the "Annual
Report"), has been delivered or is included with this proxy statement.
A list of the Stockholders entitled to vote at the Annual Meeting will
be available for examination by Stockholders during ordinary business hours for
a period of ten days prior to the Annual Meeting at the corporate offices of the
Company. A Stockholder list will also be available for examination at the Annual
Meeting.
If you are unable to attend the Annual Meeting, you may vote by proxy
on any matter to come before that meeting. The enclosed proxy is being solicited
by the Board of Directors. Any proxy given pursuant to such solicitation and
received in time for the Annual Meeting will be voted as specified in such
proxy. If no instructions are given, proxies will be voted (i) FOR the election
as Directors of the nine nominees named below under the caption "Election of
Directors" to one year terms, (ii) FOR the ratification of the appointment of
Deloitte & Touche ("D&T") as independent public auditors for the Company's
fiscal year ending December 31, 2002, and (iii) in the discretion of the proxies
named on the proxy card with respect to any other matters properly brought
before the Annual Meeting. Attendance in person at the Annual Meeting will not
of itself revoke a proxy; however, any Stockholder who does attend the Annual
Meeting may revoke a proxy orally and vote in person. Proxies may be revoked at
any time before they are voted by timely submitting a properly executed proxy
with a later date or by sending a written notice of revocation to the Secretary
of the Company at the Company's principal executive offices.
This Proxy Statement and the accompanying form of proxy are being
mailed to Stockholders of the Company on or about April 18, 2002.
Following the original mailing of proxy solicitation material,
executive and other employees of the Company and professional proxy solicitors
may solicit proxies by mail, telephone, telegraph and personal interview.
Arrangements may also be made with brokerage houses and other custodians,
nominees and fiduciaries who are record holders of the Company's Common Stock to
forward proxy solicitation material to the beneficial owners of such stock, and
the Company may reimburse such record holders for their reasonable expenses
incurred in such forwarding. The cost of soliciting proxies in the enclosed form
will be borne by the Company.
The Company's Board of Directors has unanimously voted to recommend
that you vote for the nominees for election to the Board of Directors listed
below and for the appointment of D&T as the independent public auditors of the
Company for the fiscal year ended December 31, 2002.
- 4 -
VOTING OF SHARES
The holders of one-third of the outstanding shares entitled to vote,
present in person or represented by proxy, will constitute a quorum for the
transaction of business. Shares represented by proxies that are marked "abstain"
will be counted as shares present for purposes of determining the presence of a
quorum on all matters. Brokers holding shares for beneficial owners in "street
name" must vote those shares according to specific instructions they receive
from the owners of such shares. If instructions are not received, brokers may
vote the shares, in their discretion, depending on the type of proposals
involved. "Broker non-votes" result when brokers are precluded from exercising
their discretion on certain types of proposals. However, brokers have
discretionary authority to vote on all the proposals being submitted hereby to
the Stockholders. Shares that are voted by brokers on some but not all of the
matters will be treated as shares present for purposes of determining the
presence of a quorum on all matters, but will not be treated as shares entitled
to vote at the Annual Meeting on those matters as to which authority to vote is
withheld by the broker.
The election of each nominee for Director requires a plurality of votes
cast. Accordingly, abstentions and Broker non-votes will not affect the outcome
of the election; votes that are withheld will be excluded entirely from the vote
and will have no effect. The affirmative vote of the holders of a majority of
the shares present in person or represented by proxy at the meeting and entitled
to vote is required for the appointment of the independent public auditors. On
this matter the abstentions will have the same effect as a negative vote.
Because Broker non-votes will not be treated as shares that are present and
entitled to vote with respect to a specific proposal, a Broker non-vote will
have no effect on the outcome.
The Company will appoint an inspector to act at the Annual Meeting who
will: (1) ascertain the number of shares outstanding and the voting powers of
each; (2) determine the shares represented at the Annual Meeting and the
validity of the proxies and ballots; (3) count all votes and ballots; (4)
determine and retain for a reasonable period of time a record of the disposition
of any challenges made to any determinations by such inspector; and (5) certify
his determination of the number of shares represented at the Annual Meeting and
his count of all votes and ballots.
Only Stockholders of record at the close of business on April 18, 2002
are entitled to notice of, and to vote at, the Annual Meeting and any
adjournment or postponement thereof. As of the close of business on April 18,
2002, there were outstanding 5,916,527 shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock"). Each share of Common Stock entitles
the record holder thereof to one vote on all matters properly brought before the
Annual Meeting and any adjournment or postponement thereof, with no cumulative
voting.
- 5 -
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT(1)
The following table sets forth, as of April 1, 2002, the number of
shares of Common Stock (and the percentage of the Company's Common Stock)
beneficially owned by (i) each person known (based solely on Schedules 13D or
13G filed with the Securities and Exchange Commission (the "Commission")) to the
Company to be the beneficial owner of more than 5% of the Common Stock, (ii)
each Director and nominee for Director of the Company, (iii) the Named
Executives (as defined in "Executive Compensation" below), and (iv) all
Directors and Executive Officers of the Company as a group (based upon
information furnished by such persons). Under the rules of the Commission, a
person is deemed to be a beneficial owner of a security if such person has or
shares the power to vote or direct the voting of such security or the power to
dispose of or to direct the disposition of such security. In general, a person
is also deemed to be a beneficial owner of any securities of which that person
has the right to acquire beneficial ownership within 60 days. Accordingly, more
than one person may be deemed to be a beneficial owner of the same securities.
NUMBER OF SHARES PERCENTAGE (%)
NAME AND ADDRESS BENEFICIALLY OWNED OF COMMON STOCK
- ---------------- ------------------ ---------------
Thomas J. Axon(1)(2) 3,183,490 53.8%
Seth Cohen(1)(3) 100,000 *
Joseph Caiazzo(1)(4) 143,550 2.4%
Michael Bertash(1)(5) 16,000 *
Frank B. Evans, Jr.(1)(6) 908,960 15.3%
Alan Joseph(1) 0 *
Steven W. Lefkowitz(1)(8) 163,000 2.7%
Allan R. Lyons(1)(7) 48,500 *
Vincent A. Merola(9) 295,935 5.0%
William F. Sullivan(1)(5) 45,700 *
All Directors and Executive Officers as a group 4,905,135 82.9%
(9) persons)(10)
- --------------------------
* Indicates beneficial ownership of less than one (1%) percent.
- 6 -
(1) Mailing address: C/O Franklin Credit Management Corporation, Six
Harrison Street, New York, New York 10013.
(2) Does not include 11,610 beneficially owned by Mr. Axon's mother, Ann
Axon, with respect to which shares Mr. Axon disclaims beneficial
ownership. Includes 1,030 shares owned of record by him as custodian for
a minor child. Includes 65,000 shares issuable upon exercise of options
exercisable within sixty days.
(3) Includes 100,000 shares issuable upon exercise of options exercisable
within sixty days.
(4) Includes 120,000 shares issuable upon exercise of options exercisable
within sixty days.
(5) Includes 16,000 shares issuable upon exercise of options exercisable
within sixty days.
(6) Does not include 20,720 shares beneficially owned by Mr. Evans' wife and
5,225 shares beneficially owned by Mr. Evans' father, Frank Evans.
Includes 5,000 shares beneficially owned by each of his four minor
children for which Mr. Evans is the trustee. Includes 11,000 shares
issuable upon exercise of options exercisable within sixty days.
(7) Includes 21,000 shares issuable upon exercise of options exercisable
within sixty days.
(8) Includes 87,000 shares issuable upon exercise of warrants exercisable
within sixty days and 16,000 shares issuable upon exercise of options
exercisable within sixty days.
(9) Mr. Merola's mailing address is P.O. Box 769 Tannersville, PA
18372-0769. Mr. Merola is not an officer nor director.
(10) Includes 370,000 shares issuable upon exercise of options exercisable
within sixty days and 87,000 shares issuable upon exercise of warrants
exercisable within sixty days.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and Officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Reporting persons are required by
Commission regulations to furnish the Company with copies of all Section 16(a)
forms that they file.
Based solely on review of the copies of such reports furnished to the
Company, the Company believes that during 2001 all Section 16(a) filing
requirements applicable to its Officers, Directors and ten percent stockholders
were complied with.
PROPOSALS
The Company's Board of Directors has unanimously voted to recommend the
nominees for election to the Board of Directors listed below and for the
appointment of D&T as the independent public auditors of the Company for the
fiscal year ended December 31, 2001.
- 7 -
PROPOSAL 1 - ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
Unless instructed otherwise, the enclosed proxy will be voted FOR the
election of the nominees named below. Voting is not cumulative. While management
has no reason to believe that the nominees will not be available as candidates,
should such a situation arise, proxies may be voted for the election of such
other persons as a Director as the holders of the proxies may, in their
discretion, determine.
The following sets forth certain information with respect to each of
the nine nominees to the Board of Directors as well as to the remaining
Directors and Executive Officers of the Company:
Year First
Name Age Elected Director Office
- ---- --- ---------------- ------
Nominees to the Board
Thomas J. Axon(1)(2) 50 1988 Chairman and Director
Seth Cohen 37 2000 President, Chief Executive
Officer and Director
Joseph Caiazzo(1) 44 1994 Sr. Vice President, Chief
Operating Officer, Secretary
and Director
Michael Bertash(1) 49 1998 Director
Frank B. Evans, Jr.(1)(2) 50 1994 Director
Alan Joseph 41 2000 Vice President, Chief Financial
Officer, and Director
Steven W. Lefkowitz(1)(2) 46 1996 Director
Allan R. Lyons(1) 61 1994 Director
William F. Sullivan(1) 52 1996 Director
- 8 -
DIRECTORS OF THE COMPANY
Thomas J. Axon has served as Chairman of Board of Directors of the
Company since December 30, 1994 and as Chief Executive Officer and President
from December 30, 1994 through June 30, 2000. Mr. Axon also served as Director
of Franklin Credit Management Corporation ("Franklin") from April 25, 1988 until
the merger of Franklin and Miramar Resources, Inc. in December 1994 (the
"Merger") and President of Franklin from October 8, 1991 until the Merger. Since
1985, Mr. Axon has been the President and principal owner of RMTS Associates,
LLC. Mr. Axon holds a Bachelor of Arts in economics from Franklin and Marshall
College and attended the New York University Graduate School of Business.
Seth Cohen has served as Chief Executive Officer and President of the
Company since July 17, 2000. Previously, Mr. Cohen provided
management-consulting services to several companies and venture capital firms in
a variety of different industries. In addition, from 1996 to 2000 Mr. Cohen held
executive positions, including COO and General Counsel with two insurance
companies. Mr. Cohen holds a Bachelor of Arts from the University of Michigan
and a Juris Doctor from New York University School of Law.
Joseph Caiazzo has served as Vice President and Chief Operating Officer
since March of 1996, and Secretary since June 1999. Mr. Caiazzo also serves as
President of the Company's mortgage banking subsidiary Tribeca Lending Corp.
From August 1989 to March 1996, Mr. Caiazzo served as corporate controller of
R.C. Dolner, Inc., a general contractor. Mr. Caiazzo holds a Bachelor of Science
from St. Francis College and a Masters of Business Administration in Finance
from Long Island University.
Michael Bertash has been a Senior Vice President with J. & W. Seligman
&. Co., an investment management firm, since 1997. Mr. Bertash was an Associate
Director of the asset management division of Bear, Stearns & Co. Inc., a
worldwide investment bank and brokerage firm, from 1991 to 1997. Mr. Bertash
holds a Bachelor of Science in Operations Research from Syracuse University and
a Master in Business from New York University.
Frank B. Evans, Jr. had served as Vice President, Treasurer Secretary
and Chief Financial Officer of the Company since December 30, 1994 until
November 15, 1998. Mr. Evans also served as the Secretary, Treasurer, a Vice
President and a Director of Franklin from its inception in 1990 until the
Merger. Mr. Evans has served as CEO of Earthsafe Corporation, a McLean, Virginia
firm that designs and supplies environmental compliance systems, since its
inception in 1990. Mr. Evans is a Certified Public Accountant and holds a
Bachelor of Science from the University of Maryland and a Masters in Business
from the University of Southern California.
Alan Joseph, as of April 15, 2001, will join the Company as the Chief
Financial Officer. Mr. Joseph served as Vice President in the Term Asset Backed
Securitization group at SG Cowen Securities Corporation, the investment-banking
subsidiary of the Societe Generale Group, since 2000. Prior to joining SG Cowen,
Mr. Joseph served as First Vice President in the Asset Trading & Finance group
at Paine Webber, Inc. where he worked from 1997 to 2000. From 1996 to 1997, Mr.
Joseph was an Assistant Vice President at the Clayton Group, Inc., a portfolio
due diligence and Advisory Company. From 1994 to 1996 Mr. Joseph served in
various capacities in the Commercial Real Estate groups at Paine Webber, Inc.
and Kidder Peabody, Inc. Mr. Joseph holds a Bachelor of Science in Finance from
Arizona State University and a Juris Doctor degree from New York Law School.
Steven W. Lefkowitz has served as the founder and President of Wade
Capital Corporation, a privately held investment firm since 1990. From 1988 to
1990, Mr. Lefkowitz served as a Vice President of Corporate Finance for Drexel
Burnham Lambert, Incorporated, where he had been employed since 1985. Mr.
Lefkowitz serves on the Board of Directors of Allstate Financial Corp., a
publicly traded financial services company, as well as several private
companies. Mr. Lefkowitz holds a Bachelor of Arts in history from Dartmouth
College and a Masters in Business Administration from Columbia University.
Allan R. Lyons is a Certified Public Accountant who was an executive in
Piaker & Lyons, P.C., an accounting firm, and its predecessors from 1968 until
his retirement on December 31, 1999. Mr. Lyons is currently the owner of 21st
Century Strategic Investment Planning, a Florida LC doing financial planning
services and investment structuring and review of financial opportunities and
private placements, and acts as a general partner for
- 9 -
two venture capital partnerships. Mr. Lyons has been a director of Retail
Entertainment Group, Inc. (formerly Starlog Franchise Corporation) since August
1993 and a Director of the Scoreboard Inc., since June 1990. Mr. Lyons has been
a director of AMBANC Holding Company (Mohawk Community Bank, Amsterdam, New
York) since April 1999. Mr. Lyons holds a Bachelor of Science in Accounting from
Harpur College and a Masters of Business Administration from Ohio State
University.
William F. Sullivan has been a Partner at Marnik & Sullivan, a general
practice law firm, since 1985 and is admitted to both the New York State and
Massachusetts Bar Associations. Mr. Sullivan graduated from Suffolk University
School of Law and holds a Bachelor of Arts in political science from the
University of Massachusetts.
All Directors hold office for one year terms and until their successors
have been duly elected and qualified, or until their earlier death, resignation
or removal. The Company's Officers are elected by, and serve at the pleasure of,
the Board of Directors, subject to the terms of any employment agreements. No
familial relationships exist between Directors or Executive Officers of the
Company.
COMPENSATION OF DIRECTORS
Since March 21, 2000, the Company's policy has been that each
non-employee director receives $1,000 for every meeting of the Board of
Directors or its committees attended in person and $500 for meetings attended
telephonically. Since April 5, 2000, the Company's policy has been that each
non-employee director will be granted an option to purchase 3,500 shares of
Common Stock pursuant to the Company's 1996 Stock Incentive Plan, upon election
or re-election to the Board. The options vest on the date of grant and are
exercisable at an exercise price of the fair market value of the shares on the
date of grant as determined by the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has an Audit Committee of which
Messrs. Evans, Lyons and Bertash are the members. The Audit Committee meets with
the Company's auditors and principal financial personnel to review the results
of the annual audit. The Audit Committee also reviews the scope of the annual
audit and other services before they are undertaken by the Company's auditors,
and reviews the adequacy and effectiveness of the Company's internal accounting
controls. The Company's Board of Directors has not adopted a written charter for
the Audit Committee. The Company's Board of Directors has a Compensation
Committee of which Messrs. Caiazzo, Lefkowitz and Sullivan are the members. The
Compensation Committee reviews the compensation provided to executive officers
and Board members and administers the Company's 1996 Stock Incentive Plan. The
Company's Board of Directors does not have a standing nominating committee.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During Fiscal 2001, there were four meetings of the Board of Directors
of the Company, two meetings of the Audit Committee and one meeting of the
Compensation Committee. No Director attended fewer than 75% of the aggregate
number of meetings of the Board of Directors and of any committee on which he
served.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Franklin Credit Management Corporation Board
of Directors (the "Committee") is composed of three directors, each of whom is
an "independent director" as defined in Section 303.01(B)(2)(a) and (3) of the
NYSE's Listing Standards. The Audit Committee reviews our financial reporting
process on behalf of the Board of Directors. In fulfilling its responsibilities,
the Audit Committee has reviewed and discussed the audited financial statements
contained in the 2001 Annual Report on Form 10-KSB with management and the
independent auditors. Management is responsible for the financial statements and
the reporting process, including the system of internal controls. The
independent auditors are responsible for performing an independent audit of the
Company's financial statements and expressing an opinion on the conformity of
those audited financial statements with accounting principles generally accepted
in the United States.
- 10 -
The Committee discussed with the independent auditors, the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended. In addition, the Committee has
discussed with the independent auditors, the auditors' independence from the
Company and its management, including the matters in the written disclosures
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees. The Audit Committee has considered whether
the independent auditors provision of information technology services to the
Company is compatible with the auditor's independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board approved
including the audited financial statements in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 2001, filed with the Securities and
Exchange Commission.
Michael Bertash
Frank B. Evans
Allan R. Lyons
- 11 -
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation earned by or paid to Thomas
J. Axon, the Chairman of the Company, Seth Cohen Chief Executive Officer of the
Company and Joseph Caiazzo, the Chief Operating Officer of the Company
(collectively the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
NAME AND PRINCIPAL POSITION FISCAL YEAR ANNUAL COMPENSATION AWARDS
- --------------------------- ----------- ----------------------------------- ------------------------
SALARY BONUS OTHER ANNUAL RESTRICTED SECURITIES
($) ($) COMPENSATION STOCK UNDERLYING
($) AWARD(S) OPTIONS/SARS
($) (#)
Seth Cohen - Chief Executive 2001 200,000 59,554(2)
Officer and President(1) 2000 89,487 - - - 150,000(3)
Thomas J. Axon-Chairman 2001 75,000 59,554(2) - - -
2000 75,000 - - - -
1999 75,000 - - - -
Joseph Caiazzo-Chief Operating 2001 165,000 59,554(2)
Officer 2000 148,750 - - - 40,000(4)
1999 141,557 - - -
(1) Mr. Cohen has served as Chief Executive Officer and President of the Company
since July 17, 2000.
(2) Represents bonus earned for fiscal year 2001.
(3) Represents options to purchase shares of the Company's Common Stock granted
on July 17, 2000 at an exercise price of $0.75 per share, of which 50,000
vested upon grant, 50,000 of vested on July 1, 2001 and 50,000 will vest on
July 1, 2002.
(4) Represents options to purchase shares of the Company's Common stock granted
on September 1, 2000 at an exercise price of $.75 per share, 20,000 of which
vested on September 1, 2001 and 20,000 of which vest on September 1, 2002.
The following table sets forth the aggregate value, realized gain, and
number of options granted to the Named Executive Officers.
- 12 -
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Name Shares Value Number of Securities Value of Unexercised
Acquired On Realized Underlying Unexercised In-The-Money Options at
Exercise Options at FY-END FY-End(1)
----------------- ----------- -------- -------------------------- --------------------------
# ($) Exercisable Unexercisable Exercisable Unexercisable
Seth Cohen - - 100,000 50,000 - -
Joseph Caiazzo - - 120,000 20,000 - -
(1) Based upon a $.75 share price at December 31, 2001.
EMPLOYMENT AGREEMENTS.
Seth Cohen serves as Chief Executive Officer of the Company under a
three-year contract for annual compensation of $200,000 expiring on July 16,
2004. In addition, under his employment contract Mr. Cohen will receive a bonus
of 3.5% of post tax profits of the Company in any fiscal year in excess of
$500,000. Mr. Cohen also received a grant of 150,000 options to purchase Common
Stock at an exercise price of $.75 per share, of which 50,000 vested upon grant,
50,000 vested on July 1, 2001 and 50,000 will vest on July 1, 2002.
Joseph Caiazzo serves as Chief Operating Officer of the Company under a
five-year contract for annual compensation of $165,000, expiring on March 24,
2006. In addition, under his employment contract Mr. Caiazzo will receive a
bonus of 3.5% of post tax profits of the Company in any fiscal year in excess of
$500,000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In 1998, Mr. Axon, the Company's President, Chief Executive Officer and
Chairman purchased from the Company a Florida condominium unit subject to
considerable title defects, held by the Company in its OREO inventory available
for sale. The consideration included forgiveness of $ 184,335 of indebtedness of
the Company to Axon Associates, Inc. and issuance by Mr. Axon of a note to the
Company in the amount of $234,165. The note bears interest at a rate of 8% per
annum, is secured by the condominium property, and was due June 1, 2001. During
2001, the parties agreed to extend the note until December 31, 2002. The Company
believes that the terms of the sale were at least as advantageous to the Company
as those available from an arms-length purchaser.
During April, 2000, the Company extended its letter agreement with Wade
Capital Corporation ("WCC"), of which Steven W. Lefkowitz, a member of the
Company's Board of Directors, serves as President, to extend WCC's retention to
provide financial advisory services to the Company through April 30, 2002. This
agreement has been extended to April 30, 2003. Pursuant to such extension, WCC
receives $1,500 per month in consulting fees. In connection with the original
execution of the letter agreement in 1998, WCC was granted 87,000 warrants to
purchase Common Stock at $1.56 per share.
On December 29, 2000, Mr. Axon, the Company's Chairman purchased from
the Company a New York condominium held by the Company in its OREO inventory
available for sale. The consideration included the issuance by Mr. Axon of a
note to the Company in the amount of $165,000. The note bears interest at a rate
of 8% per annum, is secured by the condominium property, and was due together
with all accrued interest and other charges on January 30, 2001. During 2001,
the parties agreed to extend maturity of the note for an additional two years.
- 13 -
VOTE REQUIRED FOR APPROVAL OF THE ELECTION OF DIRECTORS
The election of each nominee for Director requires a plurality of votes
cast. Accordingly, abstentions and Broker non-votes will not affect the outcome
of the Election. Proxies solicited by the Board of Directors will be voted for
each of the nominees listed above, unless Stockholders specify otherwise.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF EACH OF THE NOMINEES LISTED ABOVE.
PROPOSAL 2 - APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
The firm of Deloitte & Touche, independent certified public auditors,
has audited the Company's financial statements since 1997. The Board of
Directors has appointed D&T as the Company's independent public auditors for the
fiscal year ending December 31, 2002. Although Stockholder approval of such
appointment is not required by law, the Board of Directors believes that it is
advisable to give the Stockholders an opportunity to ratify this appointment. If
the proposal is not approved, the Board of Directors will reconsider its
selection of D&T. It is expected that a representative of D&T will be present at
the Annual Meeting with the opportunity to make a statement if he or she desires
to do so, and will be available to respond to appropriate questions.
AUDIT FEES
The aggregate fees billed to the Company for this fiscal year ended
December 31, 2001 by D&T, are as follows:
Audit Fees $218,000
Financial Information Systems Design and Implementation Fees: $0
All Other Fees $40,000
"All other fees" includes fees for tax and management consulting
assignments and other non-audit services.
The Audit Committee has considered whether the provision of the
non-audit services provided by D&T is compatible with maintaining the principal
accountant's independence.
VOTE REQUIRED FOR RATIFICATION OF D&T
Ratification of the appointment of D&T requires the affirmative vote of
a majority of the shares of Common Stock present at the Annual Meeting and
entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
D&T.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not
aware of any other matter that is to be presented to Stockholders for formal
action at the Annual Meeting. If, however, any other matter or matters are
properly brought before the Annual Meeting or any adjournment or postponement
thereof, it is the intention of the persons named in the enclosed form of proxy
to vote such proxy in accordance with their judgment on such matters.
- 14 -
STOCKHOLDER PROPOSALS
Any Stockholder proposal intended to be presented at the next annual
meeting of Stockholders must be received by the Company at its principal
executive offices, Six Harrison Street, New York, New York 10013, no later than
December 19, 2001 in order to be eligible for inclusion in the Company's proxy
statement and form of proxy to be used in connection with that meeting. Any
proposal submitted but not to be so included shall be considered to be untimely
if not received by the Company at the principal executive office by March 4,
2002.
OTHER INFORMATION
Although it has entered into no formal agreements to do so, the Company
will reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding proxy-soliciting
materials to their principals. The cost of soliciting proxies on behalf of the
Board of Directors will be borne by the Company. Such proxies will be solicited
principally through the mail but, if deemed desirable, may also be solicited
personally or by telephone, telegraph, facsimile transmission or special letter
by Directors, Officers and regular employees of the Company without additional
compensation.
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE ANNUAL MEETING
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING. THE BOARD URGES YOU TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID
REPLY ENVELOPE. YOUR COOPERATION AS A STOCKHOLDER, REGARDLESS OF THE NUMBER OF
SHARES OF STOCK YOU OWN, WILL REDUCE THE EXPENSES INCIDENT TO A FOLLOW-UP
SOLICITATION OF PROXIES.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING YOUR SHARES, PLEASE TELEPHONE
THE COMPANY AT (212) 925-8745.
Sincerely yours,
THOMAS J. AXON
Chairman
New York, New York
April 18, 2002
- 15 -
EXHIBIT A
FRANKLIN CREDIT MANAGEMENT CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas J. Axon, Seth Cohen and Joseph
Caiazzo, or if only one is present, then that individual, with full power of
substitution, to vote all shares of Franklin Credit Management Corporation (the
"Company"), which the undersigned is entitled to vote at the Company's Annual
Meeting to be held at the corporate offices of the Company, on Thursday, the 9th
day of May, 2002, at 10:00 a.m., New York time, and at any adjournment or
postponement thereof, hereby ratifying all that said proxies or their
substitutes may do by virtue hereof, and the undersigned authorizes and
instructs said proxies to vote as follows:
1. ELECTION OF DIRECTORS. Please complete both of the sections below:
FOR ALL NOMINEES LISTED BELOW WITHHOLD AUTHORITY
(except as marked to the contrary below) [ ] to vote for all nominees listed below [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Thomas J. Axon
Seth Cohen
Joseph Caiazzo
Michael Bertash
Frank B. Evans, Jr.
Alan Joseph
Steven W. Lefkowitz
Allan R. Lyons
William F. Sullivan
3. APPROVAL OF AUDITORS: To ratify and approve the appointment of Deloitte &
Touche as independent public auditors of the Company for the fiscal year ending
December 31, 2002;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
and in their discretion, upon any other matters that may properly come before
the meeting or any adjournments or postponements thereof.
(Continued and to be dated and signed on the other side.)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
- 16 -
Receipt of the Notice of Annual Meeting and of the Proxy Statement and
Annual Report of the Company accompanying the same is hereby acknowledged.
Dated: , 2002
------------------------------
------------------------------------------------
(Signature of Stockholder)
------------------------------------------------
(Signature of Stockholder)
Your signature should appear the same as your name appears herein. If signing as
attorney, executor, administrator, trustee or guardian, please indicate the
capacity in which signing. When signing as joint tenants, all parties to the
joint tenancy must sign. When the proxy is given by a corporation, it should be
signed by an authorized Officer.
- 17 -