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
by Rule 14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FRANKLIN CREDIT MANAGEMENT CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No Fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
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>
FRANKLIN CREDIT MANAGEMENT CORPORATION
Six Harrison Street
New York, New York 10013
May 23, 1997
To Our Stockholders:
You are cordially invited to attend the 1997 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, June 11, 1997, at 10:00
A.M., New York 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, 1996.
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>
FRANKLIN CREDIT MANAGEMENT CORPORATION
SIX HARRISON STREET
NEW YORK, NEW YORK 10013
(212) 925-8745
------------------------------------
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
JUNE 11, 1997
------------------------------------
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., New York time, on Wednesday, June 11, 1997
for the following purposes:
1. to elect three Directors to Class 3 of the Company's Board of
Directors;
2. to ratify the appointment of McGladrey & Pullen as the Company's
independent public auditors for the fiscal year ending December
31, 1997; 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 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 May 16, 1997 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
May 23, 1997
<PAGE>
FRANKLIN CREDIT MANAGEMENT CORPORATION
SIX HARRISON STREET
NEW YORK, NEW YORK 10013
(212) 925-8745
------------------------------------
PROXY STATEMENT FOR
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 1997
------------------------------------
GENERAL INFORMATION
This Proxy Statement and the enclosed form of proxy are being
furnished, commencing on or about May 23, 1997, 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., New York time, on Wednesday, June 11, 1997, and at any
adjournment or postponement thereof, for the purposes set forth in the foregoing
Notice of 1997 Annual Meeting of Stockholders.
The annual report of the Company, containing financial statements of
the Company as of December 31, 1996, 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 nominees named below under the caption "Election of
Directors" to Class 3 of the Board of Directors, (ii) FOR the ratification of
the appointment of McGladrey & Pullen ("M&P") as independent public auditors for
the Company's fiscal year ending December 31, 1997, 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 May 23, 1997.
Following the original mailing of proxy solicitation material, executiv
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 M&P as the independent public auditors of the
Company for the fiscal year ended December 31, 1997.
<PAGE>
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
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 May 16, 1997
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 May 16,
1997, there were outstanding 1,102,077 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 May 16, 1997, 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>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE (%)
NAME AND ADDRESS BENEFICIALLY OWNED OF COMMON STOCK
- ---------------- ------------------ ---------------
<S> <C> <C>
Thomas J. Axon(1)(2).......................... 596,224 54.06%
Frank B. Evans, Jr.(1)(3).................... 185,550 16.82%
Joseph Caiazzo(1)(4)........................... 10,220 *
Vincent A. Merola.............................. 59,187 5.37%
25 Wildwood Court
Montvale, NJ 07645
Joseph Bartfield(1)(5)......................... 19,958 1.81%
Robert M. Chiste(1)(5)......................... 9,511 *
Steven W. Lefkowitz(1)(6)...................... 17,650 1.57%
Allan R. Lyons(1)(5)........................... 500 *
William F. Sullivan(1)(7)...................... 2,190 *
Eugene T. Wilkinson(1)(5)...................... 3,402 *
All Directors and Executive Officers as a
group (8 persons)(8)........................... 845,205 74.67%
</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) Includes 2,322 shares beneficially owned by Mr. Axon's mother, Ann Axon,
with respect to which shares Mr. Axon disclaims beneficial ownership and
206 shares owned of record by him as custodian for a minor child.
(3) Includes 1,045 shares beneficially owned by Mr. Evans's father, Frank
Evans, with respect to which shares Mr. Evans disclaims beneficial
ownership.
(4) Includes 10,000 shares of Common Stock issuable upon exercise of options
exercisable within sixty days.
(5) Includes 500 shares of Common Stock issuable upon exercise of options
exercisable within sixty days.
(6) Includes 17,650 shares of Common Stock issuable upon exercise of options
exercisable within sixty days.
(7) Includes 250 shares of Common Stock issuable upon exercise of options
exercisable within sixty days.
(8) Includes 29,900 shares of Common Stock issuable upon exercise of options
exercisable within sixty days.
-3-
<PAGE>
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 executive 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 the fiscal year ended December 31,
1996 ("Fiscal 1996") all Section 16(a) filing requirements applicable to its
Officers, Directors and greater than ten percent stockholders were complied with
except for the submission four days late of a single Form 4 by each of Mr. Evans
and Mr. Bartfield.
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 M&P as the independent public auditors of the Company for the
fiscal year ending December 31, 1997.
PROPOSAL 1 - ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
The Board of Directors is divided into three classes. Each class is
elected in a different year for a term of three years, except to the extent that
shorter terms may be required to effect an appropriate balance among the classes
in the event of an increase in the number of Directors. It is proposed to elect
three Directors to Class 3 of the Company's Board of Directors, each for a term
of three years. All of the nominees, set forth in the table below, are currently
members of the Board of Directors. 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 three nominees to Class 3 of the Board of Directors as well as to the
remaining Directors and executive Officers of the Company:
<TABLE>
<CAPTION>
Year First
Name Age Elected Director Office
- ---- --- ---------------- ------
Nominees to the Board
<S> <C> <C> <C>
Thomas J. Axon 45 1994 President, Chief Executive Officer
and Director
Frank B. Evans, Jr. 45 1994 Vice President, Chief Financial
Officer, Treasurer, Secretary and
Director
Steven W. Lefkowitz 41 1996 Director
-4-
<PAGE>
Other Directors and Executive
Officers
Joseph Bartfield 41 1994 Director
Joseph Caiazzo 39 1994 Vice President, Chief Operating
Officer and Director
Robert M. Chiste 49 1994 Director
Allan R. Lyons 56 1994 Director
William F. Sullivan 47 1996 Director
Eugene T. Wilkinson 46 1994 Director
</TABLE>
NOMINEES TO CLASS 3 DIRECTOR FOR TERM ENDING 2000
Thomas J. Axon has served as President, Chief Executive Officer and
Chairman of the Board of Directors of the Company since December 30, 1994. Mr.
Axon served as President and a Director of Franklin Credit Management
Corporation ("Franklin") from its inception in 1990 until its merger on December
30, 1994 with the Company (the "Merger"), which until the Merger had operated
under the name Miramar Resources, Inc. ("Miramar"). Mr. Axon also served as a
Director of the Company from 1991 until the Merger. Since 1984, Mr. Axon has
also served as the President of Axon Associates, Inc., a company engaged in
consumer financing. Since 1985, Mr. Axon has been the president and owner of
RMTS Associates, LLC. ("RMTS"), an insurance consulting and underwriting
business with emphasis in professional sports, medical stop-loss insurance and
large risk management. 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. has served as Vice President, Treasurer, Chief
Financial Officer, Secretary and Director of the Company since December 30,
1994. Mr. Evans also served as the Secretary, Treasurer, a Vice President and a
Director of Franklin. Mr. Evans is CEO of Earthsafe Corporation, a McLean,
Virginia firm that designs and supplies environmental compliance systems. Since
October 1995, Mr. Evans has served as Vice President of RMTS, an insurance
consulting and underwriting business. 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 a Director of the Company since June
1996. Mr. Lefkowitz is the founder and President of Wade Capital Corporation, a
privately held investment firm organized in 1990. From 1988 to 1990, Mr.
Lefkowitz served as a Vice President of Corporate Finance for Drexel Burnham
Lambert, Incorporated, where he had been employed since 1985. Mr. Lefkowitz
serves on the Board of Directors of several private companies. Mr. Lefkowitz
holds a Bachelor of Arts degree in history from Dartmouth College and a Masters
in business administration from Columbia University.
-5-
<PAGE>
CLASS 1 DIRECTORS WITH TERMS EXPIRING 1998
Joseph Bartfield has served as a Director of the Company since December
30, 1994. Mr. Bartfield has practiced law in New York State since 1980. Since
1988 he has been self-employed, specializing in commercial and real estate law
with particular emphasis on commercial litigation and commercial arbitration.
Mr. Bartfield graduated from New York Law School and holds a masters degree in
political science from Long Island University.
Joseph Caiazzo has served as a Director of the Company since December
30, 1994 and Vice President and Chief Operating Officer since March of 1996.
From August 1989 to March 1996, Mr. Caiazzo served as corporate controller of
R.C. Dolner, Inc., a general contractor. He holds a Bachelor of Science from St.
Francis College and a Masters of Business Administration in Finance from Long
Island University.
Robert M. Chiste has served as a Director of the Company since December
30, 1994. Since November 1994 Mr. Chiste has served as Chief Executive Officer
and a Director of Allwaste, Inc. From February 1986 to November 1994, Mr. Chiste
served as Chief Executive Officer and President of American National Power,
Inc., successor to Transco Energy Ventures Company. 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.
CLASS 2 DIRECTORS WITH TERMS EXPIRING 1999
Allan R. Lyons has served as a Director of the Company since December
30, 1994. Mr. Lyons is a Certified Public Accountant who has been a principal in
Piaker & Lyons, P.C. and its predecessors since 1968. Mr. Lyons is engaged
primarily in estate, tax and financial planning services including investment
structuring. Mr. Lyons has been a director of Starlog Franchise Corporation
since August 1993, and a Director of The Score Board, Inc., a corporation
primarily engaged in the sale of sports and entertainment memorabilia since June
1990. 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 served as a Director of the Company since June
1996. 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.
Eugene T. Wilkinson has served as a Director of the Company since
December 30, 1994. Mr. Wilkinson has served as President and CEO of Management
Facilities Corporation, a Warren, New Jersey reinsurance facilities manager,
underwriter and consultant primarily in the health care field since 1987. Mr.
Wilkinson holds a Bachelor of Business Administration from the University of
Ohio.
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. 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.
Pursuant to the By-laws of the Company, the Board of Directors has set the
number of Directors at nine with three classes of three Directors each. Nine
Directors are currently serving. No familial relationships exist between any
Directors or executive Officers of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has an Audit Committee. Messrs.
Bartfield, Lyons and Wilkinson serve on the Audit Committee. 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
-6-
<PAGE>
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.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During Fiscal 1996, there were 3 meetings of the Board of Directors of
the Company and no meetings of the Audit Committee. No Director other than
Robert Chiste attended fewer than 75% of the aggregate of the number of meetings
of the Board of Directors and of any committee on which he served.
COMPENSATION OF DIRECTORS
Directors of the Company received no compensation for their service as
such. 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 2,000 shares
of Common Stock, and each other non-employee director was granted an option to
purchase 1,000 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 $7.80 per share. To date none of these options have been
exercised.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation earned by or paid to Thomas
J. Axon, the Chief Executive Officer of the Company (the "Named Executive"). The
Company awarded or paid such compensation to Mr. Axon for services rendered in
all capacities during the applicable fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
===================================================================================================================
Annual Compensation
- -------------------------------------------------------------------------------------------------------------------
Other Annual
Name and Fiscal Year Salary Bonus Compensation
Principal Position ($) ($) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thomas J. Axon-Chief 1996 $0 - $7,000(1)
Executive Officer 1995 $0 - $7,000(1)
1994 $0 - $7,000(1)
===================================================================================================================
</TABLE>
(1) Represents health insurance benefits received by Mr. Axon.
EMPLOYMENT AGREEMENTS.
The Company and its subsidiaries have written employment agreements
with two of its senior employees. Mr. Joseph Caiazzo, the Company's Chief
Operation Officer and Ms. Marcia Vacacela, President of Liberty Lending
Corporation, a wholly-owned subsidiary of the Company. Mr. Caiazzo entered into
a five year contract for annual compensation of $125,000 beginning March 25,
1996 and expiring on March 24, 2001. In addition, under his employment contract
Mr. Caiazzo will receive a bonus of 3.5% of post-tax profits in excess of
$500,000. Mr. Caiazzo also received a grant of 20,000 options to purchase Common
Stock, of which 10,000 vested immediately and the balance of which will vest on
March 26, 1998.
Ms. Vacacela, entered into a two year employment agreement with Liberty
Lending effective January 1, 1997. The agreement provides for an annual
compensation of $104,000 and provides for a renewal term of four
-7-
<PAGE>
years, upon agreement of the parties. Ms. Vacacela also received a signing bonus
of $12,000 and a grant of 10,000 options to purchase Common Stock, of which
2,000 vest after each year of service is completed. In addition, under her
employment agreement Ms. Vacacela will receive a bonus based on 1.5% of post-tax
profits of Liberty Lending from $250,000 up to $2 million and 1% of any post-tax
profits in excess of $2 million.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the year ended December 31, 1995, the Company held an undivided
60% interest in an office condominium unit located on the Sixth Floor of Six
Harrison Street, New York, New York, which houses the Company's principal
executive offices. During the fiscal year ended December 31, 1995, the Company
made monthly mortgage payments proportional to its undivided 60% interest of the
mortgage of the unit. On December 31, 1995, the Company purchased the remaining
undivided interests in the condominium unit from RMTS and Axon Associates, Inc.
("Axon") in consideration of the assumption by the Company of the obligation to
pay all principal and interest under the mortgage and a purchase price of
$150,000, half of which is due to each of RMTS and Axon. In payment of such
amounts the Company issued to RMTS and to Axon 10% Demand Notes due on demand,
which are reflected on the financial statements of the Company as Notes Payable
to Affiliates at December 31, 1996 and December 31, 1995. Thomas J. Axon owns
100% of the outstanding stock of Axon.
The Company has indebtedness to Mr. Axon currently in the amount of
$79,000, $75,000 of which was originally incurred to Axon Associates, Inc. on
December 31, 1995 in respect of the purchase by the Company of the remainder of
the undivided interest in the condominium unit and $4,000 of which is the
principal amount remaining outstanding on a 1994 advance of $120,000 to fund the
purchase of a portfolio. This indebtedness bears interest at a rate of 10% per
annum and requires quarterly payments of $6,000 in respect of principal and
interest.
Additionally, in connection with such purchase, the Company incurred
indebtedness of $100,000 to RMTS. Such indebtedness accrues interest at a rate
of 10% per annum and is payable on demand.
In January, 1995 the Company incurred indebtedness to Vincent A.
Merola, the former Secretary of Miramar, and Mr. Axon, the President of the
Company, of $90,034 and $82,139, respectively, in respect of advances used to
finance certain of the Company's ordinary operating expenses in 1995. Such
indebtedness bears interest at a rate of 10% per annum. The indebtedness to Mr.
Merola requires monthly payments of $4,155 until repaid in full at December 31,
1997, and the indebtedness to Mr. Axon requires monthly interest payments, with
the principal due upon demand. $39,704 of the indebtedness to Mr. Merola
currently remains outstanding.
As of December 31, 1996, the Company had indebtedness of $65,000
outstanding to RMTS in respect of a November 1996 advance under a line of credit
provided to the Company by RMTS to fund deposits required in connection with
bids at notes receivable auctions. The indebtedness bears interest at a rate of
9.85% per annum and $8,250 of the indebtedness to RMTS currently remains
outstanding.
On May 3, 1995, 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, 1996 to provide financial advisory services to the
Company. In consideration for such services, the Company agreed to pay WCC a
monthly retainer of $2,500 and a success fee based upon performance parameters,
and to issue WCC a five year warrant to purchase 5% of the amount of the
Company's securities issued in any financing or acquisition transaction. The
Company has paid WCC the $30,000 of retainer fees pursuant to this Agreement.
On April 24, 1997, the Company entered into a letter agreement with WCC
pursuant to which the Company issued to WCC a five year warrant to purchase
17,400 shares of the Company's Common Stock, in consideration for the financial
advisory services to be provided by WCC to the Company during the twelve-month
period following such date. This letter agreement superseded the letter
agreement entered into in 1995.
-8-
<PAGE>
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 McGladrey & Pullen, independent certified public auditors,
has audited the Company's financial statements since 1994. The Board of
Directors has appointed M&P as the Company's independent public auditors for the
fiscal year ending December 31, 1997 and the Stockholders will be asked to
ratify such appointment. It is expected that a representative of M&P 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 M&P
Ratification of the appointment of M&P 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
M&P.
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
January 23, 1998, 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.
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.
-9-
<PAGE>
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
May 23, 1997
<PAGE>
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 11th day of
June, 1997, at 10:00 a.m., New York time, and at any adjournment or postponement
thereof, hereby ratifying all that said proxies or their substitutes may do by
virtue hereof, and the undersigned authorizes and instructs said proxies to vote
as follows:
1. ELECTION OF DIRECTORS: To elect the nominees for Class 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 [ ]
(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
2. APPROVAL OF AUDITORS: To ratify and approve the appointment of McGladrey &
Pullen as independent public auditors of the Company for the fiscal year
ending December 31, 1997;
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>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
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: _____________________________, 1997
------------------------------------------------
(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.
