Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
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 o
Check
the
appropriate box:
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o |
Preliminary
proxy statement |
|
o |
Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x |
Definitive
proxy statement
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o |
Definitive
additional materials
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o |
Soliciting
material pursuant to Rule 14a-11(c) or Rule
14a-12
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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
101
Hudson Street
Jersey
City, New Jersey 07302
May
1,
2006
To
Our
Stockholders:
You
are
cordially invited to attend the 2006 Annual Meeting of Stockholders of Franklin
Credit Management Corporation (the “Company”), which will be held at the
corporate offices of the Company, located at 101 Hudson Street, 25th
floor,
Jersey City, New Jersey on Thursday, May 24, 2006, 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,
2005.
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.
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Sincerely yours, |
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/s/ Thomas J. Axon |
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THOMAS J. AXON |
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Chairman |
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FRANKLIN
CREDIT MANAGEMENT CORPORATION
101
Hudson Street
Jersey
City, New Jersey 07302
(201)
604-1800
NOTICE
OF 2006 Annual Meeting OF STOCKHOLDERS
May
24, 2006
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 101 Hudson Street 25th floor, Jersey City, New Jersey,
at 10:00 A.M., Eastern Daylight Time, on Thursday, May 24, 2006 for the
following purposes:
1. |
to
elect three directors to Class 1 of the Company’s Board of
Directors;
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2. |
to
approve the Company’s 2006 Stock Incentive
Plan;
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3. |
to
ratify the appointment of Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for the fiscal year
ending
December 31, 2006; and
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4. |
to
transact such other business as may be properly brought before the
meeting
and any adjournment or postponement
thereof.
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The
Board
of Directors unanimously recommends that you vote FOR the election of all three
nominees as Class 1 Directors, FOR the approval of the 2006 Stock Incentive
Plan
and FOR the ratification of the appointment of Deloitte & Touche LLP as the
Company’s independent registered public accounting firm for the fiscal year
ending December 31, 2006.
Stockholders
of record at the close of business on April 10, 2006 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.
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By Order of the Board of
Directors, |
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/s/ Thomas J. Axon |
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THOMAS J. AXON |
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Chairman |
Jersey
City, New Jersey
May
1,
2006
FRANKLIN
CREDIT MANAGEMENT CORPORATION
101
Hudson Street
Jersey
City, New Jersey 07302
(201)
604-1800
PROXY
STATEMENT FOR
2006
Annual Meeting OF STOCKHOLDERS
To
Be Held May 24, 2006
General
Information
This
Proxy Statement and the enclosed form of proxy are being furnished, commencing
on or about May 1, 2006, 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 101 Hudson Street, 25th floor, Jersey City, New Jersey, at 10:00 A.M.,
Eastern Daylight Time, on Thursday, May 24, 2006, and at any adjournment or
postponement thereof, for the purposes set forth in the foregoing Notice of
2006
Annual Meeting of Stockholders.
The
annual report of the Company, containing financial statements of the Company
as
of December 31, 2005, and for the year then ended (the “Annual Report”), has
been delivered to you 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 Company’s offices on the 25th
floor of
101 Hudson Street, Jersey City, New Jersey. 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 three nominees named below under the caption “Election of Directors” to
Class 1 of the Board of Directors, (ii) FOR the approval of the Franklin Credit
Management Corporation 2006 Stock Incentive Plan (the “2006 Stock Incentive
Plan”), (iii) FOR the ratification of the appointment of Deloitte & Touche
LLP (“D&T”) as independent registered public accounting firm for the
Company’s fiscal year ending December 31, 2006, and (iv) 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 May 1, 2006.
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 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
Board
of Directors unanimously recommends that you vote FOR the election of the three
nominees named below under the caption “Election of Directors” to Class 1 of the
Board of Directors, FOR the approval of the 2006 Stock Incentive Plan and FOR
the ratification of the appointment of Deloitte & Touche LLP as the
Company’s independent registered public accounting firm for the fiscal year
ending December 31, 2006.
Voting
of Shares
The
holders of one-half 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. Brokers do not have discretionary
authority to vote on the proposal for approval of the 2006 Stock Incentive
Plan,
but do have discretionary authority to vote on all of the other 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 approval of the 2006 Stock Incentive Plan and ratification
of the appointment of the independent registered public accounting firm. On
these matters 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. Proxies solicited by the Board of Directors
will
be voted FOR the election of the three nominees named below under the caption
“Election of Directors” to Class 1 of the Board of Directors, FOR the approval
of the 2006 Stock Incentive Plan and FOR the ratification of the appointment
of
D&T as independent registered public accounting firm for the Company’s
fiscal year ending December 31, 2006, unless Stockholders specify otherwise.
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 10, 2006 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 10, 2006, there
were
outstanding 7,544,295 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.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
April
10,
2006, and the percentages of beneficial ownership by:
· |
each
person, group or entity known to the Company to beneficially own
more than
5% of the Company’s outstanding Common
Stock;
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· |
each
of the Company’s directors and named executive
officers;
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· |
all
of the Company’s directors and executive officers as a
group.
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The
amounts and percentages of Common Stock beneficially owned are reported on
the
basis of regulations of the Securities and Exchange Commission governing the
determination of beneficial ownership of securities. Under the rules of the
Securities and Exchange Commission, a person is deemed to be a “beneficial
owner” of a security if that person has or shares “voting power,” which includes
the power to vote or to direct the voting of that security, or “investment
power,” which includes the power to dispose of or to direct the disposition of
that security. A person is also deemed to be a beneficial owner of any security
as to which that person has a right to acquire beneficial ownership presently
or
within 60 days. Under these rules, more than one person may be deemed to be
a
beneficial owner to the same securities, and a person may be deemed to be the
beneficial owner of the same securities as to which that person has no economic
interest. Including those shares in the tables does not, however, constitute
an
admision that the named stockholder is a direct or indirect beneficial owner
of
those shares.
Name
and Address of
Beneficial
Owner (1)
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Number
of Shares
Beneficially
Owned
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Percentage
(%) of
Common
Stock Outstanding
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Thomas
J. Axon (2)
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3,373,619
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44.0
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%
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Michael
Bertash (3)
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19,000
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*
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Robert
M. Chiste (4)
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9,000
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*
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Frank
B. Evans, Jr. (5)
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872,425
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11.5
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%
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Alexander
Gordon Jardin (4)
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18,000
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*
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Steven
W. Lefkowitz (6)
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283,650
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3.7
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%
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Allan
R. Lyons (7)
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81,500
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1.1
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%
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William
F. Sullivan (8)
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70,700
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*
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Joseph
Caiazzo (9)
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219,050
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2.8
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%
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Paul
D. Colasono
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17,000
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*
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John
Devine (10)
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66,750
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*
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Jeffrey
R. Johnson (11)
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84,000
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1.1
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%
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All
Directors and Executive Officers
as
a group (11 persons) (12)
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5,065,694
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62.2
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%
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* Indicates
beneficial ownership of less than one (1%) percent.
(1) Unless
otherwise indicated the address of each beneficial owner identified is C/O
Franklin Credit Management Corporation, 101 Hudson Street, Jersey City, New
Jersey 07302.
(2) Includes
115,000 shares issuable upon exercise of options exercisable within sixty
days.
(3) Includes
19,000 shares issuable upon exercise of options exercisable within sixty
days.
(4) Includes
3,000 shares issuable upon exercise of options exercisable within sixty
days.
(5) Includes
5,000 shares beneficially owned by each of four minor children for which Mr.
Evans is the trustee. Includes 29,000 shares issuable upon exercise of options
exercisable within sixty days.
(6) Includes
87,000 shares issuable upon exercise of warrants exercisable within sixty days
and 34,000 shares issuable upon exercise of options exercisable within sixty
days. Includes 47,500 shares beneficially owned by Mr. Lefkowitz’s
wife.
(7) Includes
39,000 shares issuable upon exercise of options exercisable within sixty
days
(8) Includes
34,000 shares issuable upon exercise of options exercisable within sixty
days.
(9) Includes
150,000 shares issuable upon exercise of options exercisable within sixty
days.
(10) Includes
52,500 shares issuable upon exercise of options exercisable within sixty
days.
(11) Includes
60,000 restricted shares.
(12) Includes
513,500 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 during
2005 and 2006 prior to the date hereof, the Company believes that all Section
16(a) filing requirements applicable to its Officers, Directors and ten percent
stockholders were complied with except: Mr. Colasono belatedly filed one report
in connection with a single transaction.
PROPOSALS
The
Board
of Directors unanimously recommends that you vote FOR the election of the three
nominees named below under the caption “Election of Directors” to Class 1 of the
Board of Directors, FOR the approval of the 2006 Stock Incentive Plan and FOR
the ratification of the appointment of Deloitte & Touche LLP as the
Company’s independent registered public accounting firm for the fiscal year
ending December 31, 2006.
PROPOSAL
1 - ELECTION OF DIRECTORS
Nominees
for Election
The
Board
of Directors is divided into three classes. Each class is elected in a different
year for a term of three years, except to the extent that shorter terms may
be
required to effect an appropriate balance among the classes in the event of
an
increase in the number of Directors or to the extent any class of preferred
stock issued in the future entities the holders thereof to designate a director
or directors with a longer or shorter term. It is proposed to elect three
Directors to Class 1 of the Board of Directors, each for a term of three years.
Each of the nominees named below is currently a member of the Board of
Directors.
As
previously announced, on January 21, 2006, Jeffrey R. Johnson resigned from
his
positions as our President and Chief Executive Officer and as a member of
our Board of Directors. Following Mr. Johnson's resignation, the
Board of Directors reduced its size from nine to eight members, as permitted
by
our Certificate of Incorporation and Bylaws.
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.
Proxies cannot be voted for a greater number
of
persons than
the
number
of
nominees named.
The
Board of Directors unanimously recommends a vote FOR the election of each of
Robert M. Chiste, Alexander Gordon Jardin and William F. Sullivan as a Class
1
Director to hold office until the 2009 annual meeting of stockholders and until
each of their respective successors is elected.
Director
Nominee Information
Nominees
for Class 1 Directors with Terms Expiring in 2009
Robert
M.
Chiste, 59, was elected a Director of the Company in 2005, and also served
as a
member of the Board of Directors from 1994 until 2001. Mr. Chiste has served
as
Chairman, President and Chief Executive Officer of Comverge, Inc., a venture
funded company in the utility solutions business, since October 2001. Since
September 1999, Mr. Chiste has served as Chairman of FuelQuest, Inc., a
business-to-business e-commerce enterprise in the fuels and lubricant industry.
Since July 1998, Mr. Chiste has served as Chairman of TriActive, Inc., a network
and systems management company. From March 2000 until October 2001, Mr. Chiste
was a private investor. Mr. Chiste holds a Bachelor of Science with honors
in
mathematics from The College of New Jersey (formerly known as Trenton State
College), a J.D. degree cum laude from Rutgers University School of Law and
a
Master of Business Administration degree cum laude from Rutgers University
School of Management.
Alexander
Gordon Jardin, 53, was elected a Director of the Company in 2005. Mr. Jardin
has
served as Chief Executive Officer of the Company since April 26, 2006. From
April 2004 until March 2006, Mr. Jardin acted as a consultant assisting the
development of start-up life and health insurance companies. From October 2000
until April 2004, Mr. Jardin served as President and Chief Operating Officer
of
Generali USA Life Reinsurance Company and Senior Vice President, Reinsurance
of
Business Men’s Assurance, both wholly-owned subsidiaries of Assicurazioni
Generali S.p.A., a leading international insurer, and the successor of Business
Men’s Assurance. From July 1993 until August 2000, Mr. Jardin was President and
Chief Executive Officer of Partner Re Life Insurance Company of the U.S.
(previously known as Winterthur Life Re Insurance Company), the U.S. life
reinsurance subsidiary of Partner Re and a leading provider of multi-line
reinsurance on a global scale with principal offices in Bermuda, Greenwich,
Paris and Zurich. From 1986 until 1993, Mr. Jardin was Vice President and
General Manager, Reinsurance of Sun Life of Canada. Mr. Jardin holds a Bachelor
of Science degree from McGill University.
William
F. Sullivan, 56, was elected a Director of the Company in 1996. Mr. Sullivan
served as the Company’s General Counsel from February 2006 until April 2006.
From July 2004 until February 2006, Mr. Sullivan was the sole proprietor of
the
Law Office of William F. Sullivan. From 1985 until June 2004, Mr. Sullivan
was a
Partner at Marnik & Sullivan, a general practice law firm. Mr. Sullivan 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 degree in Political Science from the University of
Massachusetts.
Class
2 Directors with Terms Expiring in 2007
Michael
Bertash, 53, was elected a Director of the Company in 1998. Mr. Bertash has
served as Chief Executive Officer of New York Capital Advisers, LLC, an
investment management firm, since August 2004. From February 1997 until July
2004, Mr. Bertash served as a Senior Vice President with J. & W. Seligman
&. Co., an investment management firm. Mr. Bertash was an Associate Director
of the asset management division of Bear, Stearns & Co., Inc., a worldwide
investment bank and brokerage firm, from October 1991 until January 1997. Mr.
Bertash holds a Bachelor of Science degree in Operations Research from Syracuse
University and a Master of Business Administration degree from New York
University.
Frank
B.
Evans, Jr., 54, was elected a Director of the Company in 1994. Mr. Evans
co-founded Franklin Credit Management Corporation and served as the Company’s
Vice President, Treasurer, Secretary and Chief Financial Officer from December
1994 until November 1998. Mr. Evans also served as the Company’s Secretary,
Treasurer, a Vice President and a member of the Company’s Board of Directors
from its inception in 1990 until the Company’s merger with Miramar Resources,
Inc. in December 1994. Mr. Evans has served as Chief Executive Officer of Core
Engineered Solutions, Inc., a Herndon, Virginia design/build firm that
specializes in fuel and chemical storage systems, since its inception in 1990.
Mr. Evans is a Certified Public Accountant and holds a Bachelor of Science
degree from the University of Maryland and a Masters in Business Administration
degree from the University of Southern California.
Steven
W.
Lefkowitz, 50, was elected a Director of the Company in 1996. Mr. 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 several private companies. Mr. Lefkowitz holds a Bachelor of Arts
degree in History from Dartmouth College and a Masters in Business
Administration degree from Columbia University.
Class
3 Directors with Terms Expiring in 2008
Thomas
J.
Axon, 53, was elected a Director of the Company in 1988. Mr. Axon has served
as
Chairman of the Company’s Board of Directors since December 1994, has served as
President of the Company since January 2006, served as the Company’s Chief
Executive Officer from January 2006 until April 2006, and served as the
Company’s Chief Executive Officer and President from December 1994 through June
2000. Mr. Axon also served as the Company’s President and a member of the
Company’s Board of Directors from the Company’s inception in 1990 until the
Company’s merger with Miramar Resources, Inc. in December 1994. Mr. Axon served
as President of Miramar Resources, Inc. from October 1991 until the merger,
and
as a member of Miramar Resources, Inc.’s Board of Directors from its inception
in 1988. Within the last five years, Mr. Axon has been the controlling interest
in, and acted directly and indirectly as a principal of, various private
companies, including RMTS, LLC, and its affiliated companies, an insurance
consulting and underwriting company; Axon Associates, Inc., Harrison Street
Realty Corporation, and its predecessors, 185 Franklin Street Development
Associates, L.P., Harrison Street Development Associates, L.P. and Thomas James
Realty, which hold various real estate interests and/or manage rental commercial
space; and AIS Ltd., a reinsurance company. Mr. Axon holds a Bachelor of Arts
degree in Economics from Franklin and Marshall College and attended the New
York
University Graduate School of Business.
Allan
R.
Lyons, 65, was elected a Director of the Company in 1995. Mr. Lyons is a
Certified Public Accountant and owns 21st
Century
Strategic Investment Planning, LC, a Florida limited company, which offers
financial planning and investment structuring services and reviews financial
opportunities and private placements. Mr. Lyons also acts as a general partner
for two venture capital partnerships and as money manager for select clients.
From 1993 until his retirement in December 1999, Mr. Lyons was Chief Executive
Officer of Piaker & Lyons, P.C., an accounting firm, of which he was a
member from 1965 until December 1999. Mr. Lyons has served as a director of
Source Interlink Companies, Inc. since March 2003 and is the chair of its audit
committee. Mr. Lyons holds a Bachelor of Science degree in Accounting from
Harpur College and a Masters of Business Administration degree from Ohio State
University.
No
familial relationships exist between any Directors and Executive
Officers.
Meetings
of the Board of Directors and its Committees
During
2005, there were five meetings of the Board of Directors of the Company, four
meetings of the Audit Committee, three meetings of the Compensation Committee
and two meetings of the Nominating and Corporate Governance 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.
Director
Attendance at Annual Meetings
Each
director of the Company is expected to be present at annual meetings of
stockholders, absent exigent circumstances that prevent his or her attendance.
Where a director is unable to attend an annual meeting in person but is able
to
do so by electronic conferencing, the Company will arrange for the director’s
participation by means of which the director can hear, and be heard, by those
present at the meeting. At last year’s annual meeting, all of the Company’s
directors attended in person.
Compensation
of Directors
During
fiscal year 2005, the Company’s non-management directors, Messrs. Bertash,
Chiste, Evans, Jardin, Lefkowitz, Lyons and Sullivan, were granted options
to
purchase 3,000 shares of Common Stock pursuant to the Company’s 1996 Stock
Incentive Plan, as amended (the “1996 Plan”), upon their election or re-election
to the Board, and received $1,000 for each Board or Committee meeting attended
in person and $500 for each Board or Committee meeting attended telephonically.
The options were vested on the date of grant and are exercisable at an exercise
price equal to the fair market value of the underlying shares on the date of
grant as determined by the Board of Directors.
In
April
2005, the Compensation Committee recommended and the Board of Directors approved
the following director compensation program, which replaces in its entirety
the
Company’s previous director compensation program:
· |
Each
non-employee director will receive an annual retainer fee of $20,000
for
serving on the Board.
|
· |
Each
non-employee director who serves as Chairman of the Board or Chairman
of
the Audit Committee will receive an additional retainer fee of $10,000
for
such service.
|
· |
Each
non-employee director will receive $500 for each meeting of the Board
of
Directors, the Compensation Committee and the Nominating and Corporate
Governance Committee attended in person and $250 for each such meeting
attended telephonically.
|
· |
Each
non-employee director will receive $1,000 for each meeting of the
Audit
Committee attended in person and $500 for each such meeting attended
telephonically.
|
· |
Each
non-employee director will be reimbursed for reasonable travel expenses
incurred in connection with serving on the
Board.
|
· |
Each
non-employee director will be granted an option to purchase 3,000
shares
of Common Stock of the Company pursuant to the Company’s 1996 Stock
Incentive Plan, as amended, upon such director’s election or re-election
to the Board and, for each year that such director serves during
such
director’s term on the Board, upon the anniversary of such director’s
election or re-election to the Board. The options will vest on the
date of
grant and will be exercisable at an exercise price equal to the fair
market value of the underlying shares of Common Stock on the date
of
grant.
|
Directors
who are also employees of the Company do not receive any additional compensation
for their service as directors and are compensated as described under “Executive
Compensation.” The Company’s non-employee Directors during fiscal 2005 included
Messrs. Bertash, Chiste, Evans, Jardin, Lefkowitz, Lyons and
Sullivan.
Committees
of the Board of Directors
The
Board
of Directors currently has, and appoints the members of, standing Audit,
Compensation and Nominating and Corporate Governance Committees. The Board
of
Directors has determined that each member of the Audit, Compensation and
Nominating and Corporate Governance Committees is an Independent Director as
such term is defined by Rule 4200(a)(15) of NASD Marketplace Rules. Each of
these committees has a written charter approved by the Board of the Directors
in
January 2005. A copy of each charter is posted on the Company’s website at
www.franklincredit.com.
Audit
Committee. The
Audit
Committee currently consists of directors Allan R. Lyons, Michael Bertash and
Steven W. Lefkowitz. During 2005, the Audit Committee consisted of Mr. Lyons,
Mr. Bertash and Alexander Gordon Jardin and held four meetings. Mr. Jardin
resigned from the Audit Committee in March 2006 upon becoming employed by the
Company. The Board of Directors has determined that each member of the Audit
Committee is independent as such term is defined by Rule 4200(a)(15) of the
NASD
Marketplace Rules, and that Mr. Lyons is an “audit committee financial expert”
as defined by Regulation S-K under the Securities Act of 1933, as amended.
The
purpose of the Audit Committee is to assist the Board of Directors in the
oversight of the integrity of the financial statements of the Company, the
Company’s compliance with legal and regulatory matters, the independent
registered public accounting firm’s qualifications and independence, and the
performance of the Company’s independent registered public accounting firm. The
primary responsibilites of the Audit Committee include the
following:
· |
Overseeing
the Company’s accounting and financial reporting process and audits of the
Company’s financial statements on behalf of the Company’s Board of
Directors.
|
· |
Selecting
the independent registered public accounting firm to conduct the
annual
audit of the Company’s financial
statements.
|
· |
Evaluating
the qualifications, independence and performance of the Company’s
independent auditors.
|
· |
Reviewing
the proposed scope of the annual audit of the Company’s financial
statements.
|
· |
Reviewing
the Company’s accounting and financial controls with the independent
registered public accounting firm and the Company’s finanical accounting
staff.
|
· |
Preparing
the report required by the rules of the SEC to be included in the
Company’s annual proxy statement.
|
Compensation
Committee. The
Compensation Committee currently consists of directors Steven W. Lefkowitz,
Robert M. Chiste and Frank B. Evans. During 2005, the Compensation Committee
also included Alexander Gordon Jardin, who resigned from the Compensation
Committee in March 2006 upon becoming employed by the Company. During 2005,
the
Compensation Committee held three meetings. The Board of Directors has
determined that each member of the Compensation Committee is independent as
such
term is defined by Rule 4200(a)(15) of the NASD Marketplace Rules. The
responsibilities of the Compensation Committee include the
following:
· |
Reviewing
and approving the compensation and benefits for the Company’s executive
officers.
|
· |
Administering
the Company’s stock plans.
|
· |
Making
recommendations to the Company’s Board of Directors regarding these
matters.
|
Nominating
and Corporate Governance Committee.
The
Nominating and Corporate Governance Committee currently consists of Allan R.
Lyons and Michael Bertash. During 2005, the Nominating and Corporate Governance
Committee consisted of Allan R. Lyons, Michael Bertash and William F. Sullivan
and held two meetings. Mr. Sullivan resigned from the Nominating and Coporate
Governance Committee in February 2006 upon his appointment as General Counsel
of
the Company. As a result of Mr. Sullivan's resignation, there were only two
directors left on the Nominating and Corporate Governance Committee, which
is
less than the three directors required by the Committee's charter. Accordingly,
the independent members of the Board of Directors recommended the slate of
nominees to stand for election as directors at the Annual Meeting. The Board
of
Directors has determined that each member of the Nominating and Corporate
Governance Committee is independent as such term is defined by Rule 4200(a)(15)
of the NASD Marketplace Rules. The responsibilities of the Nominating and
Corporate Governance Committee include the following:
· |
Searching
for and recommending to the Board of Directors potential nominees
for
Director positions.
|
· |
Making
recommendations to the Board of Directors regarding the size and
composition of the Board of Directors and its
committees.
|
· |
Monitoring
the Board of Directors
effectiveness.
|
· |
Developing
and implementing the Company’s corporate governance procedures and
policies.
|
A
copy of
the Nominating and Corporate Governance Committee charter is available on the
Company’s website at www.franklincredit.com.
The
Board of Directors has determined that all of the members of the Nominating
and
Corporate Governance Committee are independent as such term is defined by Rule
4200(a)(15) of the NASD Marketplace Rules.
In
identifying and evaluating candidates for the Board of Directors, the Nominating
and Corporate Governance Committee begins by determining whether the incumbent
directors whose terms expire at the annual meeting of stockholders desire and
are qualified to continue their service on the Board of Directors. The Company
is of the view that the continuing service of qualified incumbents promotes
stability and continuity in the board room, giving the Company the benefit
of
the familiarity and insight into the Company’s affairs that its directors have
accumulated during their tenure, while contributing to the Board of Director’s
ability to work as a collective body. Accordingly, the Nominating and Corporate
Governance Committee will, absent special circumstances, propose for re-election
qualified incumbent directors who continue to satisfy the Nominating Committee’s
criteria for membership on the Board of Directors, whom the Nominating Committee
believes will continue to make important contributions to the Board of Directors
and who consent to stand for re-election and, if re-elected, to continue their
service on the Board of Directors. If there are positions on the Board of
Directors for which the Nominating Committee will not be re-nominating an
incumbent director, or if there is a vacancy on the Board of Directors, the
Nominating and Corporate Governance Committee will consider potential nominees
recommended by members of the Board of Directors, the management of the Company
and stockholders. The Nominating and Corporate Governance Committee may also
engage a professional search firm to assist in the identification of qualified
candidates, but did not do so in 2005. As to each recommended candidate that
the
Nominating and Corporate Governance Committee believes merits serious
consideration, the Committee will collect as much information, including without
limitation, soliciting views from other directors and the Company’s management
and having one or more Committee members interview each such candidate,
regarding each candidate as it deems necessary or appropriate in order to make
an informed decision with respect to such candidate. Based on all available
information and relevant considerations, the Nominating and Corporate Governance
Committee will select, for each directorship to be filled, a candidate who,
in
the view of the Committee, is most suited for membership on the Board of
Directors. In making its selection, the Nominating and Corporate Governance
Committee will evaluate candidates proposed by stockholders under criteria
similar to the evaluation of other candidates, except that the Committee may
consider, as one of the factors in its evaluation of stockholder recommended
nominees, the size and duration of the interest of the recommending stockholder
or stockholder group in the equity of the Company. This consideration may also
include how long the recommending stockholder intends to continue holding its
equity interest in the Company.
The
Nominating and Corporate Governance Committee has adopted a policy with regard
to the minimum qualifications that must be met by a Committee-recommended
nominee for a position on the Company’s Board of Directors, which policy is
described in this paragraph. The Committee generally requires that all
candidates for the Board of Directors be committed to representing the Company
and all of its stockholders, demonstrate the judgment and knowledge necessary
to
assess Company strategy and management, manifest willingness to meaningfully
participate in the governance of the Company, possess the ability to fulfill
the
legal and fiduciary responsibilities of a director, undertake to make the
appropriate time commitment for Board service, and maintain standing and
reputation in the business, professional and social communities in which such
candidate operates. The Committee requires that candidates not have any
interests that would, in the view of the Committee, materially impair his or
her
ability to exercise independent judgment or otherwise discharge the fiduciary
duties owed as a director to the Company and its stockholders. The Company
also
requires that at least a majority of the directors serving at any time are
independent, as such term is defined by Rule 4200(a)(15) of the NASD Marketplace
Rules, that at least three of the directors satisfy the financial literacy
requirements required for service on the Audit Committee under the NASD
Marketplace Rules and the Audit Committee charter, and that at least one of
the
directors qualifies as an audit committee financial expert in accordance with
the rules of the Commission and the Audit Committee charter.
It
is the
policy of the Company that the Nominating and Corporate Governance Committee
will consider director candidates recommended by stockholders entitled to vote
generally in the election of directors. The Committee will give consideration
to
such stockholder recommendations for positions on the Board where the Committee
has not determined to re-nominate a qualified incumbent director. While the
Committee has not established a minimum number of shares that a stockholder
must
own in order to present a nominating recommendation for consideration, or a
minimum length of time during which the stockholder must own its shares, the
Committee may take into account the size and duration of a recommending
stockholder’s ownership interest in the Company. The Nominating Committee may
also consider whether the stockholder making the nominating recommendation
intends to maintain an ownership interest in the Company of substantially the
same size as at its interest at the time of making the recommendation. The
Committee may refuse to consider stockholder-recommended candidates who do
not
satisfy the minimum qualifications prescribed by the Committee for board
candidates.
The
Nominating and Corporate Governance Committee has adopted procedures to be
followed by stockholders in submitting recommendations of candidates for
director. The procedures are posted on the Company’s website at
www.franklincredit.com, and are described in this paragraph. A stockholder
(or
group of stockholders) wishing to submit a recommendation of a candidate for
consideration as a potential director nominee by the Nominating and Corporate
Governance Committee should submit such recommendation in accordance with the
timing requirements set forth in connection with the submission of a
stockholder’s notice of an intent to make a nomination under Article I, Section
11 of the Company’s By-laws. All stockholder nominating recommendations should
be in writing, addressed to the Chair of the Nominating and Corporate Governance
Committee, Six Harrison Street, New York, New York 10013. Submissions should
be
made by mail, courier or personal delivery. A nominating recommendation should
be accompanied by the information that is required to be provided in connection
with the submission of a stockholder’s notice of an intent to make a nomination
under Article I, Section 11 of the Company’s By-laws, a copy of which is posted
on the Company’s website at www.franklincredit.com.
Stockholder
Communications with the Board of Directors
Stockholders
may send communications to the Board of Directors, any committee of the Board
of
Directors or the non-management directors of the Board of Directors. The process
for sending such communications can be found on the Company’s website at
www.franklincredit.com. All stockholder communications are sent directly to
board members, except for communications that contain offensive, scurrilous
or
abusive content, communications that advocate the Company’s engaging in illegal
activities, communications that have no rational relevance to the business
or
operations of the Company, and communications regarding individual grievances
or
other interests that are personal to the party submitting the communication
and
could not reasonably be construed to be of concern to security holders or other
constituencies of the Company generally.
Code
of Ethics
The
Company has adopted a code of ethics and business conduct that applies to its
officers, directors and employees, including without limitations, the Company’s
Chief Executive Officer, President and Chief Financial Officer. The Code of
Ethics and Business Conduct is available on the Company’s website at
www.franklincredit.com.
Audit
Committee Report
The
following Report of the Audit Committee does not constitute soliciting material
and is not filed or deemed to be incorporated by reference in any previous
or
future documents filed by the Company with the Securities and Exchange
Commission under the Securities Act of 1933 or the Securities Exchange Act
of
1934, except to the extent the Company specifically incorporates the Report
by
reference in any such document.
The
members of the Audit Committee have been appointed by the Board of Directors.
During the 2005 fiscal year, the Audit Committee consisted solely of independent
directors, as such term is defined by Rule 4200(a)(15) of the NASD Marketplace
Rules. The Audit Committee operates under a written charter that was adopted
by
the Board of Directors in January 2005 in order to assure continued compliance
by the Company with SEC and NASDAQ rules and regulations enacted in response
to
requirements of the Sarbanes-Oxley Act of 2002.
The
Audit
Committee assists the Board of Directors in monitoring the integrity of the
Company’s financial statements, the independent registered public accounting
firm’s qualifications and independence, the performance of the independent
registered public accounting firm, and the compliance by the Company with legal
and regulatory requirements. Management is responsible for the Company’s
internal controls and the financial reporting process. The independent
registered public accounting firm is responsible for performing an independent
audit of the Company’s financial statements in accordance with generally
accepted auditing standards and for issuing a report on those financial
statements. The Audit Committee monitors and oversees these
processes.
In
this
context, the Audit Committee has reviewed and discussed the audited financial
statements for the year ended December 31, 2005 with management and with
Deloitte & Touche LLP, the Company’s independent registered public
accounting firm. The Audit Committee has discussed with Deloitte & Touche
LLP the matters required to be discussed by Statement on Auditing Standards
No.
61 (Communications with Audit Committees), which includes, among other items,
matters related to the conduct of the audit of the Company’s annual financial
statements.
The
Audit
Committee has also received the written disclosures and the letter from Deloitte
& Touche LLP required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and has discussed with Deloitte
& Touche LLP the issue of their independence from the Company and
management. In addition, the Audit Committee has considered whether the
provision of non-audit services by the independent registered public accounting
firm in 2005 is compatible with maintaining the auditors’ independence and has
concluded that it is.
Based
on
its review of the audited financial statements and the various discussions
noted
above, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2005. The Audit Committee has also
appointed, subject to stockholder ratification, the Company’s independent
registered public accounting firm for the year ending December 31,
2006.
The
members of the Audit Committee are Allan R. Lyons, Michael Bertash and Steven
W.
Lefkowitz, none of whom is or, during the fiscal year 2005, was, an employee
of
the Company. Alexander Gordon Jardin was a member of the Audit Committee in
2005
and until he became employed by the Company in March 2006, at which point he
resigned from the Audit Committee. Mr. Lefkowitz was appointed to the Audit
Committee in March 2006 and did not participate in the Audit Committee’s
deliberations in 2005.
Respectfully
submitted by the Audit Committee,
Allan
R.
Lyons, Chairman
Michael
Bertash
Steven
W.
Lefkowitz
MANAGEMENT
Executive
Officers
The
following table sets forth certain information with respect to the executive
officers of the Company:
Name
|
Age
|
Position
|
Thomas
J. Axon (1)
|
53
|
President
and Chairman of the Board of Directors
|
Alexander
Gordon Jardin (2)
|
53
|
Chief
Executive Officer
|
Paul
D. Colasono (3)
|
59
|
Chief
Financial Officer and Executive Vice President
|
Joseph
Caiazzo
|
48
|
Executive
Vice President and Secretary
|
John
Devine
|
37
|
Vice
President - Credit/Acquisitions
|
Kimberly
Shaw
|
44
|
Vice
President - Finance, Treasurer and Controller
|
|
|
|
(1) Thomas
J. Axon became President in January 2006, and served as Chief Executive
Officer from January 21, 2006 until April 26, 2006.
(2) Alexander
Gordon Jardin became Chief Executive Officer on April 26,
2006.
(3) Paul
D. Colasono became Chief Financial Officer in April
2005.
|
Paul
D.
Colasono has served as the Company’s Chief Financial Officer and Executive Vice
President since April 2005. Mr. Colasono has more than 30 years of experience
in
banking and mortgage banking in a broad range of senior management positions.
From 2003 until his engagement by the Company, Mr. Colasono served as an
independent business consultant providing strategic and financial consulting
services. From September 1997 until September 2001, Mr. Colasono served as
Vice
President and Controller of GE Capital Mortgage Services Corporation. From
February 1981 until September 1997, Mr. Colasono was employed by The Dime
Savings Bank of New York in a variety of executive and senior management
positions. From April 1994 until September 1997, Mr. Colasono held the titles
of
Senior Vice President, Chief Administrative Officer and Chief Financial Officer
of Dime Bank’s mortgage banking business. From November 1990 until April 1994,
Mr. Colasono served as the President and Chief Executive Officer of The Dime
Savings Bank of New Jersey, a subsidiary of Dime Bank. Mr. Colasono began his
career with The Chase Manhattan Bank. Mr. Colasono holds a Bachelor of Science
degree in Accounting and a Masters of Business Administration from St. John’s
University.
Joseph
Caiazzo has served as the Company’s Executive Vice President since September
2004 and as the Company’s Secretary since March 1996. From March 1996 until
August 2004, Mr. Caiazzo served as the Company’s Vice President and Chief
Operating Officer. Mr. Caiazzo has also served as President of the Company’s
mortgage banking subsidiary, Tribeca Lending Corporation since 1997. From August
1989 until March 1996, Mr. Caiazzo served as corporate controller of R.C.
Dolner, Inc., a general contractor. Mr. Caiazzo holds a Bachelor of Science
degree from St. Francis College and a Masters of Business Administration degree
in Finance from Long Island University.
John
Devine has served as the Company’s Vice President - Credit/Acquisitions since
April 2000. From September 1997 until April 2000, Mr. Devine served as Vice
President and Operations Manager of Tribeca Lending Corporation. From September
1989 until August 1997, Mr. Devine served as the Company’s Vice President,
Operations. Mr. Devine holds a Bachelor of Science Degree in Business Management
from The City University of New York - The College of Staten
Island.
Kimberly
Shaw has served as the Company’s Vice President - Finance since April 2002, as
the Company’s Treasurer since November 2004 and as the Company’s corporate
controller since September 1998. Ms. Shaw is a Certified Public Accountant
and
holds a Bachelor of Science Degree in Business Management from Ramapo College
of
New Jersey.
Executive
Compensation
The
following table sets forth the total compensation paid or accrued for the years
ended December 31, 2005, 2004 and 2003, for each person who acted as the
Company’s Chief Executive Officer at any time during the year ended December 31,
2005, and its four most highly compensated executive officers, other than its
Chief Executive Officer, whose salary and bonus for the fiscal year ended
December 31, 2005 in excess of $100,000 each (collectively, the “Named Executive
Officers”).
Name
and Principal Position
|
Fiscal
Year
|
Annual
Compensation
|
Long-Term
Compensation Awards
|
All
Other Compensation ($)
|
Salary
($)
|
Bonus
($)
(1)
|
Other
Annual Compensation ($)
|
Restricted
Stock Award(s) ($)
|
Securities
Underlying Options/SARs (#)
|
Thomas
Axon
Chairman,
Chief Executive Officer and President (2)
|
2005
2004
2003
|
150,000
150,000
150,000
|
150,000
290,000
151,544
|
-
-
-
|
-
-
-
|
|
3,150(3)
3,075(3)
1,844(3)
|
Jeffrey
R. Johnson
President
and Chief Executive Officer (4)
|
2005
2004
|
325,000
81,250
|
-
90,000
|
-
593,696(5)
|
-
1,100,000(8)
|
-
-
|
285,650(7)
|
Joseph
Caiazzo
Executive
Vice President and Secretary
|
2005
2004
2003
|
229,466
224,167
200,000
|
120,000
140,000
151,544
|
|
|
|
3,150(3)
3,075(3)
2,848(3)
|
Paul
D. Colasono
Chief
Financial Officer (6)
|
2005
2004
2003
|
|
175,000
|
-
-
|
218,451
-
-
|
|
2,870(3)
-
-
|
John
Devine
Vice
President - Credit/Acquisitions
|
2005
2004
2003
|
125,000
115,000
100,000
|
125,000
85,000
43,298
|
- - -
|
|
|
1,875(3)
1,725(3)
1,481(3)
|
(1) |
Represents
performance-based bonus earned for fiscal year 2005, 2004 and
2003.
|
(2) |
Thomas
J. Axon served in 2005, and continues to serve as the Company’s Chairman.
Since January 21, 2006, he has also served as the Company’s President.
From January 21, 2006 until April 26, 2006 he served as the Company’s
Chief Executive Officer.
|
(3) |
Represents
employer-match contributions under the Company’s 401(k)
plan.
|
(4) |
Jeffrey
R. Johnson served as President and Chief Executive Officer of the
Company
until January 21, 2006.
|
(5) |
Includes
$557,295 representing reimbursement for tax liability in respect
of a
restricted stock award, $9,800 representing relocation expenses,
$5,304
representing a car allowance, $1,697 representing medical insurance
and
$19,600 representing the dollar difference between the price paid
to the
Company by Mr. Johnson for 20,000 shares of the Common Stock and
the fair
market value of such security at the date of
purchase.
|
(6) |
Paul
D. Colasono has served as Executive Vice President and Chief Financial
Officer of the Company since April 8,
2005.
|
(7) |
Represents
amounts paid in connection with Mr. Johnson’s separation from the
Company.
|
(8) |
In
connection with his January 2006 separation from the Company, Mr.
Johnson
surrendered 40,000 unvested shares of restricted stock, which represents
$440,000 of this $1,100,000 amount.
|
Stock
Option Grants in Fiscal 2005
The
following table sets forth individual stock options granted to the Named
Executive Officers in fiscal 2005 :
Individual
Grants
|
Potential
Realizable Value at Assumed Annual Rates of Stock Price
Appreciation for Options Term
|
Name
|
Number
Of Securities Underlying Option Granted (#)
|
Percent
Of Total Options Granted To Employees In Fiscal
Year
|
Exercise
Price ($/Sh)
|
Expiration
Date
|
5%
($)
|
10%
($)
|
0%
($)
|
John
Devine
|
5,000
(1)
|
4.69%
|
$13.75
|
4/01/15
|
$111,986
|
$178,320
|
-
|
(1)
Represents options to purchase shares of Common Stock granted on April 1, 2005,
which will vest 50% each year.
Aggregated
Options/SAR Exercises in Fiscal 2005 and Fiscal Year-End Options/SAR Values
The
following table sets forth the aggregate value, realized gain, and number of
options exercised by the Named Executive Officers.
Name
|
Shares
Acquired On Exercise (#)
|
Value
Realized ($)
|
Number
of Securities Underlying Unexercised Options at Fiscal Year-End
(#)
|
Value
of Unexercised In-The-Money Options at Fiscal Year-End (1)
($)
|
|
|
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
Joseph
Caiazzo
|
-
|
-
|
150,000
|
-
|
1,218,900
|
-
|
Thomas
Axon
|
-
|
-
|
115,000
|
-
|
971,750
|
-
|
John
Devine
|
-
|
-
|
52,500
|
5,000(2)
|
437,550
|
-
|
(1)
Values are based on the closing bid price of the Common Stock on December
31,
2005 of $9.20. The value of unexercised stock options at December 31, 2005
is
presented to comply with SEC regulations. The actual amount realized upon
any
exercise of stock options will depend upon the excess of the fair market
value
of the Common Stock over the grant price at the time the stock option is
exercised. There is no assurance that values of unexercised stock options
reflected in this table will be realized.
(2)
Represents options with an exercise price of $13.75.
Equity
Compensation Plans
The
following table summarizes information, as of December 31, 2005, relating to
equity compensation plans of the Company pursuant to which grants of options,
restricted stock, restricted stock units or other rights to acquire shares
may
be granted from time to time.
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
Column
(a)
|
Weighted-average
exercise price of outstanding options, warrants and
rights
Column
(b)
|
Number
of securities
remaining
available for future issuance under equity compensation
plans
(excluding
securities
reflected
in column (a))
Column
(c)
|
Equity
Compensation Plans Approved by Stockholders (1)
|
667,500
|
$2.88
|
731,500
|
Equity
Compensation Plans Not Approved by Stockholders (2)
|
91,000
|
-
|
-
|
Total
|
758,500
|
$2.88
|
731,500
|
(1) The Company’s 1996 Stock Incentive Plan, as
amended.
(2)
Includes: (a) October 2004 grant of 100,000
shares of restricted stock to Jeffrey R. Johnson as compensation, of which
30,000 vested during 2005 and another 30,000 vested immediately in connection
with Mr. Johnson’s January 2006 separation from the Company; (b). April 2005
grant of 17,000 shares of restricted stock to Paul Colasano as compensation,
of
which 2,000 vested immediately and 5,000 shall vest on the 28th day of March
2006, 2007 and 2008, so long as Mr. Colasono remains in the employ of the
Company; and (c) April 2005 grant of 14,000 shares of restricted stock to two
individuals as compensation, of which 2,000 vested immediately and 4,000 shall
vest on the 14th day of April 2006, 2007 and 2008, so long as they remain in
the
employ of the Company. Since these shares of restricted stock have no exercise
price, they are not included in the weighted average exercise price
calculation.
Employment
Agreements.
Alexander
Gordon Jardin serves as Chief Executive Officer of the Company under an
employment agreement that was entered into on April 26, 2006, with an effective
date of March 1, 2006. Mr. Jardin’s appointment as Chief Executive Officer was
effective as of April 26, 2006.
Mr.
Jardin’s employment term runs for five years from the effective date of the
employment agreement, or until its earlier termination by the Company or Mr.
Jardin.
Under
the
employment agreement, Mr. Jardin is entitled to a base salary of $325,000,
subject to adjustment upward by the Board of Directors. Mr. Jardin’s target
bonus in respect of 2006 will be 2.5% of net income. His actual bonus for the
year will be subject to the reasonable discretion of the Board of Directors.
Mr.
Jardin’s bonus each year will be determined and paid on or before May
1st
of the
following year. Mr. Jardin will also receive a signing bonus of $25,000 and
a
car allowance of $1,000 per month. In connection with his employment, the
Company will grant to Mr. Jardin fully-vested non-qualified options under the
Company’s 1996 Stock Incentive Plan to purchase 20,000 shares of the Company’s
common stock, exercisable until April 1, 2007, with an exercise price equal
to
the market price of the shares on the date of approval of the
grant.
Following
approval at the Company’s 2006 annual meeting of a new incentive compensation
plan, and registration under the Securities Act of 1933, as amended, of the
shares issuable under such plan, Mr. Jardin shall be entitled to a restricted
stock grant of 100,000 shares of Company common stock. Of such shares, 10,000
will be vested upon grant, 5,000 will vest on the first day after each fiscal
quarter from July 1, 2006 until April 1, 2008 and 6,250 shares will vest on
the
first day after each fiscal quarter from July 1, 2009 until April 1, 2010;
so
long as Mr. Jardin remains in the employ of the Company. Any unvested shares
will vest immediately upon a change in control of the Company (as defined in
the
employment agreement). Mr. Jardin will make an 83(b) election with respect
to
the restricted shares and the Company will reimburse him on a grossed up basis
for any taxes due from having made such election.
To
assist
with Mr. Jardin’s relocation to the New York City metropolitan area, the Company
agreed, among other things, to pay or reimburse certain costs associated with
such relocation and to gross up the amount of such payments or reimbursements
by
the amount of any taxes due thereafter.
Pursuant
to the employment agreement, the Company may terminate Mr. Jardin's employment
with or without cause (as defined in the employment agreement) and Mr. Jardin
may terminate it with or without good reason (as defined in the employment
agreement).
In
the
event (i) Mr. Jardin is terminated by the Company without cause, (ii) Mr. Jardin
terminates his employment for good reason, (iii) following a change of control
Mr. Jardin terminates his employment or the Company terminates his employment
other than for cause, or (iv) Mr. Jardin’s employment terminates as a result of
his death or disability (as defined in the employment agreement), Mr. Jardin
will be entitled to severance, including a lump sum payment of $225,000; plus
$13,542 for each month or partial month of employment thereafter prior to
termination, provided that the total amount paid shall not exceed twelve months
of his annual salary as of the date of such termination and employee benefits;
and a prorated bonus. In addition, if such termination is by Mr. Jardin for
good
reason, or is because of Mr. Jardin’s death or disability, the unvested portion
of his restricted stock grant, if any, will immediately vest.
Paul
D.
Colasono serves as Chief Financial Officer and Executive Vice President of
the
Company under an employment agreement that was entered into on April 13, 2005,
with an effective date of April 10, 2005. Mr. Colasono was appointed to the
position of Chief Financial Officer, effective April 11, 2005. Mr. Colasono’s
employment term runs from the effective date of the employment agreement until
its termination by the Company or Mr. Colasono.
Under
the
employment agreement, Mr. Colasono is entitled to a base salary of $250,000,
subject to adjustment by the Board of Directors, and to participate in an
executive bonus pool of 10% of the after tax consolidated net profits of the
Company in excess of $500,000, subject to adjustment of the size of the bonus
pool in the reasonable discretion of the Board of Directors. Mr. Colasono will
be entitled to a targeted bonus in the amount of $150,000, prorated for the
period of his actual employment for 2005 and subject to the reasonable
discretion of the Board of Directors. Determination of the actual amount of
Mr.
Colasono’s bonus for 2005 will depend, as to 80% of the targeted amount, upon
the financial performance of the Company and as to 20% of the targeted amount
upon Mr. Colasono’s personal performance. Additionally, Mr. Colasono will
receive a housing allowance of $1,500 per month.
In
connection with his entry into the employment agreement, the Company agreed
to
grant Mr. Colasono 17,000 shares of restricted stock of the Company, of which
2,000 vested upon grant, 5,000 vest on March 28, 2006, 5,000 vest on March
28,
2007 and 5,000 vest on March 28, 2008, if Mr. Colasono is then employed by
the
Company. Any unvested shares of restricted stock vest immediately upon
occurrence of a change of control (as defined in the employment agreement)
or
Mr. Colasono’s death or disability. Except under those circumstances, any
unvested shares of restricted stock will be forfeited to the Company in the
event of a termination of Mr. Colasono’s employment with the Company. Mr.
Colasono agreed to make an 83(b) election with respect to the restricted shares
and the Company agreed to reimburse Mr. Colasono for any federal, state or
local
taxes due from having made such election at his incremental tax
rate.
Pursuant
to the employment agreement, the Company may terminate Mr. Colasono’s employment
with or without cause (as defined in the employment agreement) and Mr. Colasono
may terminate it with or without good reason (as defined in the employment
agreement). If Mr. Colasono is terminated by the Company without cause or Mr.
Colasono terminates his employment for good reason, or his employment terminates
as a result of his death or disability (as defined in the employment agreement),
Mr. Colasono will be entitled to severance, including a lump sum payment equal
to his salary for a specified period and, at his option, either continued health
benefits during the specified period or a lump sum payment equal to the medical
insurance premiums that would be payable by the Company in respect of such
specified period. If the termination occurs prior to a change in control (as
defined in the employment agreement) the specified period will be (i) three
months if the termination occurs prior to September 1, 2005, (ii) six months
if
it occurs thereafter but prior to September 1, 2006 and (iii) twelve months
if
it occurs thereafter. If the termination occurs following a change in control,
the specified period will be (i) six months if the termination occurs prior
to
September 1, 2005, (ii) twelve months if it occurs thereafter but prior to
September 1, 2006 and (iii) eighteen months if it occurs
thereafter.
Under
the
employment agreement, Mr. Colasono is subject to covenants not to compete and
not to solicit customers or employees of the Company for certain periods
specified therein.
Joseph
Caiazzo serves as Executive Vice President of the Company under an employment
agreement that was entered into on June 7, 2005, with an effective date of
June
1, 2005. Mr. Caiazzo’s employment term runs from the effective date of the
employment agreement until its termination by the Company or Mr.
Caiazzo.
Under
the
employment agreement, Mr. Caiazzo is entitled to a base salary of $230,000,
subject to adjustment by the Board of Directors, and to participate in an
executive bonus pool of 10% ofthe Company’s after tax consolidated net profits
in excess of $500,000, subject to adjustment of the size of the bonus pool
in
the reasonable discretion of the Board of Directors. Mr. Caiazzo will be
entitled to a targeted bonus in respect of 2005 in the amount of $150,000.
Determinaton of the actual amount of Mr. Caiazzo’s bonus for 2005 will depend,
as to 80% of the targeted amount, uponthe Company’s financial performance and as
to 20% of the targeted amount upon Mr. Caiazzo’s personal performance. Mr.
Caiazzo will be advised of his target bonus for each year subsequent to 2005
by
April 30 of such year. Additionally, Mr. Caiazzo will receive a $5,000 annual
allowance towards the purchase of a retirement annuity, and a car allowance
of
$600 per month. Mr. Caiazzo is also entitled to participate in any ofthe
Company’s stock option, stock purchase or other equity compensation plans
extended tothe Company’s executive officers outside the context of inducement
grants.
Pursuant
to the employment agreement, the Company may terminate Mr. Caiazzo’s employment
with or without cause (as defined in the employment agreement) and Mr. Caiazzo
may terminate it with or without good reason (as defined in the employment
agreement). If Mr. Caiazzo is terminated by the Company without cause or Mr.
Caiazzo terminates his employment for good reason, or his employment terminates
as a result of his death or disability (as defined in the employment agreement),
Mr. Caiazzo will be entitled to severance, including a lump sum payment equal
to
his salary for a specified period, a prorated bonus and, at his option, either
continued health benefits during the specified period or a lump sum payment
equal to the medical insurance premiums that would be payable by us in respect
of such period. If the termination occurs prior to a change in control (as
defined in the employment agreement) the specified period will be eighteen
months. If the termination occurs following a change in control, the specified
period will be twenty four months.
Jeffrey
R. Johnson served as President and Chief Executive Officer of the Company until
January 21, 2006. Pursuant to a separation agreement and release of claims
between Mr. Johnson and the Company, the Company agreed to make a one-time
payment of $282,500 to Mr. Johnson and vest 30,000 additional shares of
restricted stock previously granted to Mr. Johnson but not yet otherwise vested.
Mr. Johnson also remains subject to restrictive covenants prohibiting his
solicitation of the Company’s employees or the employees of the Company’s
affiliates for nine months, and agreed to terminate his demand registration
rights under the Registration Rights Agreement, effective as of October 4,
2004,
between the Company and Mr. Johnson. The Company agreed to indemnify Mr.
Johnson, in accordance with its Certificate of Incorporation and Bylaws, for
matters arising during his term as a director or officer of the Company, and
Mr.
Johnson released the Company from all claims arising prior to the Separation
Agreement.
Compensation
Committee Interlocks and Insider Participation.
During
2005, Steven W. Lefkowitz, Robert M. Chiste, Frank B. Evans and Alexander Gordon
Jardin served on the Company’s Compensation Committee.
The
Compensation Committee of the Company was established in 2000. The Compensation
Committee establishes compensation for the chief executive officer and reviews
compensation for other officers and employees and other employee benefit
programs, when necessary. This Committee is responsible for the 2005
Compensation Committee Report on Executive Compensation.
REPORT
OF THE COMPENSATION COMMITTEE
The
following report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or
the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
Committee
Report on Executive Compensation
Under
rules established by the Securities and Exchange Commission, the Company is
required to provide certain data and information with regard to the compensation
and benefits provided to the Company’s Chief Executive Officer and the other
executive officers of the Company. The disclosure requirements for those
executive officers include the use of a report explaining the rationale and
considerations that led to fundamental compensation decision affecting those
individuals. The Compensation Committee of the Board of Directors (the
Committee”) establishes compensation for the chief executive officer and reviews
compensation for other officers and employees and other benefit programs, when
necessary. In fulfillment of the disclosure requirement, the Committee has
prepared the following report for inclusion in this proxy
statement.
The
Company has no employees who perform services for the Company without additional
compensation. The Committee evaluates the performance of each named executive
officer of the Company and reviews the compensation of all
executives.
Compensation
Policies
The
Committee’s functions include establishing the general compensation policies of
the Company, reviewing and approving compensation for the executive officers
and
members of the Board of Directors and administering the Company’s stock option
plans. The goal of the committee is to design compensation packages that will
allow the Company to attract and retain, as well as motivate and reward,
executives and directors with the skills and talents to achieve both the current
and long term financial, strategic and operating goals of the Company. The
intended result is to align the interests of the executives and directors with
those of the Company’s shareholders.
The
Company’s typical executive compensation package has historically consisted of
three main components: (1) base salary; (2) annual incentive cash bonuses;
and
(3) long-term incentive compensation in the form of stock options and/or
restricted stock grants. The Committee manages all three components on an
integrated basis to attract and retain highly qualified management; to provide
short-term incentive compensation that varies directly with the Company’s
financial performance; and to link long-term compensation directly with
long-term stock price performance.
Base
Compensation
The
Committee’s approach is to offer executive salaries competitive with those of
other executives in the industry in which the Company operates. To that end,
the
Committee evaluates the competitiveness of its base salaries based upon
information drawn from various sources, including published and proprietary
survey data, consultants’ reports and the Company’s own experience recruiting
executives and professionals as well as the recommendations of the chief
executive officer. The Company’s base salary levels are intended to be
consistent with competitive practice and level of responsibility, with salary
increases reflecting competitive trends, the overall financial performance
of
the Company and the performance of the individual executive.
Annual
Incentive Cash Bonuses
In
addition to base salary, executives and managers are eligible to receive annual
incentive cash bonuses, upon the achievement of certain financial, strategic
and
operating goals, including, but not limited to, profitable asset acquisitions,
achieving servicing goals and achieving financial targets. At the beginning
of
each year, the Committee and the Chief Executive Officer review each
individual’s job responsibilities and goals for the upcoming year. The amount of
the bonus and any performance criteria vary with the position and role of the
individual within the Company. Such
bonuses are intended to recognize the
contributions of key employees of the Company in achieving its current
goals.
It is
further intended to attract and retain key employees of outstanding ability.
Certain key executives are entitled to participate in and may be awarded
percentages of an Executive Bonus Pool the size of which is determined each
year
by the Board of Directors and which was set at 10% of all Net Income in excess
of $500,000 for fiscal year 2005 and is payable on or before May 1, 2006 with
respect to 2005.
Equity-Based
Incentive Awards
The
Committee considers long-term, equity-based compensation as an essential tool
in
aligning the interests of management with that of the Company’s shareholders. In
its evaluation
of
the appropriate level of long-term stock-based compensation, the Committee
considers industry peer group data, the Company’s prior long-term incentive
compensation practice and the number of stock options outstanding relative
to
the number of shares of Common Stock outstanding. Incentive and/or Non-qualified
options to purchase Common Stock of the Company are granted to individuals
under
the 1996 Stock Option Plan, as amended. The objective is to encourage these
individuals to manage the Company in a manner that would increase long-term
shareholder value. Options are generally granted at an exercise price of 100%
of
the Common Stock’s market value on the grant date, vest over varying amounts of
time and expire 10 years from the date of grant unless the optionee no longer
serves as an employee or director of the Company or a subsidiary. Options are
granted by the Committee using the Black-Scholes option valuation model, and
the
Committee takes into consideration other factors such as dilution, the number
of
shares of Common Stock outstanding, the Company’s financial performance and the
officer’s individual performance. In 2005, the Committee increasingly
recommended the use of restricted stock grants rather than options in connection
with the retention of key executives.
The
Committee continues to believe that equity-based incentive awards provide
executive officers with an incentive to manage the Company from the perspective
of an owner with an equity stake in the business. In connection with that belief
and the fact that the Company's 1996 Stock Option Plan, as amended, will expire
in May 2006, the Committee has recommended that the Company adopt the 2006
Stock
Incentive Plan (which is subject to Stockholder approval at this meeting).
See
“Proposal 2 -- Approval of the Franklin Credit Management Corporation 2006 Stock
Incentive Plan” below in the Proxy Statement. The 2005 Stock Inventive Plan is
intended to enable the Company to continue to provide certain key persons,
on
whose initiative and efforts the successful conduct of the business of the
Company depends, with incentives to enter into and remain in the service of
the
Company (or a Company subsidiary or joint venture), acquire a proprietary
interest in the success of the Company, maximize their performance, and thereby
enhance the long-term performance of the Company. If approved by the Company's
Stockholders, the 2006 Stock Incentive Plan would authorize the grants of
non-qualified stock options, incentive stock options, stock appreciation rights,
shares of restricted stock, restricted stock units, shares of unrestricted
stock, performance shares and dividend equivalent rights. Moreover, Section
162(m) of the Internal Revenue Code disallows a federal income tax deduction
for
certain compensation in excess of $1 million per year paid to each of the
Company’s chief executive officer and its four other most highly compensated
executive officers, while compensation that qualifies as “performance-based
compensation” under Section 162(m) is not subject to the $1 million limit. If
the 2006 Stock Incentive Plan is approved by the Company's Stockholders, grants
of non-qualified stock options, incentive stock options and stock appreciation
rights generally would qualify as “performance-based compensation” under Section
162(m) and would be eligible for this exception to the $1 million
limit.
Chief
Executive Officer’s Compensation
Mr.
Johnson served as President and Chief Executive Officer of the Company until
January 21, 2006. The Committee negotiated the terms and conditions of Mr.
Johnson’s employment agreement, which has been filed with the SEC. Under the
term of said agreement, Mr. Johnson’s base salary was $325,000 per annum.
In
addition Mr. Johnson was eligible to receive 25% of the Executive Bonus Pool.
In
connection with his departure, the Committee negotiated with Mr. Johnson a
lump
sum payment in settlement of amounts he otherwise would have been entitled
to,
including any bonus in respect of 2005.
The
members of the Compensation Committee are Steven W. Lefkowitz, Robert M. Chiste
and Frank B. Evans. Alexander Gordon Jardin was a member of the Compensation
Committee in 2005 and until he became employed by the Company in March 2006,
at
which point he resigned from the Compensation Committee.
Respectfully
submitted by the Compensation Committee,
Steven
W.
Lefkowitz, Chairman
Robert
M.
Chiste
Frank
B.
Evans
STOCK
PERFORMANCE GRAPH
The
following graph illustrates a comparison of the cumulative total stockholder
return (change in stock price plus reinvested dividends) of Common Stock with
the Russell 2000 index and a peer group for the period from December 31, 1999
through December 31, 2005. The measurement assumes a $100 investment on December
31, 1997. The peer group is made up of the following 10 publicly-held financial
services companies: 21st
Century
Technologies Inc., Advanta Corp., Asta Funding, Inc., Credit Acceptance
Corporation, Encore Capital Group, Inc., Equitex, Inc., First Investors
Financial Services Group, Inc., MFC Development Corp., Microfinancial
Incorporated and Temporary Financial Services, Inc. The comparisons in the
graph
are required by the Securities and Exchange Commission and are not intended
to
forecast or be indicative of possible future performance of the Common Stock,
which performance could be affected by factors and circumstances outside of
the
Company’s control. Data for the Russell 2000 index and the peer group assume
reinvestment of dividends. The Company has not paid dividends on its Common
Stock in recent years and has no present plans to do so.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
During
2004 and until August 31, 2005, the Company subleased approximately 2,500 square
feet of office space on the fifth floor at Six Harrison Street in New York,
New
York, from RMTS, LLC, of which Mr. Axon owns 80%. Pursuant to the sublease,
the
Company paid RMTS rent of approximately $34,926 in 2005. The sublease was due
to
expire on August 31, 2009. On May 12, 2005, the Company entered into a
termination agreement with RMTS and James Thomas Realty, the landlord of the
Six
Harrison Street premises and of which Mr. Axon owns 90% and Mr. Evans owns
10%.
Under this termination agreement, RMTS and James Thomas Realty agreed, in
connection with the Company’s planned relocation of most of its offices to
Jersey City, New Jersey, to the early termination of this sublease in
consideration of the Company’s payment of $125,000 to the James Thomas Realty.
Pursuant to this termination agreement, the Company agreed to surrender the
premises on or before August 31, 2005, provided that the Company extend the
scheduled surrender date for all or any portion of the premises by one-month
increments through November 30, 2005, subject to payment of monthly rent, pro
rated to reflect the portion of the premises retained.
The
Company subleases approximately 2,200 square feet of office space on the fourth
floor at Six Harrison Street in New York, New York, from RMTS on a
month-to-month basis with monthly payments of $2,333. During 2005, the Company
paid $18,667 in rent.
During
2004 and until August 31, 2005, the Company leased approximately 7,400 square
feet of office space at 185 Franklin Street in New York, New York from 185
Franklin Street Development Associates L.P., a limited partnership, the general
partner of which is owned by an entity that is owned by Mr. Axon. Pursuant
to
the leases, the Company paid 185 Franklin Street Development Associates rent
of
approximately $19,650 per month in 2005. Various leases govern the six floors
of
office space at 185 Franklin Street, all of which were due to expire on dates
ranging from February 2008 through October 2008. On May 12, 2005, the Company
entered into a termination agreement with 185 Franklin Street Development
Associates. Under this termination agreement, 185 Franklin Street Development
Associates agreed, in connection with the Company’s planned relocation of most
of its offices to Jersey City, New Jersey, to the early termination of these
leases in consideration of the Company’s payment of $462,859 to 185 Franklin
Street Development Associates. Pursuant to this termination agreement, the
Company agreed to surrender the premises by August 31, 2005, provided that
the
Company may extend the scheduled surrender date in one-month increments through
November 30, 2005, subject to payment of monthly rent, pro rated to reflect
the
portion of the premises retained.
On
February 13, 2006, Tribeca Lending Corporation entered into a lease with 18
Harrison Street Development Associates, a limited partnership, the general
partner of which is controlled by Thomas J. Axon, for the entire fifth floor
of
office space at 18 Harrison Street in New York, New York, at an annual rental
rate of $58,560 (or $4,880 per month).
On
May
12, 2005, the Company entered into a purchase agreement with Mr. Axon. Under
this purchase agreement, we sold to Mr. Axon certain interests in oil and
gas-related assets remaining from before the merger of Miramar Resources, Inc.
and Franklin Credit Management Corporation in 1994 for a purchase price of
$30,800.
On
April
28, 2005, pursuant to a recommendation of the compensation committee ofthe
Company’s Board of Directors, the Company paid Mr. Axon $23,322 as compensation
for Mr. Axon providing personal guarantees with regard to certain ofthe
Company’s debt outstanding to the Company’s lender. The compensation amount was
determined based on the amount of capital at risk, a reasonable reimbursement
rate and the time value of money.
The
Board of Directors unanimously recommends a vote FOR the election of each of
the
nominees listed above.
PROPOSAL
2
APPROVAL
OF THE FRANKLIN CAPITAL MANAGEMENT 2006 STOCK INCENTIVE
PLAN
The
Company is submitting the Franklin Credit Management Corporation 2006 Stock
Incentive Plan (the “Plan”) to its stockholders for approval at the Annual
Meeting. The Plan is intended to enable the Company to continue to provide
certain key persons, on whose initiative and efforts the successful conduct
of
the business of the Company depends, with incentives to enter into and remain
in
the service of the Company (or a Company subsidiary or joint venture), acquire
a
proprietary interest in the success of the Company, maximize their performance,
and thereby enhance the long-term performance of the Company. The following
discussion is qualified in its entirety by reference to the full text of the
Plan, a copy of which is attached hereto as Exhibit A.
General
Description of the Plan
Awards.
The
Plan
authorizes the grants of non-qualified stock options (“NQOs”), incentive stock
options (“ISOs”), stock appreciation rights (“SARs”), shares of restricted
stock, restricted stock units, shares of unrestricted stock, performance shares,
and dividend equivalent rights (“DERs”, and collectively with NQOs, ISOs, SARs,
restricted stock, restricted stock units and performance shares, “Awards”).
Under the Plan, the Company may deliver authorized but unissued shares of its
Common Stock, par value $.01 per share (“Stock”), treasury shares of Stock, or
shares of Stock acquired by the Company for the purposes of the
Plan.
Maximum
Number of Shares. A
maximum
of 750,000 shares of Stock will be available for grants pursuant to Awards
under
the Plan. The following shares of Stock shall again become available for Awards
under the Plan: any shares subject to an award under the Plan that remain
unissued upon the cancellation or termination of the award for any reason;
any
shares of restricted stock that are forfeited, provided that any dividends
paid
on such shares are also forfeited; and any shares in respect of which a
performance share award is settled for cash. The maximum number of shares of
Stock with respect to which any individual may be granted Awards during any
one
calendar year is 225,000 shares.
Committee;
Authority. The
Compensation Committee of the Board of Directors, or such other committee or
subcommittee of the Board of Directors as the Board of Directors appoints or
is
formed by abstention or recusal of one or more members of the Compensation
Committee (the “Committee”), will administer the Plan. The Committee is to
consist of at least two individuals. It is intended that each Committee member
will be both an “outside director” (within the meaning of section 162 (m) of the
Internal Revenue Code (the “Code”) and a “non-employee director” (as defined in
Rule 16b-3 promulgated under the Securities Exchange Act of 1934). However,
Awards under the Plan will not be invalidated if the Committee includes members
who are not outside directors and non-employee directors. If the Committee
does
not exist, or for any other reason determined by the Board of Directors, the
Board of Directors may act for the Committee. The Committee or the Board of
Directors may delegate to one or more officers of the Company the authority
to
designate the individuals (from among those eligible to receive Awards, other
than such officer(s) themselves) who will receive Awards under the Plan, to
the
fullest extent permitted by the Delaware General Corporation Law (or any
successor provision thereto), provided that the Committee shall itself grant
awards to those individuals who could reasonably be considered to be subject
to
the insider trading provisions of section 16 of the 1934 Act or whose awards
could reasonably be expected to be subject to the deduction limitations of
section 162(m) of the Code. The Committee will determine the key persons who
will receive Awards, the type of Awards granted, and the number of shares
subject to each Award. The Committee also will determine the prices, expiration
dates and other material features of Awards. No Award that involves the issuance
of Common Stock may be granted under the Plan after May 23, 2016. The Committee
has the authority to interpret and construe any provision of the Plan and to
adopt such rules and regulations for administering the Plan as it deems
necessary or appropriate. All decisions and determinations of the Committee
are
final and binding on all parties. No member of the Committee shall be liable
for
any action or determination made in good faith with respect to the Plan or
any
Award.
Eligibility.
Officers,
directors (including non-employee directors), and executive, managerial,
professional or administrative employees of, and consultants to, the Company,
its subsidiaries and its joint ventures, as the Committee in its sole discretion
shall select, are eligible to receive Awards under the Plan. Approximately
216
individuals are eligible to participate in the Plan. However the granting of
Awards is discretionary and it is not possible to determine how many individuals
actually will receive Awards under the Plan.
Suspension,
Discontinuance, Amendment. The
Board
of Directors may, at any time, suspend or discontinue the Plan or revise or
amend it in any respect whatsoever. However, no amendment shall be effective
without the approval of the stockholders of the Company if it would increase
the
number of shares of Stock available for issuance under the Plan, materially
increase the benefits under the Plan or if the Board determines that stockholder
approval is necessary and appropriate so that Awards under the Plan may comply
with Sections 422 or 162(m) of the Code.
The
Committee may, in its absolute discretion, without amending the Plan, amend
any
Award to (i) accelerate the date on which any option or SAR becomes exercisable
or otherwise adjust any of the terms of such option or SAR, (ii) accelerate
the
date on which any Award vests, (iii) waive any condition imposed under the
Plan
with respect to any Award, or (iv) otherwise adjust any of the terms of any
Award; provided, however, that no such amendment may lower the exercise price
of
an option. No amendment or modification to the Plan or any Award may reduce
the
grantee’s rights under any previously granted and outstanding Award without the
consent of the grantee, except to the extent that the Board of Directors
determines that such amendment is necessary or appropriate to prevent such
Awards from being subject to the deduction limit of Section 162(m) of the Code
or from being subject to tax under section 409A of the Code.
Summary
of Awards Available Under the Plan
Non-Qualified
Stock Options. The
exercise price per share of each NQO granted under the Plan will be determined
by the Committee on the grant date and will not be less than the fair market
value of a share of Stock on the date of grant. Each NQO will be exercisable
for
a term, not to exceed ten years, established by the Committee on the grant
date.
The exercise price shall be paid in cash or, subject to the approval of the
Committee, in shares of Stock valued at their fair market value on the date
of
exercise or by such other method as the Committee may from time to time
prescribe.
The
Plan
contains provisions applicable to the exercise of NQOs subsequent to a
“termination of employment” other than for “cause,” for “cause,” or due to
“disability” (as each such term is defined in the Plan) or death. These
provisions apply unless the Committee establishes alternative provisions with
respect to an Award. In general, these provisions provide that NQOs that are
not
exercisable at the time of such termination shall expire upon the termination
of
employment and NQOs that are exercisable at the time of such termination shall
remain exercisable until the earlier of the expiration of their original term
and (i) in the event of a grantee’s termination other than for cause, the
expiration of three months after such termination of employment, and (ii) in
the
event of a grantee’s disability or death, the first anniversary of such
termination. In the event of a termination for cause, all NQOs held by the
grantee, whether or not then exercisable, terminate immediately as of the
commencement of business on the termination of employment date. In addition,
if
a grantee dies subsequent to a termination of employment but before the
expiration of the exercise period, then the grantee’s NQOs shall remain
exercisable until the first anniversary of the grantee’s date of death (or the
expiration of the original exercise period, if earlier).
Incentive
Stock Options. Generally,
ISOs are options that may provide certain federal income tax benefits to a
grantee not available with NQOs. A grantee must hold the shares acquired upon
exercise of an ISO for at least two years after the grant date and at least
one
year after the exercise date. The exercise price per share of each ISO must
be
at least the fair market value of a share of Stock on the grant date. An ISO
will be exercisable for a maximum term, not to exceed ten years, established
by
the Committee on the grant date. The exercise price of an ISO will be paid
in
cash or, subject to the approval of the Committee, in shares of Stock valued
at
their fair market value on the date of exercise or by such other method as
the
Committee may from time to time prescribe. The aggregate fair market value
of
shares of Stock (determined on the ISO grant date) with respect to which ISOs
are exercisable for the first time by a grantee during any calendar year under
the Plan or any other plan of the Company or its subsidiaries may not exceed
$100,000. An ISO granted to any individual who owns stock possessing more than
ten percent of the total combined voting power of all classes of stock of the
Company is subject to the following additional limitations: the exercise price
per share of the ISO must be at least 110% of the fair market value of a share
of Stock at the time any such ISO is granted, and the ISO cannot be exercisable
more than five years from the grant date.
In
the
event of a grantee’s termination of employment, ISOs generally are exercisable
to the same extent as described above with respect to NQOs. However, the
definition of the term “disability” in respect of ISOs may differ. In addition,
an option cannot be treated as an ISO if it is exercised more than three months
following the grantee’s termination of employment for any reason other than
death or disability or more than one year after the grantee’s termination of
employment for disability, unless the grantee died during the three-month or
one-year periods. ISOs are not transferable other than by will or by the laws
of
descent and distribution.
Reload
Options. The
Committee may include in any agreement evidencing an option (the “original
option”) a provision that a “reload option” will be granted to any grantee who
delivers shares of Stock in partial or full payment of the exercise price of
the
original option. The reload option will relate to that number of shares of
Stock
equal to the number of shares of Stock delivered, and will have an exercise
price per share equal to the fair market value of a share of Stock on the
exercise date of the original option.
Stock
Appreciation Rights.
The
Committee may grant SARs pursuant to the Plan. The exercise price of each SAR
shall be such price as the Committee shall determine on the grant date but
not
less than the fair market value of a share of stock on the grant date. Each
SAR
shall be exercisable for a term, not to exceed ten years, established by the
Committee on the grant date. The exercise of an SAR with respect to a number
of
shares entitles the grantee to receive for each such share an amount equal
to
the excess of (i) the fair market value of a share of Stock on the date of
exercise over (ii) the exercise price of the SAR. The Committee, in its sole
discretion, shall determine whether payment upon exercise of a stock
appreciation right will be in cash or in shares of Common Stock (valued at
their
Fair Market Value on the date of exercise of the stock appreciation right).
SARs
may be granted as stand-alone awards or in connection with any NQO or ISO with
respect to a number of shares of Stock less than or equal to the number of
shares subject to the related option. The exercise of a SAR that relates to
a
particular NQO or ISO causes the cancellation of its related option with respect
to the number of shares exercised. The exercise of an option to which a SAR
relates causes the cancellation of the SAR with respect to the number of shares
exercised. In the event of a grantee’s termination of employment, SARs granted
to the grantee generally are exercisable to the same extent as described above
with respect to NQOs.
Restricted
Stock.
The
Committee may grant restricted shares of Stock pursuant to the Plan. Prior
to
the vesting of the shares, the shares are not transferable by the grantee and
are forfeitable. Vesting of the shares may be based on continued employment
with
the Company and/or upon the achievement of specific performance goals. The
Committee may at the time that shares of restricted stock are granted impose
additional conditions to the vesting of the shares. Unvested shares of
restricted stock are automatically and immediately forfeited upon a grantee’s
termination of employment for any reason.
Restricted
Stock Units.
The
Committee may grant restricted stock units pursuant to the Plan. Vesting of
the
restricted stock units may be based on continued employment with the Company
and/or upon the achievement of specific performance goals. The Committee may
at
the time that shares of restricted stock units are granted impose additional
conditions to the vesting of the restricted stock units. Unvested restricted
stock units are automatically and immediately forfeited upon a grantee’s
termination of employment for any reason. If vesting of a restricted stock
unit
award is based on continued employment, the award will not be vested at all
until at least one year after the grant date and will not vest in full until
at
least three years after the grant date.
Unrestricted
Stock. Shares
of
Stock may be granted by the Committee and may be payable at such times and
subject to such conditions as the Committee determines; provided that any such
awards to officers or directors shall involve a number of shares determined
by
the Committee as being reasonable and shall be identified as being granted
in
lieu of salary or cash bonus.
Performance
Shares. The
Committee may grant performance share awards to such key persons, in such
amounts, and subject to such terms and conditions, as the Committee shall
determine in its discretion. The grantee of such an award will be entitled
to
receive shares or the cash value thereof if performance goals specified by
the
Committee are met. The shares or cash value will be paid to the grantee as
soon
as practicable following the satisfaction of the performance goals and no event
later than 2-1/2 months after the satisfaction of the performance
goals.
Dividend
Equivalent Rights. The
Committee may, in its discretion, grant with respect to any option, SAR or
performance share award, a DER entitling a grantee to receive amounts equal
to
the ordinary dividends that would have been paid on the shares of Stock covered
by such Award as if such shares were then outstanding. DERs may be payable
in
cash, in shares of Stock or in any other form.
Transferability
No
Award
is transferable other than by will or the laws of descent and distribution
except to the extent an agreement with respect to an NQO or SAR Award permits
certain transfers to a grantee’s family members or trusts.
Certain
Corporate Changes
The
Plan
provides for an adjustment in the number of shares of Stock available to be
delivered under the Plan, the number of shares subject to Awards, and the
exercise prices of certain Awards in the event of a change in the capitalization
of the Company, a stock dividend or split, a merger or combination of shares
and
certain other similar events. The Plan also provides for the adjustment or
termination of Awards upon the occurrence of certain corporate
events.
Tax
Withholding
The
Plan
provides that a grantee may be required to meet certain tax withholding
requirements by remitting to the Company cash or through the withholding of
shares otherwise payable to the grantee. In addition, the grantee may meet
such
withholding requirements, subject to certain conditions, by remitting previously
acquired shares of Stock.
New
Plan Benefits
Since
no
Awards have been made under the Plan and since Awards under the Plan are wholly
discretionary, amounts payable under the Plan are not determinable at this
time.
For information regarding certain awards made in respect of fiscal 2005 under
the Franklin Credit Management Corporation 1996 Stock Incentive Plan, see
“Executive Compensation - Summary Compensation Table” and the Compensation
Committee Report.
Summary
of Federal Tax Consequences
The
following is a brief description of the federal income tax treatment that will
generally apply to Awards under the Plan based on current federal income tax
rules.
Non-Qualified
Options. The
grant
of an NQO will not result in taxable income to the grantee. Except as described
below, the grantee will realize ordinary income at the time of exercise in
an
amount equal to the excess of the fair market value of the Stock acquired over
the exercise price for those shares and the Company will be entitled to a
corresponding deduction. Gains or losses realized by the grantee upon
disposition of such shares will be treated as capital gains and losses, with
the
basis in such Stock equal to the fair market value of the shares at the time
of
exercise.
Incentive
Stock Options.
The
grant of an incentive stock option will not result in taxable income to the
grantee. The exercise of an incentive stock option will not result in taxable
income to the grantee provided that the grantee was, without a break in service,
an employee of the Company or a subsidiary during the period beginning on the
date of the grant of the option and ending on the date three months prior to
the
date of exercise (one year prior to the date of exercise if the grantee is
disabled, as that term is defined in the Code). The excess of the fair market
value of the Stock at the time of the exercise of an incentive stock option
over
the exercise price is an adjustment that is included in the calculation of
the
grantee’s alternative minimum taxable income for the tax year in which the
incentive stock option is exercised.
If
the
grantee does not sell or otherwise dispose of the Stock within two years from
the date of the grant of the incentive stock option or within one year after
the
transfer of such Stock to the grantee, then, upon disposition of such Stock,
any
amount realized in excess of the exercise price will be taxed to the grantee
as
capital gain and the Company will not be entitled to a corresponding deduction.
A capital loss will be recognized to the extent that the amount realized is
less
than the exercise price. If the foregoing holding period requirements are not
met, the grantee will generally realize ordinary income at the time of the
disposition of the shares, in an amount equal to the lesser of (i) the excess
of
the fair market value of the Stock on the date of exercise over the exercise
price, or (ii) the excess, if any, of the amount realized upon disposition
of
the shares over the exercise price and the Company will be entitled to a
corresponding deduction. If the amount realized exceeds the value of the shares
on the date of exercise, any additional amount will be capital gain. If the
amount realized is less than the exercise price, the grantee will recognize
no
income, and a capital loss will be recognized equal to the excess of the
exercise price over the amount realized upon the disposition of the shares.
The
Company will be entitled to a deduction to the extent that the grantee
recognizes ordinary income because of a disqualifying disposition.
Stock
Appreciation Rights. The
grant
of a SAR will not result in taxable income to the grantee. Upon exercise of
a
SAR, the fair market value of Stock received will be taxable to the grantee
as
ordinary income and the Company will be entitled to a corresponding deduction.
Gains and losses realized by the grantee upon disposition of any such shares
will be treated as capital gains and losses, with the basis in such shares
equal
to the fair market value of the shares at the time of exercise.
Restricted
Stock. A
grantee
who has been granted a restricted stock award will not realize taxable income
at
the time of grant and the Company will not be entitled to a corresponding
deduction, assuming that the restrictions constitute a “substantial risk of
forfeiture” for federal income tax purposes. Upon the vesting of shares of
restricted stock, the holder will realize ordinary income in an amount equal
to
the then fair market value of those shares, and the Company will be entitled
to
a corresponding deduction. Gains or losses realized by the grantee upon
disposition of such shares will be treated as capital gains and losses, with
the
basis in such shares equal to the fair market value of the shares at the time
of
vesting. Dividends paid to the holder during the restriction period, if so
provided, will also be compensation income to the grantee and the Company will
be entitled to a corresponding deduction. A grantee may elect pursuant to
section 83(b) of the Code to have income recognized at the date of grant of
a
restricted stock award and to have the applicable capital gain holding period
commence as of that date and the Company will be entitled to a corresponding
deduction.
Restricted
Stock Units. A
grantee
who has been granted a restricted stock unit award will not realize taxable
income at the time of grant and the Company will not be entitled to a
corresponding deduction. Upon the vesting of the restricted stock unit, the
holder will realize ordinary income in an amount equal to the then fair market
value of the shares received, and the Company will be entitled to a
corresponding deduction. Gains or losses realized by the grantee upon
disposition of such shares will be treated as capital gains and losses, with
the
basis in such shares equal to the fair market value of the shares at the time
of
vesting, when granted to the grantee.
Unrestricted
Stock.
A
grantee who receives shares of unrestricted stock will recognize taxable income
at the time of grant in an amount equal to the then fair market value of those
shares and the Company will be entitled to a corresponding deduction. Gains
or
losses realized by the grantee upon disposition of such shares will be treated
as capital gains and losses, with the basis in such shares equal to the fair
market value of the shares at the time of grant.
Performance
Shares. A
grantee
who has been granted a performance share award will not realize taxable income
at the time of grant and the Company will not be entitled to a corresponding
deduction. The grantee will have compensation income at the time of distribution
equal to the amount of cash received and the then fair market value of the
distributed shares and the Company will then be entitled to a corresponding
deduction. If the shares received under a performance share award are not
transferable and are subject to forfeiture, the shares will be considered
restricted stock for tax purposes and the grantee will not realize ordinary
income until the restrictions lapse (unless the grantee makes an election under
section 83(b)).
Dividend
Equivalent Rights. The
grant
of dividend equivalent rights will not result in income to the recipient or
in a
tax deduction for the Company. When any amount is paid or distributed to a
recipient in respect of a dividend equivalent right, the recipient will
recognize ordinary income equal to the fair market value of any property
distributed and/or the amount of any cash distributed, and the Company will
be
entitled to a corresponding deduction.
Withholding
of Taxes. The
Company may withhold amounts from grantees to satisfy withholding tax
requirements. Subject to guidelines established by the Committee, grantees
may
have Stock withheld from Awards or may tender Stock to the Company to satisfy
tax withholding requirements.
$1
Million Limit. Section
162(m) of the Code disallows a federal income tax deduction for certain
compensation in excess of $1 million per year paid to each of the Company’s
chief executive officer and its four other most highly compensated executive
officers. Compensation that qualifies as “performance-based compensation” under
section 162(m) is not subject to the $1 million limit. If the Company’s
stockholders approve the Plan, grants of NQOs, ISOs, and SARs generally would
be
eligible for this exception to the $1 million limit. In addition, the Plan
permits the Committee to defer payment of other Awards until the recipient’s
termination of employment, at which time the $1 million limit will not apply
to
the payment.
Section
409A.
Section
409A of the Code, which was enacted in October 2004, imposes significant new
restrictions on deferred compensation and may impact on Awards under the Plan.
If the Section 409A restrictions are not followed, a grantee could be subject
to
accelerated liability for tax on the non-complying award, as well as a 20%
penalty tax. The Plan is intended to comply with the requirements of Section
409A. The Company anticipates that it will amend the Plan and/or any Award
to
the extent that future additional administrative guidance indicates that the
amendment is necessary to ensure that grantees are not subject to the Section
409A tax penalties.
Tax
Advice. The
preceding discussion is based on federal tax laws and regulations presently
in
effect, which are subject to change, and the discussion does not purport to
be a
complete description of the federal income tax aspects of the Plan. A grantee
may also be subject to state and local taxes in connection with the grant of
Awards under the Plan.
Principal
Reasons to Adopt the Plan
The
Board
of Directors views the issuance of stock options and other equity-based awards
to key individuals as necessary in order to attract and retain the services
of
the individuals essential to the Company’s long term success. The purpose of the
Plan is to encourage and enable the key individuals associated with the Company,
upon whose judgment, initiative and efforts the Company will largely depend
for
the successful conduct of its business, to acquire or increase their proprietary
interest in the success of the Company. It is anticipated that providing such
persons with a direct stake in the Company will assure a close identification
of
their interests with those of the Company, thereby stimulating their efforts
on
the Company’s behalf.
Voting
on the Proposal
The
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy at the Annual Meeting and voting thereon is
required for the approval of the adoption of the Plan.
The
Board of Directors unanimously recommends a vote FOR approval of the 2006 Stock
Incentive Plan.
PROPOSAL
3
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The
Audit
Committee of the Board of Directors has appointed the firm of Deloitte &
Touche LLP (“D&T”) as the Company’s independent registered public accounting
firm to audit the financial statements of the Company for the fiscal year ending
December 31, 2006, and recommends that stockholders vote for ratification of
this appointment. D&T has audited the Company’s financial statements since
January 1997. A representative of D&T is expected to be present at the
Annual Meeting and will have the opportunity to make a statement if he or she
desires to do so, and is expected to be available to respond to appropriate
questions.
Audit
Fees
D&T
has billed the Company the following fees for professional services rendered
in
respect of the years ended December 31, 2005 and 2004:
|
|
|
2005
|
|
|
2004
|
|
Audit
Fees
|
|
$
|
570,000
|
|
$
|
400,000
|
|
Audit-Related
Fees
|
|
$
|
25,000
|
|
$
|
14,000
|
|
Tax
Fees
|
|
$
|
175,000
|
|
$
|
143,600
|
|
All
Other Fees
|
|
|
-
|
|
|
-
|
|
Audit
Fees consist of fees for the audit and review of the Company’s financial
statements, statutory audits, comfort letters, consents, and assistance with
and
review of documents filed with the SEC. Audit-related fees consist of fees
for
employee benefit plan audits, accounting advice regarding specific transactions,
internal control reviews, and various attestation engagements. Tax fees
generally represent fees for tax compliance and advisory services. 100% of
audit-related fees and tax fees were approved by the Audit Committee.
Policy
on Pre-Approval of Retention of Independent Auditor
The
engagement of D&T for non-audit accounting and tax services performed for
the Company is limited to those instances in which such services are considered
integral to the audit services that it provides or in which there is another
compelling rationale for utilizing its services. Pursuant to the requirements
of
the Sarbanes-Oxley Act of 2002, all audit and permitted non-audited services
to
be performed by D&T require pre-approval by the Audit Committee. Such
pre-approval may be given by the chairman of the Audit Committee under certain
circumstances, with notice to the full Committee at its next
meeting.
Vote
Required for Ratification of Deloitte &Touche
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. If the Stockholders fail to ratify the selection, the Audit Committee
will reconsider its selection of D&T. Even if the selection is ratified, the
Audit Committee, in its discretion, may direct the appointment of a different
independent registered public accounting firm at any time during the year,
if it
determines that such change would be in the best interests of the Company and
its Stockholders.
The
Board of Directors recommends a vote FOR ratification of the appointment of
Deloitte & Touche LLP as the Company’s independent registered public
accounting firm for the fiscal year ending December 31,
2006.
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.
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 26, 2006
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 pursuant to Rule 14a-8
under
the Securities Exchange Act of 1934 (the “Exchange Act”). Such proposals must
comply with the Company’s By-laws and the requirements of Regulation 14A of the
Exchange Act.
In
addition, the Company's By-laws require Stockholders desiring to bring
nominations or other business before an annual meeting of Stockholders to do
so
in accordance with the terms of the By-laws’ advance notice provision regardless
of whether the Stockholder seeks to include such matters in the Company’s Proxy
Statement pursuant to Rule 14a-8 under the Exchange Act. The Company's By-laws
provide that a notice of the intent of a Stockholder to make a nomination or
to
bring any other matter before an annual meeting must be made in writing and
received by the secretary of the Corporation no earlier than the 119th day
and
not later than the close of business on the 45th day prior to the first
anniversary of the date of mailing of the Corporation’s proxy statement for the
prior year’s annual meeting. However, if the date of the annual meeting has
changed by more than 30 days from the date it was held in the prior year or
if
the Corporation did not hold an annual meeting in the prior year, then such
notice must be received a reasonable time before the Corporation mails its
proxy
statement for the annual meeting.
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
(201) 604-1800
|
|
Sincerely yours, |
|
|
|
|
|
/s/ Thomas J. Axon |
|
|
|
|
|
THOMAS J. AXON |
|
|
Chairman
|
Jersey
City, New Jersey
May
1,
2006
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, Paul D. Colasono 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, May
24,
2006, 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. To elect the nominees for Class 1 Director below for
a term
of three years:
|
o FOR
ALL NOMINEES LISTED BELOW
(except
as marked to the contrary below)
|
|
o WITHHOLD
AUTHORITY
from
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.)
|
Robert
M. Chiste
|
|
|
Alexander
Gordon Jardin
|
|
|
William
F. Sullivan
|
|
|
|
|
2.
|
APPROVAL
OF THE COMPANY’S 2006 STOCK INCENTIVE PLAN: To approve the Company’s 2006
Stock Incentive Plan:
|
FOR o AGAINST o ABSTAIN o
3. RATIFICATION
OF APPOINTMENT OF AUDITORS: To ratify the appointment of Deloitte & Touche
LLP as the independent registered public accounting firm of the Company for
the
fiscal year ending December 31, 2006:
FOR o AGAINST o ABSTAIN o
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 PROPOSALS 2 AND 3.
PLEASE
DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE: x
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:
_____________________________, 2006 ________________________________________________
(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.