SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
|_| Preliminary information statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
|X| Definitive information statement
FRANKLIN CREDIT MANAGEMENT CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
FRANKLIN CREDIT MANAGEMENT CORPORATION
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INFORMATION STATEMENT
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GENERAL INFORMATION
General
This Information Statement (the "Information Statement") is furnished to
the holders of Common Stock, $0.01 par value per share (the "Common Stock"), of
Franklin Credit Management Corporation ("Franklin Credit") in connection with
certain actions taken by a Written Consent of Stockholders in Lieu of Special
Meeting dated December 29, 2004 (the "Written Consent"). WE ARE NOT ASKING YOU
FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. This Information
Statement is being provided pursuant to the requirements of Rule 14c-2
promulgated under Section 14 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to inform holders of Common Stock entitled to vote or give
an authorization or consent in regard to the actions authorized by the Written
Consent, of the actions having been taken by the Written Consent and is being
mailed on or about January 21, 2005.
By executing and delivering the Written Consent to Franklin Credit,
stockholders holding no less than a majority of the outstanding shares of
Franklin Credit's Common Stock (the "Majority Stockholders") ratified the
amendment of Franklin Credit's current certificate of incorporation, as declared
advisable by the board of directors of Franklin Credit on December 29, 2004, to:
o provide for a classified board of three classes of directors,
effective at the next annual meeting of stockholders; provide that the
number of Franklin Credit's directors will be not less than three and
that the exact number of directors will be fixed exclusively by
Franklin Credit's board of directors; require that directors can be
removed only by the affirmative vote of at least two-thirds of the
voting power of all of the shares of Franklin Credit entitled to vote
generally in the election of directors, voting together as a single
class; and provide that vacancies or newly created directorships
resulting from an increase in the number of directors, other than
those that may be filled by holders of any class of preferred stock,
may only be filled by the board of directors;
o require the vote of at least two-thirds of the voting power of all
outstanding shares of Franklin Credit entitled to vote generally in
the election of directors, voting together as a single class, in order
for shareholders to adopt, amend, or repeal any provision of the
by-laws of Franklin Credit;
o require the vote of at least two-thirds of the voting power of all
outstanding shares of Franklin Credit entitled to vote generally in
the election of directors, voting together as a single class, to
amend, alter, change, add to, or repeal the provisions of the
certificate of incorporation relating to:
- the classified board, the size of the board and the filling of
board vacancies and newly created directorships;
- the two-thirds voting requirement in order for stockholders to
remove a director for cause;
- the two-thirds voting requirement in order for stockholders to
adopt, amend or repeal the by-laws; and
- the two-thirds voting requirement to modify any of the provisions
of the certificate of incorporation described above.
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o modernize the provision for indemnification and advancement of
reasonable out-of-pocket fees and expenses to directors in connection
with suits or proceedings arising by reason of the directors' service
on the board of directors of Franklin Credit or any of its
subsidiaries or any other entity at the request of Franklin Credit;
mandate advancement of expenses subject to the receipt of reasonable
assurances of recovery in the event of a final determination that the
director was not entitled to be indemnified; and provide that Franklin
Credit may elect to indemnify others (including officers) to the
fullest extent permitted by Delaware law; and
o repeal a provision that required stockholder approval for certain
mergers and consolidations, sales, leases or exchanges of a
substantial part of the corporation's assets, issuance or transfers of
securities with an aggregate fair market value of not less than
$250,000, and issuances of securities for cash, by Franklin Credit
with holders of more than 10% of its capital stock entitled to vote
generally in the election of directors, unless such transactions were
approved by at least three-quarters of the board of directors.
As described below, certain of these changes could have anti-takeover
effects.
On December 29, 2004, the board of directors also approved new by-laws for
Franklin Credit, which will automatically become effective upon effectiveness of
the amended and restated certificate of incorporation. The new by-laws include
conforming language to the amendments to Franklin Credit's certificate of
incorporation. They also include certain other provisions that could have
anti-takeover effects. Such provisions are also described below.
Record Date
On December 29, 2004 (the "Record Date"), there were 6,062,295 shares of
Common Stock outstanding and entitled to one vote upon each of the matters
approved by the Written Consent. On the Record Date, the Majority Stockholders
owned or had the right to vote 4,031,044 shares of Common Stock constituting
approximately 66% of Franklin Credit's outstanding Common Stock. All of the
shares of Common Stock, of which the Majority Stockholders owned or had the
right to vote on the Record Date, consented to the actions authorized or taken
by the Written Consent. Only stockholders of record of Franklin Credit at the
close of business on the Record Date are entitled to receive this Information
Statement.
The Written Consent was executed as of December 29, 2004 and delivered by
the Majority Stockholders to Franklin Credit's principal executive offices at
Six Harrison Street, New York, NY 10013.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 5, 2005, the number of
shares of Common Stock (and the percentage of Franklin Credit's Common Stock)
beneficially owned by (i) each person known (based solely on Schedules 13D or
13G filed with the Securities and Exchange Commission (the "Commission")) to
Franklin Credit to be the beneficial owner of more than 5% of the Common Stock,
(ii) each Director and nominee for Director of Franklin Credit, (iii) the Named
Executives (as defined in "Executive Compensation" below), and (iv) all
Directors and Executive Officers of Franklin Credit as a group (based upon
information furnished by such persons). Under the rules of the Commission, a
person is deemed to be a beneficial owner of a security if such person has or
shares the power to vote or direct the voting of such security or the power to
dispose of or to direct the disposition of such security. In general, a person
is also deemed to be a beneficial owner of any securities of which that person
has the right to acquire beneficial ownership within 60 days. Accordingly, more
than one person may be deemed to be a beneficial owner of the same securities.
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Number of Shares Percentage (%)
Name and Address Beneficially Owned of Common Stock
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Thomas J. Axon(1)(2) 3,285,953 53.3%
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Jeffrey R. Johnson(1)(3) 120,000 2.0%
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Joseph Caiazzo(1)(4) 218,550 3.5%
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Michael Bertash(1)(5) 63,001 1.0%
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Frank B. Evans, Jr. (1)(6) 867,092 14.2%
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Alan Joseph (1)(7) 103,500 1.7%
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Steven W. Lefkowitz (1)(8) 262,501 4.2%
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Allan R. Lyons (1)(9) 70,501 1.2%
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William F. Sullivan (1)(9) 67,701 1.1%
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All Directors and Executive
Officers as a group
(nine (9) persons)(10) 5,058,799 75.4%
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* Indicates beneficial ownership of less than one (1%) percent.
(1) Mailing address: C/O Franklin Credit Management Corporation, Six Harrison
Street, New York, New York 10013.
(2) Includes 98,334 shares issuable upon exercise of options exercisable within
sixty days.
(3) Includes 100,000 restricted shares, of which 10,000 have vested, 5,000 vest
on the first day of each of the first eight calendar quarters beginning on
April 1, 2005, and 6,250 vest on the first day of each of the first eight
calendar quarters beginning on April 1, 2007.
(4) Includes 190,000 shares issuable upon exercise of options exercisable
within sixty days.
(5) Includes 53,001 shares issuable upon exercise of options exercisable within
sixty days.
(6) Includes 5,000 shares beneficially owned by each of four minor children for
which Mr. Evans is the trustee. Includes 23,667 shares issuable upon
exercise of options exercisable within sixty days.
(7) Includes 103,500 shares issuable upon exercise of options exercisable
within sixty days.
(8) Includes 87,000 shares issuable upon exercise of warrants exercisable
within sixty days and 28,001 shares issuable upon exercise of options
exercisable within sixty days. Includes 47,500 shares beneficially owned by
Mr. Lefkowitz wife.
(9) Includes 33,001 shares issuable upon exercise of options exercisable within
sixty days.
(10) Includes 562,505 shares issuable upon exercise of options exercisable
within sixty days and 87,000 shares issuable upon exercise of warrants
exercisable within sixty days.
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AMENDMENTS TO FRANKLIN CREDIT'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
Not less than twenty days after mailing of this Information Statement,
Franklin Credit's certificate of incorporation will be amended and restated to
include the provisions described below. Franklin Credit's new by-laws will
automatically become effective upon effectiveness of its amended and restated
certificate of incorporation. The Majority Holders have acted by written consent
to approve the amendment and restatement of Franklin Credit's certificate of
incorporation and Franklin Credit's board of directors has approved new by-laws,
which include conforming language to the amended and restated certificate of
incorporation. The following is a summary of the amendments to Franklin Credit's
certificate of incorporation to be effected by the amendment and restatement.
For complete information, you should read the full text of the new amended and
restated certificate of incorporation, included as Appendix A to this
information statement.
General
On December 29, 2004 Franklin Credit's board of directors approved by
unanimous vote of those present the amendment and restatement of Franklin
Credit's certificate of incorporation. The amendment and restatement will amend
Franklin Credit's certificate of incorporation in a manner that Franklin
Credit's board of directors believes is appropriate to foster Franklin Credit's
long-term growth and ability to raise capital in the public markets.
Under the terms of Franklin Credit's existing certificate of
incorporation, Franklin Credit's board of directors has the power to amend the
by-laws without stockholder approval. As a result, separate stockholder approval
is not required to enact the new by-laws. In addition to containing those
provisions described in "Adoption of New Franklin Credit By-Laws" below, the new
by-laws contain provisions necessary to conform Franklin Credit's by-laws to the
new amended and restated certificate of incorporation. For complete information,
you should read the full text of the amended and restated by-laws, included as
Appendix B to this Information Statement.
Purpose and Effects of the Amendments
Franklin Credit has recently experienced a significant increase in
interest in its common stock by the investor community. This interest has
resulted in Franklin Credit's receiving and considering various proposals to
raise capital in the public markets, thereby increasing its stockholders equity.
Such an increase could make Franklin Credit more attractive as a borrower and
enable it to further grow its business through additional borrowing or borrowing
on more favorable terms than would otherwise be available.
Because Thomas J. Axon currently holds approximately 53% of Franklin
Credit's outstanding common stock, it is impossible at present for a person
other than Mr. Axon to gain control of Franklin Credit without Mr. Axon's
consent. Any public offering or series of public offerings which diluted Mr.
Axon's interests could create the potential for other stockholders to gain
control of Franklin Credit and elect Franklin Credit's entire board of
directors. Accordingly, a person or group of related persons could gain control
of Franklin Credit by acquiring a majority of the outstanding common stock, or
the votes represented by those shares. For these reasons, such offering or
offerings could render Franklin Credit more susceptible to proxy contests for
control of the board of directors and unsolicited takeover bids from third
parties, including offers below the intrinsic value of Franklin Credit or other
offers that would not be in the best interests of Franklin Credit's
stockholders.
The amendments to Franklin Credit's certificate of incorporation, together
with the new by-laws, will make it more difficult for a potential acquirer of
Franklin Credit to acquire Franklin Credit by means of a transaction that is not
negotiated with Franklin Credit's board of directors, thereby reducing the
vulnerability of Franklin Credit to an unsolicited or unfriendly takeover
proposal. These provisions are designed to enable Franklin Credit to develop its
business in a manner that will foster its long-term growth by reducing the
threat of a takeover not deemed by Franklin Credit's board of directors to be in
the best interests of Franklin Credit and its stockholders and the potential
disruption entailed by such a threat of a takeover, to the extent practicable.
The amendments to Franklin Credit's certificate of incorporation, together
with the new by-laws and the blank check preferred stock provision already
included in Franklin Credit's certificate of incorporation, may have
5
the effect of deterring unsolicited takeover proposals or delaying or preventing
changes in control or management of Franklin Credit, including transactions in
which stockholders might otherwise receive a premium for their shares over then
current market prices. Franklin Credit's becoming subject to the provisions of
the business combination statute of the General Corporation Law of the State of
Delaware, which could occur in the future, would have similar effects. See the
discussion under "Certain Other Circumstances Potentially Affecting A Change In
Control of Franklin Credit"-"General Corporation Law of the State of Delaware"
below. In addition, these documents and provisions may limit the ability of
stockholders to approve transactions that they may deem to be in their best
interests. These provisions could also discourage bids for Franklin Credit's
common stock at a premium as well as create a depressive effect on the market
price of the shares of Franklin Credit's common stock.
The board of directors is not aware of any current effort to accumulate
shares of Franklin Credit's common stock or to otherwise obtain control of
Franklin Credit. Rather, the defensive provisions included in the amended and
restated certificate of incorporation are being proposed at this time because of
the changes in the market for the Common Stock which may make offerings of the
Company's securities attractive in the future. The board of directors is not
currently contemplating adopting or recommending the approval of any other
action which might have the effect of delaying, deterring or preventing a change
in control of Franklin Credit, except that in the context of any future offering
Franklin Credit may apply for listing on a stock exchange or quotation on the
Nasdaq Stock Market. If Franklin Credit were to be so listed or quoted, it would
become subject to the provisions of Section 203 of the General Corporation Law
of the State of Delaware, which restricts business combinations with certain
interested stockholders.
Classified Board
Franklin Credit's certificate of incorporation will be amended to provide
for a classified board of directors, also known as a staggered board, of not
less than three directors. Effective as of the first annual meeting of
stockholders following the effectiveness of the amended and restated certificate
of incorporation, the board of directors, other than directors who may be
elected by the holders of any Franklin Credit preferred stock issued in the
future, will be divided into three classes of directors, each having a
three-year term. A classified board staggers the terms of the three classes and
will be implemented through initial one, two and three-year terms for the three
classes, followed in each case by full three-year terms. The classified board
provision will make it more difficult for a person seeking to obtain control of
Franklin Credit to do so. With a classified board, only one-third of the members
of the board are elected each year, and directors may only be removed from
office for cause.
In addition, Franklin Credit's certificate of incorporation will provide
that directors can only be removed by affirmative vote of at least two-thirds of
the voting power of all outstanding shares of Franklin Credit's common stock
entitled to vote generally in the election of directors. Accordingly, control of
a majority of Franklin Credit's board of directors will require the election of
new directors at a minimum of two successive annual meetings of stockholders.
The amended and restated certificate of incorporation will also provide that any
newly created directorship that results from an increase in the number of
directors and any vacancy occurring in the board of directors can be filled only
by a majority of the directors then in office, except for any new directorships
or vacancies which holders of Franklin Credit's preferred stock issued in the
future may be entitled to fill. In the event the board of directors fills any
vacancy occurring during the year it may do so for the remainder of the full
term associated with the class in which such vacancy occurs.
The overall impact of the classified board amendment will be to render
more difficult or discourage attempts to assume control of Franklin Credit by
means of a merger or tender offer that is not negotiated with Franklin Credit's
board of directors, even if the transaction will result in a premium over the
market price for the shares of Franklin Credit's common stock held by the
stockholders or may otherwise be favorable to the interests of the stockholders,
or by means of a proxy contest. The classified board will similarly delay
stockholders who do not approve of policies of Franklin Credit's board of
directors in their attempt to replace a majority of the directors.
Franklin Credit believes that the classified board amendment is
advantageous to Franklin Credit and its stockholders for a number of reasons. As
discussed above, public companies are potentially subject to attempts by various
individuals and entities to acquire significant minority positions with the
intent of either obtaining actual control by electing their own slate of
directors, or of achieving some other goal, such as the repurchase of their
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shares by Franklin Credit at a premium. These prospective acquirers may in the
future be in a position to elect the majority or the entirety of Franklin
Credit's board of directors through a proxy contest or otherwise, even though
they do not actually own a majority of a Franklin Credit's outstanding shares of
common stock at the time. Once the classified board amendment is implemented, a
majority of Franklin Credit's directors will not be able to be replaced without
cause until at least two annual meetings of stockholders have occurred. By
eliminating the possibility of the sudden replacement or removal of Franklin
Credit's board of directors, the incumbent board of directors will be given the
time and opportunity to evaluate any proposals for acquisition of control of
Franklin Credit and to assess and develop alternatives in a manner consistent
with their responsibilities to Franklin Credit's stockholders without the
pressure created by the threat of imminent replacement or removal or loss of
control.
In addition, by allowing directors to serve three-year terms rather than
one-year terms, the classified board enhances the continuity and stability of
both the composition of Franklin Credit's board of directors and the policies
formulated by the board of directors. This enhances Franklin Credit's ability to
adopt and implement long-term business strategies aimed at increasing
stockholder value. Franklin Credit believes, therefore, that removing the threat
of sudden replacement or removal will permit it to more effectively represent
the interests of all stockholders, including responding to demands or actions by
any stockholder or group.
Thomas J. Axon's current ownership of 53% of Franklin Credit's voting
stock currently prevents any effort by any other stockholders to gain control of
Franklin Credit or to conduct a proxy contest. In addition, Franklin Credit has
not experienced any problems in the past or at the present time with its board
of directors' continuity or stability. However, Franklin Credit believes that
adopting a classified board is advisable and in the best interests of
stockholders because in the event of dilution of Mr. Axon's interest in any
additional offering or offerings of Franklin Credit's voting securities, it will
give Franklin Credit's board of directors more time to fulfill its
responsibilities to stockholders and it will provide greater assurance of
continuity and stability in the composition and policies of Franklin Credit's
board of directors. Franklin Credit also believes that these advantages outweigh
any disadvantages relating to discouraging potential acquirers from attempting
to obtain control of Franklin Credit.
Implementation of the Classified Board
Franklin Credit's directors will be elected to three separate classes at
Franklin Credit's next annual meeting, as follows:
- three "Class I Directors" will be elected at Franklin Credit's next
annual meeting to serve for a term expiring at the first annual
meeting of stockholders to be held following that meeting;
- three "Class II Directors" will be elected at Franklin Credit's next
annual meeting to serve for a term expiring at the second annual
meeting of stockholders to be held following that meeting; and
- three "Class III Directors" will be elected at Franklin Credit's next
annual meeting to serve for a term expiring at the third annual
meeting of stockholders to be held following that meeting.
At each annual meeting following Franklin Credit's next annual meeting,
only directors of the class whose term is expiring that year will be required to
stand for election, and upon election each director will serve a three-year
term. No change may have the effect of removing any director from office. Upon
any change in the authorized number, the total number of directors will be
allocated as evenly as possible among the three classes, provided that the term
of office may not be shortened for any incumbent director. Any director elected
to fill a vacancy not resulting from an increase in the number of directors
shall have the same remaining term as that of his or her predecessor. Any
director elected to fill a newly created directorship resulting from an increase
in the size of any class shall have the same remaining term as the other
directors of that class.
Board Size
Franklin Credit's certificate of incorporation will provide that the
number of Franklin Credit's directors will be not less than three. Pursuant to
the new by-laws, Franklin Credit will have nine directors provided that the
number of directors may, subject to the provisions of the certificate of
incorporation, be increased or decreased from
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time to time exclusively by the affirmative vote of Franklin Credit's board of
directors. The stockholders of Franklin Credit, acting on their own and without
amending the new by-laws (which would require the affirmative of holders of at
least two-thirds of the voting power of the outstanding shares of Franklin
Credit), will not have the power to amend Franklin Credit's by-laws to increase
the size of its board of directors and fill the new directorships with their own
representatives. Franklin Credit believes that it is important to reinforce the
classified board provision in this way in light of the increased vulnerability,
discussed above, that Franklin Credit will have following any future offering of
its voting securities to potentially abusive takeover tactics and efforts to
acquire control of Franklin Credit at a price or on terms that are not in the
best interests of all stockholders. Protecting the classified board structure
will help ensure that the incumbent board of directors will be given the time
and opportunity to evaluate any proposals for acquisition of control of Franklin
Credit and to assess and develop alternatives in a manner consistent with their
responsibility to Franklin Credit's stockholders, without the pressure created
by the threat of imminent loss of control.
Supermajority Approval Requirements
Currently, in addition to approval by Franklin Credit's board of
directors, the approval of the holders of a majority in voting power of Franklin
Credit's outstanding shares of stock entitled to vote thereon is required to
amend any provision of Franklin Credit's certificate of incorporation. Delaware
law permits a company to include provisions in its certificate of incorporation
that require a greater vote than the vote otherwise required by law for any
corporate action. Franklin Credit's certificate of incorporation will be amended
to require the affirmative vote of the holders of at least two-thirds of the
voting power of the outstanding shares of Franklin Credit entitled to vote
generally in the election of directors, voting together as a single class, to
adopt, amend or repeal, specified provisions of Franklin Credit's certificate of
incorporation. The provisions in Franklin Credit's certificate of incorporation
affected by this amendment are:
- the provisions concerning the classified board, the size of the board
and the filling of board vacancies and newly created directorships;
- the provision requiring a two-thirds vote of Franklin Credit's
stockholders to remove a director for cause;
- the provisions requiring a two-thirds vote of Franklin Credit's
stockholders for such stockholders to adopt, amend, or repeal the
provisions of the by-laws; and
- the provisions requiring a two-thirds vote of Franklin Credit's
stockholders to modify any of the provisions of the certificate of
incorporation described above.
These supermajority voting requirements may discourage or deter a person
from attempting to obtain control of Franklin Credit by making it more difficult
to amend these provisions to eliminate their anti-takeover effect or the
protections they afford minority stockholders. The supermajority voting
requirement will make it more difficult for a stockholder or stockholder group
to put pressure on Franklin Credit's board of directors to amend Franklin
Credit's certificate of incorporation to facilitate a takeover attempt.
In addition, the provisions requiring a supermajority vote of stockholders
for the stockholders to amend, alter, change, add to or repeal any provisions of
the by-laws of Franklin Credit may discourage or deter a person from attempting
to obtain control of Franklin Credit by making it more difficult to amend
Franklin Credit's by-laws, whether to eliminate provisions that have an
anti-takeover effect or those that protect the interests of minority
stockholders. This supermajority voting amendment permits a minority of Franklin
Credit's shareholders to block an attempt by its stockholders to amend or repeal
its by-laws.
Indemnification
Franklin Credit's certificate of incorporation will be amended to
modernize and add greater specificity to the existing provision obligating
Franklin Credit to indemnify its directors to the maximum extent permitted by
Delaware law. Such indemnification will be provided in connection with suits or
proceedings arising by reason of
8
the directors' service on the board of directors of Franklin Credit or any of
its subsidiaries or any other entity at the request of Franklin Credit. The
directors will be indemnified against all expense, liability and loss in respect
of such proceedings where:
- the director acted in good faith and in a manner the director
reasonably believed to be in the best interests of Franklin Credit;
- in a criminal matter, the director had no reasonable cause to believe
that the director's behavior was illegal; and
- the proceeding (or part thereof) was not initiated without Franklin
Credit's consent against Franklin Credit, its subsidiaries, certain of
its or their affiliates or agents.
The right to indemnification will include advancement of certain expenses,
subject to Franklin Credit's receipt of an undertaking and reasonable assurances
that Franklin Credit may reasonably require that any such advances will be
repaid in the event it is ultimately determined that the director or former
director was not entitled to such indemnification.
The directors' right to indemnification under the amended and restated
certificate of incorporation will not be exclusive of indemnification available
to them by contract or otherwise. Additionally, the amended and restated
certificate of incorporation does not mandate the indemnification of persons
other than directors, such as officers. However, it does expressly permit
Franklin Credit to indemnify persons who are not directors to the fullest extent
permitted by Delaware law.
Franklin Credit's present directors are personally interested in, and will
personally benefit from some of the aspects of these amendments to the
directors' rights of indemnification, including in particular, the provisions
mandating advancement of expenses. However, the board of directors believes
that, by reducing the potential risks of personal liability to directors and the
potential for directors to have to go out of pocket to advance funds in
connection with litigation to which they are parties, these amendments will
enhance Franklin Credit's ability to attract and retain highly qualified
directors, and ensure that actions taken by such directors stem primarily from
their desire to act in the best interests of Franklin Credit and not from a fear
of litigation. Therefore, the board of directors believes that the level of care
and diligence exercised by the directors will not be lessened by adoption of
these amendments. Additionally, the board of directors believes that by making
indemnification of persons other than directors permissive rather than
mandatory, the amended and restated certificate of incorporation will enable
Franklin Credit to negotiate suitable indemnification arrangements with each
such other person, on a case by case basis.
Interested Party Transactions
Franklin Credit's certificate of incorporation will be amended to repeal a
provision that required stockholder approval for certain transactions with
holders of more than 10% of its capital stock entitled to vote generally in the
election of directors. The transactions covered include mergers and
consolidations, sales leases or exchanges of a substantial part of the
corporation's assets, issuance or transfers of securities with an aggregate fair
market vale of not less than $250,000, and issuances of securities for cash. The
restrictions did not apply to stockholders who received approval from the board
of directors prior to becoming 10% stockholders, or to transactions approved in
advance by vote of three-quarters of the directors.
Currently, only Thomas J. Axon and Frank Evans own more than 10% of
Franklin Credit's capital stock entitled to vote generally in the election of
directors. Mr. Axon's current ownership of more than 50% of such capital stock
would allow him to approve any transaction subject to the provision without the
affirmative votes of other stockholders. In the event of any offering by
Franklin Credit of its equity securities Mr. Axon could cease to hold a majority
of Franklin Credit's voting shares. In that event, if this provision still
applied, the votes of additional stockholders would have been required to
approve any such transactions.
9
Following repeal of this provision, such interested party transactions,
including without limitation any with Mr. Axon or Mr. Evans, will continue to
require approval of the board of directors and thereby be subject to the
protections accorded to stockholders by the fiduciary duties of the board of
directors with respect to such approvals. Additionally, if Franklin Credit
becomes subject to the business combination statute of the General Corporation
Law of the State of Delaware, the stockholders will also have the protections
accorded thereunder. See the discussion under "Certain Other Circumstances
Potentially Affecting A Change In Control of Franklin Credit"-"General
Corporation Law of the State of Delaware" below.
Mr. Evans, and, in the event Mr. Axon's ownership of Franklin Credit's
voting securities is in the future diluted to less than 50%, Mr. Axon, may be
deemed to be personally interested in, and will personally benefit from the
repeal of this provision. Nevertheless, the board of directors believes that
this provision should be repealed because the protections afforded by the
director's fiduciary duties and, if Franklin Credit becomes subject to it, the
protections accorded by Delaware's business combination statute, are typically
relied upon by stockholders of public companies and adequate to protect the
stockholders of the company from improper transactions with interested
stockholders. Additionally, the board of directors believes that Franklin
Credit's current, fairly unusual interested party transaction provision could in
the future delay and thereby impede transactions that otherwise might be in the
interests of stockholders.
Required Vote
Approval of the charter amendments described above, which will be effected
by the amendment and restatement of the current certificate of incorporation,
requires the vote or the written consent of the holders of a majority in voting
power of the shares of Franklin Credit's common stock outstanding as of the
Record Date. The Majority Holders have acted by written consent with respect to
all shares of Franklin Credit's common stock owned by them, constituting
approximately 66% of the total number of outstanding shares of common stock,
approving such amendment and restatement of the current certificate of
incorporation, provided that such amendment and restatement will not become
effective at least until twenty days after mailing of this Information
Statement.
ADOPTION OF NEW FRANKLIN CREDIT BY-LAWS
Franklin Credit's board of directors has also adopted new by-laws for
Franklin Credit. Under the terms of Franklin Credit's certificate of
incorporation, Franklin Credit's directors have the power to amend, adopt or
repeal Franklin Credit's by-laws without stockholder approval. As a result,
separate approval by Franklin Credit's stockholders is not required to adopt the
new by-laws.
Franklin Credit's current by-laws date back to its merger with Miromar
Resources in December, 1994, and have not been substantially updated since. The
new by-laws were adopted to conform to the amended and restated certificate of
incorporation, modernize the provisions to which Franklin Credit is subject and
better reflect Franklin Credit's status as a publicly traded company. The new
by-laws will become effective upon filing of the amended and restated
certificate of incorporation. For complete information, we refer you to the full
text of the form of amended and restated Franklin Credit by-laws, which are
attached as Appendix B.
Certain provisions of the new by-laws could have anti-takeover effects. A
description of those provisions is included in this information statement for
informational purposes only.
Ability to Call Special Meetings
Under Franklin Credit's new by-laws stockholders will be unable to call a
special meeting. Special meetings may be called by the chairman of the board of
directors, the chief executive officer, the president of Franklin Credit or by
written request of a majority of Franklin Credit's board of directors.
Additionally, the new by-laws will require that business transacted at any
special meeting be limited to the purpose stated in the notice of the meeting. A
common tactic of bidders attempting a takeover is to initiate a proxy contest by
calling a special meeting. By not providing stockholders with the right to call
a special meeting, expensive proxy contests cannot occur other than in
connection with Franklin Credit's annual meeting. Also, Franklin Credit's board
of directors will retain the ability to call a special meeting of the
stockholders when issues arise that require a stockholder
10
meeting. The inability of a stockholder to call a special meeting might impact
upon a person's decision to purchase voting securities of Franklin Credit.
Notice of Stockholder Nominations and Proposals
Franklin Credit's new by-laws require that, at an annual meeting of
stockholders, the only nominations of persons for election to the board of
directors and proposals of business to be considered will be the nominations
made or proposals of business brought before the meeting:
- pursuant to Franklin Credit's notice of meeting;
- by or at the direction of the board of directors; and
- by a stockholder of Franklin Credit who was a stockholder of record of
Franklin Credit at the time of the delivery of the notice provided for
in the by-laws and who is entitled to vote at the meeting and who
complies with the notice procedures set forth below.
For nominations or other business to be properly brought before an annual
meeting of stockholders pursuant to the third point above, the stockholder must
give written notice to the secretary of Franklin Credit not later than 45 days
and not earlier than 119 days prior to the first anniversary of the date of
mailing of Franklin Credit's proxy statement for the preceding year's annual
meeting. If the annual meeting is more than 30 days before or after that
anniversary date or Franklin Credit did not hold a stockholder meeting the
previous year, then such notice must be received a reasonable time before
Franklin Credit mails its proxy statement for the annual meeting. The notice
must set forth:
- as to nominations, all information relating to the proposed nominee
that is required to be disclosed under Regulation 14A under the
Securities Exchange Act of 1934, as amended, and such person's written
consent to be named as nominee and to serving as a director if
elected;
- as to other business, a description of the business desired to be
brought before the meeting, the text of any proposal to be presented
to the stockholders and the reasons for conducting the business at the
meeting; the name and address, as they appear on Franklin Credit's
books, of the stockholder who is proposing the business, and the name
and address of the beneficial owner, if any, on whose behalf the
nomination or proposal is made;
- the class and number of shares of stock of Franklin Credit that are
owned by the stockholder or the beneficial owner on whose behalf the
nomination or proposal is made;
- a representation that the stockholder is a stockholder of record of
Franklin Credit entitled to vote at the meeting and intends to appear
in person or by proxy at the meeting to propose the business or
nomination;
- any material interest of the stockholder of record and the beneficial
owner, if any, on whose behalf the proposal is made, in the business;
and
- a representation as to whether the stockholder of record or the
beneficial owner, if any, intends, or is part of a group which
intends, to solicit proxies in support of the nominee or proposal.
The new by-laws also provide that at any special meeting of the
stockholders of Franklin Credit, the only business that may be brought before
the special meeting is the business specified in the notice of special meeting.
Accordingly, the stockholders of Franklin Credit may not raise any other matters
for consideration at special meetings.
With respect to an election of directors to be held at a special meeting
of the stockholders as determined by Franklin Credit's notice of special
meeting, a stockholder may make a nomination pursuant to notice given not
11
earlier than 119 days prior to the special meeting and not later than the close
of the business on the later of the day that is 45 days prior to the special
meeting or 10 days following the date on which public announcement of the
special meeting is first made. The stockholders' notice must include the same
information that would be required in a notice proposing a nomination for
consideration at an annual meeting.
The presiding officer of the meeting will determine and declare at the
meeting whether the business was properly brought before the meeting in
accordance with the procedures described above and may declare the nominations
or the business as not properly brought before the meeting and not recognize the
nominations or the business.
These procedures may preclude nominations or the conduct of business by
stockholders at a particular stockholders meeting if the proper procedures are
not followed, and may discourage or deter a third party from attempting to
obtain control of Franklin Credit, even if this attempt might be viewed as
beneficial to Franklin Credit by its stockholders.
CERTAIN OTHER CIRCUMSTANCES POTENTIALLY AFFECTING
A CHANGE IN CONTROL OF FRANKLIN CREDIT
Existing Provisions in Franklin Credit's Certificate of Incorporation
Franklin Credit's certificate of incorporation authorizes the issuance of
preferred stock with such designations, rights and preferences as may be
determined from time to time by its board of directors. Accordingly, Franklin
Credit's board of directors is empowered, without stockholder approval, to issue
preferred stock with dividends, liquidation, voting or other rights that could
adversely affect the voting power or other rights of the holders of Franklin
Credit's common stock. In the event preferred stock is issued, it could be used,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of Franklin Credit. No shares of preferred stock are issued
or outstanding and Franklin Credit has no present plans to issue any shares of
preferred stock.
General Corporation Law of the State of Delaware
Section 203 of the General Corporation Law of the State of Delaware does
not currently apply to Franklin Credit. It could begin to apply to Franklin
Credit if Franklin Credit were to apply and be accepted for quotation on The
Nasdaq Stock Market or listing on a stock exchange or through additional
offerings of its equity securities or otherwise come to have 2,000 or more
holders of record.
Under Section 203 of the General Corporation Law of the State of Delaware,
a corporation is generally restricted from engaging in a business combination
with an interested stockholder for a three-year period following the time the
stockholder became an interested stockholder. An interested stockholder is
defined as a stockholder who, together with its affiliates or associates, owns,
or who is an affiliate or associate of the corporation and within the prior
three-year period did own, 15% or more of the corporation's voting stock. This
restriction applies unless,
- prior to the time the stockholder became an interested stockholder,
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder
becoming an interested stockholder;
- the interested stockholder owned at least 85% of the voting stock of
the corporation, excluding specified shares, upon completion of the
transaction which resulted in the stockholder becoming an interested
stockholder; or
- at or subsequent to the time the stockholder became an interested
stockholder, the business combination was approved by the board of
directors of the corporation and authorized by the affirmative vote,
at an annual or special meeting, and not by written consent, of at
least 66 2/3% of the outstanding voting shares of the corporation,
excluding shares held by that interested stockholder.
12
A business combination generally includes:
- mergers, consolidations and sales or other dispositions of 10% or more
of the assets of a corporation to or with an interested stockholder;
- transactions resulting in the issuance or transfer to an interested
stockholder of any capital stock of the corporation or its
subsidiaries, subject to certain exceptions;
- transactions having the effect of increasing the proportionate share
of the interested stockholder in the capital stock of the corporation
or its subsidiaries, subject to certain exceptions; and
- other transactions resulting in a disproportionate financial benefit
to an interested stockholder. This makes a take-over of a company more
difficult and may have the effect of diminishing the possibility of
certain types of two-step acquisitions of a company or other
unsolicited attempts to acquire a company. This may further have the
effect of preventing changes in the board of directors of a company
and it is possible that such provisions could make it more difficult
to accomplish transactions which stockholders may otherwise deem to be
in their best interests.
By Order of the Board of Directors
/s/ Jeffrey R. Johnson
--------------------------------
Jeffrey R. Johnson
Dated: January 21, 2005
13
APPENDIX A
FIFTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FRANKLIN CREDIT MANAGEMENT CORPORATION
The undersigned, FRANKLIN CREDIT MANAGEMENT CORPORATION (the
"Corporation"), a corporation existing under the laws of the State of Delaware,
hereby certifies as follows:
1. The name of the Corporation is FRANKLIN CREDIT MANAGEMENT
CORPORATION.
2. The original Certificate of Incorporation of the Corporation
(previously named "Miramar Resources, Inc.") was filed with the Secretary of
State of the State of Delaware on February 24, 1988.
3. The Amended and Restated Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
December 30, 1994.
4. The Amended and Restated Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
December 6, 1996.
5. The Amended and Restated Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
October 8, 1997.
6. The Amended and Restated Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
May 24, 2000.
7. That this Fifth Amended and Restated Certificate of Incorporation
amends and restates in its entirety the Amended and Restated Certificate of
Incorporation filed with the Secretary of State of the State of Delaware on May
24, 2000.
8. This Fifth Amended and Restated Certificate of Incorporation, as
hereinafter set forth, was duly authorized and approved by the Board of
Directors and recommended to be adopted by the stockholders of the Corporation
in accordance with the provisions of Sections 242 and 245 of the Delaware
General Corporation Law, and was adopted by the stockholders of the Corporation
in accordance with Section 228 of the Delaware General Corporation Law.
9. The text of the Certificate of Incorporation is amended and
restated in full to read as follows:
FIFTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FRANKLIN CREDIT MANAGEMENT CORPORATION
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ARTICLE I.
----------
The name of the Corporation shall be Franklin Credit Management
Corporation.
ARTICLE II.
-----------
The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of the registered agent of the Corporation at such address is
The Corporation Trust Company.
ARTICLE III.
------------
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV.
-----------
A. The aggregate number of shares which the Corporation shall have
authority to issue is twenty five million (25,000,000), consisting of twenty two
million (22,000,000) shares of common stock, par value $.01 per share and three
million (3,000,000) shares of undesignated preferred stock, par value $.001 per
share (the "Preferred Stock").
B. Authority is hereby expressly granted to the Board of Directors
(or a committee thereof designated by the Board of Directors pursuant to the
Corporation's By-Laws, as from time to time amended), to issue the Preferred
Stock from time to time as Preferred Stock of any series and to declare and pay
dividends thereon in accordance with the terms thereof and, in connection with
the creation of each such series, to fix by the resolution or resolutions
providing for the issue of shares thereof, the number of share of such series,
and the designations, powers, preferences, and rights (including, without
limitation, conversion rights, voting rights and dividends), and the
qualifications, limitations, and restrictions, of such series, to the full
extent now or hereafter permitted by the laws of the State of Delaware.
ARTICLE V.
----------
The Board of Directors shall have the power to adopt, amend or
repeal the Corporation's By-Laws or any provision thereof. The affirmative vote
of the holders of at least two-thirds of the voting power of all outstanding
shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required in order for the
stockholders to adopt, amend or repeal the Corporation's By-Laws or any
provision thereof. Notwithstanding any other provision of this Amended and
Restated Certificate of Incorporation, the by-laws of the Corporation or any
provision at law, the provisions of this Article V shall not be deleted, amended
or repealed except by holders of at least two-thirds of the shares then entitled
to vote at an election of directors.
ARTICLE VI.
-----------
A. The Corporation shall to the fullest extent permitted by Delaware
law, as in effect from time to time (but, in the case of any amendment of the
Delaware General Corporation Law, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), indemnify each
person who is or was a director of the Corporation or of any of its wholly-owned
subsidiaries who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, or was or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a director of the Corporation or of any of its
subsidiaries, or is or was at any time serving, at the request of the
Corporation, any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity (provided that such person's
actions subject to such proceeding were taken in good faith and in a
A-2
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal proceeding, had
no reasonable cause to believe his or her conduct was unlawful), against all
expense, liability and loss (including, but not limited to, reasonable
out-of-pocket attorneys' fees, judgments, fines, excise taxes or penalties with
respect to any employee benefit plan or otherwise, and amounts paid or to be
paid in respect of any settlement approved in advance by the Corporation, which
approval shall not be unreasonably withheld) incurred or suffered by such
director in connection with such proceeding; provided, however, that, except as
provided in Paragraph E of this Article VI, the Corporation shall not be
obligated to indemnify any person under this Article VI in connection with a
proceeding (or part thereof) if such proceeding (or part thereof) was not
authorized by the Board of Directors of the Corporation and was initiated by
such person against (i) the Corporation or any of its subsidiaries, (ii) any
person who is or was a director, officer, employee or agent of the Corporation
or any of its subsidiaries and/or (iii) any person or entity which is or was
controlled, controlled by, or under common control with the Corporation or has
or had business relations with the Corporation or any of its subsidiaries.
B. The right to indemnification conferred in this Article VI shall
be a contract right, shall continue as to a person who has ceased to be a
director of the Corporation or of any of its wholly-owned subsidiaries and shall
inure to the benefit of his or her heirs, executors and administrators, and
shall include the right to be paid by the Corporation the reasonable
out-of-pocket fees and expenses incurred in connection with the defense or
investigation of any such proceeding in advance of its final disposition;
provided, however, that the payment of such expense in advance of the final
disposition of a proceeding shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or former director , and
such other reasonable assurance that the Corporation may reasonably require,
that such director or former director shall repay all amounts so advanced if it
shall ultimately be determined that such director or former director is not
entitled to be indemnified by the Corporation.
C. The Corporation's obligation to indemnify and to pay reasonable
out-of-pocket fees and expenses in advance of the final disposition of a
proceeding under this Article VI shall arise, and all rights and protections
granted to directors under this Article VI shall vest, at the time of the
occurrence of the transaction or event to which any proceeding relates, or at
the time that the action or conduct to which any proceeding relates was first
taken or engaged in (or omitted to be taken or engaged in), regardless of when
any proceeding is first threatened, commenced or completed.
D. Notwithstanding any other provision of this Fifth Amended and
Restated Certificate of Incorporation or the By-laws of the Corporation, no
action by the Corporation, either by amendment to or repeal of this Article VI
or the By-laws of the Corporation or otherwise shall diminish or adversely
affect any right or protection granted under Paragraphs A through G of this
Article VI to any director or former director of the Corporation or of any of
its wholly-owned subsidiaries which shall have become vested as aforesaid prior
to the date that any such amendment, repeal or other corporate action is taken.
E. If a claim for indemnification and/or for payment of reasonable
out-of-pocket fees and expenses in advance of the final disposition of a
proceeding arising under this Article VI is not paid in full by the Corporation
within thirty days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the reasonable out-of-pocket fees
and expenses of prosecuting such claim.
F. The right to indemnification and the payment of reasonable
out-of-pocket fees and expenses incurred in connection with the defense or
investigation of a proceeding in advance of its final disposition conferred in
this Article VI shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of this Fifth Amended and
Restated Certificated of Incorporation, By-laws of the Corporation, insurance
policy, agreement, vote of stockholders or disinterested directors or otherwise.
G. In addition to the persons specified in Paragraph A of this
Article VI, the Corporation may also indemnify all other persons to the fullest
extent permitted by Delaware law.
A-3
H. No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law is amended after the date
hereof to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended. No amendment to or repeal
of this Paragraph H. shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
ARTICLE VII.
------------
A. The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors, and all corporate powers of
the Corporation shall be exercised by the Board of Directors except as otherwise
provided herein or required by law.
B. Election of directors of the Corporation need not be by written
ballot unless the By-laws of the Corporation shall so provide.
C. The number of directors of the Corporation shall be that number
determined in accordance with the By-laws of the Corporation, but in no event
less than three. Commencing with the election of directors at the first annual
meeting following this Fifth Amended and Restated Certificate of Incorporation
becoming effective, the directors shall be divided into three classes designated
Class I, Class II and Class III, as nearly equal in number as possible. Class I
directors shall be originally elected for a term expiring at the succeeding
annual meeting of stockholders, Class II directors shall be originally elected
for a term expiring at the second succeeding annual meeting of stockholders, and
Class III directors shall be originally elected for a term expiring at the third
succeeding annual meeting of stockholders. At each annual meeting of
stockholders, other than the first annual meeting following this Fifth Amended
and Restated Certificate of Incorporation becoming effective, successors to the
class of directors whose term expires at that annual meeting shall be elected by
a plurality vote of all votes cast at such meeting to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election. Members of each class shall hold office until their
successors are duly elected and qualified or until their earlier resignation or
removal. The persons nominated to classes whose terms expire in 2005, 2006 and
2007 shall be determined by resolution of the Board of Directors (or a
nominating committee of the Board of Directors, if so determined by the Board of
Directors).
D. Notwithstanding the foregoing, whenever pursuant to the
provisions of Article IV of this Fifth Amended and Restated Certificate of
Incorporation, the holders of any one or more series of Preferred Stock shall
have the right, voting separately as a series or together with holders of other
such series, to elect directors at an annual or special meeting of stockholders,
the election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Amended and Restated
Certificate of Incorporation and any certificate of designations applicable
thereto, and such directors so elected shall not be divided into classes
pursuant to this Article VII unless so provided by such terms.
During any period when the holders of any series of Preferred Stock
have the right to elect additional directors as provided for or fixed pursuant
to the provisions of Article IV hereof, then upon commencement and for the
duration of the period during which such right continues: (i) the then otherwise
total authorized number of directors of the Corporation shall automatically be
increased by such specified number of directors, and the holders of such
Preferred Stock shall be entitled to elect the additional directors so provided
for or fixed pursuant to said provisions, and (ii) each such additional director
shall serve until such director's successor shall have been duly elected and
qualified, or until such director's right to hold such office terminates
pursuant to said provisions, whichever occurs earlier, subject to such
director's earlier death, disqualification, resignation or removal. Except as
otherwise provided by the Board in the resolution or resolutions establishing
such series, whenever the holders of any series of Preferred Stock having such
right to elect additional directors are divested of
A-4
such right pursuant to the provisions of such stock, the terms of office of all
such additional directors elected by the holders of such stock, or elected to
fill any vacancies resulting from the death, resignation, disqualification or
removal of such additional directors, shall forthwith terminate and the total
and authorized number of directors of the Corporation shall be reduced
accordingly.
E. Except as otherwise required by law, or by this Paragraph D of
this Article VII, any vacancy on the Board of Directors that results from an
increase in the number of directors shall be filled only by a majority of the
Board of Directors then in office, provided that a quorum is present, and any
other vacancy occurring in the Board of Directors shall be filled by a majority
of the directors then in office, even if less than a quorum, or by a sole
remaining director. Any director elected to fill a vacancy not resulting from a
increase in the number of directors shall have the same remaining terms as that
of his predecessor.
F. Subject to the rights, if any, of the holders of any series of
Preferred Stock to elect directors and to remove any director whom such holders
have the right to elect, and notwithstanding the provisions of this Article VII
providing for the classification of the Board of Directors, any director or the
entire Board of Directors (including persons elected by directors to fill
vacancies in the Board of Directors) may be removed, for cause only, by the
holders of at least two-thirds of the shares then entitled to vote at an
election of directors.
G. Notwithstanding any other provision of this Amended and Restated
Certificate of Incorporation, the by-laws of the Corporation or any provision at
law, the provisions of this Article VII shall not be deleted, amended or
repealed except by holders of at least two-thirds of the shares then entitled to
vote at an election of directors.
ARTICLE VIII.
-------------
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
[Remainder of Page Intentionally Left Blank]
A-5
IN WITNESS WHEREOF, the Corporation has caused this Fifth Amended
and Restated Certificate of Incorporation to be signed by its Chief Executive
Officer and Secretary on this day of ______, 2005.
FRANKLIN CREDIT MANAGEMENT
CORPORATION
By: __________________________________
Jeffrey R. Johnson
Chief Executive Officer
Attest:
By: __________________________________
Joseph Caiazzo, Secretary
A-6
APPENDIX B
AMENDED AND RESTATED
BY-LAWS
OF
FRANKLIN CREDIT MANAGEMENT CORPORATION
(A Delaware Corporation)
ARTICLE I.
----------
Stockholders
------------
Section 1. Place of Meetings. Meetings of stockholders shall be held
at such place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of stockholders shall be
held at such time and place, within or without the State of Delaware, as may be
designated by the Board of Directors, the Chairman, the President or the
Secretary, and stated in the notice of the meeting. At each annual meeting the
stockholders shall elect directors to the Board of Directors, as provided in the
Certificate of Incorporation, by plurality vote and transact such other business
as may be properly brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders
may be called only by the Chairman of the Board, the Chief Executive Officer or
the President, or by the Secretary upon the written request of at least one-half
of the Board of Directors stating the purpose of the meeting.
Section 4. Notice of Meetings. Written notice of each meeting of the
stockholders stating the place, date and hour of the meeting shall be given by
or at the direction of the Board of Directors to each stockholder entitled to
vote at the meeting at least ten, but not more than sixty, days prior to the
meeting. Notice of any special meeting shall state in general terms the purpose
or purposes for which the meeting is called and only such matters shall be
considered at such special meeting.
Section 5. Quorum; Adjournments of Meetings. The holders of a
majority of the issued and outstanding shares of the capital stock of the
Corporation entitled to vote at a meeting, present in person or represented by
proxy, shall constitute a quorum for the transaction of business at such
meeting; but, if there be less than a quorum, the holders of a majority of the
stock so present or represented may adjourn the meeting to another time or
place, from time to time, until a quorum shall be present, whereupon the meeting
may be held, as adjourned, without further notice, except as required by law,
and any business may be transacted thereat which might have been transacted at
the meeting as originally called.
Section 6. Voting. At any meeting of the stockholders every
registered owner of shares entitled to vote may vote in person or by proxy and,
except as otherwise provided by statute, in the Certificate of Incorporation or
these By-Laws, shall have one vote for each such share standing in his name on
the books of the Corporation. Except as otherwise required by statute, the
Certificate of Incorporation or these By-Laws, all matters, other than the
election of directors (which may be decided by plurality vote), brought before
any meeting of the stockholders shall be decided by a vote of a majority in
interest of the stockholders of the Corporation present in person or by proxy at
such meeting and voting thereon, a quorum being present.
Section 7. Transfer Books. The transfer books of the stock of the
Corporation may close for such period, not exceeding sixty days, in anticipation
of stockholders' meetings as the Board of Directors may determine. In lieu of
closing the transfer books, the Board of Directors may fix a day not more than
sixty days prior to the day of holding any meeting of stockholders as the day as
of which stockholders entitled to notice of and to
B-1
vote at such meeting shall be determined; and only stockholders of record on
such day shall be entitled to notice of or to vote at such meeting.
Section 8. Chairman of Meetings. The Chairman of the Board or, in
his or her absence, the Chief Executive Officer or, in his or her absence, the
President, shall preside at all meetings of the stockholders. In the absence of
the Chairman of the Board, the Chief Executive Officer and the President, a
majority of the members of the Board of Directors present in person at such
meeting may appoint any other officer or director to act as chairman of the
meeting.
Section 9. Secretary of Meetings. The Secretary or an Assistant
Secretary of the Corporation shall act as secretary of all meetings of the
stockholders. In the absence of the Secretary or an Assistant Secretary, the
chairman of the meeting shall appoint any other person to act as secretary of
the meeting.
Section 10. Inspectors of Election. In advance of any meeting of the
stockholders, the Board of Directors or the presiding officer of such meeting
shall appoint one or more inspectors of election to act at such meeting or at
any adjournments thereof and make a written report thereof. One or more persons
may also be designated by the Board of Directors or such presiding officer as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate is able to act at a meeting of stockholders, the presiding officer
of such meeting shall appoint one or more inspectors to act at such meeting. No
director or nominee for the office of director at such meeting shall be
appointed an inspector of election. Each inspector, before entering on the
discharge of the inspector's duties, shall first take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of such person's ability. The inspectors
of election shall, in accordance with the requirements of the Delaware General
Corporation Law, (i) ascertain the number of shares outstanding and the voting
power of each, (ii) determine the shares represented at the meeting and the
validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period and file with the secretary of the
meeting a record of the disposition of any challenges made to any determination
by the inspectors, and (v) make and file with the secretary of the meeting a
certificate of their determination of the number of shares represented at the
meeting and their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of the inspectors.
Section 11. Notice of Stockholder Nomination and Stockholder
Business. At an annual meeting of the stockholders, only such persons who are
nominated in accordance with the procedures set forth in this section shall be
eligible to stand for election as directors and only such business shall be
conducted as shall have been brought before the meeting in accordance with the
procedures set forth in these By-laws. Nominations of persons for election to
the Board of Directors of the Corporation and the proposal of business to be
considered by the stockholders at an annual meeting of stockholders may be made
(i) pursuant to the Corporation's notice of meeting, including matters covered
by Rule 14a-8 under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), (ii) by or at the direction of the Board of Directors or (iii)
by any stockholder of the Corporation who was a stockholder of record at the
time of giving of notice by the stockholder as provided in this section, who is
entitled to vote at the meeting, and who complies with the notice provision set
forth in this section. 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 Corporation's proxy statement
for the prior year's 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. At a special meeting of the stockholders, only
such business shall be conducted as shall have been brought before the meeting
pursuant to the Corporation's notice of meeting. Nominations of persons for
election to the Board of Directors of the Corporation at a special meeting of
stockholders at which directors are to be elected pursuant to the Corporation's
notice of meeting may be made (i) by or at the direction of the Board of
Directors or (ii) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of notice by the stockholder as provided in this
section, who is entitled to vote at the meeting, and who complies with the
notice provision set forth in this section. A notice of the intent of a
stockholder to make a nomination at a special 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 later of the 45th day prior to
such special meeting or the tenth day following the day on which public
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announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of an adjournment or postponement of a an
annual or special meeting commence a new time period (or extend any time period)
for the giving of stockholder notice as described above. Every such notice by a
stockholder shall set forth (i)as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (A)
the name and address of such stockholder as they appear on the Corporation's
books, and of such beneficial owner, (B) the class and number of shares of
voting capital stock of the Corporation ("Voting Stock") which are owned
beneficially and of record by such stockholder and such beneficial owner, and
(C) a representation whether the stockholder or the beneficial owner, if any,
intends or is part of a group which intends (I) to deliver a proxy statement
and/or form of proxy to holders of at least the percentage of the Corporation's
outstanding capital stock required to approve or adopt the proposal or elect the
nominee and/or (II) otherwise to solicit proxies from stockholders in support of
such proposal or nomination; (ii) a representation that the stockholder is a
holder of the Voting Stock and intends to appear in person or by proxy at the
meeting to make the nomination or bring up the matter specified in the notice;
(iii) with respect to notice of an intent to make a nomination, a description of
all arrangements or understandings among the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder, and such other
information regarding each nominee proposed by such stockholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been nominated
by the Board of Directors of the Corporation; and (iv) with respect to notice of
an intent to bring up any other matter at an annual meeting, a description of
the matter, the text of any proposal to be presented to the stockholders at the
meeting, the reasons for conducting such business at the meeting and any
material interest of the stockholder in the matter. Notice of intent to make a
nomination shall be accompanied by the written consent of each nominee to be
named in a proxy statement as a nominee and to serve as director of the
Corporation if so elected. Except as otherwise provided by law or by the
Certificate of Incorporation, the presiding officer of the meeting shall have
the power and authority to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this By-law and whether such
matter is an appropriate subject for stockholder action under applicable law,
and, if it was not, to declare that such proposal or nomination shall be
disregarded. Notwithstanding the foregoing provisions of this section, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this section. Nothing in this section shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement in accordance with Rule 14a-8 under the Exchange Act or the
holders of any series of preferred stock to elect directors under circumstances
specified in the Certificate of Incorporation.
Section 12. Notice By Electronic Transmission. Without limiting the
manner by which notice otherwise may be given effectively to stockholders, any
notice to stockholders given by the Corporation under any law, the Certificate
of Incorporation or these By-laws shall be effective if given by a form of
electronic transmission then consented to by the stockholder to whom the notice
is given.
ARTICLE II.
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Board of Directors
Section 1. Number of Directors. The Board of Directors shall consist
of 9 members, provided, however, that, except as provided in the Certificate of
Incorporation, such number may from time to time be increased or decreased by
the Board of Directors. Except as provided in the Certificate of Incorporation,
(i) the directors shall be divided into three classes as nearly equal in number
as possible, (ii) at each annual meeting directors to re-elect those whose terms
expire at such annual meeting shall be elected to hold office until the third
succeeding annual meeting and until their successors are chosen; (iii) if the
number of directors is changed, any newly created directorship or decrease in
directorships shall be so apportioned among the classes as to make all classes
as nearly equal in number as possible; and (iv) if the number of directors is
increased by the Board of Directors and any newly created directorships are
filled by the Board there shall be no classification of the additional directors
until the next annual meeting of stockholders. No decrease in the Board of
Directors shall shorten the term of any incumbent director.
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Section 2. Nomination of Directors. Nominations of persons for
election to the Board of Directors may be made at a meeting of stockholders (i)
by or at the direction of the Board of Directors, or (ii) by any stockholder of
the Corporation entitled to vote for the election of directors at such meeting
who complies with the notice procedures set forth in Article I.
Section 3. Vacancies. Whenever any vacancy shall occur in the Board
of Directors by reason of death, resignation, removal, increase in the number of
directors or otherwise, it may be filled solely by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director,
for the balance of the term.
Section 4. Regular Meetings. Regular meetings of the Board of
Directors may be held without special notice at such times and places as the
Board of Directors may from time to time determine.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be called by order of the Chairman of the Board, the Chief
Executive Officer or the President or by a majority of the Board of Directors.
Notice of the time and place of each special meeting shall be given by or at the
direction of the person or persons calling the meeting by mailing the same at
least three days before the meeting or by telephoning, transmitting via
electronic mail, facsimile, telegraphing or delivering personally the same at
least twenty-four hours before the meeting to each director. Except as otherwise
specified in the notice thereof, or as required by statute, the Certificate of
Incorporation or these By-Laws, any and all business may be transacted at any
special meeting.
Section 6. Place of Conference Call Meeting. Any meeting at which
one or more of the members of the Board of Directors or of a committee
designated by the Board of Directors shall participate by means of conference
telephone or similar communications equipment shall be deemed to have been held
at the place designated for such meeting, provided that at least one member is
at such place while participating in the meeting.
Section 7. Organization. Every meeting of the Board of Directors
shall be presided over by the Chairman of the Board, or, in his absence, the
Chief Executive Officer or, in his absence, the President. In the absence of the
Chairman of the Board, the Chief Executive Officer and the President, a
presiding officer shall be chosen by a majority of the directors present. The
Secretary of the Corporation shall act as secretary of the meeting, or the
presiding officer may appoint any person to act as secretary of the meeting.
Section 8. Quorum; Vote. A majority of the directors then in office
(but in no event less than one-third of the directors) shall constitute a
quorum, for the transaction of business, but less than a quorum may adjourn any
meeting to another time or place from time to time until a quorum shall be
present, whereupon the meeting may be held, as adjourned, without further
notice. Except as otherwise required by statute, the Certificate of
Incorporation or these By-Laws, all matters coming before any meeting of the
Board of Directors shall be decided by the vote of a majority of the directors
present at the meeting, a quorum being present.
Section 9. Committees. The Board of Directors may, by resolution
adopted by a majority of the entire Board, provide for such standing or special
committees, including, without limitation an Executive Committee, as it deems
desirable and discontinue the same at its pleasure. Each committee shall have
such powers and perform such duties, not inconsistent with law, as may be
assigned to it by the Board of Directors, which in the case of an Executive
Committee, may include the exercise during the intervals between the meetings of
the directors all of the powers of the Board of Directors in the management of
the business affairs and property of the Corporation, including, without
limitation, the power to cause the seal of the Corporation to be affixed to all
papers that may require it.
ARTICLE III.
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Officers
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Section 1. General. The Board of Directors shall elect the officers
of the Corporation, which shall include a Chairman of the Board, a Chief
Executive Officer, a President, a Secretary and a Treasurer and such other or
additional officers as the Board of Directors may designate.
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Section 2. Term of Office; Removal and Vacancy. Each officer shall
hold his office until his successor is elected and qualified or until his
earlier resignation or removal. Any officer or agent shall be subject to removal
with or without cause at any time by the Board of Directors. Vacancies in any
office, whether occurring by death, resignation, removal or otherwise, may be
filled by the Board of Directors.
Section 3. Powers and Duties. Each of the officers of the
Corporation including, but not limited to the Chairman of the Board shall,
unless otherwise ordered by the Board of Directors, have such powers and duties
as generally pertain to his respective office as well as such powers and duties
as from time to time may be conferred upon him by the Board of Directors.
Section 4. Power to Vote Stock. Unless otherwise ordered by the
Board of Directors, the Chairman of the Board and the President each shall have
full power and authority on behalf of the Corporation to attend and to vote at
any meeting of stockholders of any Corporation in which this Corporation may
hold stock, and may exercise on behalf of this Corporation any and all of the
rights and powers incident to the ownership of such stock at any such meeting
and shall have power and authority to execute and deliver proxies, waivers and
consents on behalf of the Corporation in connection with the exercise by the
Corporation of the rights and powers incident to the ownership of such stock.
The Board of Directors, from time to time, may confer like powers upon any other
person or persons.
ARTICLE IV.
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Capital Stock
-------------
Section 1. Certificates of Stock. Certificates for stock of the
Corporation shall be in such form as the Board of Directors may from time to
time prescribe and shall be signed by the Chairman of the Board or the President
or a Vice-President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary.
Section 2. Transfer of Stock. Shares of capital stock of the
Corporation shall be transferable on the books of the Corporation only by the
holder of record thereof, in person or by duly authorized attorney, upon
surrender and cancellation of certificates for a like number of shares, with an
assignment or power of transfer endorsed thereon or delivered therewith, duly
executed, and with such proof of the authenticity of the signature and of
authority to transfer, and of payment of transfer taxes, as the Corporation or
its agents may require.
Section 3. Ownership of Stock. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the owner thereof
in fact and shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise expressly provided by
law.
ARTICLE V.
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Miscellaneous
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Section 1. Corporate Seal. The seal of the Corporation shall be
circular in form and shall contain the name of the Corporation and the year and
State of incorporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall end
on December 31.
ARTICLE VI.
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Amendment
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Section 1. By the Stockholders. Except as otherwise provided by
statute or the Certificate of Incorporation, these By-laws may be amended by the
affirmative vote of the holders of at least two-thirds of the voting power of
the then outstanding capital stock then entitled to vote at stockholders
meetings of the Corporation,
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voting together as a single class at any annual or special meeting of the
stockholders, provided that notice of intention to amend shall have been
contained in the notice of the meeting.
Section 2. By the Board of Directors. The Board of Directors by a
majority vote of the whole Board of Directors at any meeting may amend these
By-laws, including by-laws adopted by the stockholders.
ARTICLE VII.
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Indemnification
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The Corporation may indemnify any director, officer, employee or
agent of the Corporation to the full extent permitted by law.
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