<PAGE> 1
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:
<TABLE>
<S> <C>
[x] Preliminary proxy statement [ ] Confidential, for Use of the Commission Only
[ ] Definitive proxy statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
</TABLE>
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:
<PAGE> 2
FRANKLIN CREDIT MANAGEMENT CORPORATION
Six Harrison Street
New York, New York 10013
April 25, 2000
To Our Stockholders:
You are cordially invited to attend the 2000 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 Wednesday, May 24, 2000, 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, 1999.
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
President
<PAGE> 3
FRANKLIN CREDIT MANAGEMENT CORPORATION
SIX HARRISON STREET
NEW YORK, NEW YORK 10013
(212) 925-8745
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
MAY 24, 2000
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 Wednesday, May 24,
2000 for the following purposes:
1. to ratify the amendment and restatement of the Company's
Certificate of Incorporation to remove the classification of
the Company's Board of Directors, provide for terms of one
year for all directors, and provide for the number of
directors to be seven or such number (not less than 5 or
greater than 9) as the Board of Directors shall determine from
time to time;
2. to elect seven directors to the Company's Board of Directors
or, if Proposal 1 is not ratified, to elect three Directors to
Class 3 of the Company's Board of Directors;
3. to ratify the appointment of Deloitte & Touche as the
Company's independent public auditors for the fiscal year
ending December 31, 2000; and
4. 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
amendment and restatement of the Company's Certificate of Incorporation, FOR the
election of all seven nominees as Directors or if Proposal 1 is not ratified,
FOR the election of all three nominees as Directors and FOR the approval of the
appointment of the independent public auditors.
Stockholders of record at the close of business on April 19, 2000 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
President
New York, New York
April 25, 2000
<PAGE> 4
FRANKLIN CREDIT MANAGEMENT CORPORATION
SIX HARRISON STREET
NEW YORK, NEW YORK 10013
(212) 925-8745
PROXY STATEMENT FOR
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 2000
GENERAL INFORMATION
This Proxy Statement and the enclosed form of proxy are being
furnished, commencing on or about April 25, 2000, 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 Wednesday, May 24, 2000, and at any
adjournment or postponement thereof, for the purposes set forth in the foregoing
Notice of 2000 Annual Meeting of Stockholders.
The annual report of the Company, containing financial statements of
the Company as of December 31, 1999, 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 approval of
the proposed amendments to the Company's Amended and Restated Certificate of
Incorporation, (ii) FOR the election as Directors of the seven nominees named
below under the caption "Election of Directors" to one year terms or, if
Proposal 1 is not approved, FOR the election as Directors of the three nominees
indicated below the same caption to Class 3 of the Board of Directors, (iii) FOR
the ratification of the appointment of Deloitte & Touche ("D&T") as independent
public auditors for the Company's fiscal year ending December 31, 2000, and (iv)
in the discretion of the proxies named on the proxy card with respect to any
other matters properly brought before the Annual Meeting. Attendance in person
at the Annual Meeting will not of itself revoke a proxy; however, any
Stockholder who does attend the Annual Meeting may revoke a proxy orally and
vote in person. Proxies may be revoked at any time before they are voted by
timely submitting a properly executed proxy with a later date or by sending a
written notice of revocation to the Secretary of the Company at the Company's
principal executive offices.
This Proxy Statement and the accompanying form of proxy are being
mailed to Stockholders of the Company on or about April 25, 2000.
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 amendment of the Amended and Restated Certificate of
Incorporation, 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, 2000.
<PAGE> 5
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. Except with respect to Proposal
1, 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 affirmative vote of holders of a majority of the outstanding shares
of the Company is required for approval of the amendments to the Amended and
Restated Certificate of Incorporation. On this matter abstentions and Broker
non-votes will have the same effect as a negative vote.
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
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.
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 19, 2000
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 19,
2000, 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 19, 2000, 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.
-2-
<PAGE> 6
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE (%)
NAME AND ADDRESS(1) BENEFICIALLY OWNED OF COMMON STOCK
- ------------------- ------------------ ---------------
<S> <C> <C>
Thomas J. Axon(1)(2) 3,118,490 52.7%
Frank B. Evans, Jr.(1)(3) 897,960 15.2%
Joseph Caiazzo(1)(4) 123,550 2.1%
Joseph Bartfield(1)(5) 167,290 2.8%
Robert M. Chiste(1)(5) 70,055 1.2%
Allan R. Lyons(1)(5) 47,500 *
William F. Sullivan(1)(6) 34,700 *
Michael Bertash(1) 0 *
Steven W. Lefkowitz(1)(7) 152,000 2.5%
Vincent A. Merola(8) 295,935 5.0%
Peter Spielberger(1)(4) 100,000 1.7%
All Directors and Executive Officers as a 4,711,545 75.5%
group (10 persons)(9)..........................
</TABLE>
* 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 1,030 shares owned of record by him as custodian
for a minor child.
(3) Does not include 20,720 shares beneficially owned by Mr. Evans' wife
and 5,225 shares beneficially owned by Mr. Evans' father, Frank Evans.
Includes 5,000 shares beneficially owned by each of his four minor
children for which Mr. Evans is the trustee.
(4) Includes 100,000 shares issuable upon exercise of options exercisable
within sixty days.
(5) Includes 10,000 shares issuable upon exercise of options exercisable
within sixty days.
(6) Includes 5,000 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 5,000 shares issuable upon exercise of options
exercisable within sixty days.
(8) Mr. Merola's mailing address is P.O. Box 769 Tannersville, PA
18372-0769. Mr. Merola is not as officer nor director.
(9) Includes 240,000 shares issuable upon exercise of options exercisable
within sixty days and 87,000 shares issuable upon exercise of warrants
exercisable within sixty days.
-3-
<PAGE> 7
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 1999 all Section 16(a) filing
requirements applicable to its Officers, Directors and ten percent stockholders
were complied with except that Mr. Axon failed to file a Form 4 with respect to
the purchase for $6,083 of 3,000 shares of Common Stock in February, 1996, and a
Form 4 with respect to the purchase for $5,088 of 2,500 shares of Common Stock
in March, 1996.
PROPOSALS
The Company's Board of Directors has unanimously voted to recommend that
you vote for amendment of the Amended and Restated Certificate of Incorporation,
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, 2000.
PROPOSAL 1 - AMENDMENT AND RESTATEMENT OF CERTIFICATE OF INCORPORATION
On April 5, 2000, the Board of Directors adopted a resolution unanimously
recommending to stockholders an amendment of Article VII of the Company's
Amended and Restated Certificate of Incorporation (the "Charter Amendment"). The
Charter Amendment would do away with the classification of the Company's Board
of Directors into three classes, provide that directors shall serve for terms of
one year, and provide that the number of directors on the Board of Directors
shall be seven or such greater or lesser number as may be provided by the Board
of Directors from time to time, which shall in any event not be greater than
nine or less than five. The text of Article VII as proposed to be amended and
restated is substantially in the form of Annex A attached hereto.
The Charter Amendment would have the effect of requiring all of the
directors to stand for reelection by the stockholders each year rather than on
staggered schedules of three years and of enabling the Board of Directors to
increase or decrease the number of stockholders within a permissible range
without requiring further amendment to the Certificate of Incorporation to do
so. Additionally, under Section 141 of the General Corporation Law of the State
of Delaware, directors on a non-classified board may be removed by vote of the
stockholders with or without cause while those classified board of directors may
only be removed by vote of the stockholders for cause.
The Company believes that the classified Board of Directors was adopted
by the corporate predecessor of the Company in order to make it more difficult
for a potential hostile acquiror to gain full control of the Board of Directors.
In light of the concentration of stock ownership of the Company, the Board of
Directors believes the flexibility afforded by removal of the provision
classifying the Board of Directors to be of greater value to the stockholders
than the negotiating leverage accorded in the face of a hostile tender offer by
a classification of the Board of Directors.
The Company believes that reducing the number of directors from nine to
seven will make it easier for the Board of Directors to coordinate its
activities, maintain communication and create clearer lines of responsibility.
Additionally, the Charter Amendment would afford the Board of Directors the
flexibility to expand the Board of Directors if business conditions or the
availability of particular candidates made such expansion attractive, or
contract the Board of Directors if the Company could not recruit sufficient
qualified directors or if it determined that additional efficiencies would be
realized thereby.
VOTE REQUIRED FOR APPROVAL OF AMENDMENTS TO AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
The affirmative vote of holders of a majority of the outstanding shares
of the Company is required for approval of the amendments to the Amended and
Restated Certificate of Incorporation.
The Board of Directors unanimously recommends a vote FOR the approval of
the Charter Amendment.
-4-
<PAGE> 8
PROPOSAL 2 - ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS
Pursuant to the Certificate of Incorporation of the Company, the Board
of Directors currently consists of nine Directors with three classes of three
Directors each. Nine Directors are currently serving. If Proposal 1 is approved
the new Board of Directors will take office effective as of the filing of the
Charter Amendment and will consist of seven directors without classification. In
such event, Messrs. Axon, Evans, Lefkowitz, Bertash, Caiazzo, Lyons and
Sullivan, each of whom is currently a director, will stand nominated by the
Board of Directors for reelection.
If Proposal 1 is not approved the number of Directors shall remain at
nine, consisting of three classes of three. In such event, Messrs. Axon, Evans
and Lefkowitz, each of whom is a Class 3 Director whose term expires at the
Annual Meeting, will stand nominated by the Board of Directors for reelection.
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.
-5-
<PAGE> 9
The following sets forth certain information with respect to each of the
seven nominees to the Board of Directors, including three nominees for
reelection in the event if Proposal 1 is not approved by the stockholders, as
well as to the remaining Directors and Executive Officers of the Company:
<TABLE>
<CAPTION>
Year Term Expires if
Year First Proposal 1 is not
Name Age Elected Director Approved Office
- ---- --- ---------------- -------- ------
<S> <C> <C> <C> <C>
Nominees to the Board
Thomas J. Axon(1)(2) 47 1988 2000 President, Chief Executive
Officer and Director
Frank B. Evans, Jr.(1)(2) 48 1994 2000 Director
-
Steven W. Lefkowitz(1)(2) 44 1996 2000 Director
Michael Bertash(1) 47 1998 2002 Director
Joseph Caiazzo(1) 42 1994 2001 Vice President, Chief Operating
Officer, Secretary and Director
Allan R. Lyons(1) 59 1994 2002 Director
William F. Sullivan(1) 50 1996 2002 Director
Other Directors and Executive
Officers
Joseph Bartfield 44 1994 2001 Director
Robert M. Chiste 52 1994 2001 Director
Peter Spielberger 53 N/A N/A Executive Vice President, Chief
Financial Officer and Treasurer
</TABLE>
(1) Nominee if Proposal 1 is approved.
(2) Nominee if Proposal 1 is not approved.
-6-
<PAGE> 10
DIRECTORS OF THE COMPANY
Thomas J. Axon has served as President, Chief Executive Officer and
Chairman of Board of Directors of the Company since December 30, 1994. Mr. Axon
also served as Director of Franklin Credit Management Corporation ("Franklin")
from May 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.
Frank B. Evans, Jr. had 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 Earthsafe Corporation, a McLean, Virginia firm that
designs and supplies environmental compliance systems, since its inception in
1990. Mr. Evans is a Certified Public Accountant and holds a Bachelor of Science
from the University of Maryland and a Masters in Business from the University of
Southern California.
Steven W. Lefkowitz has served as the founder and President of Wade
Capital Corporation, a privately held investment firm organized since 1990. From
1988 to 1990, Mr. Lefkowitz served as a Vice President of Corporate Finance for
Drexel Burnham Lambert, Incorporated, where he had been employed since 1985. Mr.
Lefkowitz serves on the Board of Directors of Allstate Financial Corp., a
publicly traded financial services company, as well as several private
companies. Mr. Lefkowitz holds a Bachelor of Arts in history from Dartmouth
College and a Masters in Business Administration from Columbia University.
Joseph Caiazzo has served as Vice President and Chief Operating Officer
since March of 1996, and Secretary since June 1999. Mr. Caiazzo is also the
President of the Company's 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.
Mr. Lyons is a Certified Public Accountant who was an executive in
Piaker & Lyons, P.C., an accounting firm, and its predecessors from 1968 until
his retirement on December 31, 1999. Mr. Lyons is currently the owner of 21st
Century Strategic Investment Planning, a Florida LC doing financial planning
services and investment structuring and review of financial opportunities and
private placements, and acts as a general partner for two venture capital
partnerships. Mr. Lyons has been a director of Retail Entertainment Group, Inc.
(formerly Starlog Franchise Corporation) since August 1993 and a Director of the
Scoreboard Inc., since June 1990. Mr. Lyons has been a director of AMBANC
Holding Company (Mohawk Community Bank, Amsterdam, New York) since April 1999.
Mr. Lyons holds a Bachelor of Science in Accounting from Harpur College and a
Masters of Business Administration from Ohio State University.
Mr. 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.
Mr. 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.
Joseph Bartfield has practiced law in New York State since 1980. From
1988 until September 1997, Mr. Bartfield was self-employed as an attorney,
specializing in commercial litigation and commercial arbitration. From September
1997 until September 1999, Mr. Bartfield was a partner in RMTS Associates LLC.
("RMTS"), an insurance consulting and underwriting business with emphasis in
professional sports, medical stop loss insurance and large risk management.
Since November 1999, Mr. Bartfield has been a member of CFE Management LLC, a
Managing General Underwriter for medical stop loss insurance. Mr. Bartfield
graduated from New York Law School and holds a master's degree in political
science from Long Island University.
Mr. Chiste is currently involved with several Internet related
businesses. Since September 1999, he has served as Chairman of FuelQUEST, Inc.,
a development stage B2B e-commerce enterprise focusing on the fuels and
lubricant industry, as well as the Vice-Chairman, President and Chief Executive
Officer of FuelONE, Inc., an ongoing consolidation of fuel and lubricant
wholesale distribution companies. Since July 1998, Mr. Chiste has been Chairman
of TriActive, Inc., a venture funded Application Service Provider providing
systems management services over the Internet to mid-sized companies, where he
served as CEO from July 1998 to August 1999. Mr. Chiste was
-7-
<PAGE> 11
the President, Industrial Services Group, of Philip Services Corp. from August
1997 to June 1998. He was President, Industrial Services Group, of Philip
Services Corp, from August 1997 to July 1998. He served as Vice Chairman of
Allwaste, Inc. ("Allwaste"), a provider of industrial and environmental
services, from May 1997 through July 1997, President and Chief Executive Officer
of Allwaste from November 1994 through July 1997 and a director of Allwaste from
January 1995 through August 1997. Philip Services Corp. acquired Allwaste
effective July 31, 1997. Mr. Chiste served as Chief Executive Officer and
President of America National Power, Inc., a successor company of Transco Energy
Ventures Company, from its inception in 1986 until August 1994. During the same
period he served as Senior Vice President of Transco Energy Company. From
1980-1986, Mr. Chiste held several executive positions with Enron Corp. and its
successor companies. Mr. Chiste also serves as a director of Innovative Valve
Technology, Inc. and Pentacon, Inc., a provider of industrial fasteners. Mr.
Chiste holds a Bachelor of Science with honors in mathematics from Trenton State
College, a J.D. cum laude from Rutgers University School of Law and a Master of
Business Administration cum laude from Rutgers University School of Management.
OTHER EXECUTIVE OFFICERS
Peter Spielberger has served as Executive Vice President of the Company
since July 1998, Chief Financial Officer since November 1998, and Treasurer
since January 1999. He served as Vice President, Corporate Finance of Security
Capital Trading, Inc. from January to July 1998 and Director of Corporate
Finance of the Ray Dirks Division of National Securities Corporation from 1996
through 1997. Mr. Spielberger served in various executive positions, including
Vice President and Chief Financial Officer, with Ecoban Finance Limited and its
predecessors, Contitrade Services Corporation and The Merban Corporation, a
merchant banking group, from 1973 through 1995. Mr Spielberger has served as a
Lieutenant in the United States Army Finance Corps and is a Certified Public
Accountant. Mr. Spielberger holds a Bachelor of Business Administration in
Accounting from The Bernard M. Baruch School of Business and Public
Administration of The City College of New York.
All Directors hold office until the expiration of the three year term
of the class of Directors to which they were elected and until their successors
have been duly elected and qualified, or until their earlier death, resignation
or removal, provided herein that all, current Director's terms will expire
immediately upon filing of the Charter Amendment if Proposal 1 is approved. 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.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has an Audit Committee of which
Messrs. Evans, Lyons and Bertash are the members. The Audit Committee meets with
the Company's auditors and principal financial personnel to review the results
of the annual audit. The Audit Committee also reviews the scope of the annual
audit and other services before they are undertaken by the Company's auditors,
and reviews the adequacy and effectiveness of the Company's internal accounting
controls. The Company's Board of Directors has a Compensation Committee of which
Messrs. Caiazzo, Lefkowitz and Sullivan are the members. The Compensation
Committee reviews the compensation provided to Executive Officers and Board
members and administers the Company's 1996 Stock Incentive Plan. The Company's
Board of Directors does not have a standing nominating committee.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During Fiscal 1999, there were four meetings of the Board of Directors
of the Company, two meetings of the Audit Committee and one meeting of the
Compensation Committee. No Director attended fewer than 75% of the aggregate
number of meetings of the Board of Directors and of any committee on which he
served except for Mr. Bartfield.
COMPENSATION OF DIRECTORS
Effective March 21, 2000, 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. Effective April 5, 2000, 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 option will vest on the date of grant and be at
an exercise price of the fair market value of the shares on the date of grant as
determined by the Board of Directors.
Effective June 5, 1996, each non-employee director of the Company who
had served as a Director since 1994 was granted an option to purchase 10,000
shares of Common Stock, and each other non-employee Director
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<PAGE> 12
was granted an option to purchase 5,000 shares of Common Stock, pursuant to the
Company's 1996 Stock Incentive Plan. These options vest 25% each year on the
first four anniversaries of the date of grant at $1.56 per share. To date none
of these options have been exercised.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation earned by or paid to Thomas J.
Axon, the Chief Executive Officer of the Company and Joseph Caiazzo, the Chief
Operating Officer of the Company and Peter Spielberger the Chief Financial
Officer of the Company (collectively the "Named Executive Officers"). No other
executive officers of the Company earned over $100,000 in salary and bonus
during the fiscal year ended December 31, 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -------------------------------- ------------ ------------------------------------ ---------------------------
NAME AND PRINCIPAL POSITION FISCAL YEAR ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS
------------------------------------ ---------------------------
SALARY BONUS OTHER ANNUAL RESTRICTED SECURITIES
($) ($) COMPENSATION STOCK UNDERLYING
($) AWARD(S) OPTIONS/SARS
($) (#)
- -------------------------------- ------------ ---------- --------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. Axon-Chief Executive 1999 75,000 - 7,000(1) - -
Officer 1998 - - 7,000(1) - -
1997 - - 7,000(1) - -
- -------------------------------- ------------ ---------- --------- --------------- ----------- ---------------
Joseph Caiazzo-Chief Operating 1999 141,557 - - - -
Officer 1998 140,000 - - - -
1997 145,577 - - - 100,000(2)
- -------------------------------- ------------ ---------- --------- --------------- ----------- ---------------
Peter Spielberger-Chief 1999 150,000 30,000 - - -
Financial Officer 1998 69,230 - - - 100,000(3)
1997 - - - - -
- -------------------------------- ------------ ---------- --------- --------------- ----------- ---------------
</TABLE>
(1) Represents health insurance benefits received by Mr. Axon.
(2) Represents options to purchase shares of the Company's Common Stock granted
on March 25, 1996 at $1.56 per share, 50,000 of which vested upon grant and
50,000 of which vested on March 26, 1998.
(3) Represents options to purchase shares of the Company's Common Stock granted
on July 13, 1998 at $1.56 per share, 50,000 of which vested upon grant and
50,000 of which vested on July 12,1999. The following table sets forth the
aggregate value, realized gain, and number of options granted to the Named
Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Name Shares Value Number of Securities Value of Unexercised
Acquired On Realized Underlying Unexercised In-The-Money Options at
Exercise Options at FY-END FY-End
- -----------------------------------------------------------------------------------------------------------
# ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Thomas J. Axon - - - - - -
- -----------------------------------------------------------------------------------------------------------
Joseph Caiazzo(1) - - 100,000 - - -
- -----------------------------------------------------------------------------------------------------------
Peter Spielberger(1) - - 100,000 - - -
- -----------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE> 13
(1) Based upon a $1.50 share price at December 31, 1999.
EMPLOYMENT AGREEMENTS.
Joseph Caiazzo, serves as Chief Operating Officer of the Company under
a five-year contract for annual compensation of $135,000, expiring on March 24,
2001. In addition, under his employment contract Mr. Caiazzo will receive a
bonus of 3.5% of post tax profits of the Company in any fiscal year in excess of
$500,000. Mr. Caiazzo also received a grant of 100,000 options to purchase
Common Stock, of which 50,000 vested upon grant and 50,000 vested on March 26,
1998.
Peter Spielberger, serves as Chief Financial Officer of the Company,
under the terms of a contract that has been extended to July 12, 2000, for
annual compensation of $150,000. Under his employment contract Mr. Spielberger
received a bonus of $30,000 in April 1999. Mr. Spielberger also received a grant
of 100,000 options to purchase Common Stock, exercisable at a purchase price of
$ 1.56 per share of which 50,000 vested upon grant and 50,000 vested on July 12,
1999.
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 is due January 1, 2001 but
can be extended by Mr. Axon to June 1, 2001. The Company believes that the terms
of the sale were at least as advantageous to the Company as those available from
an arms-length purchaser.
As of December 31, 1999, the Company had indebtedness of $109,350
outstanding to RMTS in respect of a November 1996 advance under a financing
agreement provided to the Company by RMTS to fund deposits required in
connection with bids at portfolio auctions. The indebtedness bears interest at a
rate of 8.5% per annum and is payable monthly.
On April 2, 1997, the Company entered into a letter agreement with Wade
Capital Corporation ("WCC"), of which Steven W. Lefkowitz, a member of the
Company's Board of Directors, serves as President, pursuant to which WCC was
retained through April 30, 1998 to provide financial advisory services to the
Company. Pursuant to such agreement, WCC was granted 87,000 warrants to purchase
Common Stock at $1.56 per share.
On March 31,1999, Mr. Steven W. Leftkowitz, a board member and
stockholder, purchased from the Company without recourse a note held by the
Company. The consideration given included a note for $270,000 of indebtedness to
the Company. The note bears interest at a rate of 8% per annum payable monthly
is secured by a mortgage on real estate and is due May 31, 2001 but can extended
at his option to November 30, 2001. The Company believes that the terms of the
sale of the note were at least as advantageous to the Company as those available
from an arms-length purchaser.
During 1999, Mr. Axon provided the Company's Senior Debt Lender with a
$350,000 personal guarantee in connection with the financing of the acquisition
by the Company of certain high LTV loans. Mr. Axon is being compensated on the
outstanding balance of this guarantee at the rate of -1/4% per annum which the
Company believes is no greater than would be payable to an outside guarantor.
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.
-10-
<PAGE> 14
PROPOSAL 3 - 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, 2000 and the Stockholders will be asked to
ratify such appointment. 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.
VOTE REQUIRED FOR RATIFICATION OF D&T
Ratification of the appointment of D&T requires the affirmative vote of
a majority of the shares of Common Stock present at the Annual Meeting and
entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF D&T.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not
aware of any other matter that is to be presented to Stockholders for formal
action at the Annual Meeting. If, however, any other matter or matters are
properly brought before the Annual Meeting or any adjournment or postponement
thereof, it is the intention of the persons named in the enclosed form of proxy
to vote such proxy in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS
Any Stockholder proposal intended to be presented at the next annual
meeting of Stockholders must be received by the Company at its principal
executive offices, Six Harrison Street, New York, New York 10013, no later than
December 26, 2000 in order to be eligible for inclusion in the Company's proxy
statement and form of proxy to be used in connection with that meeting. Any
proposal submitted but not to be so included shall be considered to be untimely
if not received by the Company at the principal executive office by March 12,
2001.
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.
-11-
<PAGE> 15
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
President
New York, New York
April 25, 2000
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<PAGE> 16
ANNEX A
ARTICLE VII.
The number of directors of the Corporation shall be fixed from
time to time by its By-Laws and may be increased or decreased as
therein provided, but the number thereof shall in no event be less than
five nor more than nine. Each director shall hold office until the next
annual meeting of the Corporation and until his successor shall be
elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. A
majority of the directors shall constitute a quorum for the transaction
of business. Except as otherwise required by law, any vacancy on the
Board of Directors that results from an increase in the number of
directors shall be filled only by a majority of the Board of Directors
then in office, provided that a quorum is present, and any other
vacancy occurring in the Board of Directors shall be filled by a
majority of the directors then in office, even if less than a quorum,
or by a sole remaining director. Any director elected to fill a vacancy
not resulting from a increase in the number of directors shall have the
same remaining terms as that of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at
an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships
shall be governed by the terms of this Certificate of Incorporation
applicable thereto, and the number of such directors shall not be
counted in determining the maximum number of directors permitted under
the foregoing provision of this Article VII, in each case unless
expressly provided by such terms.
-13-
<PAGE> 17
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 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 Wednesday, the 24th day of May,
2000, 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 AMENDMENT AND RESTATEMENT OF CERTIFICATE OF INCORPORATION To approve
the amendment and restatement of the Certificate of Incorporation;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. ELECTION OF DIRECTORS. Please complete both of the sections below:
A. If the Amendment to the Amended and Restated Certificate of
Incorporation is approved:
To elect the nominees for Director below for a term of one year:
FOR ALL NOMINEES LISTED BELOW
(except as marked to the contrary below) []
WITHHOLD AUTHORITY
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
Frank B. Evans, Jr.
Steven W. Lefkowitz
Allan R. Lyons
William F. Sullivan
Michael Bertash
Joseph Caiazzo
B. If the Amendment to the Amended and Restated Certificate of
Incorporation is not approved: To elect the nominees for Class 3
Director below for a term of three years;
FOR ALL NOMINEES LISTED BELOW
(except as marked to the contrary below) [ ]
WITHHOLD AUTHORITY
to vote for all nominees listed below [ ]
<PAGE> 18
(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
Frank B. Evans, Jr.
Steven W. Lefkowitz
3. APPROVAL OF AUDITORS: To ratify and approve the appointment of Deloitte
& Touche as independent public auditors of the Company for the fiscal
year ending December 31, 2000;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
and in their discretion, upon any other matters that may properly come before
the meeting or any adjournments or postponements thereof.
(Continued and to be dated and signed on the other side.)
<PAGE> 19
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 2 AND FOR PROPOSALS 1 AND 3.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
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: , 2000
-----------------------------
------------------------------------------------
(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.
