<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>
|_| Preliminary proxy statement |_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|X| Definitive proxy statement
|_| 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 27, 1999
To Our Stockholders:
You are cordially invited to attend the 1999 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 26, 1999, 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, 1998.
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,
/s/ Thomas J. Axon
---------------------------------
THOMAS J. AXON
President
<PAGE> 3
FRANKLIN CREDIT MANAGEMENT CORPORATION
SIX HARRISON STREET
NEW YORK, NEW YORK 10013
(212) 925-8745
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 1999
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 26,
1999 for the following purposes:
1. to elect three Directors to Class 2 of 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, 1999; 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 April 26, 1999 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,
/s/ Thomas J. Axon
-----------------------------------
THOMAS J. AXON
President
New York, New York
April 27, 1999
<PAGE> 4
FRANKLIN CREDIT MANAGEMENT CORPORATION
SIX HARRISON STREET
NEW YORK, NEW YORK 10013
(212) 925-8745
PROXY STATEMENT FOR
1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1999
GENERAL INFORMATION
This Proxy Statement and the enclosed form of proxy are being
furnished, commencing on or about April 27, 1999, 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 26, 1999, and at any
adjournment or postponement thereof, for the purposes set forth in the foregoing
Notice of 1999 Annual Meeting of Stockholders.
The annual report of the Company, containing financial statements of
the Company as of December 31, 1998, 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 2 of the Board of Directors, (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, 1999, 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 27, 1999.
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, 1999.
<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. 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 April 26, 1999
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 26,
1999, 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 26, 1999, 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 BENEFICIALLY OWNED OF COMMON STOCK
- ---------------- ------------------ ---------------
<S> <C> <C>
Thomas J. Axon(1)(2)......................... 3,112,990 52.6%
Frank B. Evans, Jr.(1)(3).................... 897,960 15.2%
Joseph Caiazzo(1)(4)......................... 123,550 2.1%
Joseph Bartfield(1)(5)....................... 162,290 2.7%
Robert M. Chiste(1)(5)....................... 65,055 1.1%
Allan R. Lyons(1)(5)......................... 32,500 *
William F. Sullivan(1)(6).................... 32,200 *
Michael Bertash(1)........................... 0 *
Steven W. Lefkowitz(1)(7).................... 149,500 2.5%
Vincent A. Merola(8)......................... 295,935 5.0%
Peter Spielberger(1)(9)...................... 50,000 *
All Directors and Executive Officers as a
group (10 persons)(10)....................... 4,626,045 74.9%
</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 5,225 shares beneficially owned by Mr. Evans' father
Frank Evans and 20,720 shares beneficially owned by Mr. Evans' wife
Karen Evans, with respect to which shares Mr. Evans disclaimes
beneficial ownership. Includes 20,000 shares held by Mr. Evans as
custodian for his four minor children.
(4) Includes 100,000 shares issuable upon exercise of options exercisable
within sixty days.
(5) Includes 5,000 shares issuable upon exercise of options exercisable
within sixty days.
(6) Includes 2,500 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 2,500 shares issuable upon exercise of options
exercisable within sixty days.
(8) Mr. Merola mailing address is P.O Box 769 Tannersville, PA 18372-0769.
(9) Includes 50,000 shares issuable upon exercise of options exercisable
within sixty days.
(10) Includes 170,000 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 the fiscal year ended December 31,
1998 ("Fiscal 1998") all Section 16(a) filing requirements applicable to its
Officers, Directors and greater than ten percent stockholders were complied
with.
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 ending December 31, 1999.
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 2 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 2 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
- ---- --- ---------------- ------
<S> <C> <C> <C>
Nominees to the Board
Allan R. Lyons 58 1994 Director
William F. Sullivan 49 1996 Director
Michael Bertash 46 1998 Director
Other Directors and Executive
Officers
Joseph Bartfield 44 1994 Director
</TABLE>
-4-
<PAGE> 8
<TABLE>
<CAPTION>
Year First
Name Age Elected Director Office
- ---- --- ---------------- ------
<S> <C> <C> <C>
Joseph Caiazzo 41 1994 Vice President, Chief Operating
Officer, Secretary and Director
Robert M. Chiste 52 1994 Director
Thomas J. Axon 47 1988 President, Chief Executive Officer
and Director
Frank B. Evans, Jr. 47 1994 Director
Steven W. Lefkowitz 43 1996 Director
Peter Spielberger 52 N/A Executive Vice President, Chief
Financial Officer and Treasurer
</TABLE>
CLASS 2 DIRECTORS WITH TERMS EXPIRING 1999
Mr. Lyons is a Certified Public Accountant who has been a principal in
Piaker & Lyons, P.C., an accounting firm, 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.,
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.
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. In December
1998, Mr. Bertash was elected by the Board of Directors to fill the remainder of
the unexpired term of Mr. Wilkinson, who resigned from the Board to pursue other
interests. Mr. Bertash holds a Bachelor of Science in Operations Research from
Syracuse University and a Master in Business from New York University.
CLASS 3 DIRECTORS WITH TERMS EXPIRING 2000
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 since 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
-5-
<PAGE> 9
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.
CLASS 1 DIRECTORS WITH TERMS EXPIRING 2001
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. Since
September 1997, Mr. Bartfield has been 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. RMTS
is a partnership in which Mr. Axon is also a partner. Mr. Bartfield graduated
from New York Law School and holds a master's degree in political science from
Long Island University.
Joseph Caiazzo has served as 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. Mr. Caiazzo
holds a Bachelor of Science from St. Francis College and a Masters of Business
Administration in Finance from Long Island University.
Mr. Chiste has been Chairman and Chief Executive Officer of TriActive
Technologies, Inc. since July, 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. Mr. Chiste also serves as a director of Innovative Valve
Technology, Inc. and Pentacon, Inc. 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 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. 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
-6-
<PAGE> 10
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 of which Messrs.
Bartfield, 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 does not have standing nominating and
compensation committees.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During Fiscal 1998, there were three meetings of the Board of Directors of
the Company and one meeting of the Audit 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.
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 3,000 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 (collectively the "Named Executive Officers").
No other executive officers of the Company earned over $100,000 in salary and
bonus during the fiscal year ended December 31, 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
NAME AND PRINCIPAL POSITION FISCAL YEAR ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------- ---------------------
OTHER RESTRICTED SECURITIES
SALARY BONUS ANNUAL STOCK UNDERLYING
($) ($) COMPENSATION AWARD(S) OPTIONS/SARs
($) ($) (#)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. Axon-Chief Executive 1998 - - 7,000(1) - -
Officer 1997 - - 7,000(1) - -
1996 - - 7,000(1) - -
Joseph Caiazzo-Chief Operating 1998 $ 140,000
Officer 1997 $ 145,577 $6,000 - - -
1996 $ 91,527 - - - 100,000(2)
</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 $1.57 per share, 50,000 of which vested upon grant and
50,000 of which vested on March 26, 1998.
-7-
<PAGE> 11
The following table sets forth the aggregate value, realized gain, and
number of options granted to the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired On Value Underlying Unexercised In-The-Money Options at
Exercise Realized Options at FY-END FY-End
-------------------------- ------------------------
Name # ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- - --- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. Axon - - - - - -
Joseph Caiazzo(1) - - 100,000 - -
</TABLE>
(1) Based upon a $1.50 share price at December 31, 1998.
EMPLOYMENT AGREEMENTS.
Joseph Caiazzo, serves as Chief Operating Officer of the Company under
a five-year contract for annual compensation of $125,000 (which has been
increased by the Company to $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 a one-year contract for annual compensation of $150,000 expiring on July
12, 1999. Under his employment contract Mr. Spielberger will receive 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 $ 1.57 per share of
which 50,000 vested upon grant and 50,000 vest on July 12, 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On December 31,1998, Mr. Axon, the Company's President, Chief
Executive Officer and Chairman purchased from the Company a defaulted note
receivable secured by a Florida condominium and the related foreclosure rights.
The Company had conducted foreclosure proceedings, however its title to the
condominium remained subject to considerable defects of title. Mr. Axon's
purchase was without representation by the Company as to title and therefor
subject to the defects. 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, 1998, the Company also had indebtedness of $164,897
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 portfolio auctions. The indebtedness bears interest at a rate of 10.5%
per annum.
In September 1998, Mr. Axon purchased from the Company 133,480 shares of
Common Stock and Joseph Bartfield and Steven Lefkowitz, each a director of the
Company, each purchased from the Company 60,000 shares of Common Stock. The
purchases were pursuant to a private placement by the Company of 400,000 shares
of Common Stock, at a price of $1.25 per share, under Section 4 (2) of the
Securities Act of
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<PAGE> 12
1933, as amended. The consideration for the purchases by Messrs. Axon and
Bartfield included forgiveness of $241,850 of indebtedness of the Company to
RMTS, LLC, which was due on demand, and the consideration for Mr. Lefkowitz's
purchase was paid in cash. Messrs. Axon and Bartfield are owners of RMTS, LLC.
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 and receives $2,500 per month for the duration
of the agreement. The Company and Mr. Lefkowitz have extended this agreement to
April 30, 1999.
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, 1999 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.
The Company terminated the service of McGladrey & Pullen, L.L.P.
("M&P") as its independent auditors on July 1, 1997. M&P had served as the
Company's independent auditors since 1994.
None of the reports of M&P on the financial statements of the Company
for the fiscal year ended December 31, 1996 contained an adverse opinion or a
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope or accounting principles. During the fiscal year ended December 31, 1996
and the subsequent interim period preceding the termination of M&P, there were
no disagreement(s) with M&P on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures, which
disagreement(s), if not resolved to the satisfaction of M&P would have caused it
to make reference to the subject matter of the disagreement(s) in connection
with its report. None of the reportable events listed in Item 304 (a)(1)(v) of
Regulation S-K occurred with respect to the Company during the Registrant's two
most recent fiscal years and the subsequent interim period preceding the
termination of M&P.
On July 1, 1997, the Company with the approval of its Board of
Directors engaged D&T as its independent auditors.
During the fiscal year ended December 31, 1996 and the subsequent
interim period preceding the engagement of D&T, neither the Company nor anyone
on its behalf consulted D&T regarding the application of accounting principles
to a specific completed or contemplated transaction, or the type of audit
opinion that might be rendered on the Company's financial statements, and no
written or oral advice concerning same was provided to the Company that was an
important factor considered by the Company in reaching a decision as to any
accounting, auditing or financial reporting issue.
VOTE REQUIRED FOR RATIFICATION OF D&T
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<PAGE> 13
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 2, 1999, 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 13,
2000.
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.
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<PAGE> 14
IF YOU HAVE ANY QUESTIONS ABOUT VOTING YOUR SHARES, PLEASE TELEPHONE
THE COMPANY AT (212) 925-8745.
Sincerely yours,
/s/ Thomas J. Axon
-------------------------------
THOMAS J. AXON
President
New York, New York
April 27, 1999
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<PAGE> 15
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 26th day of May,
1999, 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 2 Director below for a
term of three years;
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.)
Michael Bertash
Allan R. Lyons
William F. Sullivan
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, 1999;
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> 16
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDESIGNED 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:
------------------------------------,
1999
------------------------------------
(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.
