UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FINANCIAL FEDERAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
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FINANCIAL FEDERAL
CORPORATION
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
TUESDAY, DECEMBER 8, 2009
AT 10:00 A.M. EASTERN TIME
270 PARK AVENUE, 11TH FLOOR
NEW YORK, NEW YORK 10017
FINANCIAL FEDERAL CORPORATION
730 THIRD AVENUE, 23RD FLOOR
NEW YORK, NEW YORK 10017
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, DECEMBER 8, 2009, 10:00 A.M.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Financial Federal Corporation, a Nevada corporation (the
"Company"), will be held at 270 Park Avenue, 11th Floor, New York, New York
10017 on Tuesday, December 8, 2009, at 10:00 a.m. Eastern Time, to:
(1) Elect six directors to serve until the next annual meeting of
stockholders and until their successors are elected and qualified;
(2) Ratify the appointment of KPMG LLP as the Company's independent
registered public accounting firm for the fiscal year ending July 31,
2010;
(3) Transact any other business that properly comes before the Annual
Meeting.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE SHAREHOLDER MEETING TO BE HELD ON DECEMBER 8, 2009.
THE 2009 PROXY STATEMENT AND THE 2009 ANNUAL REPORT TO SECURITY HOLDERS
ARE AVAILABLE AT HTTP://WWW.FINANCIALFEDERAL.COM/PROXY2009
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The Board of Directors of the Company has fixed the close of business on
October 15, 2009 as the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting. The list of
stockholders entitled to vote at the Annual Meeting will be available for
inspection by any stockholder for any valid purpose related to the Annual
Meeting at the office of Financial Federal Corporation, 730 Third Avenue, 23th
Floor, New York, New York 10017 for the ten days before the Annual Meeting. The
list will also be available during the Annual Meeting for inspection by any
stockholder present at the Annual Meeting. A copy of the Company's Annual Report
to Stockholders for the fiscal year ended July 31, 2009 is also enclosed.
All stockholders are cordially invited to attend the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please complete, date,
sign and return the enclosed proxy card as soon as possible in the enclosed
reply envelope.
FINANCIAL FEDERAL CORPORATION
Troy H. Geisser
SECRETARY
November 3, 2009
New York, New York
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE FILL IN, SIGN AND DATE THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE THAT DOES NOT NEED
POSTAGE IF MAILED IN THE UNITED STATES.
FINANCIAL FEDERAL CORPORATION
730 THIRD AVENUE, 23RD FLOOR
NEW YORK, NEW YORK 10017
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 8, 2009
This Proxy Statement and the accompanying form of proxy are solicited by
the Board of Directors (the "Board of Directors" or the "Board") of Financial
Federal Corporation, a Nevada corporation (the "Company"), to be voted at the
Annual Meeting of Stockholders to be held at 270 Park Avenue, 11th Floor, New
York, New York 10017 on December 8, 2009 and at any postponements or
adjournments (the "Meeting").
Shares represented by properly executed proxies, received timely and not
revoked, will be voted at the Meeting in accordance with the instructions of the
stockholder. Stockholders may revoke their proxy before its exercise by written
notice to the Company's Secretary stating that their proxy is revoked, by
submitting another proxy with a later date or by attending the Meeting and
voting in person. Please note, however, that if a stockholder's shares are held
through a broker, bank or other nominee and the stockholder wishes to vote the
shares at the Meeting, the stockholder must obtain a proxy to vote the shares
from the bank, broker or other nominee.
At the Meeting, the Company's stockholders will be asked (i) to elect each
of the Company's six nominees for election to the Board of Directors to serve
until the next annual meeting of stockholders and until his successor is elected
and qualified (ii) to ratify the appointment of KPMG LLP ("KPMG") as the
Company's independent registered public accounting firm for the fiscal year
ending July 31, 2010 and (iii) to take any other actions that properly come
before the Meeting. Items (i) and (ii) are described in more detail in this
Proxy Statement.
The approximate date this Proxy Statement and accompanying form of proxy
will first be sent or given to stockholders is November 3, 2009. Holders of the
Company's common stock, par value $0.50 per share (the "Common Stock"), on the
record date, the close of business on October 15, 2009, are entitled to vote at
the Meeting. On October 15, 2009, 26,127,347 shares of Common Stock were
outstanding and no shares of the Company's preferred stock, par value $1.00,
were outstanding.
Each share of Common Stock entitles the holder on the record date to one
vote on each matter submitted to a vote of stockholders at the Meeting. The
presence, in person or by proxy, of stockholders holding a majority of the
issued and outstanding shares of Common Stock entitled to vote at the Meeting is
necessary to constitute a quorum. Abstentions and broker non-votes are each
included to determine the presence of a sufficient number of shares to
constitute a quorum to transact business. A broker non-vote occurs when a
broker, bank or other nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee has not received voting
instructions from the beneficial owner and does not have discretionary voting
power with respect to that proposal. Of the matters to be voted on at the
Meeting, brokers, banks and other nominees will not have discretionary voting
authority for the election of directors, but will have discretionary voting
authority for the ratification of the appointment of KPMG as the Company's
independent registered public accounting firm.
Unless contrary instructions are indicated on the proxy, shares represented
by each properly executed and returned proxy card (and not revoked before they
are voted) will be voted "FOR" the election of the nominees for directors named
below, "FOR" the ratification of the appointment of KPMG as the Company's
independent registered public accounting firm for the fiscal year ending July
31, 2010, and by the proxies in their discretion on any other matters to come
properly before the Meeting, or any postponement or adjournment. If a
stockholder specifies a different choice on the proxy, the stockholder's shares
of Common Stock will be voted according to the specification made.
The Company will pay the entire expense of this proxy solicitation.
Solicitation will be made primarily by mail. Proxies may also be solicited
personally and by telephone by regular employees of the Company, who will
receive no additional compensation for their solicitation activities. The
Company also will reimburse brokerage firms and banks for the certain costs
incurred in transmitting the proxy materials to beneficial owners. The Company
has retained Georgeson Shareholder Communications, Inc. to assist in soliciting
proxies, at an estimated cost of $1,000 plus reimbursement for reasonable
expenses.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, to the Company's knowledge, the number of
shares of Common Stock beneficially owned on October 15, 2009, unless otherwise
indicated, by (i) each holder known to be the beneficial owner of more than 5%
of the Common Stock outstanding (ii) each director and each nominee for election
as a director (iii) each executive officer named in the Summary Compensation
Table and (iv) all directors and executive officers as a group. There were
26,127,347 shares of Common Stock outstanding on October 15, 2009.
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Amount and Nature of Percent of
Name and Address of Beneficial Owner 1 Beneficial Ownership 2 Class
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Lord, Abbett & Co. LLC 3,11 3,590,827 13.7
90 Hudson Street
Jersey City, NJ 07302
Kayne Anderson Rudnick Investment
Management, LLC 3 1,880,325 7.2
1800 Avenue of the Stars
Los Angeles, CA 90067
Barclays Global Investors UK Holdings
Ltd 3,12 1,813,237 6.9
1 Churchill Place
Canary Wharf
London, England E14 5HP
Waddell & Reed Financial, Inc. 3 1,496,006 5.7
6300 Lamar Avenue
Overland Park, KS 66202
Lawrence B. Fisher 4 6,000 *
Troy H. Geisser 5 157,892 *
John V. Golio 6 206,798 *
Steven F. Groth 7 119,812 *
James H. Mayes, Jr. 8 210,359 *
Michael C. Palitz 4,9 349,404 1.3
Paul R. Sinsheimer 10 831,243 3.2
Leopold Swergold 4 16,614 *
H. E. Timanus, Jr. 4 34,750 *
Michael J. Zimmerman 4 11,800 *
All directors and executive officers
as a group (13 persons) 13 2,214,583 8.5
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* Less than 1% of Common Stock outstanding.
1 Unless otherwise indicated, the address of each person listed is c/o
Financial Federal Corporation, 730 Third Avenue, 23rd Floor, New York,
NY 10017.
2 Unless otherwise noted, each person has the sole power to vote, or
direct the voting of, and sole power to dispose, or direct the
disposition of, all of the shares of Common Stock shown as
beneficially owned. Beneficial ownership was determined according to
the rules of the Securities and Exchange Commission ("SEC") and
includes shares of Common Stock issuable upon the exercise of stock
options that are immediately exercisable or will become exercisable
within 60 days after October 15, 2009, vested restricted stock units
that can be settled in shares of Common Stock within 60 days after
October 15, 2009 and shares of restricted stock subject to forfeiture.
3 This information is based on the most recent Form 13F filed with the
SEC.
4 Holdings include 6,000 vested restricted stock units.
5 Mr. Geisser's holdings include 141,750 shares of restricted stock
subject to forfeiture.
6 Mr. Golio's holdings include 145,562 shares of restricted stock
subject to forfeiture.
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7 Mr. Groth's holdings include 119,812 shares of restricted stock
subject to forfeiture.
8 Mr. Mayes' holdings include 191,875 shares of restricted stock subject
to forfeiture and 18,484 shares of Common Stock held in a margin
account.
9 Mr. Palitz's holdings of Common Stock include (i) 225,000 shares held
by trusts controlled by Mr. Palitz's wife (ii) 94,297 shares held by a
corporation owned and controlled by Mr. Palitz and (iii) 10,000 shares
held by Mr. Palitz's wife.
10 Mr. Sinsheimer's holdings include (i) 441,472 shares of Common Stock
held by a limited partnership of which the general partner is
controlled by Mr. Sinsheimer and (ii) 389,771 shares of restricted
stock subject to forfeiture.
11 Reported no voting power for 400,844 shares.
12 Reported no voting power for 447,088 shares.
13 Includes (i) 2,182,084 shares of Common Stock of which 1,168,143
shares are restricted stock subject to forfeiture and 30,000 vested
restricted stock units as described in notes 4 through 10 above and
(ii) 267,411 shares of Common Stock of which 179,373 shares are
restricted stock subject to forfeiture and options to purchase 2,500
shares of Common Stock held by executive officers not named in the
table.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and any beneficial owner of more than 10% of the
Common Stock (a "ten percent beneficial owner") to file reports of holdings of
and transactions in the Company's equity securities with the SEC and the New
York Stock Exchange, and to furnish the Company with copies of all Section 16(a)
forms they file. Based solely on a review of copies of these reports and written
representations from the Section 16 reporting persons, the Company believes its
executive officers, directors and ten percent owners filed all reports due under
Section 16(a) for the fiscal year ended July 31, 2009 timely.
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ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
The Corporate Governance and Nominating Committee and the Board of
Directors nominated the persons listed below to serve as directors of the
Company until the next annual meeting and until their respective successors are
elected and qualified, or until their earlier resignation or removal. The
Company's bylaws set the Board's membership at a minimum of five directors.
It is intended that shares represented by proxies solicited by the Board
will, unless authority to vote for some or all nominees is withheld, be voted in
favor of electing as directors the nominees listed below. The Company has no
reason to believe any of the nominees will be disqualified or unable or
unwilling to serve if elected. However, if any nominee becomes unavailable for
any reason, the shares will be voted for another person nominated by the Board,
unless the Board by resolution reduces the number of directors. Directors are
encouraged to attend the Annual Meeting of Stockholders. All directors attended
the 2008 Annual Meeting of Stockholders. All nominees listed below are current
directors of the Company.
Electing the six director nominees requires an affirmative vote by a
plurality of votes cast. Shares not voted (by abstention, broker non-vote, or
otherwise) will not impact the vote.
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE "FOR" EACH OF THE
NOMINEES LISTED BELOW.
NOMINEES FOR ELECTION AS DIRECTORS
The name, age, principal occupation or employment, and other information
for each nominee, based on information he provided, are set forth below:
LAWRENCE B. FISHER, 71, has served as a director of the Company since 1992.
Mr. Fisher was a partner of Orrick, Herrington & Sutcliffe LLP, a law firm, from
December 1995 until he retired in December 2005. He had previously been a
partner of Kelley Drye & Warren LLP, a law firm, from 1985 to December 1995. He
is a director of National Bank of New York City, a privately owned commercial
bank and is a member of the Board of Directors of the Quantum Group, a publicly
held health care service company.
MICHAEL C. PALITZ, 51, has served as a director of the Company since July
1996. He is a Managing Director of Preston Partners LLC, a Manhattan based
merchant banking firm. He is also a Manager of Comix New York, LLC, a New York
City based hospitality company. He served as an Executive Vice President of the
Company from July 1995 until he resigned as an officer and employee of the
Company on March 14, 2003. Mr. Palitz served as a Senior Vice President of the
Company from February 1992 to July 1995 and served as a Vice President of the
Company from its inception in 1989 to February 1992. He also served as Treasurer
and Assistant Secretary of the Company since its inception in 1989 and as Chief
Financial Officer from 1989 through September 2000. He was a member of the Board
of Directors and Chair of the Audit Committee of City and Suburban Financial
Corporation until it was sold in July 2007. He also is a Director of the Sy Syms
School of Business of Yeshiva University and a Trustee of the Museum of the
Moving Image, where he also serves on its Audit Committee.
PAUL R. SINSHEIMER, 62, has served as Chairman of the Board and Chief
Executive Officer of the Company since December 2000, as President of the
Company since September 1998, as an Executive Vice President of the Company from
its inception in 1989 to September 1998 and as a director of the Company since
its inception. From 1970 to 1989, Mr. Sinsheimer worked for Commercial Alliance
Corporation in several positions including Executive Vice President.
LEOPOLD SWERGOLD, 69, has served as a director of the Company since August
16, 2005. Mr. Swergold is the sole member of Anvers Management LLC, a general
partner of two private equity funds. Mr. Swergold was a Managing Director at ING
Groep N.V. from 1997 until he retired in December 2004. He was Head of
Healthcare Investment Banking and a member of the Board of Directors of Furman
Selz from 1989 until it was acquired by ING Groep N.V. in 1997. After working on
Wall Street for twenty years, Mr. Swergold formed his own investing banking firm
in 1983 that later merged into Furman Selz in 1989. Mr. Swergold served as a
Governor and Chair of the Audit Committee of the National Association of
Securities Dealers ("NASD") from 1989 to 1992. He is a member of the Board of
Directors of Select Medical Corporation. Mr. Swergold is also a Trustee of the
Freer and Sackler Galleries at the Smithsonian Institution in Washington, D.C.
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H. E. TIMANUS, JR., 64, has served as a director of the Company since 1999.
Mr. Timanus is the Chairman of the Board and Chief Operating Officer of
Prosperity Bank, Houston, Texas; and Vice Chairman of Prosperity Bancshares,
Inc., Houston, Texas. He was Chairman of the Board and Chief Executive Officer
of Heritage Bank, Houston, Texas, which merged into Prosperity Bank; President
and Chief Executive Officer of Commercial Bancshares, Inc., Houston, Texas,
which merged into Prosperity Bancshares, Inc.; and President and Chief Executive
Officer of Heritage Bancshares, Inc., Wilmington, Delaware, which merged into
Prosperity Holdings, Inc. Mr. Timanus began his career with Commercial
Bancshares, Inc. in 1982.
MICHAEL J. ZIMMERMAN, 59, has served as a director of the Company since
June 7, 2004. Mr. Zimmerman is Executive Vice President and Chief Financial
Officer of the Continental Grain Company and President of its subsidiary,
ContiInvestments Corp. Before joining Continental Grain in 1996, Mr. Zimmerman
was a Managing Director at Salomon Brothers Inc., where he served in various
senior positions in the investment banking and firm investment areas. He is a
member of the Board of Directors of Overseas Shipholding Group, Inc., where he
serves as non-executive Chairman, and a member of the Board of Directors of KBW,
Inc., where he is a member of the Audit Committee.
INDEPENDENT AND NON-MANAGEMENT DIRECTORS
The Board of Directors affirmatively determined Messrs. Fisher, Palitz,
Swergold, Timanus and Zimmerman each meet the independence criteria established
by the New York Stock Exchange for independent board members. Therefore, all
non-management directors are independent. The Board also affirmatively
determined no material relationships exist between the Company and any of the
independent directors that would interfere with their judgment in carrying out
their responsibilities as a director. In addition, the Board of Directors
determined the members of the Audit Committee meet the additional independence
criteria required for audit committee membership.
The non-management directors meet regularly without management directors or
employees present. If the meeting is in conjunction with a committee meeting,
the Chair of the committee meeting acts as the presiding director. If the
meeting is not in conjunction with a committee meeting, the non-management
directors rotate acting as the presiding director. Interested parties may
communicate with non-management directors in the manner described in the
Communications with the Board of Directors section below.
BOARD OF DIRECTORS COMMITTEES AND MEETINGS
EXECUTIVE COMMITTEE
The Board has established an Executive Committee, currently consisting of
four directors. The Executive Committee can exercise all the powers of the Board
between meetings of the Board. The current members of the Executive Committee
are Messrs. Fisher, Palitz, Sinsheimer and Swergold and they were the Executive
Committee's members during fiscal 2009.
AUDIT COMMITTEE
The Board has established an Audit Committee, currently consisting of three
independent directors. The Audit Committee acts under a written charter
approved by the Board. The current members of the Audit Committee are
Messrs. Palitz, Timanus (Chairperson) and Zimmerman and they were the Audit
Committee's members during fiscal 2009. The Audit Committee is responsible for
monitoring:
o the integrity of the Company's financial statements;
o the independent registered public accounting firm's qualifications and
independence;
o the performance of the Company's internal audit function and
independent registered public accounting firm; and
o the Company's compliance with legal and regulatory requirements.
The Audit Committee pre-approves all auditing services and permitted
non-audit services to be performed for the Company by the independent registered
public accounting firm. The Audit Committee is also responsible for engaging the
Company's independent registered public accounting firm and establishes
procedures (i) for the receipt, retention and treatment of complaints received
by the Company regarding accounting, internal control or auditing matters and
(ii) for the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.
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Upon consideration of the attributes of an audit committee financial expert
as set forth in the regulations promulgated by the SEC, the Board determined Mr.
Timanus possesses these attributes through his experience as Chief Operating
Officer of Prosperity Bank, and accordingly he is designated as the Audit
Committee financial expert. In addition, the Board also determined Mr. Zimmerman
possesses the attributes of an audit committee financial expert through his
experience as the Chief Financial Officer of Continental Grain Company and Mr.
Palitz also possesses the attributes of an audit committee financial expert
through his experience as former chairman of City and Suburban Financial
Corporation's audit committee and as the Company's former chief financial
officer.
EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE
The Board has established an Executive Compensation and Stock Option
Committee (the "Executive Compensation Committee"), currently consisting of
three independent directors. The Executive Compensation Committee acts under a
written charter approved by the Board. The current members are Messrs. Swergold
(Chairperson), Timanus and Zimmerman and they were the Executive Compensation
Committee's members during fiscal 2009.
The Executive Compensation Committee reviews and approves the goals,
objectives and performance relevant to the named executive officers'
compensation and approves compensation including equity compensation awards. The
Committee retains and does not delegate any of its exclusive power to determine
all matters of executive compensation and benefits, although the Committee does
discuss the compensation for other executive officers with Mr. Sinsheimer (who
is also a director). The Committee administers the Company's Amended and
Restated 2001 Management Incentive Plan (the "MIP") and the 2006 Stock Incentive
Plan (the "SIP"). The Committee also reviews director compensation annually and
recommends the form and amount of director compensation to the Board of
Directors for approval.
The Executive Compensation Committee considers the competitive market data
provided by its independent compensation consultants, the Company's performance
and the assessments provided by the Chief Executive Officer for each of the
other executives' individual performance. For fiscal 2009, the Committee engaged
Frederic W. Cook & Co., Inc. ("Cook") to construct a peer group of companies,
provide marketplace information and provide advice on competitive market
practices regarding compensation for the Chief Executive Officer. Additionally,
Cook updated the list of peer group comparisons prepared for the Committee for
fiscal 2008 by Watson Wyatt Worldwide and SNL Financial. Cook did not make any
recommendations regarding the amount or form of executive or director
compensation and did not provide any other services to the Company. The
composition of the peer groups are described in the Compensation Discussion and
Analysis section below.
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
The Board has established a Corporate Governance and Nominating Committee,
currently consisting of four independent directors. The Committee acts under a
written charter approved by the Board. The current members are Messrs. Fisher
(Chairperson), Swergold, Timanus and Zimmerman and they were the Corporate
Governance and Nominating Committee's members during fiscal 2009.
The purpose of the Corporate Governance and Nominating Committee is to
ensure that the Board of Directors is properly constituted to meet its fiduciary
obligations to the Company and its stockholders, and that the Company has and
follows appropriate corporate governance standards. The Committee is responsible
for (i) nominating qualified candidates for appointments to the Board (ii)
recommending the code of business conduct and ethics and corporate governance
guidelines to the Board and (iii) overseeing the evaluation of the Board and
management.
The Corporate Governance and Nominating Committee also recommends director
nominations, and reviews the appropriate skills and characteristics required of
Board members. In conducting this assessment, the Committee focuses on a
candidate's financial expertise and finance company experience and considers
knowledge, skills, business experience, administration and relevant technical
disciplines and other appropriate factors given the current needs of the Board
and the Company, to maintain a balance of knowledge, experience and capability.
Nominees for the Board should have the highest personal and professional ethics,
integrity and values and be committed to representing the long-term interests of
stockholders. They should be inquisitive and objective and exhibit practical
judgment on issues. The Committee may engage consultants or third-party search
firms to assist in identifying and evaluating potential nominees.
In recommending candidates for election to the Board, the Corporate
Governance and Nominating Committee considers nominees recommended by directors,
officers, stockholders and others, using the same criteria to evaluate all
candidates. Evaluation of candidates generally involves reviewing background
materials, internal discussions and
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interviewing selected candidates as appropriate. Upon selecting a qualified
candidate, the Committee recommends the candidate for the Board's consideration.
Stockholders may recommend a nominee by writing to the Company's Secretary
specifying the nominee's name and qualifications for Board membership. All
recommendations are submitted to the Corporate Governance and Nominating
Committee. Each submission must include (i) a brief description of the candidate
(ii) the candidate's name, age, business address and residence address (iii) the
candidate's principal occupation (iv) the number of shares of Common Stock
beneficially owned and (v) any other information required by the rules of the
New York Stock Exchange and SEC to list the candidate as a nominee for director
in a proxy statement. Recommended candidates may be required to provide
additional information.
MEETINGS IN FISCAL 2009
During fiscal 2009, the Board of Directors met four times, the Executive
Committee met once, the Audit Committee met four times, the Executive
Compensation and Stock Option Committee met five times and the Corporate
Governance and Nominating Committee met twice. During fiscal 2009, five of the
directors attended, either in person or telephonically, all of the meetings of
the Board and committees on which the director served and the other director
attended at least 93% of the total number of meetings of Board and committees on
which he served.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Stockholders may communicate with the Company's Board of Directors or any
individual director through the Company's Secretary by writing to the following
address: Board of Directors, c/o Secretary, Financial Federal Corporation, 730
Third Avenue, 23rd Floor, New York, NY 10017. The Company's Secretary will
forward all correspondence to the Board, except for spam, junk mail, mass
mailings, job inquiries, surveys, business solicitations or advertisements, or
other inappropriate material. The Company's Secretary may forward certain
correspondence elsewhere within the Company for review and possible response.
Interested parties can report any concerns to non-management directors
confidentially or anonymously by writing direct to the Chair of the Corporate
Governance and Nominating Committee c/o Financial Federal Corporation, 730 Third
Avenue, 23rd Floor, New York, NY 10017. These communications will be reviewed
and any concerns relating to accounting, internal control or auditing will be
forwarded to the Chair of the Audit Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Swergold, Timanus and Zimmerman served as members of the Executive
Compensation and Stock Option Committee during fiscal 2009. They have no
relationship with the Company other than as directors and stockholders and they
have never been (i) an officer or employee of the Company (ii) a participant in
a "related person" transaction or (iii) an executive officer of another entity,
where one of the Company's executive officers serves on the board of directors.
AVAILABLE INFORMATION
The Company's website is http://www.financialfederal.com. The following
corporate governance and committee charter documents are available in the
Investor Relations section of the website under Corporate Governance:
o Corporate Governance Guidelines
o Code of Business Conduct and Ethics
o Charters for the Audit Committee, Executive Compensation and Stock
Option Committee, and Corporate Governance and Nominating Committee.
Copies of these documents are also available free to any stockholder on
request to Financial Federal Corporation, 730 Third Avenue, 23rd Floor, New
York, NY 10017, Attn: Corporate Secretary.
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COMPENSATION OF DIRECTORS
This section provides information regarding the compensation policies for
non-employee directors and amounts paid to them in fiscal 2009. The Executive
Compensation Committee reviews director compensation annually, including fees,
retainers, and equity compensation, as well as total compensation. The Executive
Compensation Committee recommends changes to director compensation to the Board
for approval.
The following table presents the Company's fiscal 2009 cash compensation
arrangements for its non-employee directors. These cash compensation are
unchanged from fiscal 2008. The annual retainers are pro-rated if a director
joins the Board or begins to serve as a committee chair between annual meetings.
Any director who is an officer of the Company (currently only Mr. Sinsheimer)
does not receive compensation for his services as a director. A Director can
elect to receive his annual retainer for service as a director in shares of
Common Stock issued under the SIP.
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Annual Fee for each
Position retainer ($) meeting attended ($)
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Director 45,000 1,000
Audit Committee Chair 10,000 --
Executive Compensation and Stock
Option Committee Chair 6,000 --
Corporate Governance and Nominating
Committee Chair 4,000 --
Committee Member -- 1,000
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The Board believes in granting equity compensation to non-employee
directors to further align their interests with those of stockholders. The
Company does not have an equity compensation plan for non-employee directors,
and instead equity grants are made from time to time at the discretion of the
Board. On December 9, 2008, each non-employee director was awarded a restricted
stock unit grant representing 2,000 shares of Common Stock under the SIP. The
units vest one year after grant or earlier upon a sale of the Company or the
director's death or disability, and are forfeited upon resignation of service
before vesting or if the director is not re-elected to the Board at the next
annual meeting of stockholders. Vested units will be settled with an equal
number of shares of Common Stock upon the director's termination of service or
sale of the Company. The directors receive cash dividend equivalent payments on
vested and unvested restricted stock units when the Company pays a dividend on
its Common Stock.
As of July 31, 2009, each non-employee director held 6,000 vested
restricted stock units and 2,000 unvested restricted stock units, and Mr.
Swergold held 7,500 stock options.
Directors are reimbursed for travel and other expenses directly related to
activities as directors. Directors are also entitled to the protection provided
by the indemnification provisions in the Company's Restated Articles of
Incorporation and Bylaws and under indemnification agreements.
The following table provides compensation information for the non-employee
directors for fiscal 2009.
DIRECTOR COMPENSATION - FISCAL YEAR 2009
-----------------------------------------------------------------------------------------------------------------
Change in
Pension
Value and
Fees Nonqualified
earned or Non-Equity Deferred
paid in Stock Option Incentive Plan Compensation All Other
Name cash ($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total ($)
(a) (b) (c)(1) (d) (e) (f) (g) (h)
-----------------------------------------------------------------------------------------------------------------
Lawrence B. Fisher 56,000 46,740 0 0 0 0 102,740
Michael C. Palitz 54,000 46,740 0 0 0 0 100,740
Leopold Swergold (2) 63,000 46,740 0 0 0 0 109,740
H. E. Timanus, Jr. 70,000 46,740 0 0 0 0 116,740
Michael J. Zimmerman 59,000 46,740 0 0 0 0 105,740
-----------------------------------------------------------------------------------------------------------------
(1) Each amount in this column is the expense recognized for financial
reporting purposes in fiscal 2009 for restricted stock units awarded under
the SIP in fiscal 2007 through fiscal 2009 as calculated without reduction
for estimated forfeitures under SFAS 123(R).
(2) Mr. Swergold elected to receive his $45,000 annual retainer in shares of
Common Stock. He received a grant of 2,010 vested shares on December 9,
2008 when the closing stock price was $22.38.
~ 8 ~
RELATED PERSON TRANSACTIONS
Paul R. Sinsheimer (CEO and director), Michael C. Palitz (director), Troy
H. Geisser (executive officer) and Steven F. Groth (executive officer) directly
or through related entities invest in the Company's commercial paper. The
Company issued this debt under the terms of its direct commercial paper program
at annual interest rates, ranging from 2.25% to 4.00% in fiscal 2009, and at the
same terms and conditions available to unrelated investors. The table below
provides more information on these transactions.
------------------------------------------------------------------------
Principal
Highest Principal Interest Outstanding
Outstanding in Paid during at October
Name Fiscal 2009 ($) Fiscal 2009 ($) 15, 2009 ($)
------------------------------------------------------------------------
Paul R. Sinsheimer 3,516,616 72,349 3,631,183
Michael C. Palitz 605,477 21,086 512,857
Troy H. Geisser 490,214 3,844 534,225
Steven F. Groth 1,715,453 15,453 1,740,106
------------------------------------------------------------------------
BOARD REVIEW OF TRANSACTIONS WITH RELATED PERSONS
The Board of Directors has adopted Procedures for Review of Related Person
Transactions (the "Procedures"), that set forth the procedures followed by the
Company for the review and approval or ratification of transactions with related
persons. The Procedures are designed to ensure that any transaction with a
related person is fair and reasonable to, and in the best interests of, the
Company and does not violate the Company's Corporate Governance Guidelines or
the Code of Business Conduct. Related persons include directors, nominees for
election as a director and the Company's executive officers, as well as the
members of each such person's immediate family. The Procedures require that (i)
any transaction between the Company and an executive officer (other than the
Chief Executive Officer) or his or her immediate family member be approved by
the Chief Executive Officer and (ii) any transaction between the Company and a
director, nominee for election as a director or the Chief Executive Officer or
his or her immediate family member be approved by the Corporate Governance and
Nominating Committee. The transactions covered include any business, financial,
legal, accounting, consulting or employment transaction, arrangement or
relationship.
The commercial paper transactions referred to above occurred before the
Procedures were in effect. The commercial paper was issued to the executives and
director at the same terms and conditions as the Company issues commercial paper
to unrelated investors and therefore, the Board of Directors believes the
transactions were fair and reasonable to the Company.
~ 9 ~
COMPENSATION DISCUSSION AND ANALYSIS
This discussion describes the Company's compensation program for the five
named executive officers, namely, the Chief Executive Officer (CEO), Chief
Financial Officer (CFO) and the three other most highly compensated executive
officers in fiscal 2009.
OVERVIEW, OBJECTIVES AND COMPENSATION PHILOSOPHY
The Executive Compensation and Stock Option Committee (the "Committee") is
responsible for determining the compensation of the named executive officers.
The Committee oversees the compensation programs for these officers to ensure
consistency with Company goals and objectives and is responsible for designing
and executing the Company's executive compensation program.
The Committee's primary objectives in designing the executive compensation
program are to:
o retain key executive officers;
o link compensation directly to the Company's performance; and
o align executive officers' interests with those of stockholders.
Therefore, the Committee believes long-term performance-based equity
compensation in the form of restricted stock with extended vesting is the most
effective way to compensate executive officers and achieve these objectives. The
Committee believes earnings, asset quality, leverage, available liquidity,
growth and risk management are fundamental key metrics to measure the Company's
performance and determine compensation. The Committee also reviews compensation
paid to similarly situated executives of designated peer companies and the named
executive officers' past compensation primarily as reference points.
The Committee believes the Company has an outstanding management team that
has produced excellent results since the Company's inception in 1989. The
Company has been profitable in every fiscal quarter since its founding
regardless of economic conditions. There has been little turnover among
executive management during the last ten years. Four of the named executive
officers have been with the Company for more than ten years and the other named
executive officer (Mr. Groth) joined the Company nine years ago. The Committee
believes the Company's continuing success and management team retention
demonstrates the success and effectiveness of its compensation policies.
Fiscal 2009 was another successful year as evidenced by the amounts of net
income and earnings per share, coupled with maintaining superior asset quality,
low leverage and ample liquidity. The Committee believes this was particularly
impressive given the extremely difficult circumstances in capital markets, the
financial services industry and the economy in general. As a result, the
Committee believes it is important to keep intact the executive management team
that has generated positive results for the Company and its stockholders.
The Committee's philosophy also includes linking a significant portion of
the CEO's cash compensation directly to the Company's year-to-year performance.
Accordingly, while the Company's annual incentive plan allows for the payment of
cash awards to any of the Company's executive officers, the Committee believes
the CEO should be the only executive compensated with cash incentives for
short-term corporate performance and that other executives should have their
performance-based compensation linked to the long-term success of the Company
through equity awards. The Committee believes this is appropriate because the
CEO is ultimately responsible for the Company's yearly performance.
OVERVIEW OF COMPENSATION PROGRAM
The executive compensation program features the following practices
designed to achieve the Committee's objectives of retention, pay for performance
and alignment of executive officers' interests with those of stockholders:
o No employment agreements or cash severance arrangements;
o No retirement or pension plans (other than a one-time equity-based
award of restricted stock units to the CEO in 2002 that requires
almost eight years of service before full vesting and generally will
not be settled with shares until the CEO's retirement after age 62);
o Providing competitive base salaries that are not automatically
increased each year;
o Limiting the annual cash bonus opportunity to only the CEO;
o Awarding performance-based restricted stock linked to the Company's
profitability with extended vesting;
o Grants of restricted stock and restricted stock units to the named
executive officers in 2006 and 2009 as long-term incentives to further
encourage them to remain with the Company for the rest of their
careers. The awards generally vest only upon termination of employment
after age 62 or earlier upon a sale of the Company or the executive
officer's death or disability;
o Tax restoration payments if the executives incur a golden parachute
excise tax upon a change of control ; and
o Limited perquisites and other personal benefits.
~ 10 ~
COMPENSATION PEER GROUPS AND TALLY SHEET INFORMATION
Given the Company's niche role in the financial services industry, it is
difficult to identify and construct a true peer group of competitive companies.
To evaluate competitive compensation practices in fiscal 2009, the Committee
retained the services of Frederic W. Cook & Co., Inc. ("Cook") to construct a
peer group consisting of both commercial lenders and other financial
institutions. Additionally, Cook updated the peer groups utilized by the
Committee the previous fiscal year, consisting of both commercial lenders and
other financial institutions, constructed for the Company in fiscal 2008 by
compensation consultants Watson Wyatt and SNL Financial.
Frederic W. Cook Peer Group
---------------------------
First Busey Glacier Bancorp
First Community Bancshares Home Bancshares
First Financial Bancorp Lakeland Financial
First Financial Bankshares Renasant
First Merchants S & T Bancorp
FNB Corp SCBT Financial
Frontier Financial Texas Capital Bancshares
Watson Wyatt Peer Group
-----------------------
Trustco Bank Corp. NY Firstfed Financial Corp.
Republic Bancorp Inc. Hanmi Financial Corp.
Sterling Financial Corp. Bankunited Financial Corp.
Community Bank System Inc. Triad Guaranty Inc.
Capitol Bancorp Ltd. Dime Community Bancshares Inc.
SNL Financial Peer Group
------------------------
Banks:
------
Lakeland Bancorp, Inc. Century Bancorp, Inc.
Tompkins Financial Corporation Intervest Bancshares Corporation
Sterling Bancorp Camden National Corporation
Hudson Valley Holding Corp. Pennsylvania Commerce Bancorp, Inc.
Financial Institutions, Inc. State Bancorp, Inc.
Omega Financial Corporation Arrow Financial Corporation
Univest Corporation of Pennsylvania Bancorp Rhode Island, Inc.
Suffolk Bancorp
Specialty Lenders:
------------------
Interpool, Inc. Franklin Credit Management Corporation
Advanta Corp. TAL International Group, Inc.
Williams Scotsman International, Inc.
Cook also provided data to the Committee showing the compensation each
company paid to its chief executive officer in 2007. In addition to the peer
group data, the Committee also requested and reviewed a "tally sheet" showing
the CEO's total compensation from the Company. The tally sheet lists each
element of the CEO's fiscal year compensation, the compensation the CEO would
have received upon a sale of the Company or termination of employment without
cause, and the current value of previously granted compensatory awards. The
Committee also requested and reviewed reports from the Company showing each
executive officer's total compensation for the last five years.
TAX AND ACCOUNTING CONSIDERATIONS
Under Section 162(m) of the Internal Revenue Code, the Company is
prohibited from deducting for federal income tax purposes compensation in excess
of $1 million paid to the Company's principal executive officer and the
Company's three highest compensated executive officers (other than the principal
executive officer or the principal financial officer), except this prohibition
does not apply to compensation that qualifies as "performance-based
compensation." The Committee takes the Section 162(m) limit into account in
determining executive compensation, but retains the flexibility to grant awards
that do not qualify as performance-based compensation to the extent the
Committee considers necessary or appropriate to meet its compensation
objectives.
The Committee also considers and reviews the accounting implications of its
executive compensation decisions.
COMPONENTS OF EXECUTIVE COMPENSATION
The compensation of named executive officers has two primary components:
long-term incentive compensation and annual base salary. The CEO also has an
annual cash incentive bonus opportunity and received a supplemental executive
~ 11 ~
retirement ("SERP") benefit in the form of restricted stock units in fiscal
2002. Executive perquisites and other personal benefits are limited primarily to
the benefits available to other employees and represent a minor portion of total
compensation. The Company also does not have any employment or severance
agreements with executive officers or any retirement programs (other than the
SERP benefit for the CEO). The Committee's philosophy is to not provide cash
severance because it wants to reward and motivate performance and not compensate
former executives no longer contributing to the Company.
LONG-TERM INCENTIVE COMPENSATION
The Company's long-term incentive compensation arrangements are designed to
retain its executive officers and to ensure that a significant portion of their
compensation is at risk and linked directly with the Company's long-term
success. Long-term compensation is provided through equity awards under the 2006
Stock Incentive Plan described below and is principally in the form of
restricted stock or restricted stock units settled in shares of Common Stock
(collectively, "stock grants") with extended vesting periods. The Committee has
relied on stock grants for executives, rather than stock options, as the
preferred form of long-term incentive compensation award since Fiscal 2002
because it believes stock grants align an executive's interests more closely
with those of shareholders. The Committee does not have a formal policy for when
it grants stock options or other equity-based awards.
The executive officers receive dividends on all unvested shares of
restricted stock and dividend equivalent payments on restricted stock units when
the Company pays a dividend on its Common Stock. The agreements for restricted
stock and restricted stock units provide for immediate vesting in full upon a
sale of the Company or the officer's death or disability. Some of the agreements
also provide for immediate vesting in full upon a termination of the executive's
employment by the Company without "cause" or a termination by the executive for
"good reason." Unvested shares are subject to forfeiture upon termination of
employment for any other reason.
AMENDED AND RESTATED 2001 MANAGEMENT INCENTIVE PLAN (MIP)
The Amended and Restated 2001 Management Incentive Plan, or MIP, was last
approved by stockholders in December 2006. The MIP is designed to qualify awards
as performance-based compensation under Internal Revenue Code Section 162(m).
The CEO and the Company's other executive officers are eligible to receive
awards under the MIP. Both bonus and restricted stock awards may be granted
under the MIP. The maximum bonus award for a performance period is $3.0 million
and the maximum annual restricted stock award is 200,000 shares. Bonus awards
can be based on the achievement of individual targets or one or more specified
financial performance goals over a performance period not to exceed 12 months as
determined by the Committee. Bonus awards may be paid in cash or shares of
Common Stock. Restricted stock awards are subject to the achievement of one of
more specified financial performance goals over a performance period not to
exceed 12 months, and, if earned at the end of the performance period, may then
be subject to time-based vesting requirements. A total of 1,000,000 shares of
Common Stock were authorized for awards under the MIP and 625,000 shares
remained available for future awards at July 31, 2009.
2006 STOCK INCENTIVE PLAN (SIP)
The 2006 Stock Incentive Plan, or SIP, was approved by stockholders in
December 2006. All employees are eligible to receive awards under the SIP, which
may be restricted stock, stock options, restricted stock units or stock
appreciation rights. No employee may receive in any fiscal year (i) stock
options to purchase more than 250,000 shares (ii) stock appreciation rights
relating to more than 250,000 shares or (iii) restricted stock or restricted
stock unit awards that in the aggregate exceed 200,000 shares. A total of
2,500,000 shares of Common Stock were authorized for awards and 1,679,288
remained available for future awards at July 31, 2009.
ANNUAL BASE SALARY
The Committee sets named executive officer base salaries primarily based on
the abilities, performance and experience of the individual. The Committee also
reviews past compensation and receives recommendations from the CEO about their
compensation levels. The Committee sets base salaries for the named executive
officers at competitive levels because it does not believe all of an executive's
compensation should be at risk. In establishing the level of these salaries, the
Committee considers the Company does not offer benefits comparable to the
benefits offered by many of the companies in the peer groups such as pension
benefits and a 401(k) employer match.
SUPPLEMENTAL RETIREMENT BENEFITS (SERP)
The Company established a Supplemental Retirement Benefits program, or
SERP, for Mr. Sinsheimer in Fiscal 2002. Mr. Sinsheimer became the Company's CEO
in Fiscal 2001. The purposes of the SERP were to retain his services for many
years and to motivate him further to create stockholder value. Under the SERP,
Mr. Sinsheimer was awarded a grant of 150,000 restricted stock units subject to
annual vesting over an eight-year period ending on January 1, 2010. The extended
vesting period was designed to encourage Mr. Sinsheimer to focus on the
Company's long-term success. Granting restricted stock units furthered this
long-term objective since the underlying shares will generally not be released
to Mr. Sinsheimer until after termination of his employment as CEO after age 62.
The SERP is discussed further in the Nonqualified Deferred Compensation section
below.
~ 12 ~
EMPLOYEE BENEFITS, PERQUISITES AND DEFERRED COMPENSATION
The Company offers very limited perquisites and other personal benefits to
the named executive officers consisting mainly of 401(k) plan participation
without Company matching contributions and a health plan requiring monthly
employee payments. The limited perquisites provided to the named executive
officers during fiscal 2009 are shown in column (i) of the Summary Compensation
Table below.
Named executive officers can defer compensation but the Company does not
match any amounts deferred. Deferred compensation arrangements are described in
the Nonqualified Deferred Compensation section below.
CHANGE IN CONTROL AND SEVERANCE
The Company does not have any plans or arrangements that entitle its
executive officers to receive cash severance benefits in the event of a change
in control or a termination of employment. All unvested shares of restricted
stock and unvested restricted stock units awarded to the named executive
officers vest fully upon a sale of the Company, whether or not the employment of
the executive is terminated in connection with the sale (commonly referred to as
a "single trigger") or the officer's death or disability, and some may also vest
upon a termination of the executive's employment by the Company without "cause"
or a termination by the executive for "good reason. The Committee considers a
sale of the Company as a triggering event for the acceleration of the vesting of
equity awards to be reasonable and necessary from a competitive perspective and
to induce retention in the event a corporate transaction could place the
executive's job in jeopardy. In addition, since the Company provides no cash
severance and because equity compensation is the primary form of long-term
incentive compensation, the Committee believes providing accelerated vesting is
also appropriate in the event the executive's employment is terminated
involuntarily without cause.
Each named executive officer, under an Excise Tax Restoration Agreement,
has the right to receive excise tax restoration payments if there is a sale of
the Company and the accelerated vesting of restricted stock, restricted stock
units and any other payments or benefits received triggers an excise tax payment
under Section 280G of the Internal Revenue Code (the federal golden parachute
excise tax rules). Reimbursing the executive for any excise tax incurred ensures
the purpose and benefits of their long-term stock awards are achieved and
eliminates the incentive an executive might otherwise have to not support the
transaction. The Committee also believes providing excise tax restoration is
appropriate so executive officers would receive the same value from their equity
holdings as other stockholders.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Sinsheimer's annual base salary for fiscal 2009 was $600,000. This has
been his annual base salary since February 2006. Before February 2006, Mr.
Sinsheimer's annual base salary was $750,000 at its highest level. The Committee
and Mr. Sinsheimer previously agreed to reduce his base salary to its present
level in exchange for an increase in the at-risk, performance-based portion of
his total compensation.
For fiscal 2009, the Committee approved for the CEO both an annual award
and a long-term equity performance award under the MIP. As an annual award, the
CEO was eligible to earn a performance-based bonus ranging from $0 to $1,000,000
depending on the Company's fiscal 2009 diluted earnings per share ("EPS"), with
(i) a threshold bonus of $100,000 requiring minimum EPS of $1.55 (ii) a target
bonus of $400,000 requiring minimum EPS of $1.65 and (iii) a maximum bonus of
$1,000,000 requiring minimum EPS of $1.80. EPS is a reported financial metric
used to evaluate a Company's performance, that the Committee believes has a
positive correlation with increased stockholder value. In fiscal 2008, the
Company attained record EPS of $2.01. Consistent with the Committee's desire to
link compensation directly to successful Company performance, over 60% of the
CEO's maximum possible annual cash compensation for fiscal 2009 was payable
under the MIP and at risk. As an equity award, the CEO received a grant of
50,000 shares of restricted stock contingent upon the Company achieving EPS of
at least $1.65 for fiscal 2009, and subject forfeiture in its entirety if the
performance condition was not achieved. To encourage the CEO's long-term
service, the award provides for the shares, if earned, to vest five years from
the date of grant, subject to earlier vesting upon a sale of the Company, the
CEO's death or disability, termination of the CEO's employment by the Company
without "cause" or a termination of employment by the CEO for "good reason."
The Committee retained discretion, regardless of the amount of EPS achieved
for fiscal 2009, to reduce or eliminate (i) the amount of any bonus over the
$400,000 target amount and (ii) the restricted stock award.
For fiscal 2009, the Company reported EPS of $1.72. This resulted in the
CEO receiving a cash bonus of $600,000 and retaining all 50,000 shares of
restricted stock. The Committee did not exercise its negative discretion to
reduce either award because the Company's financial results were outstanding
considering the extremely difficult conditions in capital markets and the
economy.
The CEO's compensation is materially greater than the other executive
officers' compensation because his responsibilities for the management and
strategic direction of the Company are significantly greater and he has
substantial additional obligations as CEO. Mr. Sinsheimer is a co-founder of the
Company and has been its primary guiding force for
~ 13 ~
many years. He serves as CEO, President and Chairman of the Board. The
difference between his and the other executive officers' compensation is
primarily attributable to higher performance-based incentive awards that will
only create value for Mr. Sinsheimer if Company performance goals are attained.
The Committee believes it is desirable to provide a significant amount of
at-risk, performance-based compensation to the CEO to continue to encourage and
reward him for superior accomplishments.
COMPENSATION OF OTHER NAMED EXECUTIVE OFFICERS
The Committee uses the same criteria it uses for the CEO to set
compensation for each of the other named executive officers. The Committee's
objective in setting their compensation is to provide them with an equitable
level of compensation taking into account (i) their performance (ii) their
responsibilities (iii) their past compensation (iv) their compensation relative
to each other (v) compensation levels at companies in the peer groups and (vi)
their compensation levels relative to the next tier of management. As a result,
the base salaries and long-term equity compensation awards are similar among the
other named executive officers. The Committee reviews its initial executive
compensation determinations with the CEO and may make changes based on the CEO's
input.
The Committee did not make any changes to the salary levels of the other
named executive officers for fiscal 2009. For fiscal 2008, the Committee
approved the following increases in the other named executive officers' salaries
effective October 1, 2007 to reward them for their contributions to the many
years of successful Company performance and because their base salaries have
been the same since Fiscal 2005.
----------------------------------------------------------------
Previous Adjusted
Name Salary ($) Salary ($) Increase (%)
----------------------------------------------------------------
John V. Golio 315,000 350,000 11
James H. Mayes, Jr. 300,000 350,000 17
Steven F. Groth 300,000 340,000 13
Troy H. Geisser 295,000 340,000 15
----------------------------------------------------------------
For fiscal 2009, the Committee awarded two stock grants to each other named
executive officer under the SIP. In October 2008, Messrs. Golio and Mayes
received a grant of 20,000 shares of restricted stock and Messrs. Groth and
Geisser 16,500 shares contingent upon the Company achieving EPS of at least
$1.65 for fiscal 2009, and subject to forfeiture in their entirety if the
performance condition is not achieved. The Company reported EPS of $1.72 for
fiscal 2009. The Committee did not exercise negative discretion to reduce the
awards because the Company's financial results were outstanding considering the
extremely difficult conditions in capital markets and the economy. Accordingly,
each other named executive officer retained all of the shares granted. To
encourage their long-term service, the awards provide for the shares to vest at
the rate of 25% each year starting October 5, 2010, subject to earlier vesting
upon a sale of the Company, the executive's death or disability, termination of
the executive's employment by the Company without "cause" or a termination of
employment by the executive for "good reason."
In February 2009, the Committee approved an award of 10,000 restricted
stock units for each other named executive officer in consideration of the
Company's performance despite adverse market conditions caused by the ongoing
credit crisis and recession. These awards are not contingent on the achievement
of pre-established performance criteria. To encourage long-term service, the
restricted stock units vest upon the earlier of the executive officers attaining
age 62 or February 22, 2026, but subject to (i) immediate vesting in full upon a
change of control or the death or disability of the executive and (ii) pro rata
vesting (based on the time elapsed from the date of the grant) in the event of a
termination of the executive's employment by the Company without "cause" or a
termination of employment by the executive for "good reason."
STOCK OWNERSHIP GUIDELINES
The Company does not have a formal policy mandating each executive's
ownership level of Common Stock, although executive officers are expected to own
a meaningful number of shares.
COMPENSATION COMMITTEE REPORT
We, the Executive Compensation and Stock Option Committee of the Board of
Directors of the Company, have reviewed and discussed the foregoing Compensation
Discussion and Analysis with the management of the Company and, based on this
review and discussion, have recommended to the Board of Directors that it be
included in this Proxy Statement.
Executive Compensation and Stock Option Committee
Leopold Swergold, Chairman
H. E. Timanus, Jr.
Michael Zimmerman
~ 14 ~
The following tables provide information on compensation for services
of the Company's principal executive officer, principal financial officer and
its three other most highly compensated executive officers, as determined on the
basis of their total compensation for fiscal 2009. The information in this table
includes compensation paid by the Company or its subsidiaries.
SUMMARY COMPENSATION TABLE - FISCAL YEAR 2009
-----------------------------------------------------------------------------------------------------------------------------
Change in
Pension Value
Non-Equity and
Incentive Nonqualified
Plan Deferred All Other
Name and Principal Stock Option Compensation Compensation Compensation
Position Year Salary($) Bonus($) Awards($) Awards($) ($) Earnings($) ($) Total ($)
(a) (b) (c) (d) (e)(1) (f)(1) (g)(2) (h) (i)(3) (j)
-----------------------------------------------------------------------------------------------------------------------------
PAUL R. SINSHEIMER
President, Chief 2009 600,000 0 3,018,934 0 600,000 0 14,400 4,233,334
Executive Officer 2008 600,000 0 2,932,161 0 1,000,000 0 14,400 4,546,561
and Chairman 2007 600,000 100,000 2,775,339 0 900,000 0 14,400 4,389,739
-----------------------------------------------------------------------------------------------------------------------------
STEVEN F. GROTH
Senior Vice 2009 340,000 0 729,376 0 0 0 0 1,069,376
President and Chief 2008 333,333 0 609,582 0 0 0 0 942,915
Financial Officer 2007 300,000 0 475,677 0 0 0 0 775,677
-----------------------------------------------------------------------------------------------------------------------------
JOHN V. GOLIO 2009 350,000 0 818,352 0 0 0 0 1,168,352
Executive Vice 2008 344,167 0 685,075 0 0 0 0 1,029,242
President 2007 315,000 0 496,589 10,920 0 0 0 822,509
-----------------------------------------------------------------------------------------------------------------------------
JAMES H. MAYES, JR. 2009 350,000 0 745,212 0 0 0 12,000 1,107,212
Executive Vice 2008 341,667 0 612,782 0 0 0 12,000 966,449
President 2007 300,000 0 393,465 22,827 0 0 12,000 728,292
-----------------------------------------------------------------------------------------------------------------------------
TROY H. GEISSER
Senior Vice 2009 340,000 0 755,472 0 0 0 0 1,095,472
President and 2008 332,500 0 644,742 0 0 0 0 977,242
Secretary 2007 295,000 0 479,711 10,920 0 0 0 785,631
-----------------------------------------------------------------------------------------------------------------------------
(1) The amounts in columns (e) and (f) are the expense recognized for financial
statement reporting purposes in fiscal 2009 for equity awards granted in
fiscal 2002 through fiscal 2009 as calculated without reduction for
estimated forfeitures under SFAS 123(R). Assumptions used to calculate the
amounts in column (f) are provided in Note 6 to the Company's audited
consolidated financial statements for the fiscal year ended July 31, 2009
included in its Annual Report on Form 10-K filed with the SEC on September
28, 2009.
(2) The amounts in this column are the cash incentive bonus awards paid to the
CEO under the MIP.
(3) The amounts in this column consist solely of an automobile allowance. The
aggregate amount of perquisites and other personal benefits received by
Messrs. Golio, Geisser and Groth in each year did not exceed the $10,000
annual de minimis reporting threshold.
~ 15 ~
The following table provides information on cash-based performance awards
and restricted stock granted in fiscal 2009 to the named executive officers.
These awards are described in the Compensation Discussion and Analysis section
above. There can be no assurance the Grant Date Fair Value of Stock Awards will
be the amount actually realized by the officer.
GRANTS OF PLAN-BASED AWARDS - FISCAL YEAR 2009
----------------------------------------------------------------------------------------------------------
Estimated future payouts under
non-equity incentive plan awards
--------------------------------------
Grant Date
All other stock Fair Value
awards: number of of Stock
Name Grant date Threshold ($) Target ($) Maximum ($) shares of stock (#) Awards($)
(a) (b) (c) (d) (e) (i) (l) (1)
----------------------------------------------------------------------------------------------------------
Paul R. Sinsheimer (2) 100,000 400,000 1,000,000 0 0
10/22/2008 0 0 0 50,000 982,000
----------------------------------------------------------------------------------------------------------
Steven F. Groth 03/03/2009 0 0 0 10,000 177,600
10/22/2008 0 0 0 16,500 324,060
----------------------------------------------------------------------------------------------------------
John V. Golio 03/03/2009 0 0 0 10,000 177,600
10/22/2008 0 0 0 20,000 392,800
----------------------------------------------------------------------------------------------------------
James H. Mayes, Jr. 03/03/2009 0 0 0 10,000 177,600
10/22/2008 0 0 0 20,000 392,800
----------------------------------------------------------------------------------------------------------
Troy H. Geisser 03/03/2009 0 0 0 10,000 177,600
10/22/2008 0 0 0 16,500 324,060
----------------------------------------------------------------------------------------------------------
(1) Represents the grant date fair value as determined under SFAS 123(R) of
stock awards calculated by multiplying the number of shares by the grant
date closing price of the Common Stock of $19.64 on October 22, 2008 and
$17.76 on March 3, 2009.
(2) Mr. Sinsheimer received $600,000 of the $1,000,000 maximum award granted on
October 22, 2008 as reported in the Summary Compensation Table.
The following table shows the number of unvested shares of restricted stock
and restricted stock units held by the named executive officers as of July 31,
2009.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END - 2009
--------------------------------------------------------------------------------------------------------------
Option awards Stock awards
------------------------------------------------- ---------------------------------
Number of Number of
securities securities Market value
underlying underlying Number of shares of shares or
unexercised unexercised Option Option or units of stock units of stock
options (#) options (#) exercise expiration that have not that have not
Name exercisable unexercisable price ($) date vested (#) vested ($)
(a) (b) (c) (e) (f) (g) (6) (h) (7)
--------------------------------------------------------------------------------------------------------------
Paul R. Sinsheimer (1) 0 0 -- -- 358,192 7,264,134
Steven F. Groth (2) 0 0 -- -- 109,812 2,226,987
John V. Golio (3) 0 0 -- -- 135,562 2,749,197
James H. Mayes, Jr. (4) 0 0 -- -- 181,875 3,688,425
Troy H. Geisser (5) 0 0 -- -- 131,750 2,671,890
--------------------------------------------------------------------------------------------------------------
(1) Scheduled to vest as follows: 6,671 shares on September 28, 2009; 3,000
shares on October 14, 2009; 8,937 shares on November 2, 2009; 15,834 shares
on March 15, 2010; 18,750 units on January 1, 2010; 75,000 shares on
October 5, 2012; 50,000 shares on October 5, 2013; 180,000 shares on
February 13, 2010 (see footnote 6).
(2) Scheduled to vest as follows: 17,875 shares on March 15, 2010; 937 shares
on April 30, 2010, 2011 (938 shares) and 2012; 4,125 shares on October 5,
2010, 2011, 2012 and 2013; 2,875 shares on March 15, 2011 and 2012; 1,875
shares on March 15, 2013; 25,000 shares on October 5, 2012; 30,000 shares
and 10,000 units on November 12, 2014 (see footnote 6).
~ 16 ~
(3) Scheduled to vest as follows: 21,750 shares on March 15, 2010; 937 shares
on April 30, 2010, 2011 (938 shares) and 2012; 5,000 shares on October 5,
2010, 2011, 2012 and 2013; 3,000 shares on March 15, 2011 and 2012; 30,000
shares on October 5, 2012; 45,000 shares and 10,000 units on May 2, 2023
(see footnote 6).
(4) Scheduled to vest as follows: 14,375 shares on March 15, 2010; 3,750 shares
on April 30, 2010, 2011 and 2012; 5,000 shares on October 5, 2010, 2011,
2012 and 2013; 12,500 shares on March 15, 2011; 6,875 shares on March 15,
2012; 1,875 shares on March 15, 2013; 30,000 shares on October 5, 2012;
75,000 shares and 10,000 units on August 22, 2026 (see footnote 6).
(5) Scheduled to vest as follows: 18,000 shares on March 15, 2010; 3,750 shares
on April 30, 2010, 2011 and 2012; 4,125 shares on October 5, 2010, 2011,
2012 and 2013; 3,000 shares on March 15, 2011 and 2012; 25,000 shares on
October 5, 2012; 45,000 shares and 10,000 units on November 18, 2023 (see
footnote 6).
(6) These amounts are the long-term restricted stock award granted in February
2006 and the long-term restricted stock unit award granted in March 2009.
These shares and units are scheduled to vest and be delivered to the
executives on the earlier of (i) six months after the executive's
termination of service (other than if terminated for cause) on or after
attaining age 62 (ii) the executive's death or disability or (iii) a sale
of the Company. If an executive's service is terminated by the Company
without "cause" or by the executive for "good reason" before the executive
attains age 62, the executive will receive delivery of a portion of the
shares or units based on the percentage of the vesting period elapsed. The
remaining shares or units would be forfeited. Additionally, all shares and
units would be forfeited (i) if the executive's service terminates in any
manner other than described above or (ii) if the Company terminates the
executive's service for cause.
(7) The market value of unvested shares of restricted stock and restricted
stock units was calculated by multiplying the number of shares or units by
the $20.28 closing price of the Common Stock on July 31, 2009.
The following table shows the number of shares of restricted stock and
restricted stock units that vested, along with their market value at the time of
vesting, for the named executive officers during fiscal 2009.
OPTION EXERCISES AND STOCK VESTED - FISCAL YEAR 2009
------------------------------------------------------------------------------------------
Option awards Stock awards
--------------------------------- --------------------------------
Number of Number of
shares acquired Value realized shares acquired Value realized
Name on exercise (#) on exercise ($) on vesting (#) on vesting ($)
(a) (b) (c) (d) (e)
------------------------------------------------------------------------------------------
Paul R. Sinsheimer (1) 0 0 53,192 1,185,265
Steven F. Groth 0 0 18,813 379,512
John V. Golio 0 0 22,688 456,779
James H. Mayes, Jr. 0 0 18,125 378,925
Troy H. Geisser 0 0 21,750 451,208
------------------------------------------------------------------------------------------
(1) The amounts in columns (d) and (e) include 18,750 restricted stock units
that vested under the SERP. The SERP is described in the Nonqualified
Deferred Compensation section.
~ 17 ~
PENSION BENEFITS
The Company does not maintain any pension plan arrangements for the named
executive officers.
NONQUALIFIED DEFERRED COMPENSATION
As discussed in the Compensation Discussion and Analysis section above, the
Company established a Supplemental Retirement Benefit ("SERP") for Mr.
Sinsheimer in June 2002. Under the SERP, the Company awarded Mr. Sinsheimer
150,000 restricted stock units. The restricted stock units vest in equal annual
increments on January 1 of each year over eight years as long as Mr. Sinsheimer
remains CEO, but are subject to immediate vesting upon a sale of the Company or
upon his death, termination of his employment due to disability or without
"cause", or his voluntary termination of employment for "good reason"
(collectively, a "qualifying termination of employment"). Mr. Sinsheimer will
receive shares of Common Stock equal to the number of vested restricted stock
units (i) when he retires (ii) upon a sale of the Company or (iii) upon a
qualifying termination of employment. Under the terms of the SERP, Mr.
Sinsheimer receives dividend equivalent payments on vested and unvested units
when the Company pays a dividend on its Common Stock. As of July 31, 2009,
131,250 units have vested.
Mr. Sinsheimer and the Company entered into two agreements to defer receipt
of 27,084 shares of vested restricted stock under which he was credited with an
equal number of vested restricted stock units. Mr. Sinsheimer receives dividend
equivalent payments on these units when the Company pays a dividend on its
Common Stock. Mr. Geisser entered into four deferred compensation agreements
with the Company under which he deferred portions of his salary and receives
interest credits on the deferred balances. The executives' right to receive
these deferred compensation payments is that of an unsecured general creditor.
The following table shows the contributions, earnings, withdrawals and
balances as of July 31, 2009 for the named executive officers under these
nonqualified deferred compensation plans and arrangements. The executive
officers and the Company did not make any contributions in fiscal 2009.
NONQUALIFIED DEFERRED COMPENSATION - FISCAL YEAR 2009
-----------------------------------------------------------------------------------------------
Executive Registrant Aggregate Aggregate Aggregate
contributions contributions earnings in withdrawals/ balance at
Name in last FY ($) in last FY ($) last FY ($) distributions($) last FYE ($)
(a) (b) (c) (d) (e) (f)
-----------------------------------------------------------------------------------------------
Paul R. Sinsheimer
(1a) 0 0 (75,023) 0 549,264
(1b) 0 0 (415,500) 0 3,042,000
-----------------------------------------------------------------------------------------------
Steven F. Groth 0 0 0 0 0
-----------------------------------------------------------------------------------------------
John V. Golio 0 0 0 0 0
-----------------------------------------------------------------------------------------------
James H. Mayes, Jr. 0 0 0 0 0
-----------------------------------------------------------------------------------------------
Troy H. Geisser
(2a) 0 0 2,138 33,863 0
(2b) 0 0 1,635 0 37,469
(2c) 0 0 3,625 62,104 0
(2d) 0 0 4,230 0 76,065
-----------------------------------------------------------------------------------------------
(1a) The loss in column (d) is calculated by multiplying (i) the 27,084 vested
restricted stock units credited to Mr. Sinsheimer in February 2003 under
two agreements for the deferral of vested restricted stock by (ii) the
difference between the closing price of the Common Stock at year-end fiscal
2009 ($20.28) and year-end fiscal 2008 ($23.05). The balance in column (f)
is the 27,084 vested restricted stock units multiplied by the year-end
fiscal 2009 closing price. These vested restricted stock units will be
settled by the delivery of shares of Common Stock on January 1, 2010.
(1b) The loss in column (d) is calculated by multiplying (i) the total of the
131,250 vested and 18,750 unvested restricted stock units credited under
the SERP by (ii) the difference between the closing price of the Common
Stock at year-end fiscal 2009 ($20.28) and year-end fiscal 2008 ($23.05).
The balance in column (f) is the total of the 131,250 vested and 18,750
unvested restricted stock units multiplied by the year-end fiscal 2009
closing price.
~ 18 ~
(2a) Reflects an August 1, 1996 deferred compensation agreement for the deferral
of $14,583 of salary by Mr. Geisser with interest accruing at a 6.54%
annual rate, compounded monthly, until it was settled with a $33,863 lump
sum payment on July 31, 2009.
(2b) Reflects a December 18, 1998 deferred compensation agreement for the
deferral of $24,000 of salary by Mr. Geisser with interest accruing at a
4.43% annual rate, compounded monthly, until it is settled with a $39,002
lump sum payment on June 30, 2010. The present value will be paid earlier
upon a termination of employment.
(2c) Reflects a December 27, 1999 deferred compensation agreement for the
deferral of $36,000 of salary by Mr. Geisser with interest accruing at a
6.03% annual rate, compounded monthly, until it was settled with a $62,104
lump sum payment on July 31, 2009.
(2d) Reflects a December 27, 2000 deferred compensation agreement for the
deferral of $48,000 of salary by Mr. Geisser with interest accruing at a
5.72% annual rate, compounded monthly, until it is settled with an $80,139
lump sum payment on June 30, 2010. The present value will be paid earlier
upon a termination of employment.
(3) None of the amounts in the table were reported in the 2009 Summary
Compensation Table.
(4) The entire amount for Mr. Sinsheimer was reported in the Restricted Stock
Awards column of the Summary Compensation Table for fiscal 2002. $48,000 of
the amount for Mr. Geisser was reported in the Salary column of the Summary
Compensation Table for fiscal 2003.
~ 19 ~
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
None of the executive officers has employment, severance or change in
control agreements providing payments or other benefits upon a change of control
or termination of employment except for (i) the SERP for the CEO (ii) the terms
of restricted stock and restricted stock unit agreements and (iii) nonqualified
deferred compensation agreements. The Company has entered into Excise Tax
Restoration Agreements with each of the named executive officers as described
below.
PAYMENTS MADE UPON RESIGNATION OR TERMINATION FOR CAUSE
If an executive resigns without good reason or is terminated by the Company
for cause, the executive will be entitled only to any accrued and unpaid salary
and vested benefits and no cash severance.
PAYMENTS MADE UPON TERMINATION BY COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD
REASON OR DUE TO DEATH, DISABILITY, OR SALE OF COMPANY
If there is a sale of the Company, or a named executive officer's
employment is terminated by the Company without "cause" or by the executive for
"good reason", or due to death or disability, the officer will generally be
entitled to full vesting of all unvested shares of restricted stock and
restricted stock units. However, the executive officers' February 2006
restricted stock agreements and March 2009 restricted stock unit agreements
provide only for a portion (based on the percentage of the vesting period
elapsed) of the shares to vest if the named executive officer's employment is
terminated by the Company without "cause" or by the executive for "good reason."
For purposes of these events, the following definitions are generally
applicable:
"SALE OF COMPANY" means there is a sale of all or substantially all of the
assets (exclusive of securitized assets) or stock of the Company.
"CAUSE" means the executive officer has either (i) engaged in an act or
acts of gross misconduct or negligence that has materially harmed or
materially damaged the Company (ii) repeatedly failed to follow the lawful
instructions of the Company following written notice informing him of such
conduct (iii) misappropriated Company property (iv) been convicted of, or
plead "no contest" to, a felony or (v) exhibited a repeated inability to
competently perform the essential functions of his job which has been
memorialized in the Company's records and has resulted in material harm or
material damage to the Company.
"GOOD REASON" means the executive officer has resigned his employment after
experiencing (i) any reduction (in the aggregate) in his base salary by
more than 25%, unless all Company executive officers incur the same
proportionate reduction in base salary or (ii) a material diminishment in
his position, job duties and/or responsibilities. The officer must have
experienced the foregoing without providing his consent and he must also
provide the Company with written notice stating his intention to resign
with good reason.
"DISABILITY" means a permanent and total disability within the meaning of
Section 22(e)(3) of the Internal Revenue Code. Under this definition, an
individual is permanently and totally disabled if he is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than 12 months.
Under the terms of each named executive officer's Excise Tax Restoration
Agreement, if there is a sale of the Company and any payment or distribution to
the executive in connection with the sale subjects an executive to the golden
parachute excise tax, the Company would provide the executive with an excise tax
restoration payment so the executive will be in the same after-tax position as
if the excise tax was not imposed. As shown in the table below, if a
hypothetical corporate transaction occurred at the end of fiscal 2009, no
executive would have received payments sufficient to trigger an excise tax
restoration payment.
HYPOTHETICAL POTENTIAL PAYMENT ESTIMATES
The table below describes and provides estimates for compensation payable
to each named executive officer under hypothetical termination of employment
scenarios and in the event of a sale of the Company under the Company's
compensatory arrangements other than nondiscriminatory arrangements generally
available to salaried employees. The amounts shown in the table are estimates
and assume the hypothetical involuntary termination, sale of the Company, death
or disability occurred on July 31, 2009 (the last business day of fiscal 2009).
Due to the number of factors and assumptions that can affect the nature and
amount of any benefits provided upon the events discussed below, any amounts
paid or distributed upon an actual event may differ.
~ 20 ~
Under the golden parachute rules prescribed under Internal Revenue Code
Section 280G and 4999, a 20% excise tax is imposed on compensatory parachute
payments that equal or exceed the officer's base amount. For purposes of the
golden parachute excise tax analysis and the hypothetical estimates, some of the
important assumptions were:
o Sale of Company occurring on July 31, 2009 at share price of $20.28;
o Accelerated vesting and settlement of all unvested restricted stock
and restricted stock units;
o No cash severance;
o Equity awards, regular bonuses and similar payments made within one
year of July 31, 2009 were not contingent on or related to the
hypothetical sale of the Company;
o Base amounts are three times the average compensation for calendar
years 2004 through 2008;
o July 2009 Applicable Federal Rates were used to calculate discounted
present values (120%, semi-annual compounding; short-term: 0.98%,
mid-term: 3.29%; long-term: 5.17%); and
o Aggregate marginal income tax rates of 46.70% for New Jersey
residents, 45.42% for New York residents and 36.45% for Texas
residents.
-------------------------------------------------------------------------------------
Termination
(without cause
or for good Sale of Death or
Name reason) ($) Company ($) Disability ($)
-------------------------------------------------------------------------------------
PAUL R. SINSHEIMER
2009 Annual MIP Cash Payment (1) 0 400,000 400,000
Unvested Restricted Stock (Accelerated) 6,417,870 6,883,884 6,883,884
Vested SERP Restricted Stock Units 2,661,750 2,661,750 2,661,750
Unvested SERP Restricted Stock Units
(Accelerated) 380,250 380,250 380,250
Vested Deferred Restricted Stock
Units/Compensation 549,264 549,264 549,264
IRC 280G Excise Tax Restoration 0 0 0
-------------------------------------------------------------------------------------
Total 10,009,134 10,875,148 10,875,148
-------------------------------------------------------------------------------------
STEVEN F. GROTH
Unvested Restricted Stock and Units
(Accelerated) 1,670,768 2,226,987 2,226,987
IRC 280G Excise Tax Restoration 0 0 0
-------------------------------------------------------------------------------------
Total 1,670,768 2,226,987 2,226,987
-------------------------------------------------------------------------------------
JOHN V. GOLIO
Unvested Restricted Stock and Units
(Accelerated) 1,821,387 2,749,197 2,749,197
IRC 280G Excise Tax Restoration 0 0 0
-------------------------------------------------------------------------------------
Total 1,821,387 2,749,197 2,749,197
-------------------------------------------------------------------------------------
JAMES H. MAYES, JR.
Unvested Restricted Stock and Units
(Accelerated) 2,222,952 3,688,425 3,688,425
IRC 280G Excise Tax Restoration 0 0 0
-------------------------------------------------------------------------------------
Total 2,222,952 3,688,425 3,688,425
-------------------------------------------------------------------------------------
TROY H. GEISSER
Unvested Restricted Stock and Units
(Accelerated) 1,738,787 2,671,890 2,671,890
Vested Deferred Restricted Stock
Units/Compensation 113,534 113,534 113,534
IRC 280G Excise Tax Restoration 0 0 0
-------------------------------------------------------------------------------------
Total 1,852,321 2,785,424 2,785,424
-------------------------------------------------------------------------------------
(1) Represents the target bonus amount for fiscal 2009. Upon a sale of the
Company or death or disability, the Compensation Committee had discretion
to pay any portion of the remaining $600,000 of the $1,000,000 maximum
bonus.
~ 21 ~
AUDIT COMMITTEE REPORT
The current members of the Audit Committee are Michael C. Palitz, H. E.
Timanus, Jr. and Michael J. Zimmerman. Each meets the independence and
experience requirements of the New York Stock Exchange, Section 10A(m)(3) of the
Securities Exchange Act of 1934 and SEC rules and regulations. The Audit
Committee acts under a written charter approved by the Board of Directors.
Management is responsible for the Company's internal control over financial
reporting and the financial reporting process. The Company's independent
registered public accounting firm, KPMG, is responsible for the integrated audit
of the Company's consolidated financial statements and internal control over
financial reporting. The Audit Committee's responsibility is to monitor and
oversee these processes. The Audit Committee relies on KPMG's opinions on the
consolidated financial statements and the effectiveness of internal control over
financial reporting. The Audit Committee pre-approves all fees charged and work
performed by KPMG.
The Audit Committee reviewed and discussed the Company's audited
consolidated financial statements for fiscal 2009 with the Company's management.
The Audit Committee also discussed the matters required by Statement on Auditing
Standards No. 61, "Communication with Audit Committees" and Public Company
Oversight Board Auditing Standard No. 5, "An Audit of Internal Control Over
Financial Reporting That is Integrated with an Audit of Financial Statements"
with KPMG.
KPMG provided the Audit Committee with the written disclosure required by
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees." The Audit Committee discussed with KPMG its independence from
the Company and management. KPMG did not perform any non-audit services for the
Company during fiscal 2009.
Based on the Audit Committee's review and discussions noted above, the
Audit Committee recommended to the Board that the Company's audited consolidated
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended July 31, 2009, for filing with the SEC.
This report is submitted by the members of the Audit Committee of the Board
of Directors:
Michael C. Palitz
H. E. Timanus, Jr., Chairman
Michael J. Zimmerman
~ 22 ~
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Item 2 on Proxy Card)
GENERAL
The Audit Committee appointed KPMG as the Company's independent
registered public accounting firm for the fiscal year ending July 31, 2010. KPMG
has audited the Company's financial statements since fiscal 2002. A
representative of KPMG is expected to attend the Meeting and will have an
opportunity to make a statement and be available to respond to appropriate
questions.
Stockholder ratification of the appointment of the Company's
independent registered public accounting firm is not required by the Company's
bylaws or other applicable legal requirements. However, the Board is submitting
the appointment of KPMG to stockholders for ratification as good corporate
practice. If stockholders do not ratify the appointment, the Audit Committee
will reconsider retaining KPMG. If stockholders ratify the appointment, the
Audit Committee may appoint a different independent registered public accounting
firm at any time if it determines a change would be in the best interests of the
Company and its stockholders.
Ratification of the appointment of the Company's independent registered
public accounting firm requires the affirmative vote of a majority of the votes
cast on this proposal. Abstentions and broker non-votes will have no impact on
the vote.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The fees for services provided by KPMG to the Company in fiscal 2009 and
2008 follow:
AUDIT FEES: Consists of fees paid for the integrated audit of the
Company's consolidated financial statements and management's
assessment of internal control over financial reporting (required
by Section 404 of the Sarbanes-Oxley Act of 2002), the audit of
subsidiary consolidated financial statements and reviews of the
Company's quarterly consolidated financial statements. Audit fees
also include fees for services closely related to the audit that
primarily could only be provided by the Company's independent
registered public accounting firm. Audit fees were $730,000 in
fiscal 2009 and $715,000 in fiscal 2008.
AUDIT-RELATED FEES: No audit related services were provided for
fiscal 2009 or 2008.
TAX FEES: No tax compliance, advice or planning services were
provided for fiscal 2009 or 2008.
ALL OTHER FEES: No products or services other than the services
reported above were provided for fiscal 2009 or 2008.
PRE-APPROVAL POLICY AND PROCEDURES
The Audit Committee's policy is to pre-approve all audit and permissible
non-audit services provided by the independent registered public accounting
firm. Permissible non-audit services include audit-related services, tax
services and other services. The independent registered public accounting firm
and management are required to report periodically to the Audit Committee
services provided by the independent registered public accounting firm according
to this pre-approval, and the fees for these services.
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JULY 31, 2010.
~ 23 ~
STOCKHOLDER PROPOSALS
As a stockholder, you may be entitled to present proposals for action at
future annual meetings. Proposals to be considered for inclusion in the proxy
materials for the Company's 2010 Annual Meeting of Stockholders, expected to be
held December 7, 2010, must be directed to the Secretary of the Company at the
Company's principal executive office and must be received by July 7, 2010. To be
included in the proxy materials for the 2010 Annual Meeting of Stockholders, a
proposal must be an appropriate subject for stockholder action under the SEC
rules and must otherwise comply with the rules and regulations of the SEC. If
you intend to introduce a proposal at the 2010 Annual Meeting of Stockholders
that was not included in the proxy materials for the meeting, unless you have
provided notice of such proposal to the Company by September 20, 2010, the proxy
holders will be allowed to use their discretionary voting authority with respect
to the proposal without any discussion of the matter or how they intend to vote
in the proxy materials for the meeting.
OTHER BUSINESS
As of the date of this Proxy Statement, neither the Company nor the Board
of Directors know of any matters, other than those indicated above, to be
presented at the Meeting. If any additional matters are properly presented, the
persons named in the proxy will have discretion to vote the shares represented
by such proxy pursuant to the discretionary authority to vote conferred by the
enclosed proxy card.
INFORMATION FOR STOCKHOLDERS THAT HOLD THE COMPANY'S COMMON STOCK
THROUGH A BANK OR BROKER
Under SEC rules, brokers and banks that hold stock for the account of their
customers are permitted to elect to deliver a single Annual Report and proxy
statement (as well as other shareholder communications from the issuer) to two
or more stockholders that share the same address. If you and other residents at
your mailing address own shares of Common Stock through a broker or bank, you
may have received a notice notifying you that your household will be sent only
one copy of the Company's proxy materials. If you did not notify your broker or
bank of your objection, you may have been deemed to have consented to the
arrangement. If you would prefer in the future to receive a separate copy of the
Company's Annual Reports and Proxy Statements, you may revoke your consent at
any time by contacting the Company at the telephone number or address set forth
below for obtaining a copy of the Company's Form 10-K. Your notification should
include the name of your brokerage firm or bank and your account number.
If your household received only one copy of the 2009 Annual Report or this
Proxy Statement and you wish to receive a separate copy, please contact the
Company at the above address or telephone number. If you hold your shares of
Common Stock through a broker or bank and are receiving multiple copies of our
Annual Reports and Proxy Statements at your address and would like to receive
only one copy for your household, please contact your broker or bank.
ANNUAL REPORT
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED JULY
31, 2009 WAS MAILED WITH THE PROXY STATEMENT AND IS AVAILABLE IN THE INVESTOR
RELATIONS SECTION OF THE COMPANY'S WEBSITE AT HTTP://WWW.FINANCIALFEDERAL.COM.
THE ANNUAL REPORT ON FORM 10-K FOR FISCAL 2009 FILED WITH THE SEC UNDER THE
SECURITIES EXCHANGE ACT OF 1934 MAY BE OBTAINED FREE BY CALLING THE COMPANY AT
(212) 599-8000 OR BY SENDING A WRITTEN REQUEST TO INVESTOR RELATIONS AT
FINANCIAL FEDERAL CORPORATION, 730 THIRD AVENUE, 23rd FLOOR, NEW YORK, NEW YORK
10017 ATTN: CORPORATE SECRETARY.
BY ORDER OF THE BOARD OF DIRECTORS
Troy H. Geisser
SECRETARY
DATE: November 3, 2009
~ 24 ~
A Proposals - The Board of Directors recommends a vote FOR all the nominees
listed and FOR Proposal 2.
1. Election of Directors:
01 - Lawrence B. Fisher 02 - Michael C. Palitz 03 - Paul R. Sinsheimer
04 - Leopold Swergold 05 - H.E. Timanus, Jr. 06 - Michael J. Zimmerman
[ ] Mark here to vote FOR all nominees
[ ] Mark here to WITHHOLD vote from all nominees
[ ] For All EXCEPT - To withhold a vote for one or more nominees, mark
the box to the left and the corresponding numbered box(es) to the
right. 01 02 03 04 05 06
[ ] [ ] [ ] [ ] [ ] [ ]
FOR AGAINST ABSTAIN
2. Ratifying the appointment of [ ] [ ] [ ]
KPMG LLP as the Corporation's
independent registered public
accounting firm for the fiscal
year ending July 31, 2010.
B Non-Voting Items
Change of Address - Please print new address below
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
C Authorized Signatures - This section must be completed for your vote to be
counted. - Date and Sign Below
The signature on this Proxy should correspond exactly with stockholder's name
as printed herein. In the case of joint tenancies, co-executors, or
co-trustees, both should sign. Persons signing as Attorney, Executor,
Administrator, Trustee or Guardian should give their full title.
Date (mm/dd/yyyy) - Signature 1 - Please keep Signature 1 - Please keep
Please print date below signature within the box signature within the box
----------------------- ------------------------- -------------------------
----------------------- ------------------------- -------------------------
-------------------------------------------------------------------------------
Proxy - FINANCIAL FEDERAL CORPORATION
-------------------------------------------------------------------------------
This Proxy is Solicited on Behalf of the Board of Directors
for the Annual Meeting to be Held on December 8, 2009
The undersigned stockholder of Financial Federal Corporation (the "Corporation")
hereby appoints Paul R. Sinsheimer and Troy H. Geisser, or either of them,
with full power of substitution, as proxies for the undersigned to attend and
act for and on behalf of the undersigned at the Annual Meeting of Stockholders
of the Corporation to be held at 270 Park Avenue, New York, New York on December
8, 2009 at 10:00 a.m., and at any adjournment thereof, to the same extent and
with the same power as if the undersigned were present in person thereat and
with authority to vote and act in such proxyholder's discretion with respect to
other matters which may properly come before the Meeting. Such proxyholder is
specifically directed to vote or withhold from voting the shares registered in
the name of the undersigned as indicated on the reverse side.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF ALL NOMINEES AND FOR PROPOSAL 2.
Please Mark, Sign, Date and Return this Proxy Card Promptly Using the Enclosed
Envelope.