1. Termination of Employment. Employee’s employment with Employer terminated onOctober 15, 2009 (the “Termination Date”). As of the Termination Date, the Employment Agreement andall existing employment agreements between Employee and the Company, whether oral or written, arehereby terminated, except as otherwise expressly stated herein. Except as otherwise expresslyprovided herein, the parties agree that this Agreement supersedes the Employment Agreement (and anyexisting employment agreement between the parties). Additionally, Employee hereby resigns allpositions as an officer or director of the Employer, its subsidiaries and affiliates, effectiveimmediately.2. Payments and Other Benefits.(a) Employee acknowledges that he has received all wages, benefits and all other payments towhich he was entitled by virtue of his employment with Employer through the Termination Date.(b) Separation Payment. Provided that Employee has not revoked this Release pursuantto Paragraph 21 below, complies with all terms and conditions of this Release, and cooperates withEmployer in the orderly transition of his duties, Employer shall pay Employee the gross sum of$91,666.60 less applicable withholdings and deductions (the “Separation Payment”), which isequivalent to five (5) months of his regular base salary at Employee’s final rate of pay ($220,000per annum).(c) The payments described in Subparagraph (b) of this Paragraph 2 are in lieu of whatever theEmployment Agreement provides and shall be paid in a lump sum on Employer’s first pay date that isat least fourteen (14) days after Employer’s receipt of an executed Release from Employee. Employeeexpressly agrees and acknowledges that said
 
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payments are not otherwise due or owing to Employee under any agreement with Employer or any policyof Employer.(d) Benefits Continuation. Employee will receive under separate cover a noticeinforming him of his eligibility to continue his coverage under any group health insurance plan inwhich he is a participant as of the Termination Date, at his own expense, for a period not toexceed 18 months, in accordance with the provisions of the federal law known as the ConsolidatedOmnibus Budget Reconciliation Act (“COBRA”). Employee’s rights under COBRA are not affected inany way by this Release. In addition, provided that Employee has not revoked this Release pursuantto Paragraph 21 below, complies with all terms and conditions of this Release, cooperates withEmployer in the orderly transition of his duties, and provides (or has finished providing) theTransitional Services set forth in the first sentence of Paragraph 2(f) below, on a satisfactorybasis; and provided further that Employee timely elects continuation of his group healthinsurance coverage pursuant to COBRA, Employer agrees to pay the employer and employee portions ofsuch coverage (including the reimbursement to Employee of a maximum of $1,500 towards coveredexpenses subject to the deductible under the medical plan) until the later of (i) the earlier of(x) the date the Employee finds other employment with health benefits and (y) the twelve (12) monthanniversary of the Termination Date, or (ii) the date that is five (5) months following theTermination Date (the “Health Benefit Continuation”).(e) Employee agrees that other than as expressly stated in this Paragraph 2, he will not seekanything further from Employer or the Released Parties (as defined below), including any otherpayment. Employee agrees that except as expressly set forth in this Release, all benefits, wages,bonuses, commissions, compensation or other payments provided to Employee during his employmentwith Employer shall cease as of the Termination Date and that Employee shall not receive any payments from Employer other than as expressly set forth in thisParagraph 2 of this Release.
 
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(f) Transitional Services.(i) For a period not to exceed six (6) months from the Termination Date (the “TransitionPeriod”), the Employee shall provide the following transitional services to the Employer, in aprofessional workmanlike manner consistent with prevailing industry practices, solely as anindependent contractor and not as an agent of the Employer: (1) preparation and provision toEmployer of a written evaluation of the predictive models of mortgage prepayments, defaults, andtask prioritization being considered by FCMC as of the Termination Date; (2) preparation andprovision to Employer of a written review, containing recommendations, concerning right partycontact rates of FCMC with respect to successful efforts in speaking with borrowers about theresolution of their delinquencies; and (3) preparation and provision to Employer of writtenguidance on the rating process for obtaining a rating by a nationally recognized statisticalrating agency of residential mortgage servicers (the “Transitional Services”). In considerationfor providing these Transitional Services and provided that Employee has not revoked this Releasepursuant to Paragraph 21 below, complies with all terms and conditions of this Release, andcooperates with Employer in the orderly transition of his duties, Employee shall be paid the sumof $7,638.89, on a semi-monthly basis, up to a maximum total of $91,666.68, beginning on theEmployer’s first pay date that is at least fourteen (14) days after Employer’s receipt of anexecuted Release from Employee, with such payments and Transitional Services subject totermination by the Employer, in its sole and absolute discretion, or by Employee, if he findsother employment (of which Employee will provide Employer prompt notice thereof), with thirty (30) days priorwritten notice to the other party.
 
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(ii) The Company shall pay to Employee a one-time contingent Transitional Services successfee of $15,000 for the successful completion during the Transition Period of each of the followingobjectives (for a possible total of $30,000 in contingent success fees), provided that Employeehas performed Transitional Services that have materially assisted the Employer with respect to anobjective and provided further that following the successful completion of an objective FCMCdeclares pre-tax net income of more than $3 Million for the fiscal quarter in which the objectiveis successfully completed or any quarter ending thereafter up until the quarter ending September30, 2010: (1) the successful implementation and integration of a statistically accurate predictivemodel of mortgage prepayments, defaults, and task prioritization; and (2) a servicer rating of atleast “average” or “fully acceptable” (or equivalent rating) as a residential mortgage servicer orresidential special servicer by a nationally recognized statistical agency of residential mortgageservicers. Provided that Employee has not revoked this Release pursuant to Paragraph 21 below,complies with all terms and conditions of this Release, and cooperates with Employer in theorderly transition of his duties, Employer shall pay the contingent success fee, if any, on thenext business day following thirty (30) days after satisfaction of the conditions to suchcontingent success fee(s). Notwithstanding the foregoing, Employee acknowledges and agrees thatFCMC is not obligated to implement the Employee’s Transitional Services, and that the failure todo so by the Employer will not entitle Employee to payment of the contingent Transitional Servicessuccess fee(s).
 
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(g) Adequate Compensation. The Employee agrees and acknowledges that the paymentsprovided under this Paragraph 2 constitute fair and adequate compensation for the promises andcovenants of the Employee set forth in this Agreement.3. Indemnification. Employer shall continue to indemnify Employee in accordance withthe terms and conditions set forth in the Employer’s Certificate of Incorporation and By-Laws (assuch Certificate of Incorporation and By-Laws may be amended from time to time) or under the termsand conditions made generally available to its officers and directors from time to time for aperiod of six (6) years from the Termination Date and in accordance with any contractualindemnification rights of Employee as of the date hereof. Notwithstanding the foregoing, theindemnification of Employee shall extend only to acts or omissions of Employee during the period oftime during which Employee was an officer or director of the Employer, and only to the extent thatsuch indemnification is otherwise permissible under applicable law.4. Employee’s Release And Waiver of Claims.(a) “Released Parties” means Employer, its parents, subsidiaries, affiliates, divisions,partners, predecessors, insurance carriers, and shareholders; its current and former directors,officers, employees, attorneys, agents, and contractors; its employee pension or welfare benefitplans; and current and former trustees and administrators of these plans.(b) Employee hereby releases the Released Parties from all claims and rights that Employee hasagainst any and all Released Parties, including, but not limited to, those claims of which Employeeis not aware, those not mentioned in this Release, and all claims for attorney’s fees, costs, andinterest. Employee releases the Released Parties from all claims and rights resulting fromanything that has happened up to now. This Release does not apply to claims arising after the date of this Release or any right to indemnification Employee wouldotherwise have.
 
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(c) Employee specifically releases all claims and rights arising from or relating toEmployee’s employment or other relationship with the Released Parties, including but not limited toany claims or rights Employee may have under Section 12 of the Employment Agreement, Title VIIof the Civil Rights Act of 1964, as amended, and the Civil Rights Act of 1991, the AgeDiscrimination in Employment Act, the Rehabilitation Act of 1973, the Older WorkersBenefit Protection Act, the Pregnancy Discrimination Act, the Americans withDisabilities Act, the federal Family and Medical Leave Act, Section 1981 of theCivil Rights Act of 1866, the Employee Retirement Income Security Act, the federalEqual Pay Act, the Fair Labor Standards Act, the federal Worker Adjustment andRetraining Notification Act, the New Jersey Law Against Discrimination, the NewJersey Worker Adjustment and Retraining Notification Act, the New Jersey ConscientiousEmployee Protection Act, the New Jersey Family Leave Act, the New Jersey Equal PayAct, the New Jersey Wage Payment Law, the New Jersey Wage and Hour Law, NewYork State Human Rights Law, the New York City Human Rights Act, the New York StateEqual Pay Law, the New York State Labor Law, the New York State Wage PaymentLaw, the New York State Wage and Hour Law, the New York State Minimum Wage Act,any federal, state or local laws against discrimination, harassment, retaliation, or lawsprotecting whistleblowers, or any other federal, state, or local law or regulation or common lawrelating to employment, wages, hours, or any other terms and conditions of employment andtermination of employment. Employee further releases the Released Parties from any claim forwrongful discharge, retaliation, failure to promote, failure to accommodate, breach of contract,breach of fiduciary duty, breach of the covenant of good faith and fair dealing, promissory or
 
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equitable estoppel, unjust enrichment, whistle-blowing, negligent infliction of emotional distress,negligence, intentional infliction of emotional distress, fraud, misrepresentation, defamation,torts, violations of public policy of the State of New Jersey or State of New York; any claims forwages or other compensation, including, but not limited to salary, bonuses, accumulated sick leave,stipends, vacation pay, employee benefits, deferred compensation, or any other payments ordistributions of any kind; and any other claims in any way related to Employee’s employment ortermination of his employment with Employer, it being acknowledged that nothing in this paragraphshall affect Employee’s entitlement to the amounts vested under any Employer 401(k) plan prior tothe date hereof.(d) Employee represents and warrants that there are no pending or outstanding administrativeor judicial proceedings, charges, complaints, claims or actions against Employer or any of theReleased Parties to which Employee is a party or which are maintained on behalf of Employee.Employee acknowledges that Employer relies upon this representation and warranty in agreeing toenter into this agreement.5. Employer’s Release And Waiver of Claims. Employer releases Employee from any andall claims related to, or arising out of, Employee’s performance of his job duties, so long asEmployee acted in good faith, in a manner Employee reasonably thought to be in, or not opposed to,the best interests of the Employer and had no reason to believe his conduct was unlawful orillegal. Employer’s release of Employee shall be effective for all claims arising, in whole orpart, out of any transactions, events, or occurrences occurring prior to the date of this Release.
 
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6. Non-Disparagement. Employee agrees that he shall not issue any communication ormake any statement, written or otherwise, that disparages, criticizes or otherwise reflectsadversely on or encourages any adverse action against the Employer or the Released Parties. TheEmployer shall respond to employment reference inquiries concerning Employee only by confirming jobtitle, salary and dates of service.7. Cooperation.  In partial consideration for the Separation Payment and the HealthBenefit Continuation set forth above in Section 2(b) and (d), respectively, Employee will fullycooperate with Employer and its counsel as it relates, in any way, to any action or proceedingwhich relates to Employer, including without limitation, any regulatory action, litigation ordispute arising out of alleged actions or inactions of the Employer of which the Employee may haveknowledge or information or which the Employer, in its sole discretion, deems the cooperation ofthe Employee is needed. Full cooperation shall include, without limitation, review of documents,attendance at meetings, trial or administrative proceedings, depositions, and interviews withoutthe need of the subpoena process. Nothing in this Release shall be construed to require Employee toact in an unlawful manner. To the extent that the Employer requests Employee’s cooperation, theEmployer shall reimburse Employee for reasonable expenses consistent with the Employer’s travel andexpense policy in effect at the time.8. Return of Property. Prior to Employer making the Separation Payment, Employeeshall deliver to Employer, (1) all materials belonging to Employer, including Employer’sconfidential information, documents, correspondence, plans, records, notes, drawings, or papers andany copies thereof in Employee’s possession or control, including in particular all notes orrecords Employee has relating to Employer’s finances, made or compiled by or delivered to Employee;and (2) all other property of the Employer, including all uniforms, identification and diningcards, passwords, credit or charge cards, security cards, Employer telephones, pagers,computer equipment (including diskettes and software), keys, and any of Employer’s businessequipment, files or manuals.
 
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9. Confidential Information.(a) Employee acknowledges that he has had access to and possession of Employer’s tradesecrets, confidential business information and/or proprietary information (“ConfidentialInformation”) and may have access to Confidential Information in connection with the performance ofthe Transitional Services. Employee shall not disclose any Confidential Information to any thirdperson unless required by law for a period of six (6) years from the later of the date of thisAgreement or the date of disclosure. Employee further agrees that he shall not use anyConfidential Information for his personal benefit or for the benefit of any other employer, client,or other person or entity.(b) In providing the Transitional Services hereunder, the Employee will comply withinformation safeguarding requirements of Title V of the Gramm-Leach-Bliley Act, 15 U.S.C.§§6801-6810, as implemented by 16 CFR Part 314, and utilize procedures reasonably calculated toinsure compliance with the foregoing, including, without limitation, maintaining appropriatesafeguards designed to: (i) insure the security and confidentiality of Non-Public PersonalInformation; (ii) protect against anticipated threats or hazards to the security or integrity ofNon-Public Personal Information; and (iii) protect against unauthorized access to or use ofNon-Public Personal Information. (In this Agreement, the term “Non-Public Personal Information”shall have the meaning ascribed to it in the above-referenced law and regulation and shall includepersonally identifiable information of the borrowers of the FCMC, such as name, address, telephonenumber, e-mail address or Social Security number.) Upon completion of the Transitional Services, the Employee shall immediately return to the Employer anyoriginal and any copies of Confidential Information provided to Employee.
 
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10. Binding Effect. This Release is binding upon and shall inure to the benefit ofanyone who succeeds to the rights, interests or responsibilities of the parties. Employee makesthe releases contained in this Release for the benefit of the Released Parties and all who succeedto their rights, interests, or responsibilities.11. Enforceability. If a court rules that any provision of this Release is notenforceable in the manner set forth in this Release, that provision should be enforceable to themaximum extent possible under applicable law and should be reformed accordingly. If a court rulesthat any provision of this Release is invalid or unenforceable, that ruling shall not affect thevalidity or enforceability of the other portions of this Release, which shall continue in fullforce and effect.12. Entire Agreement. This Release is the entire agreement between Employee andEmployer. It supersedes the Employment Agreement and any existing oral or written agreements withrespect to Employee’s employment or termination of employment with Employer, except for Section 8(“Trade secrets and confidential information”), Section 9(b) (“Non-competition”) and Section 9 (c)of the Employment Agreement between Employee and FCMC, which Section 8, Section 9(b) and Section9(c) shall remain in full force and effect. No representations regarding the Released Parties’relationship with Employee, or any obligations to Employee, have been made, or survive, except asset forth in this Release.13. Amendment. This Release cannot be amended, except by a written document signed bythe party against whom enforcement of any such amendment is sought.
 
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14. Legal Counsel. Employee has had ample time to consult with an attorney beforesigning this Release and acknowledges that he has been advised to consult with an attorney beforesigning this Release.15. Confidentiality of Agreement. Employee shall not directly or indirectlydisseminate the terms of this Agreement to any person or entity not a party to this Agreement,except (a) by written agreement of the parties, (b) as required by law, or (c) as otherwiseprovided in this paragraph. Without limiting the generality of the foregoing, Employeespecifically agrees that he shall not disclose information regarding this Release to any current,former or future employee of Employer or the Released Parties. This provision shall not be deemedbreached by disclosure by Employee to his attorneys and accountants for purposes of obtaining legaland tax advice, provided such individuals agree to be bound by the terms of this Paragraph 15.16. Full Understanding. Employee has read this Release carefully, fully understandsthe meaning of its terms, and is signing this Release knowingly and voluntarily.17. Governing Law. This Release shall be interpreted in accordance with the laws ofthe State of New Jersey, without regard to its principles of conflicts of law. This Release isdeemed to be jointly prepared by the parties hereto, and the language of all parts of this Releaseshall in all cases be construed as a whole, according to its fair meaning, and not strictly for oragainst any party. Any action relating to this Release shall be filed in the State of New Jersey.18. Non-Waiver. In the event either party violates any provision of this Agreement,the failure of the other party to enforce any of its rights at that time shall not constitute awavier by the other party to enforce any provision of this Agreement at any time.
 
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19. No Assignment. Employee may not assign this Agreement or any rights under thisAgreement, except by will or by operation of the laws of intestate succession. Notwithstanding theforegoing, in the event of the death of the Employee, all amounts otherwise due to the Employeepursuant to the Agreement shall be paid to the surviving spouse of the Employee or, if there is nosurviving spouse, the Employee’s estate.20. Breach of Agreement; Remedies*.*If any party violates a provision of thisAgreement, the other party shall have the right to (a) injunctive or other equitable reliefprohibiting further violations of this Agreement, and (b) all other legal and equitable reliefavailable under the law.21. Period for Consideration and Revocation. Employee shall have 21 days to considerthis Release. Employee may elect, at his option, to sign this Release in a shorter period of time.The parties further agree that any changes to this Release, whether material or immaterial, do notrestart the running of the 21-day period. Employee may revoke this Release within 7 days ofsigning it. Any revocation must be made by delivering written notice of revocation to KevinGildea, Esq., Chief Legal Counsel, Franklin Credit Management Corporation, 101 Hudson Street,Jersey City, New Jersey 07302. To be effective, any revocation of this Release must be in writingand received by Employer no later than the close of business on the 7th day afterEmployee signs this Release. This Release shall not become effective or enforceable until theexpiration of 7 days after Employee signs this Release. If Employee revokes his acceptance of thisRelease, Employer shall not be required to provide any of the consideration described in thisRelease.
 
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22. Agreement Does Not Establish Precedent. The parties agree that the terms of thisAgreement will not establish any precedent, nor will this Agreement be used as a basis by theparties or anyone else to seek or justify similar terms in any subsequent matter.23. Attorneys’ Fees. If any action or proceeding is brought for the enforcement ofthis Agreement, or because of an alleged dispute, breach, default, or misrepresentation inconnection with any of the provisions of this Agreement, the successful or prevailing party shallbe entitled to reasonable attorneys’ fees and other costs incurred in that action or proceeding, inaddition to any other relief to which it or they may be entitled.[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
 
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      ACCEPTED AND AGREED TO:WILLIAM F. SULLIVAN