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 ¨
Check
the
appropriate box:
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¨
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Preliminary
proxy statement
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¨
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
proxy statement
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¨
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Definitive
additional materials
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¨
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Soliciting
material pursuant to Rule 14a-11(c) or Rule 14a-12
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FRANKLIN
CREDIT MANAGEMENT CORPORATION
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(Name
of Registrant as Specified in Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of filing fee (Check the appropriate box):
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x
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No
fee required.
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¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed
pursuant to
Exchange Act Rule 0-11:
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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¨
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Fee
paid previously with preliminary materials.
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¨
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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.
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(1)
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Amount
previously paid:
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(2)
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Form,
schedule or registration statement no.:
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(3)
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Filing
party:
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(4)
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Date
filed:
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FRANKLIN
CREDIT MANAGEMENT CORPORATION
101
Hudson Street
Jersey
City, New Jersey 07302
April
30,
2007
To
Our
Stockholders:
You
are
cordially invited to attend the 2007 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 Tuesday, June 5, 2007, at 2:00 P.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,
2006.
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
and President
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FRANKLIN
CREDIT MANAGEMENT CORPORATION
101
Hudson Street
Jersey
City, New Jersey 07302
(201)
604-1800
NOTICE
OF 2007 ANNUAL MEETING OF STOCKHOLDERS
June
5, 2007
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 2:00 P.M., Eastern Daylight Time, on Tuesday, June 5, 2007 for the following
purposes:
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1.
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to
elect three directors to Class 2 of the Company’s Board of
Directors;
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2.
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to
ratify the appointment of Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for the fiscal year
ending
December 31, 2007; and
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3.
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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 2 Directors 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, 2007.
Stockholders
of record at the close of business on April 16, 2007 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
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Jersey
City, New Jersey
April
30,
2007
FRANKLIN
CREDIT MANAGEMENT CORPORATION
101
Hudson Street
Jersey
City, New Jersey 07302
(201)
604-1800
PROXY
STATEMENT FOR
2007
ANNUAL MEETING OF STOCKHOLDERS
To
Be Held June 5, 2007
General
Information
This
Proxy Statement and the enclosed form of proxy are being furnished, commencing
on or about April 30, 2007, 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 2:00 P.M., Eastern
Daylight Time, on Tuesday, June 5, 2007, and at any adjournment or postponement
thereof, for the purposes set forth in the foregoing Notice of 2007 Annual
Meeting of Stockholders.
The
annual report of the Company, containing financial statements of the Company
as
of December 31, 2006, 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 2 of the Board of Directors, (ii) 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, 2007, and
(iii) in the discretion of the proxies named on the proxy card with respect
to
any other matters properly brought before the Annual Meeting. Attendance in
person at the Annual Meeting will not of itself revoke a proxy; however, any
Stockholder who does attend the Annual Meeting may revoke a proxy orally and
vote in person. Proxies may be revoked at any time before they are voted by
timely submitting a properly executed proxy with a later date or by sending
a
written notice of revocation to the Secretary of the Company at the Company’s
principal executive offices.
This
Proxy Statement and the accompanying form of proxy are being mailed to
Stockholders of the Company on or about April 30, 2007.
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 2 of the
Board of Directors 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, 2007.
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 have discretionary authority
to vote on all of the proposals being submitted hereby to the Stockholders.
Shares that are voted by brokers on some but not all of the matters will be
treated as shares present for purposes of determining the presence of a quorum
on all matters, but will not be treated as shares entitled to vote at the Annual
Meeting on those matters as to which authority to vote is withheld by the
broker.
The
election of each nominee for Director requires a plurality of votes cast.
Accordingly, abstentions and Broker non-votes will not affect the outcome of
the
election; votes that are withheld will be excluded entirely from the vote and
will have no effect. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy at the meeting and entitled
to
vote is required for the appointment of the independent 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 2 of the Board of Directors 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, 2007, 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 16, 2007 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 16, 2007, there
were
outstanding 8,025,295 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.
-2-
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information, as of April 16, 2007, with respect
to
beneficial ownership of Coommon Stock and the percentages of beneficial
ownership by:
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·
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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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·
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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.
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Name
and Address of
Beneficial
Owner (1)
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Amount
and Nature of Beneficial
Ownership
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Percentage
(%) of
Common
Stock Outstanding
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Thomas
J. Axon
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3,418,749
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42.6
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%
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Michael
Bertash
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8,000
(2
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)
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*
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Robert
M. Chiste
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6,000
(3
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)
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*
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Frank
B. Evans, Jr.
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876,425
(4
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)
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10.9
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%
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Alexander
Gordon Jardin
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118,000
(5
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1.5
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%
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Steven
W. Lefkowitz
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301,650
(6
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3.8
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%
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Allan
R. Lyons
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85,500
(7
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)
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1.1
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%
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William
F. Sullivan
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76,700
(8
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)
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*
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Joseph
Caiazzo
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195,520
(9
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2.4
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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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Jeffrey
R. Johnson
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55,000
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*
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All
Directors and Executive Officers
as
a group (11) persons)
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5,098,544
(10
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62.2
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%
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*
Indicates
beneficial ownership of less than one (1%) percent.
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(1)
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Unless
otherwise indicated the address of each beneficial owner identified
is C/O
Franklin Credit Management Corporation, Six Harrison Street, New
York, New
York 10013.
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(2)
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Includes
8,000 shares issuable upon exercise of options exercisable within
sixty
days.
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(3)
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Includes
6,000 shares issuable upon exercise of options exercisable within
sixty
days.
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(4)
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Includes
20,000 shares, the aggregate of 5,000 shares beneficially owned by
each of
four minor children for which Mr. Evans is the trustee. Includes
33,000
shares issuable upon exercise of options exercisable within sixty
days.
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(5)
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Includes
3,000 shares issuable upon exercise of options exercisable within
sixty
days.
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(6)
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Includes
13,000 shares issuable upon exercise of options exercisable within
sixty
days. Includes 47,500 shares beneficially owned by Mr. Lefkowitz’s
wife.
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(7)
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Includes
22,000 shares issuable upon exercise of options exercisable within
sixty
days.
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-3-
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(8)
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Includes
30,000 shares issuable upon exercise of options exercisable within
sixty
days.
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(9)
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Includes
90,000 shares issuable upon exercise of options exercisable within
sixty
days.
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(10)
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Includes
177,000 shares issuable upon exercise of options exercisable within
sixty
days.
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SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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
2006, the Company believes that all Section 16(a) filing requirements applicable
to its Officers, Directors and ten percent stockholders were complied with
except: each of Messrs. Caiazzo, Sullivan, and Lyons belatedly filed a 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 2 of the
Board of Directors 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, 2007.
-4-
PROPOSAL
1 - ELECTION OF DIRECTORS
Nominees
for Election
The
Board
of Directors is divided into three classes, and is comprised of eight directors.
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 2 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 and has consented to serve if
elected.
Pursuant
to the NASDAQ Marketplace Rules, a majority of the Board of Directors must
be
comprised of independent directors as defined in NASDAQ Marketplace Rule 4200.
Accordingly, the Board of Directors has concluded that each of Michael Bertash,
Frank B. Evans, Steven W. Lefkowitz, Robert M. Chiste and Allan R. Lyons
qualifies as an independent director.
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
Michael Bertash, Frank B. Evans, Jr. and Steven W. Lefkowitz as a Class 2
Director to hold office until the 2010 annual meeting of stockholders and until
each of their respective successors is elected.
Director
Nominee Information
Nominees
for 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.
-5-
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, Chief Executive Officer and a director of Comverge, Inc.,
a
publicly-traded energy solutions company, 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, 54, 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, 57, was elected a Director of the Company in 1996. Mr. Sullivan
has
served as Chief Operating Officer of the Company since August 17, 2006. 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
3 Directors with Terms Expiring in 2008
Thomas
J.
Axon, 54, 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.
-6-
No
familial relationships exist between any Directors and Executive
Officers.
Meetings
of the Board of Directors and its Committees
During
2006, there were five meetings of the Board of Directors of the Company, six
meetings of the Audit Committee, two meetings of the Compensation Committee.
No
Director attended fewer than 75% of the aggregate number of meetings of the
Board of Directors and of any committee on which he served except for Mr.
Chiste.
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. Seven of the eight members of the Board of Directors
attended last year’s annual meeting of stockholders.
Compensation
of Directors
During
fiscal year 2006, the Company’s non-management directors, Messrs. Bertash,
Chiste, Evans, Lefkowitz and Lyons, were granted options to purchase 3,000
shares of Common Stock pursuant to the Company’s 2006 Stock Incentive Plan, as
amended (the “2006 Plan”), upon their election or re-election to the Board or
the anniversary thereof, 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 2006 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 annual 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.
|
-7-
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 2006 included
Messrs. Bertash, Chiste, Evans, Lefkowitz and Lyons.
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 NASDAQ Marketplace Rules. Each
of
these committees has a written charter approved by the Board of the Directors
in
January 2005. A copy of each committee’s charter is posted on the Company’s
website at www.franklincredit.com.
Audit
Committee. The
Audit
Committee currently consists and during 2006 consisted of directors Allan R.
Lyons, (Chairman of the Committee), Michael Bertash and Steven W. Lefkowitz.
Until March 2006, the Audit Committee consisted of Mr. Lyons, Mr. Bertash and
Alexander Gordon Jardin and held one meeting. Mr. Jardin resigned from the
Audit
Committee in March 2006 upon becoming employed by the Company and the Audit
Committee held five additional meetings during the remainder of the year. 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 NASDAQ
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,
(Chairman of the Committee), Robert M. Chiste and Frank B. Evans. Until March
2006, the Compensation Committee also included Alexander Gordon Jardin. Mr.
Jardin resigned from the Compensation Committee in March 2006 upon becoming
employed by the Company. The Compensation Committee held two meetings in 2006.
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
NASDAQ 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.
|
-8-
|
·
|
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. Until February 2006, the Nominating and Corporate
Governance Committee consisted of Allan R. Lyons, Michael Bertash and William
F.
Sullivan. 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. The Committee
did not hold any meetings in 2006. Accordingly, the independent members of
the
Board of Directors recommended a 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 NASDAQ 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.
|
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 2006. 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.
-9-
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 NASDAQ
Marketplace Rules, that at least three of the directors satisfy the financial
literacy requirements required for service on the Audit Committee under the
NASDAQ 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, 101 Hudson Street Jersey City, NJ 07302. 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.
-10-
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 2006 fiscal year, the Audit Committee consisted solely of independent
directors, as such term is defined by Rule 4200(a)(15) of the NASDAQ Marketplace
Rules. The Audit Committee operates under a written charter that was adopted
by
the Board of Directors in January 2006 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, 2006 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 2006 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, 2006. The Audit Committee has also
appointed, subject to stockholder ratification, the Company’s independent
registered public accounting firm for the year ending December 31,
2007.
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 2006, was, an employee
of
the Company. Alexander Gordon Jardin was a member of the Audit Committee 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.
|
Respectfully
submitted by the Audit Committee,
|
|
|
Allan
R. Lyons, Chairman
|
|
|
Michael
Bertash
|
|
|
Steven
W. Lefkowitz
|
-11-
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)
|
54
|
President
and Chairman of the Board of Directors
|
|
Alexander
Gordon Jardin (2)
|
54
|
Chief
Executive Officer
|
|
Paul
D. Colasono
|
60
|
Chief
Financial Officer and Executive Vice President
|
|
William
F. Sullivan (3)
|
57
|
Chief
Operating Officer
|
|
Joseph
Caiazzo
|
49
|
Executive
Vice President
|
|
Richard
W. Payne III (4)
|
50
|
President,
Tribeca Lending Corporation
|
|
(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)
William F. Sullivan became Chief Operating Officer on August 17,
2006.
(4)
Richard W. Payne III became President of Tribeca Lending Corporation
on
February 22, 2007.
|
||
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 served as the Company’s Secretary from March 1996 until August 2006.
From March 1996 until August 2004, Mr. Caiazzo served as the Company’s Vice
President and Chief Operating Officer. Mr. Caiazzo also served as President
of
Tribeca Lending Corporation, the Company’s wholly-owned mortgage banking
subsidiary, from 1997 until February 22, 2007, and has served as Executive
Vice
President of Tribeca Lending Corporation since February 22, 2007. 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.
Richard
W. Payne III has served as President of Tribeca Lending Corporation, the
Compay’s wholly-owned mortgage banking subsidiary, since February 22, 2007. From
March 2005 until his engagement by the Company, Mr. Payne served as President,
Wholesale Division of The New York Mortgage Company. From March 2004 until
March
2005, Mr. Payne served as Managing Director and Director of Wholesale
Development - Aurora Loan Services of Lehman Brothers. From October 1997 until
March 2004, Mr. Payne served as President and CEO of SIB Mortgage Corp. Mr.
Payne holds a Bachelor of Science degree in Business Administration from the
University of Richmond.
-12-
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis included in this proxy statement with management. Based on such
review and discussions, the Compensation Committee recommended to the Board
of
Directors that the Compensation Discussion and Analysis be included in the
company’s proxy statement relating to the 2007 annual meeting of
shareholders.
|
The
Compensation Committee,
|
|
|
Steven
W. Lefkowitz, Chairman
|
|
|
Robert
M. Chiste
|
|
|
Frank
B. Evans
|
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
The
Compensation Committee of our Board of Directors (the “Compensation Committee”)
establishes our general compensation policies and reviews and approves
compensation for the executive officers. As a general matter, executive
compensation consists of annual base salary, incentive cash bonus, equity-based
incentive awards, and additional benefits and perquisites.
This
section discusses the principles underlying our executive compensation policies,
our decisions to date and the principles that we expect to use in coming
years.
Our
Named Executive Officers
The
following table sets forth all individuals who served as our principal executive
officer at any time during 2006, all individuals who served as our principal
financial officer at any time during 2006 and our three most highly compensated
executive officers other than our principal executive officer and our principal
financial officer who were serving as executive officers at the end of
2006:
|
Name
|
Title
|
|
Thomas
J. Axon (1)
|
President
and Chairman of the Board of Directors
|
|
Alexander
Gordon Jardin (2)
|
Chief
Executive Officer
|
|
Jeffrey
R. Johnson (3)
|
President
and Chief Executive Officer
|
|
Paul
D. Colasono
|
Chief
Financial Officer and Executive Vice President
|
|
William
F. Sullivan (4)
|
Chief
Operating Officer
|
|
Joseph
Caiazzo
|
Executive
Vice President
|
|
(1)
|
Thomas
J. Axon served as our Chief Executive Officer from January 21, 2006
until
April 26, 2006 and has served as our
President since January 21, 2006.
|
|
(2)
|
Alexander
Gordon Jardin became our Chief Executive Officer on April 26,
2006.
|
|
(3)
|
Jeffrey
R. Johnson served as our President and Chief Executive Officer until
January 21, 2006.
|
|
(4)
|
William
F. Sullivan became our Chief Operating Officer August 17,
2006.
|
On
February 22, 2007, Richard W. Payne III became President of Tribeca Lending
Corp., our wholly-owned subsidiary.
Our
Compensation Methodology
The
Compensation Committee’s functions include establishing our general compensation
policies, reviewing and approving compensation for the executive officers and
members of the Board of Directors and administering our 2006 Stock Incentive
Plan. The goal of the Compensation Committee is to design compensation packages
that will allow our company to attract and retain, as well as motivate and
reward, executives and directors with the skills and talents to achieve both
our
current and long term financial, strategic and operating goals. The intended
result is to align the interests of the executives and directors with those
of
our shareholders.
-13-
Elements
of Compensation
Our
typical executive compensation package consists of four main components: (1)
base salary; (2) annual incentive cash bonuses; (3) long-term incentive
compensation in the form of equity-based awards; and (4) perquisites and other
compensation. The Compensation Committee manages all four components on an
integrated basis to attract and retain highly qualified management, to provide
short-term incentive compensation that varies directly with our financial
performance and to link long-term compensation directly with long-term stock
price performance.
Annual
Base Salary
The
annual base salary is intended to attract and retain high performing employees
that can produce superior financial results. In establishing base salaries,
the
Compensation Committee’s approach is to offer executive salaries competitive
with those of other executives in the industry in which we operate. To that
end,
the Compensation Committee evaluates the competitiveness of its base salaries
based upon information drawn from various sources, including published and
proprietary survey data, and our company’s experiences recruiting executives and
professionals, as well as the recommendations of the Chief Executive Officer
and
the Chairman of the Board. Our base salary levels are intended to be consistent
with competitive practice and level of responsibility, with salary increases
reflecting competitive trends, our overall financial performance and the
performance of the individual executive.
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
and originations, achieving servicing goals and achieving financial targets.
At
the beginning of each year, the Compensation 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 our company. Such cash bonuses are
intended to recognize the contributions of our key employees in achieving our
current goals. They are further intended to attract and retain key employees
of
outstanding ability. Currently, 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 based on
profitability of Company and which pool will be 0 for 2006. However, the
Compensation Committee and Chief Executive Officer may determine to award key
executives with bonuses from outside of the pool with respect to 2006.
Equity-Based
Incentive Awards
The
third
element of compensation consists of equity-based incentive awards.
We
consider long-term, equity-based compensation as an essential tool in aligning
the interests of management with those of our stockholders. We believe that
equity-based incentive awards provide executive officers with an incentive
to
manage our company from the perspective of an owner with an equity stake in
the
business and thus increase long-term shareholder value. In connection with
that
belief and the fact that our 1996 Stock Option Plan, as amended, expired in
May
2006, we adopted the 2006 Stock Incentive Plan.
The
2006
Stock Incentive Plan authorizes 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.
-14-
In
its
evaluation of the appropriate level of long-term stock-based compensation,
the
Compensation Committee considers industry peer group data, our prior long-term
incentive compensation practice and the number of stock options outstanding
relative to the number of shares of Common Stock outstanding. Options are
generally granted at an exercise price of 100% of the Common Stock’s fair market
value on the grant date, vest over varying amounts of time and generally expire
10 years from the date of grant unless the grantee no longer serves as an
employee or director of our company or a subsidiary. Options are granted by
the
Compensation Committee using the Black-Scholes option valuation model. The
Compensation Committee takes into consideration other factors such as dilution,
the number of Common Stock outstanding, our financial performance and the
officer’s individual performance. Since 2005, the Compensation Committee has
been increasingly recommending the use of restricted stock grants rather than
options in connection with the retention of key employees.
Additional
Benefits and Perquisites
Our
final
primary compensation element consists of certain benefits and perquisites
provided to our executive officers.
All
of
our executive officers are eligible to participate in our employee benefit
plans, including medical, dental, vision, group life insurance, disability
and
our 401(k) plan. In
each
case, we provide these benefits to our executive officers on the same basis
as
our other employees except for long term disability polices. Effective October
1, 2006, each Executive Officer and certain other members of senior management
are eligible to receive long term disability insurance benefits of 60% of their
monthly salary to a maximum of $10,000 dollars per month to age 65. The Company
contributes 50% of the premium which ranges from approximately $32 to $74 per
month per participant. Effective October 1, 2006, other employees are eligible
to receive long term disability insurance benefits of 60% of their monthly
salary to a maximum of $5,000.00 dollars for a maximum term of five 5 years.
The
Company contributes 100% of the premium which is approximately $10 per month
per
person. Prior to October 1, 2006, Executive Officers and other employees had
the
same long term disability benefits and policy.
In
addition, we provide our executive officers with perquisites, which are
described in more detail in a footnote to our Summary Compensation Table and
under the subheading “—Employment Agreements” below. During the fiscal year
ended December 31, 2006, certain of our named executive officers received
perquisites including vehicle
allowances, parking passes or reimbursement, cell phone/blackberry devices,
expense reimbursement, reimbursement of legal fees, moving expenses, tax
gross-ups, life insurance policy premiums, health insurance policy premiums,
housing allowances, allowances to cover retirement annuities, cost of living
allowances and use of Company-owned apartment.
We
believe that the provided perquisites are generally comparable to those offered
to executive officers in companies similar to our size and industry. We also
believe that these perquisites help us to attract and retain our executives.
Our
Compensation Committee plans to regularly review these benefits. If our
Compensation Committee determines that the perquisites are not reasonable or
justified, then we expect the Compensation Committee will stop offering the
perquisites to our executive officers.
Severance
and Change-in-Control Agreements
In
addition to the compensation elements described above, we also provide some
of
our executive officers with severance and change-in-control arrangements, which
are described in more detail under the subheadings "--Employment Agreements"
and
"--Potential Payments Upon Termination or Change in Control" below. We believe
that severance packages are a common characteristic of compensation for key
executive officers. They are intended to provide our executive officers with
a
sense of security in making the commitment to dedicate their professional career
to our success. Due to our size relative to other public companies, we believe
that severance and change-in-control agreements are necessary to help us attract
and retain necessary skilled and qualified executive officers to continue to
grow our business.
Role
of Executive Officers in Executive Compensation
The
Compensation Committee determines
the compensation payable to each of the named executive officers as well as
the
compensation of the members of the Board of Directors. The Compensation
Committee determines the compensation paid to each of our named executive
officers, other than with respect to compensation payable to Mr. Jardin, based
upon the recommendations received from our Chief Executive Officer, Mr. Jardin.
-15-
Employment
Agreements with Named Executive Officers
We
currently have employment agreements with the following named executive
officers: Alexander Gordon Jardin, Paul D. Colasono, William F. Sullivan, and
Joe Caiazzo. In addition, during his term of employment, we had an employment
agreement with our former Chief Executive Officer, Jeffrey R. Johnson. All
of
these employment agreements are described in detail below and the severance
arrangements with respect thereto (including the definitions contained in each
relevant employment agreement of “cause,” “good reason” and “change in control”)
are discussed in further detail under the heading “—Potential Payments Upon
Termination or Change in Control.”
Thomas
J. Axon - President and Chairman of the Board of Directors
We
do not
have a written employment agreement with Mr. Axon. Pursuant to an oral
agreement, Mr. Axon receives an annual base salary of $150,000 and is eligible
to receive an annual performance bonus, which is determined by the Board of
Directors. Mr. Axon does not have any arrangements with the Company that would
require a payment upon a change in control of the Company or upon the
termination of Mr. Axon’s employment.
Alexander
Gordon Jardin - Chief Executive Officer
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, as well as an annual
bonus to be determined and paid on or before May 1st of the following year.
Mr.
Jardin also received a signing bonus of $25,000, and is entitled to a car
allowance of $1,000 per month.
In
connection with his employment, the Company granted to Mr. Jardin 100,000 shares
of restricted Company common stock, of which 10,000 vested upon grant, 5,000
vest on the first day after each fiscal quarter from July 1, 2006 until April
1,
2008 and 6,250 shares 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 made 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,
if
termination occurs on or after January 1, 2007, $13,542 for each month (or
partial month) of employment after December 31, 2006 prior to his 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.
-16-
Under
the
employment agreement, Mr. Jardin is subject to covenants not to compete and
not
to solicit customers or employees of the Company for certain periods specified
therein.
Further
detail on our severance obligations to Mr. Jardin, including the definitions
contained in his current employment agreement of “cause,” “good reason” and
“change in control” is set forth below under the heading “—Potential Payments
Upon Termination or Change In Control.”
Paul
D. Colasono - Chief Financial Officer
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. In addition, Mr.
Colasono will be entitled to receive an annual bonus based partially on the
net
income after taxes of FCMC. 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 vested on March 28, 2006, 5,000 vested 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 would 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.
Further
detail on our severance obligations to Mr. Colasono, including the definitions
contained in his current employment agreement of “cause,” “good reason” and
“change in control” is set forth below under the heading “—Potential Payments
Upon Termination or Change In Control.”
-17-
William
F. Sullivan - Chief Operating Officer
William
F. Sullivan serves as Chief Operating Officer of the Company under an employment
agreement dated as of February 1, 2006 and amended as of April 28, 2006 and
August 17, 2006. Mr. Sullivan’s appointment as Chief Operating Officer was
effective as of August 17, 2006. Mr. Sullivan’s employment term runs from the
effective date of the employment agreement until its termination by the Company
or Mr. Sullivan.
Under
the
employment agreement, as amended, Mr. Sullivan is entitled to a base annual
salary of $275,000, payable on a semimonthly basis. Not less than annually,
the
Company shall review Mr. Sullivan’s base compensation. Mr. Sullivan also
received a signing bonus of $10,000, and is entitled to a car allowance of
$400
per month and a parking space in the vicinity of the Company’s offices. In
addition, Mr. Sullivan is entitled to receive an annual bonus based on his
performance and the performance of the Company, the amount of which shall be
subject to the reasonable discretion of the Board of Directors of the
Company.
In
connection with his employment and as additional compensation for Mr. Sullivan’s
services under the employment agreement, Mr. Sullivan received a grant of 5,000
shares of common stock of the Company.
To
assist
with Mr. Sullivan’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, to provide Mr. Sullivan with lodging in the New York
City
metropolitan area through the earlier of his relocation or April 1, 2006 and
to
reimburse Mr. Sullivan for weekly trips (using cost-effective airfare and ground
transportation) to Boston during the period prior to his relocation.
Pursuant
to the employment agreement, the Company may terminate Mr. Sullivan’s employment
with or without cause (as defined in the employment agreement) or in the event
Mr. Sullivan is unable to perform his material duties because of illness or
disability for a continuous period of 120 days, and Mr. Sullivan may terminate
it with or without good reason (as defined in the employment agreement).
Pursuant
to the employment agreement, the Company may terminate Mr. Sullivan’s employment
with or without cause (as defined in the employment agreement) and Mr. Sullivan
may terminate it with or without good reason (as defined in the employment
agreement). If Mr. Sullivan is terminated by the Company without cause or for
Mr. Sullivan’s failure to perform assigned duties, or Mr. Sullivan terminates
his employment for good reason, Mr. Sullivan will be entitled to receive (i)
payment in a lump sum in respect of all accrued and unused vacation within
ten
days after termination of employment in an amount based on Mr. Sullivan’s
current base salary, (ii) if such termination occurs after the end of any
calendar year and before the payment date of the bonus in respect of that year,
an amount equal to the bonus for such calendar year on April 15 of the year
of
termination, (iii) monthly payments equal to one twelfth of his then current
base salary for certain specified periods after such termination, and (iv)
if
Mr. Sullivan is enrolled in and covered by a medical insurance plan offered
by
the Company on the date of termination, at his option, either continued health
benefits during a specified period or an amount equal to the medical insurance
premiums that would have been payable by the Company on behalf of Mr. Sullivan
in respect of such specified period.
Under
the
employment agreement, Mr. Sullivan is subject to covenants not to compete and
not to solicit customers or employees of the Company for certain periods
specified therein.
Further
detail on our severance obligations to Mr. Sullivan, including the definitions
contained in his current employment agreement of “cause,” “good reason” and
“change in control” is set forth below under the heading “—Potential Payments
Upon Termination or Change In Control.”
Joseph
Caiazzo -Executive Vice President
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.
-18-
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% of the 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. In addition, Mr. Caiazzo
will be entitled to receive an annual bonus based partially on the net income
after taxes of FCMC. 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 of the Company’s stock option, stock purchase or other equity
compensation plans extended to the 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.
Under
the
employment agreement, Mr. Caiazzo is subject to covenants not to compete and
not
to solicit customers or employees of the Company for certain periods specified
therein.
Further
detail on our severance obligations to Mr. Caiazzo, including the definitions
contained in his current employment agreement of “cause,” “good reason” and
“change in control” is set forth below under the heading “—Potential Payments
Upon Termination or Change In Control—Defined Terms.”
Jeffrey
R. Johnson - Former President and Chief Executive Officer
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 was 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.
Potential
Payments Upon Termination or Change in Control
As
discussed above, we currently have employment agreements with certain of our
named executive officers that contain various provisions relating to severance
and change in control payments. Pursuant to such employment agreements, the
following circumstances would trigger payments or the provision of other
benefits:
|
·
|
Termination
by either party “without cause”;
|
|
·
|
Termination
by the Company “for cause”;
|
|
·
|
Termination
by the executive officer for “good reason” (and, in the case of Paul D.
Colasono and Joseph Caiazzo, for “good reason” following a Change in
Control); and
|
-19-
|
·
|
In
the case of Alexander Gordon Jardin, termination due to the executive
officer’s death or disability, and termination following a Change in
Control.
|
The
following summaries describe and quantify these potential payments and/or
benefits. The definitions contained in such employment agreements of the terms
“cause,” “good reason,” and “change in control” can be found under the
subheading “—Defined Terms.”
Severance/Change
in Control Arrangement for Alexander Gordon Jardin
For
Cause, Without Good Reason.
In the
event that Mr. Jardin’s employment is terminated by the Company for cause or by
Mr. Jardin without good reason, Mr. Jardin shall receive nothing other than
any
accrued salary, payment for accrued but unused vacation time, and reimbursement
of expenses already incurred pursuant to the employment agreement. Any portion
of the restricted common stock of the Company granted to Mr. Jardin pursuant
to
the employment agreement that has not become vested and nonforfeitable on or
prior to the date of such termination shall be forfeited.
In
the
event that the Company terminates Mr. Jardin for cause and it is later
determined by a court of competent jurisdiction that such cause did not exist,
the executive officer’s termination shall be deemed to be a termination by the
Company without cause. In such event, Mr. Jardin shall be entitled to receive
severance pursuant to the terms of his employment agreement as if the
termination was made by the Company without cause.
Without
Cause, For Good Reason, Following a Change in Control,
Death/Disability.
In the
event that Mr. Jardin’s employment is terminated by the Company without cause,
by Mr. Jardin for good reason, by either party following a Change in Control
(other than a termination for cause following such Change in Control), or due
to
Mr. Jardin’s death or disability, Mr. Jardin shall receive the following
payments/benefits: (1) a lump sum in respect of all accrued and unused vacation
within ten days after termination of employment in an amount based on Mr.
Jardin’s current base salary; (2) a prorated bonus determined by or consistent
with the employment agreement, which bonus shall be paid at the later of six
months after termination of the employment agreement or the date provided in
the
employment agreement; and (3) an additional lump sum payable six months after
the termination of the employment agreement in the following amounts: (i) if
the
termination occurs prior to January 1, 2007, $225,000; and (ii) if the
termination occurs on or after January 1, 2007, $225,000 plus $13,542 for each
month (or partial month) of employment with the Company after December 31,
2006,
provided that in no event shall the aggregate amount in this clause (ii) exceed
Mr. Jardin’s salary as of the date of such termination plus an amount equal to
the value of Mr. Jardin’s total benefits for the prior twelve month period, as
of the date of such termination.
In
the
event that Mr. Jardin’s employment is terminated by the Company without cause,
any portion of the restricted common stock of the Company granted to Mr. Jardin
pursuant to the employment agreement that has not become vested and
nonforfeitable on or prior to the date of such termination shall be forfeited.
In addition, in the event of Employee’s death or disability, the entire award of
restricted common stock of the Company granted to Mr. Jardin pursuant to the
employment agreement shall immediately become fully vested and
nonforfeitable.
The
following table and footnotes describe and quantify the potential payments
upon
termination or change in control for Mr. Jardin, assuming that termination
or
change in control was effective as of December 31, 2006:
|
Executive
Benefits and Payments Upon Termination
|
Termination
Without Cause or For Good Reason
|
Termination
For Cause or Without Good Reason
|
Death/
Disability
|
Following
a Change In Control
|
|
Severance
Pay
|
$225,000
|
-
|
$225,000
|
$225,000
|
|
Vesting
of Stock Options and Restricted Stock Awards
|
-
|
-
|
80,000
shares of restricted common stock
|
-
|
|
Other
Benefits
|
$18,750(1)
|
$18,750(1)
|
$18,750(1)
|
$18,750(1)
|
|
(1)
|
Compensation
for accrued and unused vacation.
|
-20-
Severance/Change
in Control Arrangement for Paul D. Colasono
For
Cause, Without Good Reason.
In the
event that Mr. Colasono’s employment is terminated by the Company for cause or
by Mr. Colasono without good reason, Mr. Colasono shall receive nothing other
than (i) a lump sum in respect of all accrued and unused vacation within ten
days after termination of employment in an amount based on Mr. Colasono’s
current base salary, and (ii) reimbursement for expenses already incurred
pursuant to the employment agreement. Except as otherwise provided in the
employment agreement, any portion of the restricted common stock of the Company
granted to Mr. Colasono pursuant to the employment agreement that has not vested
on or prior to the date of such termination shall be forfeited.
In
the
event that the Company terminates Mr. Colasono for cause and it is later
determined by a court of competent jurisdiction that such cause did not exist,
Mr. Colasono’s termination shall be deemed to be a termination by the Company
without cause. In such event, Mr. Colasono shall be entitled to receive
severance pursuant to the terms of the employment agreement as if the
termination was made by the Company without cause.
Without
Cause, For Good Reason Following a Change in Control,
Death/Disability.
In the
event that Mr. Colasono’s employment is terminated by the Company without cause
or by Mr. Colasono for good reason following a Change in Control (other than
for
cause), Mr. Colasono shall receive the following payments/benefits: (i) a lump
sum in respect of all accrued and unused vacation within ten days after the
termination of his employment in an amount based on Mr. Colasono’s current base
salary, (ii) reimbursement for expenses already incurred pursuant to the
employment agreement; and (iii) within thirty days after the termination of
his
employment, a lump sum amount based on his current base salary for the periods
set forth below after such termination:
|
Date
of termination
|
Period
for which current base salary will be paid in lump sum following
termination
|
|
|
In
the event that termination occurs prior to a Change in
Control
|
If
termination occurs prior to September 1, 2005
|
Three
months
|
|
If
termination occurs on or after September 1, 2005 but prior to September
1,
2006
|
Six
months
|
|
|
If
termination occurs on or after September 1, 2006
|
Twelve
months
|
|
|
In
the event that termination occurs at the time of or following a Change
in
Control
|
If
termination occurs prior to September 1, 2005
|
Six
months
|
|
If
termination occurs on or after September 1, 2005 but prior to September
1,
2006
|
Twelve
months
|
|
|
If
termination occurs on or after September 1, 2006
|
Eighteen
months
|
In
addition, if Mr. Colasono is enrolled in and covered by a medical insurance
plan
offered by the Company on the date of termination of employment, he shall be
entitled, at his election, to receive either (x) continued health benefits
for
the periods set forth above, or (y) an amount equal to the medical insurance
premiums paid by the Company on behalf of Mr. Colasono for the periods set
forth
above.
In
the
event that Mr. Colasono’s employment is terminated by the Company without cause,
any portion of the restricted common stock of the Company granted to Mr.
Colasono pursuant to the employment agreement that has not vested on or prior
to
the date of such termination shall be forfeited.
For
purposes of calculating severance payments under the employment agreement,
a
termination due to Mr. Colasono’s illness, disability or death shall be deemed a
termination by the Company without cause.
The
following table and footnotes describe and quantify the potential payments
upon
termination or change in control for Mr. Colasono, assuming that termination
or
change in control was effective as of December 31, 2006:
|
Executive
Benefits and Payments Upon Termination
|
Termination
Without Cause or For Good Reason
|
Termination
For Cause or Without Good Reason
|
Death/
Disability
|
Following
a Change In Control
|
|||||||||
|
Severance
Pay
|
$
|
375,000
|
-
|
$
|
250,000
|
$
|
375,000
|
||||||
|
Vesting
of Stock Options and Restricted Stock Awards
|
-
|
-
|
-
|
-
|
|||||||||
|
Other
Benefits
|
$
|
5,769.12(1)
+ (2
|
)
|
$
|
5,769.12(1
|
)
|
$
|
5,769.12(1)
+ (2
|
)
|
$
|
5,769.12(1)+
(2
|
)
|
|
-21-
(1)
Compensation for accrued and unused vacation.
(2)
Employee would have had the option of either 18 months continued health benefits
or $10,654.02, an amount equal to 18 months of medical insurance premiums which
would have been paid by the Company on behalf of Mr. Colasono.
Severance
Arrangement for William
F. Sullivan
Without
Cause, For Failure to Perform Assigned Duties, For Good Reason.
In the
event that Mr. Sullivan’s employment is terminated by the Company without cause
or for Mr. Sullivan’s failure to perform assigned duties, or Mr. Sullivan
terminates his employment for good reason, Mr. Sullivan will be entitled to
receive: (i) payment in a lump sum in respect of all accrued and unused vacation
within ten days after termination of employment in an amount based on Mr.
Sullivan’s current base salary; (ii) if such termination occurs after the end of
any calendar year and before the payment date of the bonus in respect of that
year, an amount equal to the bonus for such calendar year on April 15 of the
year of termination; (iii) monthly payments equal to one twelfth of his then
current base salary for the following periods after such termination: if
termination occurs prior to February 1, 2007 - three months, and if termination
occurs on or after February 1, 2007 - four months. In addition, if Mr. Sullivan
is enrolled in and covered by a medical insurance plan offered by the Company
on
the date of termination, at his option, either continued health benefits during
a specified period or an amount equal to the medical insurance premiums that
would have been payable by the Company on behalf of Mr. Sullivan in respect
of
such specified period. In the event Mr. Sullivan’s employment is terminated and
he is not entitled to severance in accordance with the employment agreement,
Mr.
Sullivan shall be entitled to no further compensation or payments from the
Company.
Mr.
Sullivan’s employment agreement does not provide for payments upon a change in
control.
The
following table and footnotes describe and quantify the potential payments
upon
termination or change in control for Mr. Sullivan, assuming that termination
or
change in control was effective as of December 31, 2006:
|
Executive
Benefits and Payments Upon Termination
|
Termination
Without Cause or For Good Reason
|
Termination
For Cause or Without Good Reason
|
Death/
Disability
|
Following
a Change In Control
|
|||||||||
|
Severance
Pay
|
$
|
68,750
|
-
|
-
|
-
|
||||||||
|
Vesting
of Stock Options and Restricted Stock Awards
|
-
|
-
|
-
|
-
|
|||||||||
|
Other
Benefits
|
10,735.45(1)+
(2
|
)
|
-
|
-
|
-
|
||||||||
(1)Compensation
for accrued and unused vacation.
(2)
Employee would have had the option of either 3 months continued health benefits
or $2,956.20, an amount equal to 3 months of medical insurance premiums which
would have been paid by the Company on behalf of Mr. Sullivan.
Severance/Change
in Control Arrangement for Joseph Caiazzo
For
Cause, Without Good Reason.
In the
event that Mr. Caiazzo’s employment is terminated by the Company for cause or by
Mr. Caiazzo without good reason, Mr. Caiazzo shall receive nothing other than
(i) a lump sum in respect of all accrued and unused vacation within ten days
after termination of employment in an amount based on Mr. Caiazzo’s current base
salary, and (ii) reimbursement for expenses already incurred pursuant to the
employment agreement.
In
the
event that the Company terminates Mr. Caiazzo for cause and it is later
determined by a court of competent jurisdiction that such cause did not exist,
Mr. Caiazzo’s termination shall be deemed to be a termination by the Company
without cause. In such event, Mr. Caiazzo shall be entitled to receive severance
pursuant to the terms of the employment agreement as if the termination was
made
by the Company without cause.
-22-
Without
Cause, For Good Reason Following a Change in Control,
Death/Disability.
In the
event that Mr. Caiazzo’s employment is terminated by the Company without cause
or by Mr. Caiazzo for good reason following a Change in Control (other than
for
cause), Mr. Caiazzo shall receive the following payments/benefits: (i) a lump
sum in respect of all accrued and unused vacation within ten days after the
termination of his employment in an amount based on Mr. Caiazzo’s current base
salary; (ii) reimbursement for expenses already incurred pursuant to the
employment agreement; (iii) a prorated bonus amount from the executive bonus
pool based on his then target bonus as described in the employment agreement
within thirty days after termination of employment; and (iv) within thirty
days
after the termination of his employment, semi-monthly payments based on his
current base salary for the periods after such termination as follows: (a)
in
the event the termination occurs prior to a Change in Control, 18 months; and
(b) in the event the termination occurs at the time of or following a Change
in
Control, 24 months. In addition, if Mr. Caiazzo is enrolled in and covered
by a
medical insurance plan offered by the Company on the date of termination of
employment, he shall be entitled, at his election, to receive either (x)
continued health benefits for periods set forth in the preceding sentence,
or
(y) an amount equal to the medical insurance premiums paid by the Company on
behalf of Mr. Caiazzo for such periods.
For
purposes of calculating severance payments under the employment agreement,
a
termination due to Mr. Caiazzo’s illness, disability or death shall be deemed a
termination by the Company without cause.
The
following table and footnotes describe and quantify the potential payments
upon
termination or change in control for Mr. Caiazzo, assuming that termination
or
change in control was effective as of December 31, 2006:
|
Executive
Benefits and Payments Upon Termination
|
Termination
Without Cause or For Good Reason
|
Termination
For Cause or Without Good Reason
|
Death/
Disability
|
Following
a Change In Control
|
|||||||||
|
Severance
Pay
|
$
|
315,000
|
-
|
$
|
315,000
|
$
|
420,000
|
||||||
|
Vesting
of Stock Options and Restricted Stock Awards
|
-
|
-
|
-
|
-
|
|||||||||
|
Other
Benefits
|
$
|
6,262.68(1)+
(2
|
)
|
$
|
6,262.68(1
|
)
|
$
|
6,262.68(1
|
)
|
$
|
6,262.68(1)+
(3
|
)
|
|
(1)
Compensation for accrued and unused vacation.
(2)
Employee would have had the option of either 18 months continued health benefits
or $17,737.20, an amount equal to 18 months of medical insurance premiums which
would have been paid by the Company on behalf of Mr. Caiazzo.
(3)
Employee would have had the option of either 24 months continued health benefits
or $23,649.60, an amount equal to 24 months of medical insurance premiums which
would have been paid by the Company on behalf of Mr. Caiazzo.
Defined
Terms
The
terms
“cause,” “good reason” and change in control” are defined in the employment
agreements for Mr. Jardin, Mr. Colasono, Mr. Sullivan (as applicable) and Mr.
Caiazzo as follows (with any variations among the employment agreements noted
following each such definition).
“Cause”
is
generally defined to include the following:
(1) executive
officer fails or refuses to perform one or more of his material assigned duties
to the Company;
(2) executive
officer fails or refuses to comply with one or more policies of the Company;
(3) executive
officer breaches any of the material terms of his employment agreement;
or
-23-
(4) executive
officer commits any criminal, fraudulent or dishonest act related to his
employment (other than an arm’s length dispute relating to the erroneous
reporting of an immaterial amount as an expense) relating to the Company or
any
of its assets or opportunities.
Pursuant
to Mr. Jardin’s employment agreement, “Cause” is similarly defined with the
following variations: subclauses (1) and (2) require Mr. Jardin to continuously
take the
actions listed therein; and the parenthetical contained in subclause (4) states
as follows: “(other than a dispute relating to the unintentional erroneous
reporting of an immaterial amount as an expense).”
Pursuant
to Mr. Sullivan’s employment agreement, “Cause” is similarly defined except that
subclause (4) is limited to the event that Mr. Sullivan “commits any criminal,
fraudulent or dishonest act related to his employment.”
“Good
Reason”
is
generally limited to the following: (1) executive officer is asked to resign,
in
writing, by the Board of Directors or is terminated by the Company without
cause; or (2) any material diminution by the Company of executive officer’s
duties or responsibilities, except in connection with the termination of
executive officer’s employment for cause, as a result of permanent disability,
or as a result of executive officer’s death.
Pursuant
to Mr. Colasono’s employment agreement, “Good Reason” is similarly defined with
the following variation: “Good Reason” is also defined to include if he is
removed as CFO, or Executive Vice President of the Company.
Pursuant
to Mr. Jardin’s employment agreement, “Good Reason” is defined to be limited to
the following: (1) the Company transfers the place of his employment in
violation of the employment agreement; (2) the Company breaches any of the
material terms of certain specified provisions of the employment agreement
or
the Company knowingly misrepresented or failed to disclose to Mr. Jardin a
material financial, regulatory or legal matter of, or involving, the Company
prior to the execution of the employment agreement of which Mr. Jardin did
not
have knowledge; (3) any material diminution by the Company of Mr. Jardin’s
duties or responsibilities, except in connection with the termination of Mr.
Jardin’s employment by the Company, as a result of permanent disability, or as a
result of Employee’s death; (4) Mr. Jardin is requested by the Company to act in
an unethical or illegal manner; or (5) Mr. Jardin is removed as CEO, President
or Director of the Company.
Pursuant
to Mr. Sullivan’s employment agreement, “Good Reason” is defined to be limited
to the following: (1) the Company transfers the place of his employment in
violation of the employment agreement; or (2) the Company breaches any of the
material terms of certain specified provisions of the employment
agreement.
“Change
in Control”
is
generally defined to mean the occurrence of one or more of the following
events:
(1) If
(i)
any “person”(as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the total voting power represented
by the Company’s then outstanding voting securities who is not already such as
of the date of this Agreement, and (ii) Thomas J. Axon, members of Mr. Axon’s
family, and entities in which Mr. Axon has an interest shall have beneficial
ownership of less than twenty percent (20%) or more of the total voting power
represented by the Company’s then outstanding voting securities;
(2) The
consummation of a tender or exchange offer; one or more contested elections
related to the election of directors of the Company; a reorganization, merger
or
consolidation, or the acquisition of assets of another corporation, or any
combination of the foregoing transactions, which results in a change in the
composition of the Board of Directors of the Company, as a result of which
fewer
than fifty percent (50%) of the directors are incumbent directors.
(3) The
Company’s shares shall cease to be registered under Section 12(b) or 12(g) under
the Securities Exchange Act of 1934, as amended; or
(4) A
sale or
other disposition of all or substantially all of the assets of the Company.
-24-
Notwithstanding
the foregoing, a “Change of Control” shall not be deemed to have occurred if the
Company files for bankruptcy protection, or if a petition for involuntary relief
is filed against the Company.
There
is
no definition of “change in control” in Mr. Sullivan’s employment
agreement.
Severance
Arrangement for Jeffrey R. Johnson
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 was 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.
Additional
Employment Agreements
On
February 22, 2007, we entered into an employment agreement, effective as of
February 22, 2007, between with Richard W. Payne III. Under the employment
agreement, Mr. Payne will serve as President of Tribeca.
Mr.
Payne
will be entitled to a base salary of $300,000, subject to adjustment by the
Board of Directors. Mr. Payne will be entitled to participate in a bonus pool
based on the performance of Tribeca and the loans it originates, which will
be
determined and paid in respect of each year on or before May 1st of the
following year. Mr. Payne will also receive a car allowance of $400 per
month.
Mr.
Payne’s employment term runs for two years from the effective date of the
employment agreement, or until its earlier termination by the Company or Mr.
Payne. Pursuant to the employment agreement, the Company may terminate Mr.
Payne’s employment with or without cause and Mr. Payne may terminate it with or
without good reason.
The
Company may terminate Mr. Payne’s employment “for cause” if Mr. Payne: (1) fails
or refuses to perform one or more of his material assigned duties; (2) fails
or
refuses to comply with one or more policies of the Company; (3) breaches any
of
the material terms of the employment agreement; or (4) commits any criminal,
fraudulent or dishonest act related to his employment or to the Company or
any
of its assets or opportunities (other than an arm’s length dispute relating to
the erroneous reporting of an immaterial amount as an expense) or is convicted
(or enters a plea of guilty or nolo contendre to) of a felony involving, in
the
good faith judgment of the Company, fraud, dishonesty or moral turpitude.
The
employment agreement defines “good reason” to be limited to the following: (1)
Mr. Payne is asked, in writing, by the Board of Directors of the Company, to
resign; and (2) any material diminution by the Company of Mr. Payne’s title,
authority, duties or responsibilities or Mr. Payne’s salary below the initial
salary provided for in the employment agreement, except, in each case, in
connection with the termination of Mr. Payne’s employment by either party
without cause, by the Company with cause, or due to Mr. Payne’s incapacity or
death.
In
the
event that Mr. Payne is terminated by the Company without cause, by Mr. Payne
for good reason, or as a result of Mr. Payne’s death or disability, Mr. Payne
will be entitled to severance, including a lump sum payment in an amount equal
to six months’ salary at the rate in effect immediately prior to such
termination a bonus in respect of any completed year prior to termination as
to
which such bonuses have not been paid and a prorated bonus in respect of the
year of termination.
-25-
Under
the
employment agreement, Mr. Payne is subject to covenants not to engage in certain
competitive activities during his term of employment and for six months
thereafter, and not to solicit employees or certain business relations of the
Company during the term of his employment and for nine months
thereafter.
-26-
Summary
Compensation Table
The
following table provides information regarding the compensation earned by our
named executive officers during the fiscal year ended December 31,
2006.
|
SUMMARY
COMPENSATION TABLE
|
||||||||||||||||
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Stock
Awards ($)
|
All
Other Compensation
($)
|
Total
($)
|
|||||||||||
|
Thomas
J. Axon, President and Chairman of the Board of Directors
|
2006
|
150,000
|
-
|
16,683
|
166,683
|
|||||||||||
|
Alexander
Gordon Jardin,
Chief
Executive Officer
|
2006
|
295,833
|
197,500(1
|
)
|
952,545
|
2,038,376
|
||||||||||
|
Jeffrey
R. Johnson,
President
and Chief Executive Officer
|
2006
|
13,543
|
-
|
300,752
|
314,295
|
|||||||||||
|
Paul
D. Colasono, Chief Financial Officer and Executive Vice
President
|
2006
|
250,000
|
66,086(2
|
)
|
272,554
|
522,554
|
||||||||||
|
William
F. Sullivan, Chief Operating Officer
|
2006
|
248,958
|
39,500(1
|
)
|
69,659
|
358,117
|
||||||||||
|
Joseph
Caiazzo, Executive Vice President
|
2006
|
210,000
|
-
|
27,630
|
237,630
|
|||||||||||
(1)
The
Stock Award was in accordance with FAS123(r) at $7.90 per share based on the
date of grant, June 15, 2006.
(2)
The Stock Award was in accordance with FAS123(r) at
$12.75 per share based on the date of grant, April 30, 2005.
All
Other Compensation
The
following table provides information regarding the all other compensation earned
by our named executive officers during the fiscal year ended December 31,
2006.
|
Name
and Principal Position
|
Year
|
Eye
Benefits
($)
|
Medical
($)
|
Life
($)
|
Stock
Awards
($)
|
Tax
Gross up
($)
|
Other
Expenses
($)
|
Car
Allowance/ Parking ($)
|
Total
($)
|
|||||||||||||||||||
|
Thomas
J. Axon, President and Chairman of the Board of Directors
|
2006
|
-
|
16,083
|
600
|
-
|
-
|
-
|
-
|
16,683
|
|||||||||||||||||||
|
Alexander
Gordon Jardin,
Chief
Executive Officer
|
2006
|
85
|
6,435
|
400
|
197,500
|
658,698
|
79,425(1
|
)
|
10,000
|
952,545
|
||||||||||||||||||
|
Jeffrey
R. Johnson,
President
and Chief Executive Officer
|
2006
|
-
|
9,652
|
600
|
-
|
-
|
290,500(2
|
)
|
-
|
300,752
|
||||||||||||||||||
|
Paul
D. Colasono, Chief Financial Officer and Executive Vice
President
|
2006
|
128
|
9,652
|
600
|
66,086
|
174,908
|
18,000(3
|
)
|
3,180
|
272,554
|
||||||||||||||||||
-27-
|
William
F. Sullivan, Chief Operating Officer
|
2006
|
117
|
14,742
|
500
|
39,500
|
-
|
10,000(4
|
)
|
4,800
|
69,659
|
||||||||||||||||||
|
Joseph
Caiazzo, Executive Vice President
|
2006
|
128
|
16,083
|
5,600
|
-
|
-
|
-
|
5,820
|
27,630
|
|
(1)
|
This
includes $34,964 for relocation expenses and $44,461 Broker
Fee.
|
|
(2)
|
This
includes $282,500 pursuant to Separation Agreement dated January
13, 2006
and $8000 accrued and unused
vacation.
|
|
(3)
|
Housing
Allowance.
|
|
(4)
|
Consultant
Fee paid prior to hire.
|
Grants
of Plan-Based Awards
There
were no stock options and equity incentive plan awards that were granted to
named executive officers during the fiscal year ended December 31,
2006.
Outstanding
Equity Awards at December 31, 2006
The
following table provides certain summary information concerning unexercised
stock options and equity incentive plan awards for each named executive officer
as of December 31, 2006.
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END 2006
|
|||||||||||||||||||
|
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||||
|
Name
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock That Have not Vested
(#)
|
Market
Value of Shares or Units of Stock That Have Not Vested
($)
|
|||||||||||||
|
Alexander
Gordon Jardin,
Chief
Executive Officer
|
3,000
|
-
|
12.85
|
5/9/2015
|
80,000
(1
|
)
|
353,250
|
||||||||||||
|
Paul
D. Colasono, Chief Financial Officer and Executive Vice
President
|
-
|
-
|
-
|
-
|
10,000
(2
|
)
|
47,100
|
||||||||||||
|
William
F. Sullivan, Chief Operating Officer
|
11,000
|
-
|
0.75
|
6/23/2010
|
-
|
-
|
|||||||||||||
|
5,000
|
-
|
0.85
|
6/30/2011
|
-
|
-
|
||||||||||||||
|
4,000
|
-
|
0.75
|
5/12/2012
|
-
|
-
|
||||||||||||||
|
4,000
|
-
|
2.25
|
5/9/2013
|
-
|
-
|
||||||||||||||
|
3,000
|
-
|
3.55
|
5/9/2014
|
-
|
-
|
||||||||||||||
|
3,000
|
-
|
12.85
|
5/5/2015
|
-
|
-
|
||||||||||||||
|
Joseph
Caiazzo, Executive Vice President
|
40,000
|
-
|
0.75
|
6/23/2010
|
-
|
-
|
|||||||||||||
|
50,000
|
-
|
0.75
|
5/5/2012
|
-
|
-
|
||||||||||||||
-28-
(1)
The
shares shall vest as follows: 5,000 shares on each January 1, 2007, April 1,
2007, July 1, 2007, October 1, 2007, January 1, 2008, April 1, 2008 and 6,250
shares on each July 1, 2008, October 1, 2008, January 1, 2009, April 1, 2009,
July 1, 2009, October 1, 2009, January 1, 2010 and April 1, 2010.
(2)
The
shares shall vest as follows: 5,000 on March 28, 2007 and 5,000 on March 28,
2008.
Option
Exercises and Stock Vested
The
following table provides certain summary information concerning stock options
that were exercised and restricted stock awards that vested for each named
executive officer during the fiscal year ended December 31, 2006.
|
OPTION
EXERCISES AND STOCK VESTED
|
|||||||||||||
|
|
Option
Awards
|
Stock
Awards
|
|||||||||||
|
Name
|
Number
of
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
on
Exercise
($)
|
Number
of
Shares
Acquired
on
Vesting
(#)
|
Value
Realized
on
Vesting
($)
|
|||||||||
|
Thomas
J. Axon, President and Chairman of the Board of Directors
|
115,000
|
86,250
|
0
|
0
|
|||||||||
|
Alexander
Gordon Jardin,
Chief
Executive Officer
|
0
|
0
|
25,000
|
197,500
|
|||||||||
|
Paul
D. Colasono, Chief Financial Officer and Executive Vice
President
|
0
|
0
|
5,000
|
64,250
|
|||||||||
|
William
F. Sullivan, Chief Operating Officer
|
5,000
|
7,800
|
0
|
0
|
|||||||||
|
Joseph
Caiazzo, Executive Vice President
|
60,000
|
93,600
|
0
|
0
|
|||||||||
Director
Compensation
During
fiscal year 2006, each of our non-employee directors received an annual retainer
fee of $20,000 for serving on the Board. Each non-employee director who served
as Chairman of the Board or Chairman of the Audit Committee received an
additional retainer fee of $10,000 for such service. Our company compensated
each non-employee director $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 as
well as $1,000 for each meeting of the Audit Committee attended in person and
$500 for each such meeting attended telephonically.
In
addition, during fiscal year 2006, each non-employee director was granted an
option to purchase 3,000 shares of Common Stock of our company pursuant to
the
2006 Stock Incentive Plan upon each such director’s election or re-election to
the Board and, if such director was serving during such director’s term on the
Board, upon the anniversary of such director’s election or re-election to the
Board. The options will vest on the date of grant and will be exercisable at
an
exercise price equal to the fair market value of the underlying shares of Common
Stock on the date of grant.
Our
non-employee directors were also reimbursed for reasonable travel expenses
incurred in connection with serving on the Board.
Directors
who are also employees of our company did not receive any additional
compensation for their service as directors and were compensated as described
under “Compensation Discussion and Analysis.” Our non-employee Directors during
fiscal 2006 included Messrs. Bertash, Chiste, Evans, Lefkowitz and
Lyons.
-29-
The
following table provides certain summary information regarding the compensation
our directors earned for their services as members of our Board of Directors
or
any committee thereof during the fiscal year ended December 31,
2006.
|
DIRECTOR
COMPENSATION
|
|
Name
|
Fees
Earned or Paid in Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Total
($)
|
|||||||||
|
Thomas
J. Axon
|
-
|
-
|
-
|
-
|
|||||||||
|
Michael
Bertash
|
27,750
|
-
|
23,190
(1
|
)
|
50,940
|
||||||||
|
Robert
M. Chiste
|
25,000
|
-
|
23,190
(1
|
)
|
48,190
|
||||||||
|
Frank
B. Evans, Jr.
|
24,500
|
-
|
23,190
(1
|
)
|
47690
|
||||||||
|
Alexander
Gordon Jardin
|
6,000
|
-
|
-
|
6,000
|
|||||||||
|
Steven
W. Lefkowitz
|
27,250
|
-
|
23,190
(1
|
)
|
50,440
|
||||||||
|
Allan
R. Lyons
|
37,750
|
-
|
23,190
(1
|
)
|
60,940
|
||||||||
|
William
F. Sullivan
|
1,500
|
-
|
-
|
1,500
|
|||||||||
(1)
The
Option Award was in accordance with FAS123(r) at $7.73 per share based on the
date of grant, May 24, 2006.
Compensation
Committee Interlocks and Insider Participation
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 2006
Compensation Committee Report on Executive Compensation.
During
2006, Steven W. Lefkowitz, Robert M. Chiste and Frank B. Evans served on the
Company’s Compensation Committee. Alexander Gordon Jardin also served on the
Company’s Compensation Committee until April 26, 2006, on which date he entered
into an employment agreement with the Company to serve as the Company’s Chief
Executive Officer. No member of the Compensation Committee had a relationship
that requires disclosure as a Compensation Committee interlock.
-30-
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, 2000
through December 31, 2006. The measurement assumes a $100 investment on December
31, 1999. The peer group is made up of the following 10 publicly-held financial
services companies: 21st
Century
Technologies Inc., Asset Acceptance Capital Corp., Credit Acceptance
Corporation, Encore Capital Group, Inc., Equifin, Inc., First Investors
Financial Services Group, Inc., Microfinancial Incorporated, NfinanSe, Inc.,
Resource America, Inc. and White River Capital, 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 has not paid dividends
on its Common Stock in recent years and has no present plans to do so.
-31-
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions
with Related Persons
At
December 31, 2006, the Company had an outstanding receivable from an affiliate,
RMTS Associates, of $234,069. This receivable represents RMTS’s portion of
various shared operating expenses that are paid by the Company and then
reimbursed by RMTS.
Review,
Approval or Ratification of Transactions with Related
Persons
The
Company has adopted a set of written policies and procedures for the review,
approval or ratification of transactions with related persons. Pursuant to
the
Company’s related party transaction policies and procedures, any related party
transaction shall be consummated or shall continue only if the Audit Committee
has reviewed and approved or ratified such transaction in accordance with the
guidelines set forth in the Company’s policies and procedures. Under the
policies and procedures, related party transactions (1) include any
relationship, arrangement or transaction between the Company and (a) any
director, nominee for director or executive officer of the Company or any of
their immediate family members, (b) any stockholder or group owning more than
5%
of the Company’s voting securities or any of their immediate family members, or
(c) any entity in which any of the foregoing have a substantial ownership
interest or control of such entity, and (2) exclude (a) transactions available
to all employees generally, (b) transactions involving less than $60,000 in
any
12 month period, or (c) transactions involving executive compensation approved
by the Compensation Committee of the Board of Directors or director compensation
approved by the Board of Directors. Under the policies and procedures, no
Committee member may participate in any review, consideration or approval of
a
transaction involving such member or their immediate family or any entity with
which such Committee member is affiliated.
The
Board of Directors unanimously recommends a vote FOR the election of each of
the
nominees listed above.
-32-
PROPOSAL
2
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, 2007, 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, 2006 and 2005:
|
2006
|
2005
|
||||||
|
Audit
Fees
|
$
|
935,200
|
$
|
770,000
|
|||
|
Audit-Related
Fees
|
-
|
$
|
63,000
|
||||
|
Tax
Fees
|
$
|
250,000
|
$
|
200,000
|
|||
|
All
Other Fees
|
$
|
18,779
|
$
|
12,651
|
|||
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,
2007.
-33-
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,
101 Hudson Street Jersey City, NJ 07302, no later than January 1, 2008 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
April
30,
2007
-34-
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 Tuesday, June
5,
2007, at 2:00 p.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 2 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.)
|
Michael
Bertash
|
||
|
Frank
B. Evans, Jr.
|
||
|
Steven
W. Lefkowitz
|
||
2. 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, 2007:
|
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 PROPOSAL 2.
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:
_____________________________, 2007
|
|
|
|
(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.
-2-