DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.
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Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
FRANKLIN CREDIT HOLDING 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):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
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FRANKLIN CREDIT HOLDING CORPORATION
101 Hudson Street
Jersey City, New Jersey 07302
April 27, 2010
To Our Stockholders:
You are cordially invited to attend the 2010 Annual Meeting of Stockholders of Franklin Credit
Holding Corporation (the Company), which will be held at the corporate offices of the Company,
located at 101 Hudson Street, 25th floor, Jersey City, New Jersey on Wednesday, June 16,
2010, at 2:00 P.M., Eastern Daylight Time.
The Notice of Annual Meeting and Proxy Statement covering the formal business to be conducted
at the Annual Meeting follow this letter and are accompanied by the Companys Annual Report for the
fiscal year ended December 31, 2009.
We hope you will attend the Annual Meeting in person. Whether or not you plan to attend,
please complete, sign, date and return the enclosed proxy promptly in the accompanying reply
envelope to assure that your shares are represented at the meeting.
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Sincerely yours, |
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/s/ Thomas J. Axon |
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THOMAS J. AXON |
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Chairman and President |
FRANKLIN CREDIT HOLDING CORPORATION
101 Hudson Street
Jersey City, New Jersey 07302
(201) 604-1800
NOTICE OF 2010 ANNUAL MEETING OF STOCKHOLDERS
June 16, 2010
Notice is hereby given that the Annual Meeting of Stockholders of Franklin Credit Holding
Corporation (the Company) will be held at the corporate offices of the Company, located at 101
Hudson Street 25th floor, Jersey City, New Jersey, at 2:00 P.M., Eastern Daylight Time, on
Wednesday, June 16, 2010 for the following purposes:
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to elect three directors to Class II of the Companys Board of
Directors; |
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to ratify the appointment of Marcum LLP as the Companys
independent registered public accounting firm for the fiscal year ending
December 31, 2010; and |
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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 as directors of
the nominees as Class II Directors and FOR the ratification of the appointment of Marcum LLP as the
Companys independent registered public accounting firm for the fiscal year ending December 31,
2010.
Stockholders of record at the close of business on April 21, 2010 are entitled to notice of,
and to vote at, the Annual Meeting and any adjournment or postponement thereof. To obtain
directions to attend the Annual Meeting and vote in person, please telephone the Company at (201)
604-1800.
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. Stockholders attending the Annual
Meeting may vote in person even if they have returned a proxy. By promptly returning your proxy,
you will greatly assist us in preparing for the Annual Meeting.
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By Order of the Board of Directors, |
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/s/ Thomas J. Axon
THOMAS J. AXON
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Chairman |
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Jersey City, New Jersey
April 27, 2010
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be Held on June 16, 2010.
The Proxy Statement and 2009 Annual Report on Form 10-K
are available through the Franklin Credit Holding Corporation Investor Relations link on our website at
www.franklincredit.com
FRANKLIN CREDIT HOLDING CORPORATION
101 Hudson Street
Jersey City, New Jersey 07302
(201) 604-1800
PROXY STATEMENT FOR
2010 ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 16, 2010
General Information
This Proxy Statement and the enclosed form of proxy are being furnished, commencing on or
about April 27, 2010, in connection with the solicitation of proxies in the enclosed form by the
Board of Directors of Franklin Credit Holding Corporation, a Delaware corporation (the Company),
for use at the Annual Meeting of Stockholders (Stockholders) of the Company (the Annual
Meeting). The Annual Meeting will be held at the corporate offices of the Company, located at 101
Hudson Street, 25th floor, Jersey City, New Jersey, at 2:00 P.M., Eastern Daylight Time, on
Wednesday, June 16, 2010, and at any adjournment or postponement thereof, for the purposes set
forth in the foregoing Notice of 2010 Annual Meeting of Stockholders.
The annual report of the Company, containing financial statements of the Company as of
December 31, 2009, and for the year then ended (the Annual Report), has been delivered to you or
is included with this proxy statement.
A list of the Stockholders entitled to vote at the Annual Meeting will be available for
examination by Stockholders during ordinary business hours for a period of ten days prior to the
Annual Meeting at the Companys offices on the 25th floor of 101 Hudson Street, Jersey
City, New Jersey. A Stockholder list will also be available for examination at the Annual Meeting.
If you are unable to attend the Annual Meeting, you may vote by proxy on any matter to come
before that meeting. The enclosed proxy is being solicited by the Board of Directors. Any proxy
given pursuant to such solicitation and received in time for the Annual Meeting will be voted as
specified in such proxy. If no instructions are given, proxies will be voted (i) FOR the election
as Directors of the nominees named below under the caption Election of Directors to Class II of
the Board of Directors, (ii) FOR the ratification of the appointment of Marcum LLP (Marcum) as
independent registered public accounting firm for the Companys fiscal year ending December 31,
2010, 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 Companys 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, 2010.
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 Companys common stock, par value $.01 per
share (the Common Stock) to forward proxy solicitation material to the beneficial owners of such
stock, and the Company may reimburse such record holders for their reasonable expenses incurred in
such forwarding. The cost of soliciting proxies in the enclosed form will be borne by the Company.
The Board of Directors unanimously recommends that you vote FOR the election of the nominees
named below under the caption Election of Directors to Class II of the Board of Directors and FOR
the ratification of the
appointment of Marcum as the Companys independent registered public accounting firm for the
fiscal year ending December 31, 2010.
Voting of Shares
The holders of one-half of the outstanding shares entitled to vote, present in person or
represented by proxy, will constitute a quorum for the transaction of business. Shares represented
by proxies that are marked abstain will be counted as shares present for purposes of determining
the presence of a quorum on all matters. Brokers holding shares for beneficial owners in street
name must vote those shares according to specific instructions they receive from the owners of
such shares. If instructions are not received, brokers may vote the shares, in their discretion,
depending on the type of proposals involved. Broker non-votes result when brokers are precluded
from exercising their discretion on certain types of proposals. Brokers have discretionary
authority to vote under the rules governing brokers to vote without instructions from the
beneficial owner on certain routine items such as the ratification of the appointment of the
independent registered public accounting firm (Proposal 2) and, accordingly, your shares may be
voted by your broker on Proposal 2. Shares that are voted by brokers on some but not all of the
matters will be treated as shares present for purposes of determining the presence of a quorum on
all matters, but will not be treated as shares entitled to vote at the Annual Meeting on those
matters as to which authority to vote is withheld by the broker.
The election of each nominee for Director requires a plurality of votes cast. Accordingly,
abstentions and Broker non-votes will not affect the outcome of the election; votes that are
withheld will be excluded entirely from the vote and will have no effect. The affirmative vote of
the holders of a majority of the shares present in person or represented by proxy at the meeting
and entitled to vote is required for the appointment of the independent registered public
accounting firm. On this matter the abstentions will have the same effect as a negative vote.
Because Broker non-votes will not be treated as shares that are present and entitled to vote with
respect to a specific proposal, a Broker non-vote will have no effect on the outcome. Proxies
solicited by the Board of Directors will be voted FOR the election of the nominees named below
under the caption Election of Directors to Class II of the Board of Directors and FOR the
ratification of the appointment of Marcum as independent registered public accounting firm for the
Companys fiscal year ending December 31, 2010, unless Stockholders specify otherwise. The Company
will appoint an inspector to act at the Annual Meeting who will: (1) ascertain the number of shares
outstanding and the voting powers of each; (2) determine the shares represented at the Annual
Meeting and the validity of the proxies and ballots; (3) count all votes and ballots; (4) determine
and retain for a reasonable period of time a record of the disposition of any challenges made to
any determinations by such inspector; and (5) certify his/her determination of the number of shares
represented at the Annual Meeting and his/her count of all votes and ballots.
Only stockholders of record at the close of business on April 21, 2010 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 21, 2010, there were 8,029,795 shares of Common Stock outstanding. Each
share of Common Stock entitles the record holder thereof to one vote on all matters properly
brought before the Annual Meeting and any adjournment or postponement thereof, with no cumulative
voting.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of April 21, 2010, with respect to beneficial
ownership of Common Stock and the percentages of beneficial ownership by:
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each person, group or entity known to the Company to beneficially own more than
5% of the Companys outstanding Common Stock; |
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each of the Companys directors and named executive officers; and |
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all of the Companys directors and executive officers as a group. |
The amounts and percentages of Common Stock beneficially owned are reported on the basis of
regulations of the Securities and Exchange Commission (the SEC) governing the determination of
beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a
beneficial owner of a security if that person has or shares voting power, which includes the
power to vote or to direct the voting of that security, or investment power, which includes the
power to dispose of or to direct the disposition of that security. A person is also deemed to be a
beneficial owner of any security as to which that person has a right to acquire beneficial
ownership presently or within 60 days. Under these rules, more than one person may be deemed to be
a beneficial owner to the same securities, and a person may be deemed to be the beneficial owner of
the same securities as to which that person has no economic interest. Including those shares in
the table below does not, however, constitute an admission that the named stockholder is a direct
or indirect beneficial owner of those shares.
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Amount and Nature |
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Name and Address of Beneficial Owner(1) |
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of Beneficial Ownership |
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of Class |
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Thomas J. Axon |
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3,628,941 |
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45.2 |
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Michael Bertash |
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18,000 |
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Frank B. Evans, Jr. |
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885,425 |
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11.0 |
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Steven W. Lefkowitz |
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310,650 |
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3.9 |
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Allan R. Lyons |
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94,500 |
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1.2 |
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Paul D. Colasono |
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39,500 |
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Kevin Gildea |
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17,500 |
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William F. Sullivan |
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46,700 |
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Alexander Gordon Jardin |
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102,500 |
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1.3 |
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Michael Blair |
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17,000 |
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Jimmy Yan |
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17,000 |
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All Directors and Executive Officers as a group (8 persons) |
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5,011,516 |
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61.2 |
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Indicates beneficial ownership of less than one (1%) percent. |
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Unless otherwise indicated the address of each beneficial owner identified is c/o
Franklin Credit Holding Corporation, 101 Hudson Street, Jersey City, New Jersey 07302. |
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Includes 18,000 shares issuable upon exercise of options exercisable within sixty days. |
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Includes 20,000 shares, the aggregate of 5,000 shares beneficially owned by each of
four dependent children for which Mr. Evans is the trustee. Includes 42,000 shares
issuable upon exercise of options exercisable within sixty days. |
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Includes 22,000 shares issuable upon exercise of options exercisable within sixty days.
Includes 47,500 shares beneficially owned by Mr. Lefkowitzs wife. |
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Includes 31,000 shares issuable upon exercise of options exercisable within sixty days. |
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Includes 22,500 shares issuable upon exercise of options exercisable within sixty days. |
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Includes 17,500 shares issuable upon exercise of options exercisable within sixty days. |
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Includes 153,000 shares issuable upon exercise of options exercisable within sixty
days. |
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act) requires
the Companys Directors and Officers, and persons who own more than ten percent of a class of the
Companys equity securities registered pursuant to Section 12 of the Exchange Act to file with the
SEC initial reports of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, Directors and persons holding greater than ten percent
of the outstanding shares of a class of Section 12-registered securities (Reporting Persons) are
also required by SEC regulations to furnish the Company with copies of all Section 16(a) forms that
they file.
Based solely upon a review of the copies of such Section 16(a) reports furnished to the
Company during 2009 from such Reporting Persons, the Company believes that all Section 16(a) filing
requirements applicable to such Reporting Persons were complied with, except that each of Messrs.
Blair and Gildea belatedly filed a report in connection with a single transaction involving their
receipt of stock options.
PROPOSALS
The Board of Directors unanimously recommends that you vote FOR the election of the nominees
named below under the caption Election of Directors to Class II of the Board of Directors and FOR
the ratification of the appointment of Marcum LLP as the Companys independent registered public
accounting firm for the fiscal year ending December 31, 2010.
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PROPOSAL 1 ELECTION OF DIRECTORS
Nominees for Election
The Board of Directors is divided into three classes, with one class being elected each year
and members of each class holding office for a three-year term, except to the extent that shorter
terms may be required to effect an appropriate balance among the classes in the event of an
increase in the number of Directors or to the extent any class of preferred stock issued in the
future entitles the holders thereof to designate a Director or Directors with a longer or shorter
term. The Board of Directors is comprised of nine Directors, although there are currently only
five directors serving. It is proposed to elect three directors to Class II of the Board of
Directors, each for a term of three years. Each of the nominees named below is currently a member
of the Board of Directors and has consented to serve if elected. The Board of Directors will seek
to find suitable candidates to fill the remaining four vacancies when it deems appropriate and in
the best interests of the Company.
The Board of Directors has concluded that each of Michael Bertash, Frank B. Evans, Steven W.
Lefkowitz and Allan R. Lyons qualifies as an independent director as defined in NASDAQ Marketplace
Rule 5605.
Unless instructed otherwise, the enclosed proxy will be voted FOR the election of the nominees
named below. Voting is not cumulative. While management has no reason to believe that the
nominees will not be available as candidates, should such a situation arise, proxies may be voted
for the election of such other persons as a Director as the holders of the proxies may, in their
discretion, determine. Proxies cannot be voted for a greater number of persons than the number of
nominees named.
The Board of Directors unanimously recommends a vote FOR the election of each of Michael
Bertash, Frank B. Evans and Steven W. Lefkowitz as a Class II Director to hold office until the
2013 annual meeting of stockholders and until each of their respective successors is elected.
Director Nominee Information
Nominees for Class II Directors with Terms Expiring in 2013
Michael Bertash, 57, was elected a Director of the Company in 1998. Mr. Bertash served as
Chief Executive Officer of New York Capital Advisers, LLC, an investment management firm, from
August 2004 until July 2008, and is currently employed at Tocqueville Asset Management. From
February 1997 until July 2004, Mr. Bertash served as a Senior Vice President with J. & W. Seligman
&. Co., an investment management firm. Mr. Bertash was an Associate Director of the asset
management division of Bear, Stearns & Co., Inc., a worldwide investment bank and brokerage firm,
from October 1991 until January 1997. Mr. Bertash holds a Bachelor of Science degree in Operations
Research from Syracuse University and a Master of Business Administration degree from New York
University. Mr. Bertash has served on the Companys Board of Directors since 1998 and is a
seasoned financial advisor, with extensive experience in asset and investment management. The
Company believes that such experience, together with his general qualifications, attributes and
skills, gives Mr. Bertash the experience, qualifications, attributes and skills to serve as a
director of the Company.
Frank B. Evans, Jr., 58, was elected a Director of the Company in 1994. Mr. Evans co-founded
the Company and served as the Companys Vice President, Treasurer, Secretary and Chief Financial
Officer from December 1994 until November 1998. Mr. Evans also served as the Companys Secretary,
Treasurer, a Vice President and a member of the Companys Board of Directors from its inception in
1990 until the Companys merger with Miramar Resources, Inc. in December 1994. Mr. Evans has
served as Chief Executive Officer of Core Engineered Solutions, Inc., a Herndon, Virginia
design/build firm that specializes in fuel and chemical storage systems, since its inception in
1990. Mr. Evans is a Certified Public Accountant and holds a Bachelor of Science degree from the
University of Maryland and a Masters in Business Administration degree from the University of
Southern California. Mr. Evans is a co-founder and ten percent owner of the Company, was
previously a member of the executive management team of the Company, has served on the Companys
Board of Directors since 1990, and is a Certified Public Accountant and competent and seasoned
chief executive. The Company believes that such experience, together with his general
qualifications, attributes and skills, gives Mr. Evans the experience, qualifications, attributes
and skills to serve as a director of the Company.
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Steven W. Lefkowitz, 54, was elected a Director of the Company in 1996. Mr. Lefkowitz has
served as the founder and President of Wade Capital Corporation, a privately held investment firm,
since 1990. From 1988 to 1990, Mr. Lefkowitz served as a Vice President of Corporate Finance for
Drexel Burnham Lambert, Incorporated, where he had been employed since 1985. Mr. Lefkowitz serves
on the board of directors of several private companies. Since November 2007, he has served on the
board of directors of Chatsworth Data Solutions, Inc, which was a public company until January
2009. Mr. Lefkowitz holds a Bachelor of Arts degree in History from Dartmouth College and a
Masters in Business Administration degree from Columbia University. Mr. Lefkowitz has served on
the Companys Board of Directors since 1996 and is a seasoned financial professional that has led
and served on the boards of a number of other companies. The Company believes that such
experience, together with his general qualifications, attributes and skills, gives Mr. Lefkowitz
the experience, qualifications, attributes and skills to serve as a director of the Company.
Class I Directors with Terms Expiring in 2012
None.
Class III Directors with Terms Expiring in 2011
Thomas J. Axon, 57, was elected a Director of the Company in 1988. Mr. Axon has served as
Chairman of the Companys Board of Directors since December 1994, has served as President of the
Company since its inception in 1990, and served as the Companys Chief Executive Officer from
January 2006 until April 2006, and from December 1994 through June 2000. Mr. Axon also served as a
member of the Companys Board of Directors from the Companys inception in 1990 until the Companys
merger with Miramar Resources, Inc. in December 1994. Mr. Axon served as President of Miramar
Resources, Inc. from October 1991 until the merger, and as a member of Miramar Resources, Inc.s
Board of Directors from its inception in 1988. Within the last five years, Mr. Axon has been the
controlling interest in, and acted directly and indirectly as a principal of, various private
companies, including RMTS, LLC, and its affiliated companies, an insurance consulting and
underwriting company; Axon Associates, Inc., Harrison Street Realty Corporation, and its
predecessors, 185 Franklin Street Development Associates, L.P., Harrison Street Development
Associates, L.P. and James Thomas Realty LLC which hold various real estate interests and/or
manages rental commercial space; and AIS Ltd., a reinsurance company. Mr. Axon holds a Bachelor of
Arts degree in Economics from Franklin and Marshall College and attended the New York University
Graduate School of Business. Mr. Axon is a co-founder and principal shareholder of the Company,
has lead the Company and served on the Companys Board of Directors since its inception, and
provided partial guarantees and collateral so that the Company could restructure its lending
agreements with its lead lending bank in March of 2009. The Company believes that such experience,
together with his general qualifications, attributes and skills, gives Mr. Axon the experience,
qualifications, attributes and skills to serve as a director of the Company.
Allan R. Lyons, 69, was elected a Director of the Company in 1995. Mr. Lyons is a Certified
Public Accountant and owns 21st Century Strategic Investment Planning, LC, a Florida
limited company, which offers financial planning and investment structuring services and reviews
financial opportunities and private placements. Mr. Lyons also acts as a general partner for two
venture capital partnerships and as money manager for select clients. From 1993 until his
retirement in December 1999, Mr. Lyons was Chief Executive Officer of Piaker & Lyons, P.C., an
accounting firm, of which he was a member from 1965 until December 1999. Mr. Lyons serves on the
board of directors of two private companies, and is on the audit committee of one those companies.
From March 2003 until June 2009, Mr. Lyons served as a director and chair of the audit committee of
Source Interlink Companies, Inc., which at the time was a public company. Prior to his board
service with Source Interlink Companies, Inc., he served on the board of directors and as audit
committee chairman of a number of other public companies. Mr. Lyons holds a Bachelor of Science
degree in Accounting from Harpur College and a Masters of Business Administration degree from Ohio
State University. Mr. Lyons has served on the Companys Board of Directors since 1995, has served
on the boards and audit committees of a number of other companies, has 40 years of experience as a
Certified Public Accountant, and is an audit committee financial expert as defined by Regulation
S-K under the Securities Act of 1933, as amended. The Company believes that such experience,
together with his general qualifications, attributes and skills, gives Mr. Lyons the experience,
qualifications, attributes and skills to serve as a director of the Company.
No familial relationships exist between any Directors and Executive Officers.
- 6 -
Meetings of the Board of Directors and its Committees
During 2009, there were four meetings of the Board of Directors of the Company, eight meetings
of the Audit Committee, and no meetings of the Compensation or Nominating and Corporate Governance
Committees. No Director attended fewer than 75% of the aggregate number of meetings of the Board
of Directors and of any committee on which he served.
Director Attendance at Annual Meetings
Each director of the Company is expected to be present at annual meetings of stockholders,
absent exigent circumstances that prevent his or her attendance. Where a director is unable to
attend an annual meeting in person but is able to do so by electronic conferencing, the Company
will arrange for the directors participation by means of which the director can hear, and be
heard, by those present at the meeting. All seven Directors then in office attended last years
annual meeting of stockholders.
Committees of the Board of Directors
The Board of Directors currently has, and appoints the members of, standing Audit,
Compensation and Nominating and Corporate Governance Committees. Each of these committees has a
written charter approved by the Board of Directors in January 2005. A copy of each committees
charter is posted on the Companys website through the Franklin Credit Holding Corporation Investor
Relations link at www.franklincredit.com.
Audit Committee. The Audit Committee currently consists and during 2009 consisted of
directors Allan R. Lyons (Chairman of the Committee), Michael Bertash and Steven W. Lefkowitz. The
Audit Committee held eight meetings during the year. The Board of Directors has determined that
each director who served on the Audit Committee during 2009 is independent as such term is defined
by Rule 5605(a)(2) of the NASDAQ Marketplace Rules, and that Mr. Lyons is an audit committee
financial expert as defined by Regulation S-K under the Securities Act of 1933, as amended (the
Securities Act). The purpose of the Audit Committee is to assist the Board of Directors in the
oversight of the integrity of the financial statements of the Company, the Companys compliance
with legal and regulatory matters, the independent registered public accounting firms
qualifications and independence, and the performance of the Companys independent registered public
accounting firm. The primary responsibilities of the Audit Committee include the following:
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Overseeing the Companys accounting and financial reporting process and audits
of the Companys financial statements on behalf of the Companys Board of
Directors. |
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Selecting the independent registered public accounting firm to conduct the
annual audit of the Companys financial statements. |
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Evaluating the qualifications, independence and performance of the Companys
independent auditors. |
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Reviewing the proposed scope of the annual audit of the Companys financial
statements. |
|
|
|
Reviewing the Companys accounting and financial controls with the independent
registered public accounting firm and the Companys financial accounting staff. |
|
|
|
Overseeing the Companys internal controls and risk management procedures. |
|
|
|
Preparing the report required by the rules of the SEC to be included in the
Companys annual proxy statement. |
- 7 -
Compensation Committee. The Compensation Committee currently consists and during 2009
consisted of directors Steven W. Lefkowitz (Chairman of the Committee) Michael Bertash and Frank B.
Evans. The Compensation Committee did not hold any meetings during the year. The Board of
Directors has determined that
each director who served on the Compensation Committee during 2009 is independent as such term
is defined by Rule 5605(a)(2) of the NASDAQ Marketplace Rules. The responsibilities of the
Compensation Committee include the following:
|
|
|
Reviewing and approving the compensation and benefits for the Companys
executive officers. |
|
|
|
Administering the Companys stock plans. |
|
|
|
Making recommendations to the Companys Board of Directors regarding these
matters. |
The Compensation Committee establishes our general compensation policies and reviews and
approves compensation for the executive officers. The Compensation Committee determines the
compensation payable to each of the named executive officers as well as the compensation of the
members of the Board of Directors. The Compensation Committee may delegate authority to one or
more members of the Compensation Committee when appropriate, unless such delegated authority is
required by a law, regulation, or listing standard to be exercised by the Compensation Committee as
a whole. The Compensation Committee may also request that any Directors, Officers, or employees of
the Company whose advice and counsel is sought by the Compensation Committee, attend any meeting to
provide such information as the Compensation Committee requests. The Compensation Committee may
also retain consultants or other advisors that the Compensation Committee determines to employ to
assist in the performance of its duties. The Compensation Committee determines the compensation
paid to each of our named executive officers, which, other than with respect to compensation that
had been payable to Mr. Jardin, is based upon the recommendations received from our President, Mr.
Axon.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance
Committee currently consists and during 2009 consisted of Allan R. Lyons and Michael Bertash.
Since February 2006, there have been only two directors on the Nominating and Corporate Governance
Committee, which is less than the three directors required by the Committees charter. The
Committee did not hold any meetings in 2009. Accordingly, the independent members of the Board of
Directors recommended a slate of nominees to stand for election as directors at the Annual Meeting.
The Board of Directors has determined that each director who served on the Nominating and
Corporate Governance Committee during 2009 is independent as such term is defined by Rule
5605(a)(2) of the NASDAQ Marketplace Rules. The responsibilities of the Nominating and Corporate
Governance Committee include the following:
|
|
|
Searching for and recommending to the Board of Directors potential nominees for
Director positions. |
|
|
|
Making recommendations to the Board of Directors regarding the size and
composition of the Board of Directors and its committees. |
|
|
|
Monitoring the Board of Directors effectiveness. |
|
|
|
Developing and implementing the Companys corporate governance procedures and
policies. |
In identifying and evaluating candidates for the Board of Directors, the Nominating and
Corporate Governance Committee begins by determining whether the incumbent directors whose terms
expire at the annual meeting of stockholders desire and are qualified to continue their service on
the Board of Directors. The Company is of the view that the continuing service of qualified
incumbents promotes stability and continuity in the boardroom, giving the Company the benefit of
the familiarity and insight into the Companys affairs that its directors have accumulated during
their tenure, while contributing to the Board of Directors ability to work as a collective body.
Accordingly, the Nominating and Corporate Governance Committee will, absent special circumstances,
propose for re-election qualified incumbent directors who continue to satisfy the Nominating and
Corporate Governance Committees criteria for membership on the Board of Directors, whom the
Nominating and Corporate Governance Committee believes will continue to make important
contributions to the Board of Directors and who consent to stand for re-election and, if
re-elected, to continue their service on the Board of Directors. If there are positions on the
Board of Directors for which the Nominating and Corporate Governance Committee will not be
re-nominating an incumbent director, or if there is a vacancy on the Board of Directors, the
Nominating and Corporate Governance Committee will consider potential nominees
- 8 -
recommended by members of the
Board of Directors, the management of the Company and stockholders. The Nominating and Corporate
Governance Committee may also engage a professional search firm to assist in the identification of
qualified candidates, but did not do so in 2009. As to each recommended candidate that the
Nominating and Corporate Governance Committee believes merits serious consideration, the Committee
will collect as much information, including without limitation, soliciting views from other
directors and the Companys management and having one or more Committee members interview each such
candidate, regarding each candidate as it deems necessary or appropriate in order to make an
informed decision with respect to such candidate. Based on all available information and relevant
considerations, the Nominating and Corporate Governance Committee will select, for each
directorship to be filled, a candidate who, in the view of the Committee, is most suited for
membership on the Board of Directors. In making its selection, the Nominating and Corporate
Governance Committee will evaluate candidates proposed by stockholders under criteria similar to
the evaluation of other candidates, except that the Committee may consider, as one of the factors
in its evaluation of stockholder recommended nominees, the size and duration of the interest of the
recommending stockholder or stockholder group in the equity of the Company. This consideration may
also include how long the recommending stockholder intends to continue holding its equity interest
in the Company.
The Nominating and Corporate Governance Committee has adopted a policy with regard to the
minimum qualifications that must be met by a Committee-recommended nominee for a position on the
Companys Board of Directors, which policy is described in this paragraph. The Nominating and
Corporate Governance Committee considers the overall qualifications of prospective nominees for
director, including the particular experience, expertise and outlook that they would bring to the
Board of Directors. While diversity (however defined) may contribute to this overall evaluation,
it is not considered by the Nominating and Corporate Governance Committee as a separate or
independent factor in identifying nominees for director. The Nominating and Corporate Governance
Committee generally requires that all candidates for the Board of Directors be committed to
representing the Company and all of its stockholders, demonstrate the judgment and knowledge
necessary to assess Company strategy and management, manifest willingness to meaningfully
participate in the governance of the Company, possess the ability to fulfill the legal and
fiduciary responsibilities of a director, undertake to make the appropriate time commitment for
Board service, and maintain standing and reputation in the business, professional and social
communities in which such candidate operates. The Nominating and Corporate Governance Committee
requires that candidates not have any interests that would, in the view of the Committee,
materially impair his or her ability to exercise independent judgment or otherwise discharge the
fiduciary duties owed as a director to the Company and its stockholders. The Company also requires
that at least three of the directors satisfy the financial literacy requirements required for
service on the Audit Committee under the the Audit Committee charter, and that at least one of the
directors qualifies as an audit committee financial expert in accordance with the rules of the SEC
and the Audit Committee charter.
It is the policy of the Company that the Nominating and Corporate Governance Committee will
consider director candidates recommended by stockholders entitled to vote generally in the election
of directors. The Nominating and Corporate Governance Committee will give consideration to such
stockholder recommendations for positions on the Board where the Committee has not determined to
re-nominate a qualified incumbent director. While the Nominating and Corporate Governance
Committee has not established a minimum number of shares that a stockholder must own in order to
present a nominating recommendation for consideration, or a minimum length of time during which the
stockholder must own its shares, the Committee may take into account the size and duration of a
recommending stockholders ownership interest in the Company. The Nominating and Corporate
Governance Committee may also consider whether the stockholder making the nominating recommendation
intends to maintain an ownership interest in the Company of substantially the same size as its
interest at the time of making the recommendation. The Nominating and Corporate Governance
Committee may refuse to consider stockholder-recommended candidates who do not satisfy the minimum
qualifications prescribed by the Committee for board candidates.
- 9 -
The Nominating and Corporate Governance Committee has adopted procedures to be followed by
stockholders in submitting recommendations of candidates for director. The procedures are posted
on the Companys website through the Franklin Credit Holding Corporation Investor Relations link at
www.franklincredit.com, and are described in this paragraph. A stockholder (or group of
stockholders) wishing to submit a recommendation of a candidate for consideration as a potential
director nominee by the Nominating and Corporate Governance Committee should submit such
recommendation in accordance with the timing requirements
set forth in connection with the submission of a stockholders notice of an intent to make a
nomination under Article I, Section 11 of the Companys By-laws. All stockholder nominating
recommendations should be in writing, addressed to the Chair of the Nominating and Corporate
Governance Committee, 101 Hudson Street, 25th floor, Jersey City, NJ 07302. Submissions
should be made by mail, courier or personal delivery. A nominating recommendation should be
accompanied by the information that is required to be provided in connection with the submission of
a stockholders notice of an intent to make a nomination under Article I, Section 11 of the
Companys By-laws, a copy of which is posted on the Companys website through the Franklin Credit
Holding Corporation Investor Relations link at
www.franklincredit.com.
Stockholder Communications with the Board of Directors
Stockholders may send communications to the Board of Directors, any committee of the Board of
Directors or the non-management directors of the Board of Directors. The process for sending such
communications can be found on the Companys website through the Franklin Credit Holding
Corporation Investor Relations link at www.franklincredit.com. All stockholder communications are
sent directly to Board members, except for communications that contain offensive, scurrilous or
abusive content, communications that advocate the Companys engaging in illegal activities,
communications that have no rational relevance to the business or operations of the Company, and
communications regarding individual grievances or other interests that are personal to the party
submitting the communication and could not reasonably be construed to be of concern to security
holders or other constituencies of the Company generally.
Code of Ethics
The Company has adopted a code of ethics and business conduct that applies to its officers,
directors and employees, including without limitations, the Companys Chief Executive Officer,
President and Chief Financial Officer. The Code of Ethics and Business Conduct is available on the
Companys website through the Franklin Credit Holding Corporation Investor Relations link at
www.franklincredit.com.
Board Leadership Structure and Role in Risk Oversight
Mr. Axon serves as both the principal executive officer and Chairman of the Board of
Directors. The Company does not have a lead independent director. Except for Mr. Axon, the other
directors are independent, as defined by Rule 5605(a)(2) of the NASDAQ Marketplace Rules. As of
the date of this filing, the Company has determined that the leadership structure of its Board of
Directors has permitted the Board to fulfill its duties effectively and efficiently and is
appropriate given the size and scope of the Company and its financial condition; the active
involvement of its independent directors; the Companys relationship with its lead lending bank;
and Mr. Axons status as principal shareholder and co-founder of the Company.
The extent of the Boards role in risk oversight of the Company is to oversee credit,
liquidity and operational risks that are reasonably likely to have a material adverse effect on the
Company. The function primarily resides in the Audit Committee of the Board, which holds meetings
as needed, but generally no less than on a quarterly basis, with executive management and the
Companys independent auditors, separately or together, to review the financials of and material
risks, including control risks, facing the Company. In addition, the members of the Audit
Committee periodically meet in executive session without management and regularly communicate with
the two Board members not on the Committee, Messrs. Axon and Evans, on the business and management
of the Company. The Boards role in risk oversight has not had an effect on the Boards leadership
structure.
Audit Committee Report
The following Report of the Audit Committee does not constitute soliciting material and is not
filed or deemed to be incorporated by reference in any previous or future documents filed by the
Company with the Securities and Exchange Commission under the Securities Act or the Exchange Act,
except to the extent the Company specifically incorporates the Report by reference in any such
document.
- 10 -
The members of the Audit Committee have been appointed by the Board of Directors. During the
2009 fiscal year, the Audit Committee consisted solely of independent directors, as such term is
defined by Rule
5605(a)(2) of the NASDAQ Marketplace Rules. The Audit Committee operates under a written
charter that was adopted by the Board of Directors in January 2005 in order to assure continued
compliance by the Company with SEC and NASDAQ rules and regulations enacted in response to
requirements of the Sarbanes-Oxley Act of 2002.
The Audit Committee assists the Board of Directors in monitoring the integrity of the
Companys financial statements, the independent registered public accounting firms qualifications
and independence, the performance of the independent registered public accounting firm, and the
compliance by the Company with legal and regulatory requirements. Management is responsible for
the Companys internal controls and the financial reporting process. The independent registered
public accounting firm is responsible for performing an independent audit of the Companys
financial statements in accordance with the Standards of The Public Company Accounting Oversight
Board (United States) and for issuing a report on those financial statements. The Audit Committee
monitors and oversees these processes.
In this context, the Audit Committee has reviewed and discussed the audited financial
statements for the year ended December 31, 2009 with management and with Marcum LLP, the Companys
independent registered public accounting firm. The Audit Committee has discussed with Marcum LLP
the matters required to be discussed by Statement on Auditing Standards No. 61 (Communications with
Audit Committees), which includes, among other items, matters related to the conduct of the audit
of the Companys annual financial statements.
The Audit Committee has also received the written disclosures and the letter from Marcum LLP
required by applicable requirements of the Public Company Accounting Oversight Board for
independent auditor communications with the Audit Committee concerning independence, and has
discussed with Marcum LLP the issue of their independence from the Company and management. In
addition, the Audit Committee has considered whether the provision of non-audit services by the
independent registered public accounting firm in 2009 is compatible with maintaining the auditors
independence and has concluded that it is.
Based on its review of the audited financial statements and the various discussions noted
above, the Audit Committee recommended to the Board of Directors that the audited financial
statements be included in the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2009. The Audit Committee has also appointed, subject to stockholder ratification,
the Companys independent registered public accounting firm for the year ending December 31, 2010.
The members of the Audit Committee are Allan R. Lyons, Michael Bertash and Steven W.
Lefkowitz, none of whom is or, during the fiscal year 2009, was, an employee of the Company.
Respectfully submitted by the Audit Committee,
Allan R. Lyons, Chairman
Michael Bertash
Steven W. Lefkowitz
- 11 -
MANAGEMENT
Executive Officers
The following table sets forth certain information with respect to the executive officers of
the Company:
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
Thomas J. Axon
|
|
|
57 |
|
|
President and Chairman of the Board of Directors |
Paul D. Colasono
|
|
|
63 |
|
|
Chief Financial Officer and Executive Vice President |
Jimmy Yan
|
|
|
34 |
|
|
Executive Vice President and Managing Director, Loan Servicing and Recovery |
Kevin Gildea
|
|
|
40 |
|
|
Chief Legal Officer, Executive Vice President and Secretary |
Paul D. Colasono has served as the Companys Chief Financial Officer and Executive Vice
President since April 2005. Mr. Colasono has more than 35 years of experience in banking and
mortgage banking in a broad range of senior management positions. From 2003 until his engagement
by the Company, Mr. Colasono served as an independent business consultant providing strategic and
financial consulting services. From September 1997 until September 2001, Mr. Colasono served as
Vice President and Controller of GE Capital Mortgage Services Corporation. From February 1981
until September 1997, Mr. Colasono was employed by The Dime Savings Bank of New York in a variety
of executive and senior management positions. From April 1994 until September 1997, Mr. Colasono
held the titles of Senior Vice President, Chief Administrative Officer and Chief Financial Officer
of Dime Banks mortgage banking business. From November 1990 until April 1994, Mr. Colasono served
as the President and Chief Executive Officer of The Dime Savings Bank of New Jersey, a subsidiary
of Dime Bank. Mr. Colasono began his career with The Chase Manhattan Bank. Mr. Colasono holds a
Bachelor of Science degree in Accounting and a Masters of Business Administration from St. Johns
University.
Jimmy Yan has served as the Companys Executive Vice President and Managing Director of its
servicing and asset recovery operations since January 2010. From June 2005 to December 2009, Mr.
Yan was employed by Deutsche Bank Securities Inc. as Vice President, during which time he was
responsible for managing a dozen mortgage servicers. Prior to his position with Deutsche Bank
Securities, Mr. Yan, from August 2000 to June 2005, managed the Companys default operations. Mr.
Yan holds a Bachelor of Science degree in finance from the State University of New York at Buffalo.
Kevin P. Gildea has served as the Companys Chief Legal Officer/General Counsel since March
2006, Secretary since August 2006, and Executive Vice President since October 2009. From March
2005 to March 2006, he was Associate General Counsel. Mr. Gildea has been continuously in the
employ of the Company since March 2005, and was previously in the employ of the Company from
February 2000 to November 2001. From November 1995 to February 2000 and from December 2001 to
February 2005, Mr. Gildea was an Administrative Law Judge with the New York State Department of
Labor, Unemployment Insurance Appeal Board. Mr. Gildea, a practicing attorney since 1994, is
admitted to the bars of the State of New York and Commonwealth of Massachusetts, and is licensed as
an in-house attorney in the State of New Jersey. Mr. Gildea holds a Bachelor of Arts degree in
Political Science from Boston College, attended Boston College Law School as a visiting student and
holds a Juris Doctor from Albany Law School of Union University.
See Director Nominee Information, above, for a biography of Thomas J. Axon.
- 12 -
EXECUTIVE COMPENSATION
Our Named Executive Officers
The following table sets forth all individuals who served as our principal executive officer
at any time during 2009, our principal financial officer, our two most highly compensated executive
officers other than our principal executive officer who were serving as executive officers at the
end of 2009 and two additional individuals who would have been among our two most highly
compensated executive officers other than our principal executive officers and our principal
financial officer but were not serving as an executive officer at the end of 2009:
|
|
|
Name |
|
Title |
Thomas J. Axon
|
|
Chairman and President |
Paul D. Colasono
|
|
Chief Financial Officer and Executive Vice President |
Kevin Gildea
|
|
Chief Legal Officer, Executive Vice President and Secretary |
Alexander Gordon Jardin(1)
|
|
Chief Executive Officer |
William F. Sullivan(2)
|
|
Chief Operating Officer; President, Tribeca Lending Corp. |
Michael Blair(3)
|
|
Executive Vice President and Chief Operational Officer of Servicing |
|
|
|
(1) |
|
Mr. Jardin served as Chief Executive Officer of the Company until October 7, 2009. |
|
(2) |
|
Mr. Sullivan served as Chief Operating Officer and President, Tribeca Lending Corp.
until October 15, 2009. |
|
(3) |
|
Mr. Blair served as Executive Vice President and Chief Operational Officer of Servicing
until December 30, 2009. |
Summary Compensation Table
The following table provides information regarding the compensation earned by our named
executive officers during the fiscal years ended December 31, 2009 and December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
Salary |
|
|
Awards |
|
|
Compensation |
|
|
Total |
|
Name and Principal Position |
|
Year |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
Thomas J. Axon, Chairman and President |
|
|
2009 |
|
|
|
127,500 |
|
|
|
|
|
|
|
25,992 |
|
|
|
153,492 |
|
|
|
|
2008 |
|
|
|
150,000 |
|
|
|
|
|
|
|
15,721 |
|
|
|
165,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul D. Colasono, Chief Financial Officer |
|
|
2009 |
|
|
|
212,500 |
|
|
|
|
|
|
|
44,005 |
|
|
|
256,505 |
|
and Executive Vice President |
|
|
2008 |
|
|
|
250,000 |
|
|
|
|
|
|
|
40,401 |
|
|
|
290,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin Gildea, Chief Legal Officer, |
|
|
2009 |
|
|
|
187,000 |
|
|
|
|
|
|
|
26,538 |
|
|
|
213,538 |
|
Executive Vice President and Secretary |
|
|
2008 |
|
|
|
214,888 |
|
|
|
|
|
|
|
32,290 |
|
|
|
247,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexander Gordon Jardin, |
|
|
2009 |
|
|
|
227,083 |
|
|
|
|
|
|
|
37,244 |
|
|
|
264,327 |
|
Chief Executive Officer(1) |
|
|
2008 |
|
|
|
325,000 |
|
|
|
|
|
|
|
38,074 |
|
|
|
363,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William F.
Sullivan, Chief Operating Officer |
|
|
2009 |
|
|
|
189,757 |
|
|
|
|
|
|
|
164,196 |
|
|
|
353,953 |
|
and President of Tribeca Lending
Corp.(2) |
|
|
2008 |
|
|
|
275,000 |
|
|
|
|
|
|
|
32,762 |
|
|
|
307,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Blair, Executive Vice President and |
|
|
2009 |
|
|
|
220,585 |
|
|
|
|
|
|
|
43,815 |
|
|
|
264,400 |
|
Chief Operational Officer of
Servicing(3) |
|
|
2008 |
|
|
|
250,000 |
|
|
|
|
|
|
|
49,755 |
|
|
|
299,755 |
|
|
|
|
(1) |
|
Mr. Jardin served as Chief Executive Officer of the Company until October 7, 2009. |
|
(2) |
|
Mr. Sullivan served as Chief Operating Officer and President, Tribeca Lending Corp.
until October 15, 2009. |
|
(3) |
|
Mr. Blair served as Executive Vice President and Chief Operational Officer of Servicing
until December 30, 2009. |
- 13 -
All Other Compensation
The following table provides information regarding all other compensation earned by our named
executive officers during the fiscal years ended December 31, 2009 and December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical |
|
|
|
|
|
|
Long |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Car |
|
|
Elective |
|
|
|
|
|
|
|
|
|
|
Eye |
|
|
and |
|
|
|
|
|
|
Term |
|
|
Stock |
|
|
Tax |
|
|
|
|
|
|
Allowance/ |
|
|
Bonus |
|
|
|
|
Name and |
|
|
|
|
|
Benefits |
|
|
Dental |
|
|
Life |
|
|
Disability |
|
|
Awards |
|
|
Gross |
|
|
Other |
|
|
Parking |
|
|
Payments |
|
|
Total |
|
Principal Position |
|
Year |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
up ($) |
|
|
Expenses ($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
Thomas J.
Axon, Chairman and President |
|
|
2009 |
|
|
|
128 |
|
|
|
14,701 |
|
|
|
145 |
|
|
|
338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,180 |
|
|
|
7,500 |
(7) |
|
|
25,992 |
|
|
|
|
2008 |
|
|
|
128 |
|
|
|
11,844 |
|
|
|
171 |
|
|
|
398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,180 |
|
|
|
|
|
|
|
15,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul D.
Colasono, Chief Financial Officer |
|
|
2009 |
|
|
|
128 |
|
|
|
9,391 |
|
|
|
242 |
|
|
|
564 |
|
|
|
|
|
|
|
|
|
|
|
18,000 |
(6) |
|
|
3,180 |
|
|
|
12,500 |
(7) |
|
|
44,005 |
|
and
Executive Vice President |
|
|
2008 |
|
|
|
128 |
|
|
|
7,145 |
|
|
|
285 |
|
|
|
663 |
|
|
|
|
|
|
|
|
|
|
|
29,000 |
(4) |
|
|
3,180 |
|
|
|
|
|
|
|
40,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin
Gildea, Chief Legal Officer, |
|
|
2009 |
|
|
|
128 |
|
|
|
14,701 |
|
|
|
213 |
|
|
|
496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000 |
(7) |
|
|
26,538 |
|
Executive Vice
President and Secretary |
|
|
2008 |
|
|
|
128 |
|
|
|
11,844 |
|
|
|
246 |
|
|
|
572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,500 |
|
|
|
32,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexander
Gordon Jardin, Chief Executive |
|
|
2009 |
|
|
|
106 |
|
|
|
7,183 |
|
|
|
266 |
|
|
|
589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,850 |
|
|
|
16,250 |
(7) |
|
|
37,244 |
|
Officer(1) |
|
|
2008 |
|
|
|
128 |
|
|
|
7,145 |
|
|
|
371 |
|
|
|
862 |
|
|
|
|
|
|
|
|
|
|
|
14,388 |
(5) |
|
|
15,180 |
|
|
|
|
|
|
|
38,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William F.
Sullivan, Chief Operating Officer |
|
|
2009 |
|
|
|
106 |
|
|
|
10,711 |
|
|
|
230 |
|
|
|
589 |
|
|
|
|
|
|
|
|
|
|
|
132,160 |
(8) |
|
|
6,650 |
|
|
|
13,750 |
(7) |
|
|
164,196 |
|
and President of Tribeca
Lending Corp. (2) |
|
|
2008 |
|
|
|
128 |
|
|
|
11,844 |
|
|
|
314 |
|
|
|
729 |
|
|
|
|
|
|
|
|
|
|
|
11,767 |
(5) |
|
|
7,980 |
|
|
|
|
|
|
|
32,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Blair, Executive Vice President and |
|
|
2009 |
|
|
|
128 |
|
|
|
14,701 |
|
|
|
242 |
|
|
|
564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,180 |
|
|
|
25,000 |
(7) |
|
|
43,815 |
|
Chief Operational
Officer of Servicing (3) |
|
|
2008 |
|
|
|
128 |
|
|
|
11,844 |
|
|
|
285 |
|
|
|
663 |
|
|
|
|
|
|
|
|
|
|
|
8,655 |
(5) |
|
|
3,180 |
|
|
|
25,000 |
|
|
|
49,755 |
|
|
|
|
(1) |
|
Mr. Jardin served as Chief Executive Officer of the Company until October 7, 2009. |
|
(2) |
|
Mr. Sullivan was appointed President of Tribeca Lending Corp. effective February 27,
2008. Mr. Sullivan served as Chief Operating Officer and President, Tribeca Lending Corp.
until October 15, 2009. |
|
(3) |
|
Mr. Blair served as Executive Vice President and Chief Operational Officer of Servicing
until December 30, 2009. |
|
(4) |
|
This includes $16,500 as a Housing Allowance and $12,500 for accrued unused vacation
paid on December 31, 2008. |
|
(5) |
|
Accrued unused vacation paid on December 31, 2008. |
|
(6) |
|
This includes $18,000 as a Housing Allowance. |
|
(7) |
|
The amount of such elective bonuses was equivalent to the salary lost from April
through June 2009 by virtue of salary reductions implemented on April 1, 2009. |
|
(8) |
|
This includes $91,667 as a separation payment; $38,246 for transitional services, and
reimbursement of $2,247 in reimbursement of medical health insurance costs under COBRA made
pursuant to Mr. Sullivans Separation Agreement of October 15, 2009. |
- 14 -
Narrative Disclosure to Summary Compensation Table
Employment Agreements with Named Executive Officers
The registrants subsidiary, Franklin Credit Management Corporation (FCMC), has or had
employment agreements with the following named executive officers: Paul D. Colasono, Alexander
Gordon Jardin, William F. Sullivan and Michael Blair. All of these employment agreements are
described in detail below and the severance arrangements with respect thereto (including the
definitions contained in each relevant employment agreement of cause, good reason and Change
in Control) are discussed in further detail under the heading Potential Payments Upon
Termination or Change in Control.
In connection with the adoption of a holding company form of organizational structure in
December 2008, FCMC entered into an agreement with each of Alexander Gordon Jardin, Paul D.
Colasono and Michael Blair acknowledging that the holding company restructuring would not be deemed
a Change in Control under such executives employment agreements. An acknowledgement from
William Sullivan was not obtained, as his employment agreement did not contain a Change in
Control provision.
On December 30, 2008, FCMC entered into an agreement with executive officer Paul Colasono, and
on December 31, 2008, entered into similar agreements with executive officers Alexander Gordon
Jardin and William F. Sullivan to amend such executive officers employment agreements (the
Amendments). The Amendments make certain technical changes which are and were designed to make
the employment agreements comply with the requirements of Section 409A of the Internal Revenue Code
of 1986, as amended.
Effective April 1, 2009, Messrs. Axon, Colasono, Gildea, Jardin, Sullivan and Blair agreed to
a 20% reduction in their base annual salary. Effective January 1, 2010, Mr. Gildeas salary was
increased to the level that had been applicable before the April 1, 2009 reduction.
Thomas J. Axon Chairman and President
Thomas J. Axon serves as Chairman and President of the Company, without a written employment
agreement. Mr. Axon has served as Chairman since 1994, and as President since 1990. In that
capacity, Mr. Axon has been the principal executive officer of the Company since Mr. Jardins
resignation in October. From January 2008 through March 31, 2009, Mr. Axon received a base annual
salary of $150,000 until March 31, 2009. Effective April 1, 2009, Mr. Axon agreed to a 20%
reduction in his base annual salary to $120,000 (which is his current salary rate). In addition to
salary, Mr. Axon is entitled to a monthly parking pass and reimbursement of business expenses in
accordance with the Companys usual reimbursement policies and procedures.
Kevin Gildea Chief Legal Officer, Executive Vice President and Secretary
Kevin Gildea serves as Chief Legal Officer, Executive Vice President and Secretary of the
Company, without a written employment agreement. Mr. Gildea has served as Chief Legal
Officer/General Counsel since March 2006, Secretary since August 2006, and Executive Vice President
since October 2009. From January 2008 through March 31, 2009, Mr. Gildea received a base annual
salary of $220,000 until March 31, 2009. Effective April 1, 2009, Mr. Gildea agreed to a 20%
reduction in his annual base salary to $176,000. Effective January 1, 2010, his base annual salary
was increased to $220,000. In addition to salary, Mr. Gildea is entitled to reimbursement of
business expenses in accordance with the Companys usual reimbursement policies and procedures,
including reimbursement of bar registration fees and the cost of continuing legal education
courses.
Paul D. Colasono Chief Financial Officer
Paul D. Colasono serves as Chief Financial Officer and Executive Vice President of FCMC under
an employment agreement with an effective date of March 28, 2005. Mr. Colasono was appointed to
the position of Chief Financial Officer, effective April 11, 2005. Mr. Colasonos employment term
runs from the effective date of the employment agreement until its termination by FCMC or Mr.
Colasono.
- 15 -
Under the employment agreement, Mr. Colasono was entitled to a base salary of $250,000 until
March 31,
2009, subject to adjustment by the Board of Directors, and to participate in an executive
bonus pool of 10% of the after tax consolidated net profits of FCMC in excess of $500,000, subject
to adjustment of the size of the bonus pool in the reasonable discretion of the Board of Directors.
In addition, Mr. Colasono will be entitled to receive an annual bonus based partially on the net
income after taxes of FCMC. Additionally, Mr. Colasono receives a housing allowance of $1,500 per
month. Effective April 1, 2009, Mr. Colasono agreed to a 20% reduction in his base annual salary
to $200,000.
In connection with his entry into the employment agreement, FCMC granted Mr. Colasono 17,000
shares of restricted stock of the Company, of which 2,000 shares vested upon grant, 5,000 shares
vested on March 28, 2006, 5,000 shares vested on March 28, 2007, and 5,000 shares vested on March
28, 2008. Mr. Colasono agreed to make an 83(b) election with respect to the restricted shares and
FCMC agreed to reimburse Mr. Colasono for any federal, state or local taxes due from having made
such election at his incremental tax rate.
Under the employment agreement, Mr. Colasono is subject to covenants not to compete and not to
solicit customers or employees of FCMC for certain periods specified therein.
Pursuant to the employment agreement, FCMC may terminate Mr. Colasonos employment with or
without cause (as defined in the employment agreement) and Mr. Colasono may terminate it without or
for good reason (as defined in the employment agreement) following a Change in Control (as defined
in the employment agreement). Further detail on our severance obligations to Mr. Colasono,
including the definitions contained in his current employment agreement of cause, good reason
and Change in Control is set forth below under the heading Potential Payments Upon
Termination or Change in Control.
Alexander Gordon Jardin Chief Executive Officer
Alexander Gordon Jardin served as Chief Executive Officer of FCMC under an employment
agreement that was entered into on April 26, 2006, with an effective date of March 1, 2006 and
subsequently amended, until his voluntary resignation without good reason, effective October 7,
2009. Under the terms of his employment agreement, Mr. Jardin was entitled to a base annual salary
of $325,000 until March 31, 2009, subject to adjustment upward by the Board of Directors, as well
as an annual bonus to be determined and paid on or before May 1st of the following year. Mr.
Jardin also was entitled to a car allowance of $1,000 per month. Effective April 1, 2009, Mr.
Jardin agreed to a 20% reduction in his base annual salary to $260,000.
In connection with his employment, FCMC granted to Mr. Jardin 100,000 shares of restricted
Company common stock, of which 10,000 vested upon grant, 5,000 vested on the first day after each
fiscal quarter from July 1, 2006 until April 1, 2008, and 6,250 shares vested on the first day
after each fiscal quarter from July 1, 2008 until October 1, 2009. The remaining 12,500 shares of
restricted stock that had remained unvested were forfeited, upon Mr. Jardins resignation, and the
share certificates representing the same have been surrendered by Mr. Jardin and cancelled. Any
unvested shares would have vested immediately upon a Change in Control of FCMC (as defined in the
employment agreement). Mr. Jardin made an 83(b) election with respect to the restricted shares and
FCMC agreed to reimburse him on a grossed up basis for any taxes due from having made such
election.
The term of Mr. Jardins employment agreement had been until March 1, 2011 or the date of an
earlier termination by FCMC or Mr. Jardin. Mr. Jardin remains subject to covenants not to compete
and not to solicit customers or employees of FCMC for the following time periods commencing with
the date of his resignation: (i) with respect to employees of FCMC, for a period of nine (9)
months and (ii) with respect to customers of FCMC, for a period of twelve (12) months.
Pursuant to the employment agreement, FCMC could have terminated Mr. Jardins employment with
or without cause (as defined in the employment agreement) and Mr. Jardin could have terminated it
without good reason, which he did, or for good reason (as defined in the employment agreement). On
October 7, 2009, the Company and FCMC accepted the resignation of Mr. Jardin as its Chief Executive
Officer and Director, which had been tendered by Mr. Jardin on October 7, 2009, effective
immediately and paid him his base salary and prorated car allowance through November 6, 2009. The
Company believes that Mr. Jardin terminated his employment agreement with FCMC, without good reason
and paid him in accordance with the provisions relating to a termination by the employee without
good reason under the employment agreement.
- 16 -
Further detail on our severance obligations to Mr. Jardin, including the definitions contained
in his current employment agreement of cause, good reason and Change in Control is set forth
below under the heading Potential Payments Upon Termination or Change in Control.
William F. Sullivan Chief Operating Officer
William F. Sullivan served as Chief Operating Officer of FCMC under an employment agreement
dated as of February 1, 2006 and subsequently amended, until his voluntary resignation, effective
October 15, 2009. Under the terms of his employment agreement, Mr. Sullivan was entitled to a base
annual salary of $275,000 until March 31, 2009, payable on a semimonthly basis, and he was entitled
to annual and incentive bonuses, the amount of which was subject to the reasonable discretion of
the Board of Directors of FCMC. Mr. Sullivan was also entitled to a car allowance of $400 per
month and a parking space in the vicinity of FCMCs offices. In connection with his employment and
as additional compensation for Mr. Sullivans services under the employment agreement, Mr. Sullivan
received a grant of 5,000 shares of common stock of the Company. Effective April 1, 2009, Mr.
Sullivan agreed to a 20% reduction in his base annual salary to $220,000.
The term of Mr. Sullivans employment agreement had been until August 17, 2011 or the date of
an earlier termination by FCMC or Mr. Sullivan. Mr. Sullivan remains subject to covenants not to
compete and not to solicit customers or employees of FCMC for the following time periods commencing
with his date of resignation: (i) with respect to employees of FCMC, for a period of nine (9)
months and (ii) with respect to customers of FCMC, for a period of twelve (12) months.
Pursuant to the employment agreement, FCMC could have terminated Mr. Sullivans employment
with or without cause (as defined in the employment agreement) and Mr. Sullivan could have
terminated it without or for good reason (as defined in the employment agreement).
On October 15, 2009, the Company, FCMC and Tribeca Lending Corp. (Tribeca) entered into a
Separation Agreement and General Release with Mr. Sullivan, pursuant to which Mr. Sullivan,
effective October 15, 2009, resigned from all positions as an officer or director of the Company
and its subsidiaries and affiliates, including his positions as Chief Operating Officer and
Director of the Registrant and FCMC and President of Tribeca.
Pursuant to Mr. Sullivans separation agreement, Mr. Sullivans employment agreement was
terminated effective October 15, 2009. Under the severance agreement, FCMC shall (i) pay
Mr. Sullivan a separation payment equal to the gross sum of $91,666.60 less applicable withholdings
and deductions, which is equivalent to five (5) months of his regular base salary at his final rate
of pay ($220,000 per annum); and (ii) continue his health insurance coverage through COBRA for the
later of (i) the earlier of (x) the date the Employee finds other employment with health benefits
and (y) twelve (12) months, or (ii) five (5) months. In addition, in exchange for providing
certain transitional services for a period not to exceed 6 months from October 15, 2009, FCMC will
pay Mr. Sullivan the sum of $7,638.89, on a semi-monthly basis, up to a maximum total of
$91,666.68, with such payments and transitional services subject to termination by the Employer, in
its sole and absolute discretion, or by Employee, if he finds other employment, with thirty
(30) days prior written notice to the other party and, a contingent success fee of up to $30,000
payable on the next business day following thirty (30) days after the achievement by FCMC on or
before the quarter ending September 30, 2010 of certain milestones by FCMC which are dependent in
part on Mr. Sullivan having performed the transition services.
Further detail on our severance obligations to Mr. Sullivan, including the definitions
contained in his employment agreement of cause, good reason and Change in Control is set
forth below under the heading Potential Payments Upon Termination or Change in Control.
Michael Blair Executive Vice President and Chief Operational Officer of Servicing
Michael Blair served as Executive Vice President and Chief Operational Officer of the
servicing department of FCMC under an employment agreement, effective as of August 7, 2006 and
subsequently amended, until his voluntary resignation without good reason, effective December 30,
2009. Under the terms of his employment agreement, Mr. Blair received a base annual salary of
$250,000 until March 31, 2009, payable on a
semimonthly basis, and he was entitled to annual and incentive bonuses. In connection with
his employment, FCMC granted to Mr. Blair 17,000 shares of restricted Company common stock, of
which 2,000 shares vested on August 7, 2006, and 5,000 shares vested on each of January 1, 2007,
January 1, 2008 and January 1, 2009. Effective April 1, 2009, Mr. Blair agreed to a 20% reduction
in his base annual salary to $200,000.
- 17 -
The term of Mr. Blairs employment agreement had been until December 31, 2009 or the date of
an earlier termination by FCMC or Mr. Blair. Mr. Blair remains subject to covenants not to compete
and not to solicit customers or employees of FCMC for a period of twelve (12) months following the
date of his termination of employment.
Pursuant to the employment agreement, FCMC could have terminated Mr. Blairs employment with
or without cause (as defined in the employment agreement) and Mr. Blair could have terminated it
without good reason, which he did, or for good reason (as defined in the employment agreement)
following a Change in Control (as defined in the employment agreement). Further detail on our
severance obligations to Mr. Blair, including the definitions contained in his employment agreement
of cause, good reason and Change in Control is set forth below under the heading Potential
Payments Upon Termination or Change in Control.
Potential Payments Upon Termination or Change in Control
As discussed above, we currently have or had employment agreements with certain of our named
executive officers that contain various provisions relating to severance and change in control
payments. Pursuant to such employment agreements, the following circumstances would trigger
payments or the provision of other benefits:
|
|
|
Termination by FCMC without cause or by the executive officer without
good reason; |
|
|
|
Termination by FCMC for cause; |
|
|
|
Termination by the executive officer for good reason (and, in the case
of Paul D. Colasono and Michael Blair, for good reason following a Change
in Control); |
|
|
|
In the case of Alexander Gordon Jardin and Michael Blair, termination
due to the executive officers death or disability; and |
|
|
|
In the case of Alexander Gordon Jardin, termination following a Change
in Control. |
The following summaries describe and quantify these potential payments and/or benefits. The
definitions contained in such employment agreements of the terms cause, good reason, and
Change in Control can be found under the subheading Defined Terms.
Severance/Change in Control Arrangement for Paul D. Colasono
For Cause, Without Good Reason. In the event that Mr. Colasonos employment is terminated by
FCMC for cause or by Mr. Colasono without good reason, Mr. Colasono shall receive nothing other
than (i) a lump sum in respect of all accrued and unused vacation within ten days after termination
of employment in an amount based on Mr. Colasonos current base salary, and (ii) reimbursement for
expenses already incurred pursuant to the employment agreement. In the event that FCMC terminates
Mr. Colasono for cause and it is later determined by a court of competent jurisdiction that such
cause did not exist, Mr. Colasonos termination shall be deemed to be a termination by FCMC without
cause. In such event, Mr. Colasono shall be entitled to receive severance pursuant to the terms of
the employment agreement as if the termination was made by FCMC without cause.
- 18 -
Without Cause, For Good Reason Following a Change in Control, Death/Disability. In the event
that Mr. Colasonos employment is terminated by FCMC without cause or by Mr. Colasono for good
reason following a Change in Control (other than for cause), Mr. Colasono shall receive the
following payments/benefits: (i) a lump sum in respect of all accrued and unused vacation within
ten days after the termination of his employment in an amount based on Mr. Colasonos current base
salary, (ii) reimbursement for expenses already incurred pursuant to
the employment agreement; and (iii) within thirty days after the termination of his
employment, a lump sum amount based on his current base salary for the periods set forth below
after such termination:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period for which current base salary will be paid |
|
|
Date of termination |
|
in lump sum following termination |
In the event that
termination occurs
prior to a Change
in Control |
|
If termination occurs on or after September 1, 2006 |
|
Twelve months |
In the event that
termination occurs
at the time of or
following a Change
in Control |
|
If termination occurs on or after September 1, 2006 |
|
Eighteen months |
In addition, if Mr. Colasono is enrolled in and covered by a medical insurance plan offered by
FCMC on the date of termination of employment, he shall be entitled, at his election, to receive
either (x) continued health benefits for the periods set forth above, or (y) an amount equal to the
medical insurance premiums paid by FCMC on behalf of Mr. Colasono for the periods set forth above.
For purposes of calculating severance payments under the employment agreement, a termination
due to Mr. Colasonos illness, disability or death shall be deemed a termination by FCMC without
cause.
The following table and footnotes describe and quantify the potential payments upon
termination or a Change in Control for Mr. Colasono, assuming that the termination or Change in
Control was effective as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
Executive Benefits and Payments |
|
Termination |
|
|
For Cause or Without |
|
|
|
|
|
|
Following a Change |
|
Upon Termination |
|
Without Cause |
|
|
Good Reason |
|
|
Death/Disability |
|
|
in Control |
|
Severance Pay |
|
$ |
200,000 |
|
|
$ |
|
|
|
$ |
200,000 |
|
|
$ |
300,000 |
|
Vesting of Stock Options
and Restricted Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits |
|
$ |
(1) |
|
|
$ |
|
|
|
$ |
(1) |
|
|
$ |
(2) |
|
|
|
|
(1) |
|
Employee would have had the option of either 12 months continued health benefits or
$9,519, an amount equal to 12 months of medical insurance premiums which would have been
paid by FCMC on behalf of Mr. Colasono. |
|
(2) |
|
Employee would have had the option of either 18 months continued health benefits or
$14,278.50, an amount equal to 18 months of medical insurance premiums which would have
been paid by FCMC on behalf of Mr. Colasono. |
Severance/Change in Control Arrangement for Alexander Gordon Jardin
For Cause, Without Good Reason. In the event that Mr. Jardins employment had been terminated
by FCMC for cause or by Mr. Jardin without good reason, which it was, Mr. Jardin receives nothing
other than any accrued salary, payment for accrued but unused vacation time, and reimbursement of
expenses already incurred pursuant to the employment agreement. Any portion of the restricted
common stock of the Company granted to Mr. Jardin pursuant to the employment agreement that has not
become vested and nonforfeitable on or prior to the date of such termination is forfeited.
Had FCMC terminated Mr. Jardin for cause and it was later determined by a court of competent
jurisdiction that such cause did not exist, Mr. Jardins termination would be deemed to be a
termination by FCMC without cause. In such event, Mr. Jardin would be entitled to receive
severance pursuant to the terms of his employment agreement as if the termination was made by FCMC
without cause.
Without Cause, For Good Reason, Following a Change in Control, Death/Disability. Had Mr.
Jardins employment been terminated by FCMC without cause, by Mr. Jardin for good reason, by either
party following a Change in Control (other than a termination for cause following such Change in
Control), or due to Mr. Jardins death or disability, Mr. Jardin would have received the following
payments/benefits: (1) a lump sum in respect of all accrued and unused vacation within ten days
after termination of employment in an amount based on Mr. Jardins current base salary; (2) a
prorated bonus determined by or consistent with the employment agreement, which bonus
would be paid at the later of six months after termination of the employment agreement or the
date provided in the employment agreement; and (3) an additional lump sum payable six months after
the termination of the employment agreement equal to, $225,000 plus $13,542 for each month (or
partial month) of employment with FCMC after December 31, 2006, provided that in no event would the
aggregate amount exceed Mr. Jardins salary as of the date of such termination plus an amount equal
to the value of Mr. Jardins total benefits for the prior twelve month period, as of the date of
such termination.
- 19 -
Had Mr. Jardins employment been terminated by FCMC without cause, any portion of the
restricted common stock of the Company granted to Mr. Jardin pursuant to the employment agreement
that had not vested and become nonforfeitable on or prior to the date of such termination would be
forfeited. In addition, in the event of Mr. Jardins death or disability, the entire award of
restricted common stock of the Company granted to Mr. Jardin pursuant to the employment agreement
would immediately become fully vested and nonforfeitable.
The following table and footnotes describe and quantify the potential payments upon
termination or a Change in Control for Mr. Jardin, assuming that the termination or Change in
Control was effective as of December 31, 2009, and Mr. Jardin had not terminated his employment
without good reason effective October 7, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Without |
|
|
Termination For |
|
|
|
|
|
|
|
|
Executive Benefits and Payments |
|
Cause or For Good |
|
|
Cause or Without |
|
|
|
|
|
|
Following a Change |
|
Upon Termination |
|
Reason |
|
|
Good Reason |
|
|
Death/Disability |
|
|
in Control |
|
Severance Pay |
|
$ |
288,250 |
|
|
$ |
|
|
|
$ |
288,250 |
|
|
$ |
288,250 |
|
Vesting of Stock Options
and Restricted Stock Awards |
|
|
* |
|
|
|
|
|
|
|
* |
|
|
|
|
|
Other Benefits |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
* |
|
In the case of termination was For Good Reason, 12,500 shares of restricted stock would
have immediately vested. |
Severance Arrangement for William F. Sullivan
Without Cause, For Failure to Perform Assigned Duties, For Good Reason. Had Mr. Sullivans
employment been terminated by FCMC without cause or for Mr. Sullivans failure to perform assigned
duties, or had Mr. Sullivan terminated his employment for good reason, Mr. Sullivan would have been
entitled to receive: (i) payment in a lump sum in respect of all accrued and unused vacation within
ten days after termination of employment in an amount based on Mr. Sullivans current base salary;
(ii) if such termination occurred after the end of any calendar year and before the payment date of
the bonus in respect of that year, an amount equal to the bonus for such calendar year on April 15
of the year of termination; (iii) monthly payments equal to one twelfth of his then current base
salary for four months after such termination. In addition, if Mr. Sullivan was enrolled in and
covered by a medical insurance plan offered by FCMC on the date of termination, at his option,
either continued health benefits during a specified period or an amount equal to the medical
insurance premiums that would have been payable by FCMC on behalf of Mr. Sullivan in respect of
such specified period.
In the event Mr. Sullivans employment had been terminated and he was not entitled to
severance in accordance with the employment agreement, Mr. Sullivan would be entitled to no further
compensation or payments from FCMC.
Mr. Sullivans employment agreement did not provide for payments upon a change in control.
- 20 -
The following table and footnotes describe and quantify the potential payments upon
termination or a change in control for Mr. Sullivan, assuming that the termination or change in
control was effective as of December 31, 2009, and Mr. Sullivan had not resigned effective October
15, 2009 (and, therefore, do not reflect amounts payable under Mr. Sullivans separation agreement
described above):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Without |
|
|
Termination For |
|
|
|
|
|
|
|
|
Executive Benefits and Payments |
|
Cause or For Good |
|
|
Cause or Without |
|
|
|
|
|
|
Following a Change |
|
Upon Termination |
|
Reason |
|
|
Good Reason |
|
|
Death/Disability |
|
|
in Control |
|
Severance Pay |
|
$ |
73,333.33 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Vesting of Stock Options
and Restricted Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits |
|
$ |
* |
|
|
$ |
* |
|
|
$ |
* |
|
|
$ |
|
|
|
|
|
* |
|
Employee would have had the option of either 4 months continued health benefits or
$4,943, an amount equal to 4 months of medical insurance premiums which would have been
paid by FCMC on behalf of Mr. Sullivan. |
Severance/Change in Control Arrangement for Michael Blair
For Cause, Without Good Reason. In the event that Mr. Blairs employment had been terminated
by FCMC for cause or by Mr. Blair without good reason, which it was, Mr. Blair receives nothing
other than (i) a lump sum in respect of all accrued and unused vacation within ten days after
termination of employment in an amount based on Mr. Blairs current base salary, and (ii)
reimbursement for expenses already incurred pursuant to the employment agreement. Had FCMC
terminated Mr. Blair for cause and it was later determined by a court of competent jurisdiction
that such cause did not exist, Mr. Blairs termination would be deemed to be a termination by FCMC
without cause. In such event, Mr. Blair would be entitled to receive severance pursuant to the
terms of the employment agreement as if the termination was made by FCMC without cause.
Without Cause, For Good Reason Following a Change in Control, Death/Disability. Had Mr.
Blairs employment been terminated by FCMC without cause or by Mr. Blair for good reason following
a Change in Control (other than for cause), Mr. Blair would have received the following
payments/benefits: (i) a lump sum in respect of all accrued and unused vacation within ten days
after the termination of his employment in an amount based on Mr. Blairs current base salary, (ii)
reimbursement for expenses already incurred pursuant to the employment agreement; and (iii) within
thirty days after the termination of his employment, a lump sum amount based on his current base
salary for the periods set forth below after such termination:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period for which current base salary will be paid |
|
|
|
Date of termination |
|
|
in lump sum following termination |
|
In the event that
termination occurs
prior to a Change
in Control |
|
If termination occurs on or after February 1, 2008 |
|
Twelve months |
In the event that
termination occurs
at the time of or
following a Change
in Control |
|
If termination occurs on or after February 1, 2008 |
|
Eighteen months |
In addition, if Mr. Blair was enrolled in and covered by a medical insurance plan offered by
FCMC on the date of termination of employment, he would be entitled, at his election, to receive
either (x) continued health benefits for the periods set forth above, or (y) an amount equal to the
medical insurance premiums paid by FCMC on behalf of Mr. Blair for the periods set forth above.
For purposes of calculating severance payments under the employment agreement, a termination
due to Mr. Blairs illness, disability or death is deemed a termination by FCMC without cause.
- 21 -
The following table and footnotes describe and quantify the potential payments upon
termination or Change in Control for Mr. Blair, assuming that termination or Change in Control was
effective as of December 31, 2009, and Mr. Blair had not terminated his employment without good
reason effective December 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination For |
|
|
|
|
|
|
|
|
Executive Benefits and Payments |
|
Termination |
|
|
Cause or Without |
|
|
|
|
|
|
Following a Change |
|
Upon Termination |
|
Without Cause |
|
|
Good Reason |
|
|
Death/Disability |
|
|
in Control |
|
Severance Pay |
|
$ |
200,000 |
|
|
$ |
|
|
|
$ |
200,000 |
|
|
$ |
300,000 |
|
Vesting of Stock Options
and Restricted Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits |
|
$ |
(1) |
|
|
$ |
|
|
|
$ |
(1) |
|
|
$ |
(2) |
|
|
|
|
(1) |
|
Employee would have had the option of either 12 months continued health benefits or
$14,829, an amount equal to 12 months of medical insurance premiums which would have been
paid by FCMC on behalf of Mr. Blair. |
|
(2) |
|
Employee would have had the option of either 18 months continued health benefits or
$22,243.50, an amount equal to 18 months of medical insurance premiums which would have
been paid by FCMC on behalf of Mr. Blair. |
Defined Terms
The terms cause, good reason and change in control are defined in the employment
agreements for Mr. Jardin, Mr. Colasono, Mr. Sullivan and Mr. Blair (as applicable) as follows
(with any variations among the employment agreements noted following each such definition).
Cause is generally defined to include the following:
(1) executive officer fails or refuses to perform one or more of his material assigned duties
to FCMC;
(2) executive officer fails or refuses to comply with one or more policies of FCMC;
(3) executive officer breaches any of the material terms of his employment agreement; or
(4) executive officer commits any criminal, fraudulent or dishonest act related to his
employment (other than an arms length dispute relating to the erroneous reporting of an immaterial
amount as an expense) relating to FCMC or any of its assets or opportunities.
Pursuant to Mr. Jardins employment agreement, Cause is similarly defined with the following
variations: subclauses (1) and (2) require Mr. Jardin to continually take the actions listed
therein; and the parenthetical contained in subclause (4) states as follows: (other than a dispute
relating to the unintentional erroneous reporting of an immaterial amount as an expense).
Pursuant to Mr. Sullivans employment agreement, Cause is similarly defined except that
subclause (4) is limited to the event that Mr. Sullivan commits any criminal, fraudulent or
dishonest act related to his employment.
Good Reason is generally limited to the following: (1) executive officer is asked
to resign, in writing, by the Board of Directors or is terminated by FCMC without cause; or (2) any
material diminution by FCMC of executive officers duties or responsibilities, except in connection
with the termination of executive officers employment for cause, as a result of permanent
disability, or as a result of executive officers death.
Pursuant to Mr. Colasonos employment agreement, Good Reason is similarly defined with the
following variation: Good Reason is also defined to include if Mr. Colasono is removed as Chief
Financial Officer, or Executive Vice President of FCMC. Pursuant to Mr. Blairs employment
agreement, Good Reason is similarly defined with the following variation: Good Reason is also
defined to include if Mr. Blair is removed as Chief Operational Officer of FCMCs Servicing
Department, or Executive Vice President of FCMC.
- 22 -
Pursuant to Mr. Jardins employment agreement, Good Reason is defined to be limited to the
following: (1) FCMC transfers the place of his employment in violation of the employment
agreement; (2) FCMC breaches any of the material terms of certain specified provisions of the
employment agreement or FCMC knowingly misrepresented or failed to disclose to Mr. Jardin a
material financial, regulatory or legal matter of, or involving, FCMC prior to the execution of the
employment agreement of which Mr. Jardin did not have knowledge; (3) any material diminution by
FCMC of Mr. Jardins duties or responsibilities, except in connection with the termination of Mr.
Jardins employment by FCMC, as a result of permanent disability, or as a result of Employees
death; (4) Mr. Jardin is requested by FCMC to act in an unethical or illegal manner; or (5) Mr.
Jardin is removed as Chief Executive Officer, President or Director of FCMC.
Pursuant to Mr. Sullivans employment agreement, Good Reason is defined to be limited to the
following: (1) FCMC transfers the place of his employment in violation of the employment
agreement; or (2) FCMC breaches any of the material terms of certain specified provisions of the
employment agreement.
The definition of Good Reason in the employment agreements of Messrs. Colasono, Jardin,
Sullivan and Blair was amended effective December 31, 2008, in order to comply with the
requirements of Section 409A of the Internal Revenue Code of 1986, as amended, In particular, for
an event to constitute Good Reason as defined in the respective employment agreements, (i) the
Employee is required to give FCMC written notice within ninety (90) days after Employee has
knowledge of the same, (ii) FCMC thereafter fails to cure such circumstances within thirty (30)
days after receipt of such notice and (iii) the Employee terminates employment no later than two
(2) years following the occurrence of such circumstances.
Change in Control is generally defined to mean the occurrence of one or more of the
following events:
(1) If (i) any person (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) becomes the beneficial owner (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of FCMC representing twenty percent (20%) or more
of the total voting power represented by FCMCs then outstanding voting securities who is not
already such as of the date of this Agreement, and (ii) Thomas J. Axon, members of Mr. Axons
family, and entities in which Mr. Axon has an interest shall have beneficial ownership of less than
twenty percent (20%) or more of the total voting power represented by FCMCs then outstanding
voting securities;
(2) The consummation of a tender or exchange offer; one or more contested elections related to
the election of directors of FCMC; a reorganization, merger or consolidation, or the acquisition of
assets of another corporation, or any combination of the foregoing transactions, which results in a
change in the composition of the Board of Directors of FCMC, as a result of which fewer than fifty
percent (50%) of the directors are incumbent directors.
(3) FCMCs shares shall cease to be registered under Section 12(b) or 12(g) under the
Securities Exchange Act of 1934, as amended; or
(4) A sale or other disposition of all or substantially all of the assets of FCMC.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred if
FCMC files for bankruptcy protection, or if a petition for involuntary relief is filed against
FCMC.
There is no definition of change in control in Mr. Sullivans employment agreement.
- 23 -
Outstanding Equity Awards at December 31, 2009
The following table provides certain summary information concerning unexercised stock options
and equity incentive plan awards for each named executive officer as of December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of |
|
|
|
Number of |
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Shares or |
|
|
|
Securities |
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
Shares or |
|
|
Units of |
|
|
|
Underlying |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
|
Units of |
|
|
Stock |
|
|
|
Unexercised |
|
|
Unexercised |
|
|
|
|
|
|
|
|
|
|
Stock That |
|
|
That Have |
|
|
|
Options |
|
|
Options |
|
|
Option |
|
|
Option |
|
|
Have Not |
|
|
Not |
|
|
|
(#) |
|
|
(#) |
|
|
Exercise |
|
|
Expiration |
|
|
Vested |
|
|
Vested |
|
Name |
|
Exercisable |
|
|
Unexercisable |
|
|
Price ($) |
|
|
Date |
|
|
(#) |
|
|
($) |
|
Thomas J. Axon,
Chairman and President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul D. Colasono,
Chief Financial Officer and
Executive Vice President |
|
|
22,500 |
|
|
|
22,500 |
|
|
|
1.75 |
|
|
|
4/22/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin Gildea, Chief Legal Officer,
Executive Vice President and
Secretary |
|
|
17,500 |
|
|
|
17,500 |
|
|
|
1.75 |
|
|
|
4/22/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexander Gordon Jardin,
Chief Executive Officer(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William F. Sullivan, Chief Operating
Officer and President of Tribeca
Lending Corp(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Blair, Executive Vice
President and Chief Operational
Officer of Servicing(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Jardin served as Chief Executive Officer of the Company until October 7, 2009. |
|
(2) |
|
Mr. Sullivan served as Chief Operating Officer and President, Tribeca Lending Corp.
until October 15, 2009. |
|
(3) |
|
Mr. Blair served as Executive Vice President and Chief Operational Officer of Servicing
until December 30, 2009. |
- 24 -
Director Compensation
The following table provides certain summary information regarding the compensation of our
directors earned for their services as members of our Board of Directors or any committee thereof
during the fiscal year ended December 31, 2009. Directors who are also employees of the Company do
not receive any additional compensation for their service as directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned |
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
or Paid in Cash |
|
|
Stock Awards |
|
|
Option Awards |
|
|
Compensation |
|
|
Total |
|
Name |
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
Thomas J. Axon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Bertash |
|
|
24,000 |
|
|
|
|
|
|
|
900 |
(1) |
|
|
|
|
|
|
24,900 |
|
Frank B. Evans, Jr. |
|
|
21,250 |
|
|
|
|
|
|
|
900 |
(1) |
|
|
|
|
|
|
22,150 |
|
Steven W. Lefkowitz |
|
|
24,500 |
|
|
|
|
|
|
|
900 |
(1) |
|
|
|
|
|
|
25,400 |
|
Allan R. Lyons |
|
|
34,750 |
|
|
|
|
|
|
|
900 |
(1) |
|
|
|
|
|
|
35,650 |
|
Alexander Gordon Jardin(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William F. Sullivan(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Option Award represents the aggregate grant date fair value of equity awards
granted in fiscal year 2009, computed in accordance with Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC) Topic 718, Stock Compensation (FASB
ASC Topic 718), at $0.30 per share based on the date of grant, June 17, 2009. For a
discussion of the valuation assumptions utilized in calculating the aggregate grant date
fair value of equity awards under FASB ASC Topic 718, see Note 2, Summary of Significant
Accounting Policies, in the notes to our consolidated financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 2009. |
|
(2) |
|
Mr. Jardin resigned as a director of the Company effective October 7, 2009. |
|
(3) |
|
Mr. Sullivan resigned as a director of the Company effective October 15, 2009. |
The table below provides the aggregate number of option awards and stock awards outstanding at
December 31, 2009 held by each of our Directors:
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
Name |
|
(#) |
|
|
(#) |
|
Thomas J. Axon |
|
|
|
|
|
|
|
|
Michael Bertash |
|
|
18,000 |
|
|
|
|
|
Frank B. Evans, Jr. |
|
|
42,000 |
|
|
|
|
|
Steven W. Lefkowitz |
|
|
22,000 |
|
|
|
|
|
Allan R. Lyons |
|
|
31,000 |
|
|
|
|
|
Alexander Gordon Jardin(1) |
|
|
|
|
|
|
87,500 |
|
William F. Sullivan(2) |
|
|
|
|
|
|
5,000 |
|
|
|
|
(1) |
|
As a result of Mr. Jardins resignation effective October 7, 2009, unexercisable option
awards representing 75,000 shares of common stock expired on the date of his resignation
and exercisable Options awards representing 28,000 shares of common stock expired three
months following his resignation. |
|
(2) |
|
As a result of Mr. Sullivans resignation effective October 15, 2009, unexercisable
option awards representing 22,500 shares of common stock expired on the date of his
resignation and exercisable Options awards representing 37,500 shares of common stock
expired three months following his resignation. |
- 25 -
Narrative to Director Compensation Table
Compensation of Directors
During fiscal year 2009, the Companys non-management directors, Messrs. Bertash, Evans,
Lefkowitz and Lyons, were granted options to purchase 3,000 shares of Common Stock pursuant to the
Companys 2006 Stock Incentive Plan, as amended (the 2006 Plan), upon their election or
re-election to the Board or the anniversary thereof, and received $1,000 for each Board or
Committee meeting attended in person and $500 for each Board or Committee meeting attended
telephonically. The options were vested on the date of grant and are exercisable at an exercise
price equal to the fair market value of the underlying shares on the date of grant as determined by
the Board of Directors.
In April 2005, the Compensation Committee recommended and the Board of Directors approved the
following director compensation program, which replaced in its entirety the Companys previous
director compensation program:
|
|
|
Each non-employee director will receive an annual retainer fee of $20,000 for
serving on the Board. |
|
|
|
Each non-employee director who serves as Chairman of the Board or Chairman of the
Audit Committee will receive an additional retainer fee of $10,000 for such service. |
|
|
|
Each non-employee director will receive $500 for each meeting of the Compensation
Committee and the Nominating and Corporate Governance Committee attended in person and
$250 for each such meeting attended telephonically. |
|
|
|
Each non-employee director will receive $1,000 for each meeting of the Board of
Directors and the Audit Committee attended in person and $500 for each such meeting
attended telephonically. |
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|
Each non-employee director will be reimbursed for reasonable travel expenses
incurred in connection with serving on the Board. |
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Each non-employee director will be granted an option to purchase 3,000 shares of
Common Stock of the Company pursuant to the Companys 2006 Stock Incentive Plan, as
amended, upon such directors election or re-election to the Board and, for each year
that such director serves during such directors term on the Board, upon the annual
anniversary of such directors election or re-election to the Board. The options will
vest on the date of grant and will be exercisable at an exercise price equal to the
fair market value of the underlying shares of Common Stock on the date of grant. |
- 26 -
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Related Persons
Restructuring On March 31, 2009, the Company transferred ten percent of its ownership in
common stock of FCMC to its Chairman and President, Thomas J. Axon, as the cost of obtaining
certain guarantees and pledges from Mr. Axon, which were required by The Huntington National Bank
(the Bank) as a condition of the restructuring entered into by the Company and certain of its
wholly-owned direct and indirect subsidiaries on March 31, 2009. Mr. Axon is also entitled to a
grant of up to an additional ten percent of the common stock of FCMC from the Company should the
pledge of common shares of FCMC by the Company to the Bank, as part of the restructuring, be
reduced upon the attainment by FCMC of certain net collection targets set by the Bank.
Bosco Servicing Agreement On May 28, 2008, FCMC entered into various agreements, including a
servicing agreement, to service on a fee-paying basis approximately $245 million in residential
home equity line of credit mortgage loans for Bosco Credit LLC (Bosco). Bosco was organized by
FCMC, and the membership interests in Bosco include the Companys Chairman and President, Thomas J.
Axon, and a related company of which Mr. Axon is the chairman of the board and three of the
Companys directors serve as board members of that entity. The loans that are subject to the
servicing agreement were acquired by Bosco on May 28, 2008, and the Bank is the administrative
agent for the lenders to Bosco. FCMC also provided the loan analysis, due diligence and other
services for Bosco on a fee-paying basis for the loans acquired by Bosco. FCMCs servicing
agreement was approved by its Audit Committee.
FCMC began servicing the Bosco portfolio in June 2008. Included in the Companys consolidated
revenues were servicing fees recognized from servicing the Bosco portfolio of $2,014,000 and
$1,813,000 for the twelve months ended December 31, 2009 and 2008, respectively. In addition,
included in the Companys consolidated revenues were fees recognized for various administrative
services provided to Bosco by FCMC in the amount of $180,000 for the twelve months ended December
31, 2008. The Company did not recognize any administrative fees in 2009 and wrote off as
uncollectible the administrative fees recognized in 2008.
On February 27, 2009, at the request of the Bosco Lenders, FCMC adopted a revised fee
structure, which was approved by FCMCs Audit Committee. The revised fee structure provided that,
for the next 12 months, FCMCs monthly servicing fee would be paid only after a monthly loan
modification fee of $29,167 was paid to Boscos Lenders. Further, the revised fee structure
provided that, on each monthly payment date, if the aggregate amount of net collections was less
than $1 million, 25% of FCMCs servicing fee would be paid only after certain other monthly
distributions were made, including, among other things, payments made by Bosco to repay its
third-party indebtedness.
On October 29, 2009, at the additional request of the Bosco Lenders in an effort to maximize
cash flow to the Bosco Lenders and to avoid payment defaults by Bosco, the revised fee structure
relating to deferred fees was adjusted through an amendment to the loan servicing agreement with
Bosco (the Bosco Amendment), which was approved by FCMCs Audit Committee.
Under the terms of the Bosco Amendment, FCMC is entitled to a minimum monthly servicing fee of
$50,000. However, to the extent that the servicing fee otherwise paid for any month would be in
excess of the greater of $50,000 or 10% of the total cash collected on the loans serviced for Bosco
(such amount being the Monthly Cap), the excess will be deferred, without the accrual of
interest. The cumulative amounts deferred will be paid (i) with the payment of the monthly
servicing fee, to the maximum extent possible, for any month in which the servicing fee is less
than the applicable Monthly Cap, so long as the sum paid does not exceed the Monthly Cap or (ii) to
the extent not previously paid, on the date on which any of the promissory notes (Notes) payable
by Bosco to the Lenders, which were entered into to finance the purchase of and are secured by the
loans serviced by FCMC, is repaid, refinanced, released, accelerated, or the amounts owing
thereunder increased (other than by accrual or capitalization of interest). If the deferred
servicing fees become payable by reason of acceleration of the Notes, the Lenders right to payment
under such Notes shall be prior in right to FCMCs rights to such deferred fees.
- 27 -
Further, the Bosco Amendment provides that FCMC will not perform or be required to perform any
field contact services for Bosco or make any servicing advances on behalf of Bosco that
individually or in the aggregate would result in a cost or expense to Bosco of more than $10,000 per month, without the prior
written consent and approval of the Lenders. The Bosco Amendment did not alter FCMCs right to
receive a certain percentage of collections after Boscos indebtedness to the Lenders has been
repaid in full, the Bosco equity holders have been repaid in full the equity investment in Bosco
made prior to Bosco entering into the loan agreement with the Lenders, and the Lenders and Boscos
equity holders have received a specified rate of return on their debt and equity investments.
The amount and timing of ancillary fees owed to the Company is the subject of a good faith
dispute between FCMC and the Managing Member of Bosco, Thomas J. Axon (Chairman and President of
the Company and FCMC). However, even if the parties can resolve their difference amicably, there
are no funds available to Bosco for payment for such services, since all funds from collections are
required by Boscos agreements with its lenders to repay such lenders, aside from specific amounts
required for servicing fees and other specifically excepted costs. On June 30, 2009, the Company
wrote off $90,000 in internal accounting costs associated with services provided by FCMC to Bosco.
On December 31, 2009, the Company wrote-off $372,000 in additional aged receivables, due to
non-payment, consisting of (i) legal costs incurred by FCMC in 2008 related to the acquisition by
Bosco of its loan portfolio and entry into a servicing agreement with Bosco; (ii) expenses for loan
analysis, due diligence and other services performed for Bosco by FCMC in 2008 related to the
acquisition by Bosco of the loan portfolio; and (iii) additional internal accounting costs for
services provided to Bosco by FCMC through June 30, 2009. In addition, FCMC has not accrued fees
for accounting costs estimated to be approximately $61,000 for the period of June 1, 2009 to
December 31, 2009.
FCMC determined to accept the deferrals and other amendments described above with respect to
its Bosco relationship in recognition of the performance of the Bosco loan portfolio, which has
been adversely impacted by general market and economic conditions, in an effort to maintain the
continued and future viability of its servicing relationship with Bosco, and in the belief that
doing so is in its best long-term economic interests in light of the fact that the Company believes
FCMCs servicing of the Bosco portfolio is profitable notwithstanding such deferrals and
amendments. FCMCs determination to not currently take legal action with respect to the
receivables it has written off as described above, which receivables have not been settled or
forgiven by FCMC, was made in light of these same considerations.
Exclusive of the amounts written off related to the Bosco serviced loans, for the twelve
months ended December 31, 2009, the Company recognized a total of $2,014,000 in servicing fees for
servicing the Bosco portfolio, of which $299,000 was not paid to FCMC and therefore deferred per
the Bosco Amendment. As of December 31, 2009, FCMC, had $409,000 of accrued and unpaid servicing
fees due from Bosco (effective August 1, 2009, Franklins servicing fee income is recognized when
cash is received), and $190,000 of reimbursable third party expenses incurred by FCMC in the
servicing and collection of the Bosco loans.
On March 4, 2010, FCMC entered into an agreement with Bosco to provide ancillary services not
covered by the Servicing Agreement related to occupancy verification and the coordination of
on-sight visits with borrowers to facilitate the implementation of loss mitigation program
initiatives at fees ranging from $100-$140 per individual assignment. FCMC had performed such
services for Bosco on a trial basis under a pass-through cost arrangement, with total expenses to
Bosco of approximately $111,000 as of December 31, 2009.
Other Related Party Transactions with the Companys Chairman At December 31, 2009 and 2008,
respectively, the Company had an outstanding receivable from an affiliate, RMTS Associates, of
$1,781 and $12,388, respectively. This receivable represents various operating expenses that are
paid by the Company and then reimbursed by RMTS.
On August 18, 2008, FCMCs audit committee authorized a 5% commission to Hudson Servicing
Solutions, LLC (Hudson), a procurer of force-placed insurance products for the mortgage industry,
with respect to force-placed hazard insurance coverage maintained on FCMCs remaining portfolio of
mortgage loans and mortgage loans serviced for third parties. The sole member of Hudson is RMTS,
LLC, of which the Companys Chairman and President is the majority owner.
- 28 -
FCMC entered into a collection services agreement, effective December 23, 2009, pursuant to
which FCMC agreed to serve as collection agent in the customary manner in connection with
approximately 4,000
seriously delinquent and generally unsecured loans, with an unpaid principal balance of
approximately $56 million, which were acquired by two trusts set up by a fund in which the
Companys Chairman and President is a member, and contributed 50% of the purchase price and agreed
to pay certain fund expenses. Under the collection services agreement, FCMC is entitled to
collection fees consisting of 35% of the gross amount collected. The agreement also provides for
reimbursement of third-party fees and expenses incurred by FCMC as provided for in this collection
services agreement.
On February 1, 2010, FCMC entered into a collection services agreement, pursuant to which FCMC
agreed to serve as collection agent in the customary manner in connection with approximately 1,500
seriously delinquent and generally unsecured loans, with an unpaid principal balance of
approximately $85 million, which were acquired through a trust set up by a fund in which the
Companys Chairman and President is a member, and contributed twenty five percent of the purchase
price. Under the collection services agreement, FCMC is entitled to collection fees consisting of
33% of the amount collected, net of third-party expenses. The agreement also provides for
reimbursement of third-party fees and expenses incurred by FCMC in compliance with the collection
services agreement.
The Board of Directors unanimously recommends a vote FOR the election of each of the nominees
listed above.
- 29 -
PROPOSAL 2 RATIFICATION OF APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed the firm of Marcum LLP as the
Companys independent registered public accounting firm to audit the financial statements of the
Company for the fiscal year ending December 31, 2010, and recommends that stockholders vote for
ratification of this appointment. Marcum was appointed as the Companys independent registered
public accounting firm effective August 31, 2009.
A representative of Marcum is expected to be present at the Annual Meeting and will have the
opportunity to make a statement if he or she desires to do so, and is expected to be available to
respond to appropriate questions.
Change in Principal Accounting Firm
Effective August 31, 2009, the Audit Committee of the Board of Directors of the Company
dismissed Deloitte & Touche LLP (Deloitte) as the independent registered public accountant to
audit the Companys consolidated financial statements. Deloitte audited the Companys financial
statements from January 1997 through Marcums appointment.
The audit reports of Deloitte on the Companys financial statements as of December 31, 2008
and 2007 did not contain an adverse opinion, disclaimer of opinion or qualification other than an
explanatory paragraph in Deloittes report dated April 2, 2008 (which was included in the Companys
Form 10-K for the fiscal year ended December 31, 2007), relating to the change in accounting by the
Company for certain purchased notes receivable as of January 1, 2005, and an explanatory paragraph
in Deloittes report dated April 9, 2009 (which was included in the Companys Form 10-K for the
fiscal year ended December 31, 2008), that there were conditions that raised substantial doubt
about the ability of the consolidated Company to continue as a going concern.
During the fiscal years ended December 31, 2008 and December 31, 2007, and subsequent interim
period through August 31, 2009, the Company had no disagreements with Deloitte on any matter of
accounting principles or practices, financial statement disclosure, or auditing scope or procedure
that, if not resolved to Deloittes satisfaction, would have caused Deloitte to make reference to
the subject matter of the disagreements in connection with its report on the Companys consolidated
financial statements for either of such fiscal years. Further, there were no reportable events as
described in Item 304(a)(1)(v) of Regulation S-K, within said time periods.
The Company provided Deloitte with a copy of the disclosures it is making hereto. The Company
requested that Deloitte furnish the Company with a letter addressed to the Commission stating
whether it agreed with the statements made by the Company herein. A copy of Deloittes responsive
letter dated September 2, 2009 is filed as Exhibit 16.1 to the Companys Current Report on Form
8-K, as filed with the SEC on September 4, 2009.
Effective August 31, 2009, the Audit Committee of the Board of Directors of the Company
engaged Marcum as the independent registered public accountant to audit the Companys consolidated
financial statements for the fiscal year ending December 31, 2009. During the fiscal years ended
December 31, 2008 and 2007, and subsequent interim period through August 31, 2009, neither the
Company nor anyone acting on its behalf consulted with Marcum regarding either (i) the application
of accounting principles to a specified transaction, either completed or proposed; or the type of
audit opinion that might be rendered on the Companys financial statements, and neither a written
report was provided to the Company or oral advice was provided that Marcum concluded was an
important factor considered by the Company in reaching a decision as to the accounting, auditing or
financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as
that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item
304 of Regulation S-K, or a reportable event, as that term is defined in Item 304(a)(1)(v) of
Regulation S-K.
- 30 -
Audit Fees
Deloitte has billed the Company the following fees for professional services rendered in
respect of the years ended December 31, 2009 and 2008:
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2009 |
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2008 |
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Audit Fees |
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$ |
187,445 |
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$ |
1,090,000 |
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Audit-Related Fees |
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$ |
11,423 |
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$ |
31,500 |
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Tax Fees |
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$ |
378,000 |
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$ |
450,000 |
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All Other Fees |
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$ |
226,130 |
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$ |
35,000 |
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Marcum has billed the Company the following fees for professional services rendered in respect
of the years ended December 31, 2009 and 2008:
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2009 |
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2008 |
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Audit Fees |
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$ |
274,000 |
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$ |
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Audit-Related Fees |
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$ |
10,000 |
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$ |
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Tax Fees |
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$ |
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$ |
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All Other Fees |
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$ |
80,000 |
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$ |
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Audit Fees consist of fees for the audit and review of the Companys financial statements,
statutory audits, comfort letters, consents, and assistance with and review of documents filed with
the SEC. Audit-related fees consist of fees for employee benefit plan audits, accounting advice
regarding specific transactions, internal control reviews, various attestation engagements, and
reimbursement of out of pocket expenses related to the audit and review of the Companys financial
statements. Tax fees generally represent fees for tax compliance and advisory services. Other
fees consist of a SAS 70 engagement by Marcum; a tax opinion and review of the Companys March 2009
restructuring by Deloitte; and reimbursement of other out-of-pocket expenses incurred by Deloitte
and Marcum. All fees were approved by the Audit Committee.
Policy on Pre-Approval of Retention of Independent Auditor
The engagement of Marcum for non-audit accounting services performed for the Company is
limited to those instances in which such services are considered integral to the audit services
that it provides or in which there is another compelling rationale for utilizing its services.
Pursuant to the requirements of the Sarbanes-Oxley Act of 2002, all audit and permitted non-audited
services to be performed by Marcum require pre-approval by the Audit Committee. Such pre-approval
may be given by the Chairman of the Audit Committee under certain circumstances, with notice to the
full Committee at its next meeting.
Vote Required for Ratification of Marcum
Ratification of the appointment of Marcum requires the affirmative vote of a majority of the
shares of Common Stock present at the Annual Meeting and entitled to vote thereon. If the
Stockholders fail to ratify the selection, the Audit Committee will reconsider its selection of
Marcum. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the
appointment of a different independent registered public accounting firm at any time during the
year, if it determines that such change would be in the best interests of the Company and its
Stockholders.
The Board of Directors recommends a vote FOR ratification of the appointment of Marcum LLP as
the Companys independent registered public accounting firm for the fiscal year ending December 31,
2010.
- 31 -
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not aware of any other
matter that is to be presented to Stockholders for formal action at the Annual Meeting. If,
however, any other matter or matters are properly brought before the Annual Meeting or any
adjournment or postponement thereof, it is the intention of the persons named in the enclosed form
of proxy to vote such proxy in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS
Any Stockholder proposal intended to be presented at the next annual meeting of Stockholders
must be received by the Company at its principal executive offices, 101 Hudson Street,
25th floor, Jersey City, New Jersey 07302, no later than December 28, 2010 in order to
be eligible for inclusion in the Companys proxy statement and form of proxy to be used in
connection with that meeting pursuant to Rule 14a-8 under the Exchange Act. Such proposals must
comply with the Companys By-laws and the requirements of Regulation 14A of the Exchange Act.
In addition, the Companys By-laws require Stockholders desiring to bring nominations or other
business before an annual meeting of Stockholders to do so in accordance with the terms of the
By-laws advance notice provision regardless of whether the Stockholder seeks to include such
matters in the Companys Proxy Statement pursuant to Rule 14a-8 under the Exchange Act. The
Companys By-laws provide that a notice of the intent of a Stockholder to make a nomination or to
bring any other matter before an annual meeting must be made in writing and received by the
secretary of the Corporation no earlier than the 119th day and not later than the close of business
on the 45th day prior to the first anniversary of the date of mailing of the Corporations proxy
statement for the prior years annual meeting. However, if the date of the annual meeting has
changed by more than 30 days from the date it was held in the prior year or if the Corporation did
not hold an annual meeting in the prior year, then such notice must be received a reasonable time
before the Corporation mails its proxy statement for the annual meeting.
- 32 -
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.
Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy
delivery requirements for proxy statements with respect to two or more stockholders sharing the
same address by delivering a single proxy statement addressed to those stockholders. This process,
which is commonly referred to as householding, potentially provides extra convenience for
stockholders and cost savings for companies. We and some brokers household proxy materials,
delivering a single proxy statement or annual report to multiple stockholders sharing an address,
unless contrary instructions have been received from the affected stockholders. Once you have
received notice from your broker or us that they or we will be householding materials to your
address, householding will continue until you are notified otherwise or until you revoke your
consent. If, at any time, you no longer wish to participate in householding and would prefer to
receive a separate proxy statement or annual report, please notify us by sending a written request
to Franklin Credit Holding Corporation, 101 Hudson Street, 25th floor, Jersey City, New Jersey
07302 or by calling us at (201) 604-1800. You may also notify us to request delivery of a single
copy of our annual report or proxy statement if you currently share an address with another
stockholder and are receiving multiple copies of our annual report or proxy statement.
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 REPLY ENVELOPE. YOUR COOPERATION AS A STOCKHOLDER, REGARDLESS OF THE NUMBER
OF SHARES OF STOCK YOU OWN, WILL REDUCE THE EXPENSES INCIDENT TO A FOLLOW-UP SOLICITATION OF
PROXIES.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING YOUR SHARES, PLEASE TELEPHONE THE COMPANY AT (201)
604-1800.
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Sincerely yours,
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/s/ Thomas J. Axon
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THOMAS J. AXON |
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Chairman and President |
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Jersey City, New Jersey
April 27, 2010
- 33 -
FRANKLIN CREDIT HOLDING CORPORATION
Annual Meeting of Stockholders
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas J. Axon, Paul D. Colasono and Kevin Gildea or if only
one is present, then that individual, with full power of substitution, to vote all shares of
Franklin Credit Holding Corporation (the Company), which the undersigned is entitled to vote at
the Companys Annual Meeting to be held at the corporate offices of the Company, on Wednesday, June
16, 2010, at 2:00 P.M., Eastern Daylight 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. |
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ELECTION OF DIRECTORS. To elect the nominees for Class II Director below for a term of three years |
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¨
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FOR ALL NOMINEES LISTED BELOW
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¨
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WITHHOLD AUTHORITY |
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(except as marked to the contrary below)
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for all nominees listed below |
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the
nominees name in the list below.)
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Michael Bertash |
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Frank B. Evans |
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Steven W. Lefkowitz |
2. RATIFICATION OF APPOINTMENT OF AUDITORS: To ratify the appointment of Marcum LLP as the
independent registered public accounting firm of the Company for the fiscal year ending December
31, 2010:
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FOR o
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AGAINST o
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ABSTAIN o |
and in their discretion, upon any other matters that may properly come before the meeting or any
adjournments or postponements thereof.
(Continued and to be dated and signed on the other side.)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES
LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. PLEASE MARK
YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE: x
Receipt of the Notice of Annual Meeting and of the Proxy Statement and Annual Report of the
Company accompanying the same is hereby acknowledged.
Dated: , 2010
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(Signature of Stockholder) |
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(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.