SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
[X] Definitive proxy statement Commission Only (as permitted
[ ] Definitive additional materials by Rule 14a-6(e)(2))
[ ] Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
FRANKLIN CREDIT MANAGEMENT CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
FRANKLIN CREDIT MANAGEMENT CORPORATION
Six Harrison Street
New York, New York 10013
April 21, 2004
To Our Stockholders:
You are cordially invited to attend the 2004 Annual Meeting of
Stockholders of Franklin Credit Management Corporation (the "Company"), which
will be held at the corporate offices of the Company, located at Six Harrison
Street, Sixth Floor, New York, New York, on Thursday, May 13, 2004, at 10:00
A.M., Eastern Daylight Time.
The Notice of Annual Meeting and Proxy Statement covering the formal
business to be conducted at the Annual Meeting follow this letter and are
accompanied by the Company's Annual Report for the fiscal year ended December
31, 2003.
We hope you will attend the Annual Meeting in person. Whether or not
you plan to attend, please complete, sign, date and return the enclosed proxy
promptly in the accompanying reply envelope to assure that your shares are
represented at the meeting.
Sincerely yours,
THOMAS J. AXON
Chairman
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FRANKLIN CREDIT MANAGEMENT CORPORATION
SIX HARRISON STREET
NEW YORK, NEW YORK 10013
(212) 925-8745
NOTICE OF 2004 ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 2004
Notice is hereby given that the Annual Meeting of Stockholders of Franklin
Credit Management Corporation (the "Company") will be held at the corporate
offices of the Company, located at Six Harrison Street, Sixth Floor, New York,
New York, at 10:00 A.M., Eastern Daylight Time, on Thursday, May 13, 2004 for
the following purposes:
1. to elect nine directors to the Company's Board of Directors;
2. to ratify the appointment of Deloitte & Touche as the
Company's independent public auditors for the fiscal year
ending December 31, 2004; and
3. to transact such other business as may be properly brought
before the meeting and any adjournment or postponement
thereof.
The Board of Directors unanimously recommends that you vote FOR the
election of all nine nominees as Directors and FOR the approval of the
appointment of the independent public auditors.
Stockholders of record at the close of business on March 29, 2004 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournment or
postponement thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE REPLY ENVELOPE
PROVIDED WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. STOCKHOLDERS
ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF THEY HAVE RETURNED A
PROXY. BY PROMPTLY RETURNING YOUR PROXY, YOU WILL GREATLY ASSIST US IN PREPARING
FOR THE ANNUAL MEETING.
By Order of the Board of Directors,
THOMAS J. AXON
Chairman
New York, New York
April 21, 2004
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FRANKLIN CREDIT MANAGEMENT CORPORATION
SIX HARRISON STREET
NEW YORK, NEW YORK 10013
(212) 925-8745
PROXY STATEMENT FOR
2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 2004
GENERAL INFORMATION
This Proxy Statement and the enclosed form of proxy are being furnished,
commencing on or about April 21, 2004, in connection with the solicitation of
proxies in the enclosed form by the Board of Directors of Franklin Credit
Management Corporation, a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders ("Stockholders") of the Company (the "Annual
Meeting"). The Annual Meeting will be held at the corporate offices of the
Company, located at Six Harrison Street, Sixth Floor, New York, New York, at
10:00 A.M., Eastern Daylight Time, on Thursday, May 13, 2004, and at any
adjournment or postponement thereof, for the purposes set forth in the foregoing
Notice of 2004 Annual Meeting of Stockholders.
The annual report of the Company, containing financial statements of the
Company as of December 31, 2003, and for the year then ended (the "Annual
Report"), has been delivered or is included with this proxy statement.
A list of the Stockholders entitled to vote at the Annual Meeting will be
available for examination by Stockholders during ordinary business hours for a
period of ten days prior to the Annual Meeting at the corporate offices of the
Company. A Stockholder list will also be available for examination at the Annual
Meeting.
If you are unable to attend the Annual Meeting, you may vote by proxy on
any matter to come before that meeting. The enclosed proxy is being solicited by
the Board of Directors. Any proxy given pursuant to such solicitation and
received in time for the Annual Meeting will be voted as specified in such
proxy. If no instructions are given, proxies will be voted (i) FOR the election
as Directors of the nine nominees named below under the caption "Election of
Directors" to one year terms, (ii) FOR the ratification of the appointment of
Deloitte & Touche ("D&T") as independent public auditors for the Company's
fiscal year ending December 31, 2004, 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 21, 2004.
Following the original mailing of proxy solicitation material, executive
and other employees of the Company and professional proxy solicitors may solicit
proxies by mail, telephone, telegraph and personal interview. Arrangements may
also be made with brokerage houses and other custodians, nominees and
fiduciaries who are record holders of the Company's Common Stock to forward
proxy solicitation material to the beneficial owners of such stock, and the
Company may reimburse such record holders for their reasonable expenses incurred
in such forwarding. The cost of soliciting proxies in the enclosed form will be
borne by the Company.
The Company's Board of Directors has unanimously voted to recommend that
you vote for the nominees for election to the Board of Directors listed below
and for the appointment of D&T as the independent public auditors of the Company
for the fiscal year ended December 31, 2004.
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VOTING OF SHARES
The holders of one-third of the outstanding shares entitled to vote,
present in person or represented by proxy, will constitute a quorum for the
transaction of business. Shares represented by proxies that are marked "abstain"
will be counted as shares present for purposes of determining the presence of a
quorum on all matters. Brokers holding shares for beneficial owners in "street
name" must vote those shares according to specific instructions they receive
from the owners of such shares. If instructions are not received, brokers may
vote the shares, in their discretion, depending on the type of proposals
involved. "Broker non-votes" result when brokers are precluded from exercising
their discretion on certain types of proposals. However, brokers have
discretionary authority to vote on all the proposals being submitted hereby to
the Stockholders. Shares that are voted by brokers on some but not all of the
matters will be treated as shares present for purposes of determining the
presence of a quorum on all matters, but will not be treated as shares entitled
to vote at the Annual Meeting on those matters as to which authority to vote is
withheld by the broker.
The election of each nominee for Director requires a plurality of votes
cast. Accordingly, abstentions and Broker non-votes will not affect the outcome
of the election; votes that are withheld will be excluded entirely from the vote
and will have no effect. The affirmative vote of the holders of a majority of
the shares present in person or represented by proxy at the meeting and entitled
to vote is required for the appointment of the independent public auditors. On
this matter the abstentions will have the same effect as a negative vote.
Because Broker non-votes will not be treated as shares that are present and
entitled to vote with respect to a specific proposal, a Broker non-vote will
have no effect on the outcome.
The Company will appoint an inspector to act at the Annual Meeting who
will: (1) ascertain the number of shares outstanding and the voting powers of
each; (2) determine the shares represented at the Annual Meeting and the
validity of the proxies and ballots; (3) count all votes and ballots; (4)
determine and retain for a reasonable period of time a record of the disposition
of any challenges made to any determinations by such inspector; and (5) certify
his determination of the number of shares represented at the Annual Meeting and
his count of all votes and ballots.
Only Stockholders of record at the close of business on March 29, 2004 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 March 29, 2004, there were
outstanding 5,916,527 shares of the Company's Common Stock, par value $.01 per
share (the "Common Stock"). Each share of Common Stock entitles the record
holder thereof to one vote on all matters properly brought before the Annual
Meeting and any adjournment or postponement thereof, with no cumulative voting.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2004, the number of shares
of Common Stock (and the percentage of the Company's Common Stock) beneficially
owned by (i) each person known (based solely on Schedules 13D or 13G filed with
the Securities and Exchange Commission (the "Commission")) to the Company to be
the beneficial owner of more than 5% of the Common Stock, (ii) each Director and
nominee for Director of the Company, (iii) the Named Executives (as defined in
"Executive Compensation" below), and (iv) all Directors and Executive Officers
of the Company as a group (based upon information furnished by such persons).
Under the rules of the Commission, a person is deemed to be a beneficial owner
of a security if such person has or shares the power to vote or direct the
voting of such security or the power to dispose of or to direct the disposition
of such security. In general, a person is also deemed to be a beneficial owner
of any securities of which that person has the right to acquire beneficial
ownership within 60 days. Accordingly, more than one person may be deemed to be
a beneficial owner of the same securities.
NUMBER OF
SHARES PERCENTAGE (%)
NAME AND ADDRESS BENEFICIALLY OWNED OF COMMON STOCK
---------------- ------------------ ---------------
Thomas J. Axon(1)(2) 3,285,953 54.6%
Seth Cohen(1)(3) 211,000 3.4%
Joseph Caiazzo(1)(4) 218,550 3.6%
Michael Bertash(1)(5) 54,333 *
Frank B. Evans, Jr. (1)(6) 857,425 14.5%
Alan Joseph (1)(9) 103,000 1.7%
Steven W. Lefkowitz (1)(7) 205,000 3.4%
Allan R. Lyons (1)(8) 62,500 1.1%
William F. Sullivan (1)(10) 54,700 *
All Directors and Executive Officers as a group
(9) persons)(11) 5,052,461 75.2%
* Indicates beneficial ownership of less than one (1%) percent.
(1) Mailing address: C/O Franklin Credit Management Corporation, Six Harrison
Street, New York, New York 10013.
(2) Does not include 11,610 beneficially owned by Mr. Axon's mother, Ann Axon,
with respect to which shares Mr. Axon disclaims beneficial ownership.
Includes 98,334 shares issuable upon exercise of options exercisable
within sixty days.
(3) Includes 200,000 shares issuable upon exercise of options exercisable
within sixty days.
(4) Includes 190,000 shares issuable upon exercise of options exercisable
within sixty days.
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(5) Includes 44,333 shares issuable upon exercise of options exercisable
within sixty days.
(6) Includes 5,000 shares beneficially owned by each of his four minor
children for which Mr. Evans is the trustee. Includes 14,000 shares
issuable upon exercise of options exercisable within sixty days.
(7) Includes 87,000 shares issuable upon exercise of warrants exercisable
within sixty days and 20,000 shares issuable upon exercise of options
exercisable within sixty days. Includes 29,000 shares owned beneficially
owned by Mr. Lefkowitz wife.
(8) Includes 25,000 shares issuable upon exercise of options exercisable
within sixty days.
(9) Includes 103,000 shares issuable upon exercisable within sixty days.
(10) Includes 20,000 shares issuable upon exercisable within sixty days.
(11) Includes 714,667 shares issuable upon exercise of options exercisable
within sixty days and 87,000 shares issuable upon exercise of warrants
exercisable within sixty days.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and Officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Reporting persons are required by
Commission regulations to furnish the Company with copies of all Section 16(a)
forms that they file.
Based solely on review of the copies of such reports furnished to the
Company, the Company believes that during 2003 all Section 16(a) filing
requirements applicable to its Officers, Directors and ten percent stockholders
were complied with except with respect to one of the Directors Steve Lefkowitz
who's wife purchased a small amount of stock over a period of three years but
had not filed the appropriate forms. The appropriate forms have since been
recently filed.
PROPOSALS
The Company's Board of Directors has unanimously voted to recommend the
nominees for election to the Board of Directors listed below and for the
appointment of D&T as the independent public auditors of the Company for the
fiscal year ended December 31, 2004.
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PROPOSAL 1 - ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
Unless instructed otherwise, the enclosed proxy will be voted FOR the
election of the nominees named below. Voting is not cumulative. While management
has no reason to believe that the nominees will not be available as candidates,
should such a situation arise, proxies may be voted for the election of such
other persons as a Director as the holders of the proxies may, in their
discretion, determine.
The following sets forth certain information with respect to each of the
nine nominees to the Board of Directors as well as to the remaining Directors
and Executive Officers of the Company:
Year First
Name Age Elected Director Office
---- --- ---------------- ------
Nominees to the Board
Thomas J. Axon 52 1988 Chairman and Director
Seth Cohen 39 2000 President, Chief Executive
Officer and Director
Joseph Caiazzo 46 1994 Sr. Vice President, Chief
Operating Officer, Secretary
and Director
Michael Bertash 51 1998 Director
Frank B. Evans, Jr. 52 1994 Director
Alan Joseph 37 2000 Sr. Vice President, Chief
Financial Officer, and Director
Steven W. Lefkowitz 48 1996 Director
Allan R. Lyons 63 1994 Director
William F. Sullivan 54 1996 Director
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DIRECTORS OF THE COMPANY
Thomas J. Axon has served as Chairman of Board of Directors of the Company
since December 30, 1994 and as Chief Executive Officer and President from
December 30, 1994 through June 30, 2000. Mr. Axon also served as Director of
Franklin Credit Management Corporation ("Franklin") from April 25, 1988 until
the merger of Franklin and Miramar Resources, Inc. in December 1994 (the
"Merger") and President of Franklin from October 8, 1991 until the Merger. Since
1985, Mr. Axon has been the President and principal owner of RMTS Associates,
LLC. Mr. Axon holds a Bachelor of Arts in economics from Franklin and Marshall
College and attended the New York University Graduate School of Business.
Seth Cohen has served as Chief Executive Officer and President of the
Company since July of 2000. Prior to joining the company, Mr. Cohen provided
management-consulting services to several companies and venture capital firms in
a variety of different industries. In addition, from 1996 to 2000 Mr. Cohen held
executive positions, including COO and General Counsel with two insurance and
health care companies. Mr. Cohen holds a Bachelor of Arts from the University of
Michigan with honors and distinction and a Juris Doctor from New York University
School of Law.
Joseph Caiazzo has served as Vice President and Chief Operating Officer
since March of 1996, and Secretary since June 1999. Mr. Caiazzo also serves as
President of the Company's mortgage banking subsidiary Tribeca Lending Corp.
From August 1989 to March 1996, Mr. Caiazzo served as corporate controller of
R.C. Dolner, Inc., a general contractor. Mr. Caiazzo holds a Bachelor of Science
from St. Francis College and a Masters of Business Administration in Finance
from Long Island University.
Michael Bertash has been a Senior Vice President with J. & W. Seligman &.
Co., an investment management firm, since 1997. Mr. Bertash was an Associate
Director of the asset management division of Bear, Stearns & Co. Inc., a
worldwide investment bank and brokerage firm, from 1991 to 1997. Mr. Bertash
holds a Bachelor of Science in Operations Research from Syracuse University and
a Master in Business from New York University.
Frank B. Evans, Jr. served as Vice President, Treasurer Secretary and
Chief Financial Officer of the Company from December 30, 1994 until November 15,
1998. Mr. Evans also served as the Secretary, Treasurer, a Vice President and a
Director of Franklin from its inception in 1990 until the Merger. Mr. Evans has
served as CEO of 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 from the University of Maryland and a Masters in Business
from the University of Southern California.
Alan Joseph has served as the Chief Financial Officer since May 2002 and
as an advisor since November 2000. Mr. Joseph served as Vice President in the
Term Asset Backed Securitization group at SG Cowen Securities Corporation, the
investment-banking subsidiary of the Societe Generale Group, since 2000. Prior
to joining SG Cowen, Mr. Joseph served as First Vice President in the Asset
Trading & Finance group at Paine Webber, Inc. where he worked from 1997 to 2000.
From 1996 to 1997, Mr. Joseph was an Assistant Vice President at the Clayton
Group, Inc., a portfolio due diligence and Advisory Company. From 1994 to 1996
Mr. Joseph served in various capacities in the Commercial Real Estate groups at
Paine Webber, Inc. and Kidder Peabody, Inc. Mr. Joseph holds a Bachelor of
Science in Finance from Arizona State University and a Juris Doctor degree from
New York Law School.
Steven W. Lefkowitz has served as the founder and President of Wade
Capital Corporation, a privately held investment firm since 1990. From 1988 to
1990, Mr. Lefkowitz served as a Vice President of Corporate Finance for Drexel
Burnham Lambert, Incorporated, where he had been employed since 1985. Mr.
Lefkowitz serves on the Board of Directors of several private companies. Mr.
Lefkowitz holds a Bachelor of Arts in history from Dartmouth College and a
Masters in Business Administration from Columbia University.
Allan R. Lyons is a Certified Public Accountant who was an executive in
Piaker & Lyons, P.C., an accounting firm, and its predecessors from 1968 until
his retirement on December 31, 1999. Mr. Lyons is currently the owner of 21st
Century Strategic Investment planning, a Florida LC doing financial planning
services and
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investment structuring and review of financial opportunities and private
placements, and acts as a general partner for two venture capital partnerships.
Mr. Lyons has been a director of Source Interlink Companies Inc. since March
2003, Mr. Lyons holds a Bachelor of Science in Accounting from Harpur College
and a Masters of Business Administration from Ohio State University.
William F. Sullivan has been a Partner at Marnik & Sullivan, a general
practice law firm, since 1985 and is admitted to both the New York State and
Massachusetts Bar Associations. Mr. Sullivan graduated from Suffolk University
School of Law and holds a Bachelor of Arts in political science from the
University of Massachusetts.
All Directors hold office for one year terms and until their successors
have been duly elected and qualified, or until their earlier death, resignation
or removal. The Company's Officers are elected by, and serve at the pleasure of,
the Board of Directors, subject to the terms of any employment agreements. No
familial relationships exist between Directors or Executive Officers of the
Company.
COMPENSATION OF DIRECTORS
Since March 21, 2000, the Company's policy has been that each non-employee
director receives $1,000 for every meeting of the Board of Directors or its
committees attended in person and $500 for meetings attended telephonically.
Since April 12, 2000, the Company's policy has been that each non-employee
director will be granted an option to purchase 3,500 shares of Common Stock
pursuant to the Company's 1996 Stock Incentive Plan, upon election or
re-election to the Board. The options vest on the date of grant and are
exercisable at an exercise price of the fair market value of the shares on the
date of grant as determined by the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. The Company's Board of Directors has an Audit Committee
established in accordance with Section 3(a)(58(A) of the Securities Exchange Act
of 1934. as amended, of which Messrs. Evans, Lyons and Bertash are the members.
The Audit Committee meets with the Company's auditors and principal financial
personnel to review the results of the annual audit. The Audit Committee also
reviews the scope of the annual audit and other services before the Company's
auditors undertake them, and reviews the adequacy and effectiveness of the
Company's internal accounting controls. The Company's Board of Directors has not
adopted a written charter for the Audit Committee. The Company's Board of
Directors has determined that Allan Lyons and Frank Evans are "audit committee
financial expert" as defined by Regulation S-K under the Securities Act of 1933,
as amended. The Board of Directors has determined that Mssrs. Frank Evans,
Michael Bertash and Allan Lyons meet the independence requirements of the NASDAQ
Stock Market, as amended.
Compensation Committee. The Company's Board of Directors has a
Compensation Committee of which Messrs. Caiazzo, Lefkowitz and Sullivan are the
members. The Compensation Committee reviews the compensation provided to
executive officers and Board members and administers the Company's 1996 Stock
Incentive Plan.
Other Committees and Processes. The Company's Board of Directors does not
currently have a standing nominating committee and has not proscribed procedures
by which security holders may recommend nominees to the Company's Board of
Directors. In recent years, the Company's directors have informally agreed each
year to stand for re-election. If the Board of Directors determines to seek
additional candidates in the future, it may create a nominating committee. The
Board of Directors has not previously determined that it is appropriate for the
Company to have a standing nominating committee, because Mr. Axon, the Company's
Chairman, owns a majority of the voting power of the Company and thereby has the
power to choose all of the directors of the Company. The Board of Directors
currently expects to consider organizing such a committee during the next twelve
months. The Board of Directors does not currently have a policy for identifying
or evaluating nominees for director, including nominees recommended by
shareholders. If a candidate for nomination is recommended by a shareholder the
Board would evaluate that candidate in the same manner as all other candidates
to be nominees for director. Any shareholder wishing to submit such a
recommendation should do so in writing addressed to Franklin Credit Management,
Six Harrison Street, New York, New York 10013, Attention: Alan Joseph. See
"Stockholder Proposals" below in this proxy statement for information regarding
procedures that must be followed by shareholders in order to nominate directors
at the 2005 annual meeting.
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The Company's Board of Directors does not currently provide a process for
security holders to send communications to the Board of Directors. The Board of
Directors does not believe that it is appropriate to do so, since Mr. Axon, the
Company's Chairman, owns a majority of the Common Stock of the Company and
thereby has the power to direct the management and policies of the Company.
However, following the 2004 proxy season, the Board of Directors currently
expects to leverage the efforts of other public companies, and consider the
policies adopted by other similarly situated public companies in their proxy
statement in developing and adopting its own.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During 2003, there were four meetings of the Board of Directors of the
Company, four meetings of the Audit Committee and one meeting of the
Compensation Committee. No Director attended fewer than 75% of the aggregate
number of meetings of the Board of Directors and of any committee on which he
served.
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. If a director is unable to attend an annual meeting in person but is
able to do so by telephone or electronic conferencing, the Company will arrange
for the director's participation by means of which the director can hear, and be
heard, by those present at the meeting. At last year's annual meeting, all of
the Company's directors attended in person.
REPORT OF THE AUDIT COMMITTEE
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.
Management is responsible for the Company's internal controls, the
financial reporting process and preparation of the consolidated financial
statements of the Company. The Company's independent auditors are responsible
for, among other things, performing an independent audit of the Company's
consolidated financial statements in accordance with auditing standards
generally accepted in the United States and issuing a report thereon. It is the
responsibility of the Audit Committee to monitor and oversee these processes.
In fulfilling its responsibilities, the Audit Committee has reviewed and
discussed the audited financial statements contained in the 2003 Annual Report
on Form 10-K with management and the independent auditors. Management is
responsible for the financial statements and the reporting process, including
the system of internal controls.
The Committee discussed with the independent auditors, the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended and Rule 2-07 of SEC Regulation
S-X. This discussion addressed, among other topics, the auditor's responsibility
under generally accepted auditing standards; critical accounting policies and
practices; judgments and accounting estimates; alternative accounting
treatments; any significant audit adjustments; any disagreements or difficulties
encountered in performing the audit; and other material communications between
the auditors and management. The Audit Committee received the written
disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, and discussed with the independent auditors their independence. The
audit committee also considered the compatibility of non-audit services provided
to the Company by its independent auditors, and the fees and costs billed or to
be billed for these
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services, with the maintenance of the auditor's independence, and has concluded
that the provision of such services in 2003 did not impair auditor independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board approved
including the audited financial statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 2003, filed with the Securities and
Exchange Commission.
Michael Bertash
Frank B. Evans
Allan R. Lyons
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EXECUTIVE COMPENSATION
The following table sets forth compensation earned by or paid to Thomas J.
Axon, the Chairman of the Company, Seth Cohen Chief Executive Officer of the
Company and Joseph Caiazzo, the Chief Operating Officer of the Company and Alan
Joseph, the Chief Financial Officer (collectively the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------------
----------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS
NAME AND PRINCIPAL POSITION FISCAL YEAR ($) ($) ($) ($) (#)
--------------------------- ----------- ------ ----- ------------ -------- ------------
Seth Cohen - Chief Executive 2003 250,000 151,544(1)
Officer and President 2002 227,000 139,937(1) -- -- 50,000(2)
2001 225,000 59,554(1) -- -- --
Thomas Axon-Chairman 2003 150,000 151,544(1)
2002 118,750 139,937(1) 50,000(3)
2001 75,000 59,554(1) --
Joseph Caiazzo-Chief Operating 2003 200,000 151,544(1)
Officer 2002 165,000 139,937(1) 50,000(2)
2001 165,000 59, 554(1) --
Alan Joseph-Chief Financial 2003 150,000 120,740(1) -- --
Officer 2002 103,250 97,535(1) 103,000(4)
(1) Represents performance-based bonus earned for fiscal year 2003, 2002 and
2001.
(2) Represents options to purchase shares of the Company's Common Stock
granted on May 5, 2002 at an exercise price of $0.75 per share, of which
25,000 will vest on May 5, 2003 and 25,000 will vest on May 5, 2004.
(3) Represents options to purchase shares of the Company's Common Stock
granted on May 5, 2002 at an exercise price of $0.75 per share, of which
16,667 vested on May 5, 2003, 16,667 will vest on May 5, 2004 and 16,666
will vest May 5, 2005.
(4) Represents options to purchase shares of the Company's Common Stock
granted on May 5, 2002 at an exercise price of $0.75 per share, of which
51,500 vested on May 5, 2003 and 51,500 will vest on May 5, 2004.
-13-
The following table sets forth the aggregate value, realized gain, and
number of options granted to the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Value of Unexercised
Shares Number of Securities In-The-Money Options at
Acquired On Value Underlying Unexercised FY-End (1)
Exercise Realized Options at FY-END ($)
Name # ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
Seth Cohen -- -- 200,000 0 444,000 0
Joseph Caiazzo -- -- 165,000 25,000 216,300 55,500
Thomas Axon 90,000 25,000 199,800 55,500
Alan Joseph 51,500 51,500 114,330 114,330
(1) Values are based on the closing bid price of the Common Stock on December
31, 2003 of $2.97. The value of unexercised stock options at December 31,
2003 is presented to comply with SEC regulations. The actual amount
realized upon any exercise of stock options will depend upon the excess of
the fair market value of the Common Stock over the grant price at the time
the stock option is exercised. There is no assurance that values of
unexercised stock options reflected in this table will be realized.
EMPLOYMENT AGREEMENTS.
Seth Cohen serves as Chief Executive Officer of the Company. His
three-year contract, which expired on June 30, 2003, provided for annual
compensation of $250,000. In addition, under his employment contract Mr. Cohen
share in a bonus pool of 10% of post tax profits of the Company in any fiscal
year in excess of $500,000. Mr. Cohen continues to serve pursuant to the terms
of the contract, for the compensation provided therein notwithstanding its
expiration. The Company and Mr. Cohen are currently discussing the terms of a
new employment contract. During 2002 Mr. Cohen was granted on May 5, 2002
options to purchase Common Stock, of which 25,000 vests on May 5, 2003 and
25,000 vests on May 5, 2004.
Joseph Caiazzo serves as Chief Operating Officer of the Company under a
three-year contract for annual compensation of $220,000, expiring on April 15,
2005. In addition, under his employment contract Mr. Caiazzo will share in a
bonus pool of 10% of post tax profits of the Company in any fiscal year in
excess of $500,000. During 2002, Mr. Caiazzo was granted on May 5, 2002 options
to purchase an additional 50,000 shares of Common Stock at an exercise price of
$.75 per share, 25,000 of which vest on May 5, 2003 and 25,000 of which vest May
5, 2004.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
During 2003, Joseph Caiazzo, Steven W. Lefkowitz and William F. Sullivan
served on the Company's Compensation Committee. Mr. Caiazzo also serves as the
Senior Vice President, Chief Operating Officer and Secretary of the Company.
The following report of the compensation committee and the stock performance
graph shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933 (the "Securities Act") or the Securities Exchange Act of
1934 (the "Exchange
-14-
Act"), except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
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 2003
Compensation Committee Report on Executive Compensation.
REPORT OF THE COMPENSATION COMMITTEE
Committee Report on Executive Compensation. Under rules established by the
Securities and Exchange Commission, the Company is required to provide certain
data and information with regard to the compensation and benefits provided to
the Company's Chief Executive Officer and the other executive officers of the
Company. The disclosure requirements for those executive officers include the
use of a report explaining the rationale and considerations that led to
fundamental compensation decision affecting those individuals. The Compensation
Committee establishes compensation for the chief executive officer and reviews
compensation for other officers and employees and other benefit programs, when
necessary. In fulfillment of the disclosure requirement, the Compensation
Committee has prepared the following report for inclusion in this proxy
statement.
The Company has no employees who perform services for the Company without
additional compensation. The Compensation Committee evaluates the performance of
each named executive officer of the Company and reviews the compensation of all
executives.
Compensation Policies. The Company's executive compensation policies are
intended to attract and retain qualified executives, to recognize and reward
individual contributions and achievement and to offer a compensation package
that is competitive in the financial industry and motivational to each
individual executive. In furtherance of those objectives, the Company maintains
a compensation program for executive officers, which consists of a base salary
and cash bonus. The salary levels are intended to be consistent and competitive
with the practices of other comparable financial institutions and each
executive's level of responsibility. The Committee met two times to discuss
executive compensation. In making its determinations, the Compensation Committee
utilizes surveys of compensation paid to executive officers performing similar
duties for similar institutions of comparable size and characteristics primarily
in New York City.
Compensation of the Chief Executive Officer. The Compensation Committee believes
that Mr. Cohen compensation is appropriate based upon the Company's compensation
policy, Mr. Cohen's performance in managing the Company, the Company's
performance during the fiscal year and a comparison of peer institutions with
specific consideration given to the level of the Company's operations in
comparison to peer institutions.
Compensation Committee of the Company
Joseph Caiazzo
Steven W. Lefkowitz
William F. Sullivan
-15-
FRANKLIN CREDIT PERFORMANCE GRAPH INTRO
The following graph illustrates a comparison of the cumulative total stockholder
return (change in stock price plus reinvested dividends) of the Company's Common
Stock with the Russell 2000 index and a peer group for the period from December
31, 1998 through December 31, 2003. The measurement assumes a $100 investment on
December 31, 1997. 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 Company's 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 never paid dividends on its Common Stock and has no
present plans to do so.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG FRANKLIN CREDIT MANAGEMENT CORPORATION,
THE RUSSELL 2000 INDEX AND A PEER GROUP
[LINE GRAPH]
Cumulative Total Return
-----------------------------------------------------
12/98 12/99 12/00 12/01 12/02 12/03
FRANKLIN CREDIT MANAGEMENT...... 100.00 77.61 44.78 98.51 168.36 358.8
RUSSELL 2000.................... 100.00 121.26 117.59 120.52 95.83 141.1
PEER GROUP...................... 100.00 61.78 41.43 43.93 28.96 66.2
* $100 invested on 12/31/98 in stock or index -- including reinvestment of
dividends.
Fiscal year ending December 31.
-16-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In 1998, Mr. Axon, the Company's President, Chief Executive Officer and
Chairman purchased from the Company a Florida condominium unit subject to
considerable title defects, held by the Company in its OREO inventory available
for sale. The consideration included forgiveness of $ 184,335 of indebtedness of
the Company to Axon Associates, Inc. and issuance by Mr. Axon of a note to the
Company in the amount of $234,165. The note bears interest at a rate of 8% per
annum, is secured by the condominium property, and was due June 1, 2001. During
2001, the parties agreed to extend the note until December 31, 2003. This note
was paid off in April 2004.
During April 2000, the Company extended its letter agreement with Wade
Capital Corporation ("WCC"), of which Steven W. Lefkowitz, a member of the
Company's Board of Directors, serves as President, to extend WCC's retention to
provide financial advisory services to the Company through April 30, 2002.
Pursuant to such extension, WCC receives $1,500 per month in consulting fees.
On December 29, 2000, Mr. Axon, the Company's Chairman purchased from the
Company a New York condominium held by the Company in its OREO inventory
available for sale. The consideration included the issuance by Mr. Axon of a
note to the Company in the amount of $165,000. The note bears interest at a rate
of 8% per annum, is secured by the condominium property, and was due together
with all accrued interest and other charges on January 30, 2001. During 2001,
the parties agreed to extend maturity of the note for an additional two years to
December 31, 2003. This note was paid off in April 2004.
VOTE REQUIRED FOR APPROVAL OF THE ELECTION OF DIRECTORS
The election of each nominee for Director requires a plurality of votes
cast. Accordingly, abstentions and Broker non-votes will not affect the outcome
of the Election. Proxies solicited by the Board of Directors will be voted for
each of the nominees listed above, unless Stockholders specify otherwise.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES LISTED ABOVE.
PROPOSAL 2 - APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
The firm of Deloitte & Touche, independent certified public auditors, has
audited the Company's financial statements since 1997. The Board of Directors
has appointed D&T as the Company's independent public auditors for the fiscal
year ending December 31, 2004. Although Stockholder approval of such appointment
is not required by law, the Board of Directors believes that it is advisable to
give the Stockholders an opportunity to ratify this appointment. If the proposal
is not approved, the Board of Directors will reconsider its selection of D&T. It
is expected that a representative of D&T will be present at the Annual Meeting
with the opportunity to make a statement if he or she desires to do so, and will
be available to respond to appropriate questions.
-17-
AUDIT FEES
Deloitte & Touche has billed the Company the following fees for
professional services rendered in respect of the years ended December 31, 2003
and 2002:
2003 2002
---- ----
Audit Fees $320,000 $300,000
Audit-Related Fees 0 0
Tax Fees $ 65,000 $ 55,500
All Other Fees 0 0
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.
POLICY ON PRE-APPROVAL OF RETENTION OF INDEPENDENT AUDITOR
The engagement of Deloitte & Touche 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 Deloitte & Touche require pre-approval
by the Audit Committee. Such pre-approval may be given by the chairman of the
Audit Committee in 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF D&T.
-18-
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not
aware of any other matter that is to be presented to Stockholders for formal
action at the Annual Meeting. If, however, any other matter or matters are
properly brought before the Annual Meeting or any adjournment or postponement
thereof, it is the intention of the persons named in the enclosed form of proxy
to vote such proxy in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS
Any Stockholder proposal intended to be presented at the next annual
meeting of Stockholders must be received by the Company at its principal
executive offices, Six Harrison Street, New York, New York 10013, no later than
December 6, 2004 in order to be eligible for inclusion in the Company's proxy
statement and form of proxy to be used in connection with that meeting. Any
proposal submitted but not to be so included shall be considered to be untimely
if not received by the Company at the principal executive office by February 21,
2005.
OTHER INFORMATION
Although it has entered into no formal agreements to do so, the Company
will reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding proxy-soliciting
materials to their principals. The cost of soliciting proxies on behalf of the
Board of Directors will be borne by the Company. Such proxies will be solicited
principally through the mail but, if deemed desirable, may also be solicited
personally or by telephone, telegraph, facsimile transmission or special letter
by Directors, Officers and regular employees of the Company without additional
compensation.
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE ANNUAL MEETING
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING. THE BOARD URGES YOU TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID
REPLY ENVELOPE. YOUR COOPERATION AS A STOCKHOLDER, REGARDLESS OF THE NUMBER OF
SHARES OF STOCK YOU OWN, WILL REDUCE THE EXPENSES INCIDENT TO A FOLLOW-UP
SOLICITATION OF PROXIES.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING YOUR SHARES, PLEASE TELEPHONE THE
COMPANY AT (212) 925-8745.
Sincerely yours,
THOMAS J. AXON
Chairman
New York, New York
April 21, 2004
-19-
EXHIBIT A
FRANKLIN CREDIT MANAGEMENT CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
-------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas J. Axon, Seth Cohen and Joseph Caiazzo,
or if only one is present, then that individual, with full power of
substitution, to vote all shares of Franklin Credit Management Corporation (the
"Company"), which the undersigned is entitled to vote at the Company's Annual
Meeting to be held at the corporate offices of the Company, on Thursday, May 13,
2004, at 10:00 a.m., New York time, and at any adjournment or postponement
thereof, hereby ratifying all that said proxies or their substitutes may do by
virtue hereof, and the undersigned authorizes and instructs said proxies to vote
as follows:
1. Election of Directors. Please complete both of the sections below:
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Thomas J. Axon
Seth Cohen
Joseph Caiazzo
Michael Bertash
Frank B. Evans, Jr.
Alan Joseph
Steven W. Lefkowitz
Allan R. Lyons
William F. Sullivan
(Continued and to be dated and signed on the other side.)
(Continued from other side)
2. APPROVAL OF AUDITORS: To ratify and approve the appointment of Deloitte &
Touche as independent public auditors of the Company for the fiscal year
ending December 31, 2004;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and in their discretion, upon any other matters that may properly come
before the meeting or any adjournments or postponements thereof.
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.
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:---------------------, 2004 ----------------------------------
(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.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.