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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FINANCIAL FEDERAL
CORPORATION
Notice of Annual
Meeting of Stockholders
and Proxy Statement
Tuesday, December 9, 2008
at 10:00 a.m. Eastern Time
270 Park Avenue, 11th Floor
New York, New York 10017
FINANCIAL FEDERAL CORPORATION
733 Third Avenue, 24th Floor
New York, New York 10017
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Tuesday, December 9, 2008, 10:00 a.m.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting" or "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 9, 2008, at 10:00 a.m. Eastern Time, to:
(1) Elect six directors to serve until the next annual meeting of
stockholders;
(2) Ratify the appointment of KPMG LLP as the Company's independent
registered public accounting firm for the fiscal year ending July 31,
2009;
(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 9, 2008.
The 2008 Proxy Statement and the 2008 Annual Report to Security Holders
are available at http://www.financialfederal.com/proxy2008
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The Board of Directors of the Company has fixed the close of business on
October 15, 2008 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, 733 Third Avenue, 24th
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 Meeting. A copy of the Company's Annual Report to
Stockholders for the fiscal year ended July 31, 2008 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 5, 2008
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
733 Third Avenue, 24th Floor
New York, New York 10017
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held On December 9, 2008
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 9, 2008 and at any postponements or
adjournments.
Shares represented by properly executed proxies, received timely and not
revoked, will be voted at the Meeting in the manner described in the proxies.
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 of record by a broker,
bank or other nominee and that stockholder wishes to vote at the Meeting, the
stockholder must bring a letter from the broker, bank or other nominee
confirming the stockholder's beneficial ownership of shares on October 15, 2008.
At the Meeting, the Company's stockholders will be asked (i) to elect the
Board of Directors to serve until the next annual meeting of stockholders (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, 2009 and
(iii) to take any other actions that properly come before the Meeting. Each
proposal is 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 5, 2008. 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, 2008, are entitled to vote at
the Meeting. On October 15, 2008, 25,688,700 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 matters to be considered 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 or absence of a sufficient number of shares to constitute a quorum to
transact business. A broker non-vote occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power for that proposal and has not received
instructions from the beneficial owner.
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, 2009, 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 entire expense of this proxy solicitation will be paid by the Company.
Solicitation will be made primarily by mail. Proxies may also be solicited
personally and by telephone by regular employees of the Company without any
additional remuneration and at minimal cost. Management may also request banks,
brokerage houses, custodians, nominees and fiduciaries to obtain authorization
for the execution of proxies and may reimburse them for related expenses. The
Company has retained Georgeson Shareholder Communications, Inc. to assist in
soliciting proxies, at an estimated cost of $1,000 plus other reasonable
expenses.
-1-
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, 2008, unless otherwise
indicated, by (i) each holder who may be deemed 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 25,688,700 shares of Common Stock outstanding on October 15, 2008.
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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 3,15 4,313,453 16.8
90 Hudson Street
Jersey City, NJ 07302
Waddell & Reed Financial, Inc. 3 2,143,422 8.3
6300 Lamar Avenue
Overland Park, KS 66202
Kayne Anderson Rudnick Investment
Management, LLC 3 2,036,408 7.9
1800 Avenue of the Stars
Los Angeles, CA 90067
Barclays Global Investors UK
Holdings Ltd 3,16 1,459,299 5.7
1 Churchill Place
Canary Wharf
London, England E14 5HP
Goldman Sachs Group Inc. 3,17 1,223,008 4.8
85 Broad Street
New York, NY 10004
Lawrence B. Fisher 4,5 3,750 *
Troy H. Geisser 6 208,142 *
John V. Golio 7 210,049 *
Steven F. Groth 8 151,875 *
James H. Mayes, Jr. 9 225,154 *
Michael C. Palitz 4,10 357,154 1.4
Paul R. Sinsheimer 11 778,691 3.0
Leopold Swergold 4,12 19,854 *
H. E. Timanus, Jr. 4,13 32,500 *
Michael J. Zimmerman 4,14 14,750 *
All directors and executive officers
as a group (13 persons) 18 2,233,443 8.7
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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, 733 Third Avenue, 24th Floor, New York,
NY 10017.
2 Unless otherwise noted, each person has the sole power to vote, or
direct the voting of, and power to dispose, or direct the disposition
of, all shares of Common Stock. Beneficial ownership was determined
according to the rules of the Securities and Exchange Commission and
includes options that are exercisable or will become exercisable
within 60 days of October 15, 2008, vested stock units that can be
settled in shares of Common Stock within 60 days of October 15, 2008
and shares of restricted stock subject to forfeiture.
3 This information is based on the most recent Forms 13F filed with the
Securities and Exchange Commission.
4 Holdings do not include 2,250 unvested stock units because they are
not considered beneficially owned securities.
5 Mr. Fisher's holdings include 3,750 vested stock units.
-2-
6 Mr. Geisser's holdings include (i) 193,142 shares of Common Stock of
which 127,000 shares are restricted stock subject to forfeiture and
(ii) options to purchase 15,000 shares of Common Stock.
7 Mr. Golio's holdings include (i) 195,049 shares of Common Stock of
which 128,250 shares are restricted stock subject to forfeiture and
(ii) options to purchase 15,000 shares of Common Stock.
8 Mr. Groth's holdings include 102,125 shares of restricted stock
subject to forfeiture.
9 Mr. Mayes' holdings include 170,000 shares of restricted stock subject
to forfeiture.
10 Mr. Palitz's holdings include (i) 239,107 shares of Common Stock (ii)
3,750 vested stock units (iii) 104,297 shares of Common Stock held by
a corporation owned and controlled by Mr. Palitz and (iv) 10,000
shares of Common Stock held by Mr. Palitz's wife.
11 Mr. Sinsheimer's holdings include (i) 464,476 shares of Common Stock
held by a limited partnership of which the general partner is
controlled by Mr. Sinsheimer and (ii) 314,215 shares of restricted
stock subject to forfeiture. Mr. Sinsheimer's holdings do not include
177,084 stock units (of which 139,584 are vested) because they are not
considered beneficially owned securities.
12 Mr. Swergold's holdings include (i) 8,604 shares of Common Stock (ii)
3,750 vested stock units and (iii) options to purchase 7,500 shares of
Common Stock.
13 Mr. Timanus' holdings include (i) 28,750 shares of Common Stock and
(ii) 3,750 vested stock units.
14 Mr. Zimmerman's holdings include (i) 3,500 shares of Common Stock (ii)
3,750 vested stock units and (iii) options to purchase 7,500 shares of
Common Stock.
15 Reported no voting power as to 487,164 shares.
16 Reported no voting power as to 359,399 shares.
17 Reported no voting power as to 85,645 shares.
18 Includes (i) 1,938,169 shares of Common Stock of which 841,590 shares
are restricted stock subject to forfeiture, options to purchase 45,000
shares of Common Stock and 18,750 vested stock units as described in
notes 5 through 14 above and (ii) 222,774 shares of Common Stock of
which 137,125 shares are restricted stock subject to forfeiture and
options to purchase 8,750 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 certain beneficial owners of the Company's
equity securities to file reports of holdings of and transactions in the
Company's equity securities with the Securities and Exchange Commission ("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 greater than ten percent
stockholders filed all reports due under Section 16(a) of the Securities
Exchange Act of 1934 timely for the fiscal year ended July 31, 2008.
-3-
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 2007 Annual Meeting of Stockholders. All nominees listed below are 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 they provided, follow:
Lawrence B. Fisher, 70, 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, 50, 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, 61, 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, 68, 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.
-4-
H. E. Timanus, Jr., 63, 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, 58, has served as a director of the Company since
June 7, 2004. Mr. Zimmerman is Executive Vice President and Chief Financial
Officer of 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. He is also Advisory Director
of Smithfield Foods, Inc.
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 also were the
Executive Committee's members during Fiscal 2008.
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 also were the Audit Committee's
members during Fiscal 2008. 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.
-5-
Upon consideration of the attributes of an audit committee financial expert
set forth in Item 401(h) of Regulation S-K promulgated by the SEC, the Board
determined Mr. Timanus possesses these attributes through his experience as
Chief Operating Officer of Prosperity Bank, and 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 also were the Executive
Compensation Committee's members during Fiscal 2008.
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 the other named 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, Company performance and
the assessments provided by the Chief Executive Officer for each of the other
executives' individual performance. For Fiscal 2008 and 2007, the Committee
engaged Watson Wyatt Worldwide ("Watson") to construct a peer group of
companies, provide marketplace information, provide advice on competitive market
practices and also support specific decisions regarding compensation for the
Chief Executive Officer. In addition, for Fiscal 2008, the Committee also
engaged SNL Financial to construct a peer group from its database of bank and
finance public company filings for the other named executive officers. Watson
and, SNL Financial did not provide any other services to the Company. 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 also were the Corporate
Governance and Nominating Committee's members during Fiscal 2008.
The purpose of the Corporate Governance and Nominating Committee is to
ensure the Board of Directors is properly constituted to meet its fiduciary
obligations to the Company and its stockholders, and 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, experience in business, 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 interviewing selected candidates as
appropriate. Upon selecting a qualified candidate, the Committee recommends the
candidate for the Board's consideration.
-6-
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 2008
During Fiscal 2008, the Board of Directors met four times, the Executive
Committee did not meet, 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. Five of the six directors
attended, either in person or telephonically, all of the meetings of the Board
and their respective committees during Fiscal 2008 and the other director
attended 80% of his respective Board and committee meetings. The Board has no
other standing committees.
Communications with the Board of Directors
Stockholders may communicate with the Company's Board of Directors through
the Company's Secretary by writing to the following address: Board of Directors,
c/o Secretary, Financial Federal Corporation, 733 Third Avenue, 24th 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, 733 Third
Avenue, 24th 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 2008. 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, 733 Third Avenue, 24th Floor, New
York, NY 10017, Attn: Corporate Secretary.
-7-
COMPENSATION OF DIRECTORS
This section provides information regarding the compensation policies for
non-employee directors and amounts paid to them in Fiscal 2008.
The Executive Compensation Committee reviews director compensation
annually, including fees, retainers, and equity compensation, as well as total
compensation. Changes to director compensation are recommended by the Executive
Compensation Committee to the Board for approval.
The following table presents the Company's Fiscal 2008 policy for providing
cash compensation to non-employee directors. The Board determined to keep the
cash compensation schedule the same as Fiscal 2007's. The annual retainers are
pro-rated if a director joins the Board or begins to serve as a committee chair
between annual meetings. Directors who are officers of the Company, such as Mr.
Sinsheimer, do not receive any Board compensation. Directors can elect to
receive their annual cash retainer for service as a director in shares of the
Company's common stock.
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Annual Fee for attending
Position retainer ($) each meeting ($)
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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
------------------------------------------------------------------------
The Board also believes in granting equity compensation to non-employee
directors to further align their interests with those of stockholders.
Therefore, on December 11, 2007, each non-employee director was awarded a
restricted stock unit grant representing 2,250 common shares when the Company's
closing stock price was $22.08. This award had a Statement of Financial
Accounting Standards No. 123(R), SFAS 123R, grant date fair value of $49,680.
The units vest one year after grant and would vest earlier upon a sale of the
Company or the director's death or disability, and would be forfeited upon
resignation of service before vesting or not being re-elected to the Board at
the next annual meeting of stockholders. Vested units will be settled with an
equal number of Company common shares upon the director's termination of service
or sale of the Company. The directors receive dividend equivalent payments on
the stock units when the Company pays dividends on its Common Stock.
Directors are reimbursed for travel and other expenses directly related to
activities as directors. Directors are also entitled to the protection provided
by certain indemnification provisions in the Company's Restated Articles of
Incorporation, Bylaws and indemnification agreements.
The following table provides compensation information for the non-employee
directors for Fiscal 2008.
DIRECTOR COMPENSATION - FISCAL YEAR 2008
-----------------------------------------------------------------------------------------------------------------
Change in
Pension
Value and
Fees Nonqualified
earned or Non-Equity Deferred
paid in Stock Option Incentive Plan Compensation All Other
Name cash ($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total ($)
(a) (b) (c)(1) (d) (e) (f) (g) (h)
-----------------------------------------------------------------------------------------------------------------
Lawrence Fisher 55,000 79,839 0 0 0 0 134,839
Michael Palitz 53,000 79,839 0 0 0 0 132,839
Leopold Swergold (2) 62,000 79,839 0 0 0 0 141,839
H. E. Timanus, Jr. 70,000 79,839 0 0 0 0 149,839
Michael Zimmerman 57,000 79,839 0 0 0 0 136,839
-----------------------------------------------------------------------------------------------------------------
(1) The amounts in this column are the expense recorded in the Company's
audited consolidated financial statements, excluding any assumed
forfeitures, in Fiscal 2008 for stock units awarded under the SIP in Fiscal
2008 and 2007
-8-
according to FAS 123(R) as discussed in Note 6 to the Company's Fiscal 2008
audited consolidated financial statements included in the its Annual Report
on Form 10-K filed with the SEC on September 26, 2008.
(2) Pursuant to the terms of the SIP, Mr. Swergold elected to receive his
$45,000 annual retainer in shares of the Company's Common Stock. He
received a grant of 2,038 vested shares on December 11, 2007 when the
closing stock price was $22.08.
Each non-employee director held the following stock units and stock options
as of July 31, 2008.
----------------------------------------------------------------
Vested Restricted Stock
Name Units (#) Units (#) Options (#)
----------------------------------------------------------------
Lawrence Fisher 3,750 2,250 0
Michael Palitz 3,750 2,250 0
Leopold Swergold 3,750 2,250 7,500
H. E. Timanus, Jr. 3,750 2,250 0
Michael Zimmerman 3,750 2,250 7,500
----------------------------------------------------------------
RELATED PERSON TRANSACTIONS
Paul R. Sinsheimer (CEO and director), Michael C. Palitz (director), Troy
H. Geisser (executive officer) and Steven F. Groth (executive officer),
including any affiliates, invest in the Company's commercial paper. The Company
issued this debt under its direct commercial paper program at the same annual
interest rates that ranged from 2.75% to 5.25% in Fiscal 2008, and the same
terms and conditions given to unrelated investors. The table below provides more
information on these transactions.
------------------------------------------------------------------------
Principal
Highest Principal Interest Outstanding
Outstanding in Paid during at October
Name Fiscal 2008 ($) Fiscal 2008 ($) 15, 2008 ($)
------------------------------------------------------------------------
Paul Sinsheimer 5,312,832 216,176 1,784,414
Michael Palitz 696,184 24,281 497,249
Troy Geisser 159,683 2,763 0
Steven Groth 0 0 700,000
------------------------------------------------------------------------
The Company does not have a policy regarding the review, approval or
ratification of commercial paper transactions with related persons because the
Company issues commercial paper to unrelated investors with the same terms and
conditions.
-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 2008.
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 or other conditions. There has been little turnover in
the Company's 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 eight years ago.
The Committee believes the Company's continuing success and management team
retention demonstrates the success and effectiveness of its compensation
policies.
Fiscal 2008 was also another successful year as evidenced by record net
income and earnings per share along with superior asset quality, low leverage
and higher available liquidity. The Committee believes this was particularly
impressive given the extremely difficult circumstances in capital markets, the
economy and the financial services industry. As a result, the Committee
continues to believe strongly how important it is to keep the executive
management team intact to continue to generate positive results for the Company
and its stockholders.
The Committee's philosophy also includes linking a significant portion of
the CEO's compensation directly to the Company's year-to-year success. While the
MIP permits other executive officers to be participants, the Committee continues
to believe the CEO should be the only executive compensated with cash incentives
for short-term annual corporate performance and other executives should have
their performance-based compensation linked only to the long-term success of the
Company. The Committee believes this is appropriate because the CEO is
responsible for managing the Company and is ultimately responsible for its
yearly performance.
Overview of Compensation Program
The executive compensation program features the following practices 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 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 with extended vesting
periods and linked to the Company's profitability;
o A grant of restricted stock to the named executive officers in 2006 as
a long-term incentive to further encourage them to remain with the
Company for the rest of their careers. The restricted shares generally
vest only upon termination of employment after age 62 unless there is
an earlier sale of the Company;
-10-
o Golden parachute excise tax restoration for the named executive
officers that only occurs if stockholders realize significant value;
and
o Limited perquisites.
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.
As a result, for Fiscal 2008 the Committee engaged two outside consultants
(Watson and SNL Financial) to independently construct alternative peer groups to
consider and review.
Therefore, to evaluate competitive compensation practices, the Committee
selected the following peer groups of competitor and generally comparable
companies for Fiscal 2008. These groups include commercial lenders and other
financial institutions:
Watson Wyatt's Recommended 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's Recommended 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.
In addition to peer group data, the Committee also requested and reviewed a
"tally sheet" of the CEO's compensation from the Company. The tally sheet
reports details of the CEO's fiscal year compensation, the compensation that
would be provided to the CEO upon a hypothetical corporate transaction or
involuntary termination of employment, and the current value of previously
granted compensatory awards. The Committee also requested reports from the
Company showing each executive officer's compensation for the last five years
for the Committee to review the absolute and relative amounts of their
compensation.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code limits the amount of tax
deductible non-performance based compensation to $1.0 million in a fiscal year
for each covered employee (the named executive officers, other than the CFO,
listed in the Summary Compensation Table). The Committee considers the impact of
this limit in determining executive compensation but believes retaining
flexibility is important in designing compensation programs to meet its stated
objectives. Therefore, the Committee does not limit compensation to the level or
types that are fully tax deductible. The MIP and SIP described below provide for
performance-based awards that can be fully deductible under Section 162(m).
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 receives
an annual cash incentive bonus opportunity and supplemental executive retirement
benefits in the form of restricted stock units. Perquisites, and benefits
generally available to other employees, are only a minor portion of total
compensation. The Company also does not have any employment or severance
agreements with or retirement programs (other than the supplemental executive
retirement benefits for the CEO) for the named executive officers. 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.
-11-
Long-Term Incentive Compensation
The Company provides long-term equity incentive compensation to retain its
executive officers and to provide for a significant portion of their
compensation to be at risk and linked directly with the Company's long-term
success. Long-term compensation is generally provided through equity awards
principally in the form of restricted stock with extended vesting periods. The
Committee has relied on restricted stock grants for executives rather than stock
options since Fiscal 2002 because it believes restricted stock is a better
retention vehicle. The Committee does not have a formal policy for when it
grants stock options or other equity-based awards.
The named executive officers receive dividends on all unvested shares of
restricted stock and dividend equivalent payments on restricted stock units when
the Company pays dividends on its Common Stock. The stock grant agreements also
generally provide for all unvested shares or stock units to vest immediately
when certain events occur including a sale of the Company, the officer's death
or disability and qualifying involuntary terminations of employment. Unvested
shares are also subject to forfeiture for non-qualifying terminations of
employment.
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 comply with
Internal Revenue Code Section 162(m). The MIP provides an annual incentive
compensation opportunity for the CEO and other select executive officers. A
total of 1,000,000 shares may be issued under the MIP and 675,000 shares
remained available at July 31, 2008. The maximum annual restricted stock award
is 200,000 shares and the maximum cash bonus award for a performance period is
$3.0 million.
For Fiscal 2008, the Committee granted the CEO performance-based awards of
restricted stock and an annual cash bonus opportunity with the performance
objectives based on the Company's diluted earnings per share. Further details on
these awards are provided in the Compensation of the Chief Executive Officer
section below.
2006 Stock Incentive Plan (SIP)
The 2006 Stock Incentive Plan, or SIP, was approved by stockholders in
December 2006. A total of 2,500,000 shares of restricted stock, stock options,
stock units and stock appreciation rights can be issued under the SIP and
1,888,000 shares remained available at July 31, 2008. The SIP has annual grant
limits of (i) 250,000 stock options and stock appreciation rights and (ii)
200,000 total shares of stock and stock units.
For Fiscal 2008, the Committee granted performance-based restricted stock
to the other named executive officers with the performance objective based on
the Company's diluted earnings per share. Further details on these awards are
provided in the Compensation of the Other Named Executive Officers section
below.
Annual Base Salary
The Committee sets base salaries primarily based on the abilities,
performance and experience of the named executive officers. The Committee also
reviews their past compensation and compensation data for comparable positions
in the financial services industry. 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.
Supplemental Retirement Benefits (SERP)
The Company established a Supplemental Retirement Benefits program ("SERP")
for Mr. Sinsheimer in Fiscal 2002. Mr. Sinsheimer became the Company's CEO in
Fiscal 2001. The purposes of the SERP are to retain his services for many years
and to further motivate him to create stockholder value. Under the SERP, Mr.
Sinsheimer was awarded a grant of 150,000 restricted stock units subject to
annual vesting and with full vesting not scheduled to occur until 2010. The
extended vesting period was designed to encourage Mr. Sinsheimer to focus on the
Company's long-term success. Granting stock units furthers this long-term
objective since the underlying shares will generally not be released to Mr.
Sinsheimer until after termination of his employment after age 62. The SERP is
discussed further in the Nonqualified Deferred Compensation section below.
Employee Benefits, Perquisites and Deferred Compensation
The Company does not offer extensive or elaborate benefits to the named
executive officers. The Company offers 401(k) plan participation without Company
matching contributions, a health plan requiring them to pay monthly
contributions and other benefits generally available to all employees. The
Committee provided only limited perquisites to the named executive officers
during Fiscal 2008 as 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 named executive officers do not have cash severance benefits. Their
unvested shares of restricted stock or stock units would fully vest upon a sale
of the Company (commonly referred to as a "single trigger") or qualifying
involuntary
-12-
terminations of employment including death or disability. The Committee
considers a sale of the Company a triggering event that accelerates vesting of
equity awards to be reasonable and necessary from a competitive perspective and
to induce retention in the event a contemplated corporate transaction, that
would benefit stockholders, 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 involuntarily terminated without cause.
The Committee provided each named executive officer the right to receive
excise tax restoration payments if there is a sale of the Company because of the
extended vesting periods of their restricted stock grants and the federal golden
parachute excise tax rules. The basis for providing excise tax restoration is to
ensure the purpose and benefits of their long-term stock awards would be
achieved if a corporate transaction results in the imposition of the 20% excise
tax and so the executives would not have a disincentive to 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 2008 was $600,000. This has
been his annual rate 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 to
increase the at-risk performance-based portion of his total compensation.
At a meeting on October 5, 2007, the Committee, with the assistance of
Watson, approved short and long-term awards under the MIP for the CEO for Fiscal
2008. As a result, the CEO was eligible to earn a performance-based cash bonus
for Fiscal 2008 ranging from $0 to $1,000,000 determined according to a
pre-established objective performance matrix prescribed by the Committee. The
performance matrix correlated bonus amounts with the Company's Fiscal 2008
diluted earnings per share ("EPS"). EPS is a fundamental reported financial
metric used to evaluate a company's performance and is considered positively
correlated with increased stockholder value. Therefore, the Committee selected
EPS to measure the CEO's performance and determine the amount of his incentive
compensation. The Company attained record EPS of $1.90 in Fiscal 2007, and the
Committee established the following target performance goals for Fiscal 2008 to
attain similar or better performance: (i) threshold bonus of $100,000 requiring
minimum EPS of $1.80 (ii) target bonus of $400,000 requiring minimum EPS of
$1.90 and (iii) maximum bonus of $1,000,000 requiring minimum EPS of $2.00.
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 2008 was derived from the MIP and was at risk.
The Committee also awarded the CEO a long-term performance-based equity
award of 75,000 shares of restricted stock for Fiscal 2008 at its meeting in
October 2007. This award was subject to a performance condition of achieving EPS
of at least $1.90 for Fiscal 2008 and would have been forfeited if the
performance condition was not achieved. To encourage the CEO's long-term
service, this award generally does not vest until five years after the date of
grant. The restricted shares are subject to earlier vesting upon a sale of the
Company and qualifying terminations of employment and also subject to forfeiture
for non-qualifying terminations of employment.
The Committee retained the discretionary ability, regardless of the amount
of EPS achieved for Fiscal 2008, to reduce or eliminate (i) the amount of any
bonus over the $400,000 target amount and (ii) the number of shares retained by
the CEO under the stock award, as would otherwise have been paid according to
the performance matrix. The Committee is required to certify the attainment of
the performance objectives.
At a meeting on September 24, 2008, the Committee determined the amounts of
the Fiscal 2008 MIP cash bonus and long-term restricted stock awards to be paid
to the CEO. The Company's reported EPS of $2.01 for Fiscal 2008 exceeded all MIP
targets. The Committee believes this was an outstanding financial result
considering it was accomplished during extremely difficult conditions in capital
markets and the economy that had a severe impact on many other financial
institutions. Therefore, the Committee certified the performance objectives were
obtained and decided to pay the full amount of the awards and to not exercise
its discretion to reduce them. As a result, the CEO received the maximum cash
bonus of $1,000,000 and retained the 75,000 shares of restricted stock.
The CEO's compensation is materially greater than the other named 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 many years. He serves as CEO,
President, and Chairman of the Board and is a principal stockholder. The
difference between his and the other named executive officers' compensation is
primarily from performance-based incentive awards that will only create value
for Mr. Sinsheimer if the 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.
-13-
Compensation of Other Named Executive Officers
The Committee uses the same criteria to set compensation among 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) compensation levels of the next
tier of management, as well as the CEO's recommendations. As a result, their
base salaries and long-term equity compensation awards are similar.
At a meeting on September 24, 2007, 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 not increased 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
----------------------------------------------------------------
Additionally, at the October 5, 2007 meeting, the Committee awarded 110,000
shares of performance-based restricted stock under the SIP to the other named
executive officers. These restricted stock awards have the same general terms
and vesting conditions as the CEO's Fiscal 2008 restricted stock award under the
MIP and were designed to achieve their long-term retention. They were also
subject to the same performance condition as the CEO's restricted stock grant of
achieving EPS of at least $1.90 for Fiscal 2008 and would have been forfeited if
the performance condition was not achieved. A similar number of shares were
awarded to each executive officer. The Committee relied on the CEO's input in
determining the number of shares to award to each officer.
At the September 24, 2008 meeting, the Committee determined the amount of
the Fiscal 2008 SIP long-term restricted stock award to be paid to the other
named executive officers. The Company's reported EPS of $2.01 for Fiscal 2008
exceeded the SIP target. Therefore, the Committee certified the performance
objective was obtained and decided to pay the full amount of the awards and to
not exercise its discretion to reduce them. As a result, the other named
executive officers retained the 110,000 shares of restricted stock.
Stock Ownership Guidelines
The Company does not have a formal policy mandating each named executive
officer's ownership level of the Company's common stock although executive
officers are expected to own a meaningful number of shares.
Compensation Committee Report
We, the Executive Compensation and Stock Option Committee of the Board of
Directors of the Company, have reviewed and discussed this Compensation
Discussion and Analysis section with the management of the Company, and, based
on this review and discussion, have recommended to the Board of Directors to
include the Compensation Discussion and Analysis section in this Proxy
Statement.
Executive Compensation and Stock Option Committee
Leopold Swergold, Chairman
H. E. Timanus, Jr.
Michael Zimmerman
-14-
Executive Compensation Tables
The following tables provide information on compensation for services of
the Company's principal executive officer, principal financial officer and the
three other executive officers of the Company with the highest total
compensation (determined under applicable regulations) for Fiscal 2008.
SUMMARY COMPENSATION TABLE - FISCAL YEAR 2008
----------------------------------------------------------------------------------------------------------------------------
Change in
Pension Value
Non-Equity and
Incentive Nonqualified
Plan Deferred All Other
Name and Principal Stock Option Compensation Compensation Compensation
Position Year Salary($) Bonus($) Awards($) Awards($) ($) Earnings($) ($) Total ($)
(a) (b) (c) (d) (e)(1) (f)(1) (g)(2) (h) (i)(3) (j)
----------------------------------------------------------------------------------------------------------------------------
Paul R. Sinsheimer
President, Chief
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
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
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.
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
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 recorded in the
Company's audited consolidated financial statements, excluding any assumed
forfeitures, for equity awards granted in Fiscal 2002 through 2008
according to SFAS 123(R). Assumptions used to calculate these amounts are
included in Note 6 to the Company's audited consolidated financial
statements for the fiscal year ended July 31, 2008 included in its Annual
Report on Form 10-K filed with the SEC on September 26, 2008.
(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 are automobile allowances. Messrs. Golio,
Geisser and Groth did not receive perquisites above the $10,000 annual
disclosure threshold.
-15-
The following table provides information on cash-based performance awards
and restricted stock granted in Fiscal 2008 to the named executive officers.
These awards are described in the Compensation Discussion and Analysis section
above.
GRANTS OF PLAN-BASED AWARDS - FISCAL YEAR 2008
----------------------------------------------------------------------------------------------------------
Estimated future payouts under
non-equity incentive plan awards
---------------------------------------
All other stock
awards: number of Grant Date
shares of stock Fair Value
Name Grant date Threshold ($) Target ($) Maximum ($) or units (#) of Stock ($)
(a) (b) (c) (d) (e) (i) (l) (1)
----------------------------------------------------------------------------------------------------------
Paul R. Sinsheimer (2) 100,000 400,000 1,000,000
Paul R. Sinsheimer 10/05/07 75,000 2,139,000
Steven F. Groth 10/05/07 0 0 0 25,000 713,000
John V. Golio 10/05/07 0 0 0 30,000 855,600
James H. Mayes, Jr. 10/05/07 0 0 0 30,000 855,600
Troy H. Geisser 10/05/07 0 0 0 25,000 713,000
----------------------------------------------------------------------------------------------------------
(1) The grant date fair value equals the number of shares of restricted stock
multiplied by the Company's grant date closing stock price of $28.52. There
can be no assurance these will be the actual amounts realized.
(2) Mr. Sinsheimer received the maximum award of $1,000,000 as reported in the
Summary Compensation Table.
The following table shows the number of common shares covered by
exercisable stock options and the number of unvested restricted common shares
and restricted stock units held by the named executive officers as of July 31,
2008.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END - 2008
---------------------------------------------------------------------------------------------------------------
Option awards Stock awards
--------------------------------------------------- ---------------------------------
Number of Number of
securities securities Market value
underlying underlying Number of shares of shares or
unexercised unexercised Option Option or units of stock units of stock
options (#) options (#) exercise expiration that have not that have not
Name exercisable unexercisable price ($) date vested (#) vested ($)
(a) (b) (c) (e) (f) (g) (7) (h) (8)
---------------------------------------------------------------------------------------------------------------
Paul R. Sinsheimer (2) 0 0 -- -- 361,386 8,329,947
Steven F. Groth (3) 0 0 -- -- 102,125 2,353,981
John V. Golio (4) 15,000 0 25.01 03/16/09 (1) 128,250 2,956,163
James H. Mayes, Jr. (5) 0 0 -- -- 170,000 3,918,500
Troy H. Geisser (6) 15,000 0 25.01 03/16/09 (1) 127,000 2,927,350
---------------------------------------------------------------------------------------------------------------
(1) These options were granted on March 16, 2005 with an exercise price equal
to the fair market value of a Company common share on the date of grant and
vested in three equal installments on July 31, 2005, 2006 and 2007.
(2) Scheduled to vest as follows: 6,672 shares on September 28, 2008 and 6,671
shares on September 28, 2009; 3,000 shares on October 14, 2008 and 2009;
8,937 shares on November 2, 2008 and 2009; 15,835 shares on March 15, 2009
and 15,834 shares on March 15, 2010; 18,750 units on January 1, 2009 and
2010; 75,000 shares on October 5, 2012; 180,000 shares on February 13, 2010
(see footnote 7).
(3) Scheduled to vest as follows: 17,875 shares on March 15, 2009 and 2010; 938
shares on April 30, 2009, 2010 (937 shares), 2011 and 2012 (937 shares);
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 on November 12, 2014 (see
footnote 7).
-16-
(4) Scheduled to vest as follows: 21,750 shares on March 15, 2009 and 2010; 938
shares on April 30, 2009, 2010 (937 shares), 2011 and 2012 (937 shares);
3,000 shares on March 15, 2011 and 2012; 30,000 shares on October 5, 2012;
45,000 shares on May 2, 2023 (see footnote 7).
(5) Scheduled to vest as follows: 14,375 shares on March 15, 2009 and 2010;
3,750 shares on April 30, 2009, 2010, 2011 and 2012; 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 on August 22, 2026 (see
footnote 7).
(6) Scheduled to vest as follows: 18,000 shares on March 15, 2009 and 2010;
3,750 shares on April 30, 2009, 2010, 2011 and 2012; 3,000 shares on March
15, 2011 and 2012; 25,000 shares on October 5, 2012; 45,000 shares on
November 18, 2023 (see footnote 7).
(7) These shares are the long-term restricted stock award granted in February
2006. These shares are scheduled to vest and be delivered to the named
executive officers 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 of restricted stock granted based on the percentage of the vesting
period elapsed. The remaining shares would be forfeited. Additionally, all
shares 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.
(8) 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 Company's July 31, 2008 closing stock price of $23.05.
The following table shows (i) the number of shares acquired upon exercise
of stock options and the value realized upon exercise and (ii) the number of
restricted shares and restricted stock units that vested, along with their
market value at the time of vesting, for the named executive officers during
Fiscal 2008.
OPTION EXERCISES AND STOCK VESTED - FISCAL YEAR 2008
------------------------------------------------------------------------------------------
Option awards Stock awards
--------------------------------- --------------------------------
Number of Number of
shares acquired Value realized shares acquired Value realized
Name on exercise (#) on exercise ($) on vesting (#) on vesting ($)
(a) (b) (c) (d) (e)
------------------------------------------------------------------------------------------
Paul R. Sinsheimer (1) 0 0 53,192 1,223,157
Steven F. Groth 0 0 18,812 366,688
John V. Golio 0 0 22,687 441,436
James H. Mayes, Jr. 37,500 395,601 18,125 364,856
Troy H. Geisser 0 0 21,750 434,783
------------------------------------------------------------------------------------------
(1) The amounts in columns (d) and (e) include 18,750 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 stock units vesting annually in equal amounts over eight years on
January 1 of each year, subject to his continued service. Subject to forfeiture
for earlier termination of service, Mr. Sinsheimer will receive shares of Common
Stock equal to the number of stock units vested when he retires or if there is
an earlier qualifying involuntary termination of employment (including death or
disability) or a sale of the Company. The SERP was amended in December 2005
according to its anti-dilution provisions to proportionately increase the number
of units as a result of the Company's January 2006 three-for-two stock split,
and the SERP was further amended in March 2006 to provide for dividend
equivalent payments when the Company pays dividends on its Common Stock. As of
July 31, 2008, 112,500 units were vested.
Mr. Sinsheimer and the Company also entered into two agreements to defer
receipt of 27,084 shares of vested restricted stock. Mr. Sinsheimer agreed to
receive vested stock units in exchange for the vested shares. Mr. Geisser
entered into four deferred compensation agreements with the Company to defer
portions of his salary. 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, 2008 for the named executive officers under these
nonqualified deferred compensation plans and arrangements. The named executive
officers and the Company did not make any contributions in Fiscal 2008.
NONQUALIFIED DEFERRED COMPENSATION - FISCAL YEAR 2008
-----------------------------------------------------------------------------------------------
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 (143,545) 0 624,286
(1b) 0 0 (795,000) 0 3,457,500
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 2,003 0 31,725
(2b) 0 0 1,550 0 35,834
(2c) 0 0 3,414 0 58,479
(2d) 0 0 3,984 0 71,835
-----------------------------------------------------------------------------------------------
(1a) The loss in column (d) is the 27,084 vested stock units deferred by Mr.
Sinsheimer in February 2003 multiplied by the difference in the Company's
closing stock price between year-end Fiscal 2008 ($23.05) and 2007
($28.35). The balance in column (f) is the 27,084 vested stock units
multiplied by the year-end Fiscal 2008 closing stock price. These vested
stock units will be settled with shares of Common Stock on January 1, 2010.
(1b) The loss in column (d) is the total of the 112,500 vested and 37,500
unvested stock units under the SERP multiplied by the difference in the
Company's closing stock price between year-end Fiscal 2008 ($23.05) and
2007 ($28.35). The balance in column (f) is the total of the 112,500 vested
and 37,500 unvested stock units multiplied by the year-end Fiscal 2008
closing stock 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 is settled with a $33,863 lump
sum payment on July 31, 2009. The present value will be paid earlier upon a
termination of employment.
(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 is settled with a $62,104
lump sum payment on July 31, 2009. The present value will be paid earlier
upon a termination of employment.
(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 2008 Summary
Compensation Table.
(4) $3,889,103 of the amounts reported in column (f) for Mr. Sinsheimer and
$48,000 of the amounts reported in column (f) for Mr. Geisser were reported
in Summary Compensation Tables in prior fiscal years.
-19-
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
The named executive officers do not have any employment, severance or
change in control agreements providing termination benefits other than (i) the
SERP for the CEO (ii) stock and stock option agreements (iii) nonqualified
deferred compensation agreements and (iv) excise tax restoration agreements for
golden parachute excise taxes that may be incurred from a sale of the Company.
Payments Made Upon Resignation or Termination for Cause
If a named executive officer resigns without good reason or is terminated
by the Company for cause, the executive will only be entitled to any accrued and
unpaid salary and vested benefits and no cash severance.
Payments Made Upon Involuntary 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 involuntarily terminated either without cause by the Company or by
the executive for good reason, or due to death or disability, the executive will
generally be entitled to full vesting of all unvested shares of restricted stock
and stock units. However, the executives' February 2006 restricted stock
agreements provide only for a portion (based on the percentage of the vesting
period elapsed) of the shares to vest if a qualifying termination of employment
occurs.
As stated in the Compensation Discussion and Analysis section above, if
there is a sale of the Company and it subjects a named executive officer 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 2008, only one
executive would have needed an excise tax restoration payment.
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.
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, 2008 (the last business day of Fiscal 2008).
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 named executive 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, 2008 at share price of $23.05;
o Accelerated vesting and settlement of all unvested restricted stock
and stock units;
o No cash severance;
o Equity awards, regular bonuses and similar payments made within one
year of July 31, 2008 were not contingent on or related to the
hypothetical sale of the Company;
o Base amounts are the average compensation for calendar years 2003
through 2007;
o July 2008 applicable federal rates were used to calculate discounted
present values (120%, semi-annual compounding; short-term: 2.89%,
mid-term: 4.10%; long-term: 5.46%); and
o Aggregate marginal income tax rates of 46.35% for New Jersey
residents, 43.30% for New York residents and 36.45% for Texas
residents.
--------------------------------------------------------------------------------------------
Involuntary
Termination
(without cause
or for good Death or
Name reason) ($) Sale of Company ($) Disability ($)
--------------------------------------------------------------------------------------------
Paul Sinsheimer
2008 Annual MIP Cash Payment 0 1,000,000 1,000,000
Unvested Restricted Stock (Accelerated) 5,876,593 7,465,572 7,465,572
Vested SERP Stock Units 2,593,125 2,593,125 2,593,125
Unvested SERP Stock Units (Accelerated) 864,375 864,375 864,375
Vested Deferred Stock Units/Compensation 624,286 624,286 624,286
IRC 280G Excise Tax Restoration 0 0 0
--------------------------------------------------------------------------------------------
Total 9,958,379 12,547,358 12,547,358
--------------------------------------------------------------------------------------------
Steven Groth
Unvested Restricted Stock (Accelerated) 1,855,303 2,353,981 2,353,981
IRC 280G Excise Tax Restoration 0 0 0
--------------------------------------------------------------------------------------------
Total 1,855,303 2,353,981 2,353,981
--------------------------------------------------------------------------------------------
John Golio
Unvested Restricted Stock (Accelerated) 2,064,934 2,956,163 2,956,163
IRC 280G Excise Tax Restoration 0 0 0
--------------------------------------------------------------------------------------------
Total 2,064,934 2,956,163 2,956,163
--------------------------------------------------------------------------------------------
James Mayes, Jr.
Unvested Restricted Stock (Accelerated) 2,393,546 3,918,500 3,918,500
IRC 280G Excise Tax Restoration 0 973,139 0
--------------------------------------------------------------------------------------------
Total 2,393,546 4,891,639 3,918,500
--------------------------------------------------------------------------------------------
Troy Geisser
Unvested Restricted Stock (Accelerated) 2,031,988 2,927,350 2,927,350
Vested Deferred Stock Units/Compensation 197,873 197,873 197,873
IRC 280G Excise Tax Restoration 0 0 0
--------------------------------------------------------------------------------------------
Total 2,229,861 3,125,223 3,125,223
--------------------------------------------------------------------------------------------
-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 2008 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 2008.
Based on the Audit Committee's review and discussions noted above, the
Audit Committee recommended to the Board (and the Board approved) to include the
Company's audited consolidated financial statements in the Company's Annual
Report on Form 10-K for the year ended July 31, 2008, 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, 2009. 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 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 2008 and
2007 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 $725,000 in
Fiscal 2008 and $715,000 in Fiscal 2007.
Audit-Related Fees: No audit related services were provided for Fiscal 2008
or 2007.
Tax Fees: No tax compliance, advice or planning services were provided for
Fiscal 2008 or 2007.
All Other Fees: No other products or services were provided for Fiscal 2008
or 2007.
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, 2009.
-23-
STOCKHOLDER PROPOSALS
As a stockholder, you may be entitled to present proposals for action at a
forthcoming meeting if you comply with the requirements of the proxy rules
established by the SEC. All proposals of stockholders to be presented for
consideration at the Company's 2009 Annual Meeting of Stockholders, expected to
be held December 8, 2009, must be directed to the Secretary of the Company at
the Company's principal executive office and must be received by July 8, 2009 to
be considered for inclusion in the proxy materials for the 2009 Annual Meeting
of Stockholders according to the rules and regulations of the SEC. If you intend
to submit a proposal at the 2009 Annual Meeting of Stockholders that is not
eligible to be included in the proxy materials for that meeting, you must
provide notice of such proposal by September 21, 2009. If you fail to comply
with this notice provision, the proxy holders will be allowed to use their
discretionary voting authority if the proposal is raised at the 2009 Annual
Meeting of Stockholders without any discussion of the matter in the proxy
materials.
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. The attached proxy card grants proxy holders discretionary
authority to vote on any matter raised at the Meeting.
ANNUAL REPORT
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED JULY 31,
2008 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 2008 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, 733 THIRD AVENUE, 24TH FLOOR, NEW YORK, NEW YORK
10017 ATTN: CORPORATE SECRETARY.
BY ORDER OF THE BOARD OF DIRECTORS
Troy H. Geisser
Secretary
DATE: November 5, 2008
-24-
FINANCIAL FEDERAL CORPORATION PROXY
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.
1. Election of Directors
Nominees: Lawrence B. Fisher Michael C. Palitz Paul R. Sinsheimer
Leopold Swergold H.E. Timanus, Jr. Michael J. Zimmerman
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
above (except as marked vote for all nominees
to the contrary) listed above
INSTRUCTIONS: To withhold authority for an individual nominee, strike a
line through that nominee's name.
2. Ratifying the appointment of KPMG LLP as the Corporation's independent
registered public accounting firm for the fiscal year ending July 31, 2009.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on reverse side)
FINANCIAL FEDERAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING TO BE HELD ON DECEMBER 9, 2008
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
9, 2008 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.
Dated: , 2008
----------------------------------
-----------------------------------------------
(Signature)
-----------------------------------------------
(Signature, if held jointly)
The signature on this Proxy should correspond
exactly with stockholder's name as printed to
the left. In the case of joint tenancies,
co-executors, or co-trustees, both should sign.
Persons signing as Attorney, Executor, Trustee,
Administrator or Guardian should give their
full title.
Please Mark, Sign, Date and Return this Proxy Card Promptly Using the Enclosed
Envelope.