SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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
------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------------
(2) Form, Schedule or Registration No.:
--------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------
FINANCIAL FEDERAL
CORPORATION
Notice of Annual
Meeting of Stockholders
and Proxy Statement
Tuesday, December 14, 2004
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 14, 2004, 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 14, 2004, at 10:00 a.m. Eastern Time,
for the following purposes:
(1) Electing seven directors to serve until the next annual
meeting of stockholders;
(2) Ratifying the appointment of KPMG LLP as the Company's
independent registered public accounting firm for the fiscal
year ending July 31, 2005; and
(3) Transacting such other business as may properly come before
the Annual Meeting.
The Board of Directors of the Company has fixed the close of business on
October 27, 2004 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 prior to the Annual Meeting.
The list will also be available during the Annual Meeting for inspection by any
stockholder present at the Meeting. We are enclosing a copy of the Company's
Annual Report to Stockholders for the fiscal year ended July 31, 2004.
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 8, 2004
New York, New York
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE FILL IN, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH DOES
NOT REQUIRE 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 14, 2004
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 14, 2004 and at any postponements or
adjournments thereof.
Shares represented by properly executed proxies, that are received in time
and not revoked, will be voted at the Meeting in the manner described in the
proxies. A stockholder may revoke his/her proxy at any time prior to its
exercise by notice in writing to the Secretary of the Company indicating that
his/her 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 such stockholder's
beneficial ownership of shares as of October 27, 2004.
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, 2005; and
(iii) to take such other action as may properly come before the Meeting. Each
proposal is described in more detail in this Proxy Statement.
The approximate date on which this Proxy Statement and accompanying form
of proxy are first being sent or given to stockholders is November 8, 2004.
Holders of the Company's common stock, par value $.50 per share (the "Common
Stock"), as of the record date, the close of business on October 27, 2004, are
entitled to vote at the Meeting. As of October 27, 2004, the Company had
17,374,193 shares of Common Stock outstanding and had no preferred stock, par
value $1.00 per share, outstanding.
Each share of Common Stock entitles the holder thereof 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 for
purposes of determining the presence or absence of a sufficient number of shares
to constitute a quorum for the transaction of business. A broker non-vote is
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
with respect to 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, 2005 and by the proxies in their discretion on any other matters
to properly come before the Meeting, or any postponement or adjournment thereof.
If a stockholder specifies a different choice on the proxy, such stockholder's
shares of Common Stock will be voted in accordance with the specification so
made.
The entire expense of this proxy solicitation will be borne 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 expenses
incurred by them in connection therewith. The Company has retained Georgeson
Shareholder Communications, Inc. to assist in the solicitation of 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 knowledge of the Company,
information regarding the ownership of Common Stock by (i) each person who may
be deemed to be the beneficial owner of more than 5% of the Common Stock
outstanding as of October 27, 2004 or such other date as may be noted below,
(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 of the Company as a group. There were
17,374,193 shares of Common Stock outstanding as of October 27, 2004.
Number of Shares Percent of
Name and Address of Beneficial Owner(1) Beneficially Owned(2) Ownership
--------------------------------------- --------------------- ---------
Waddell & Reed Financial Services(3) 1,630,837 9.4
6300 Lamar Avenue
Shawnee Mission, KS 66201
Westcap Investors LLC(3) 1,542,790 8.9
1111 Santa Monica Blvd., Suite 820
Los Angeles, CA 90025
M. A. Weatherbie & Co., Inc.(3) 1,488,811 8.6
265 Franklin Street
Boston, MA 02110
Franklin Resources, Inc.(3) 1,467,843 8.4
One Franklin Parkway
San Mateo, CA 94403
Kayne Anderson Rudnick Investment Management, LLC(3) 1,402,107 8.1
1800 Avenue of the Stars
Los Angeles, CA 90067
Transamerica Investment Management LLC(3) 1,339,677 7.7
1150 South Olive St., Suite 2700
Los Angeles, CA 90015
Lawrence B. Fisher(4) 5,000 *
William M. Gallagher(5) 119,888 *
Troy H. Geisser(6) 106,170 *
John V. Golio(7) 128,182 *
Steven F. Groth(8) 93,590 *
William C. MacMillen, Jr.(9) 5,000 *
Michael C. Palitz(10) 429,902 2.5
Thomas F. Robards(11) 11,000 *
Paul R. Sinsheimer(12) 388,802 2.2
H. E. Timanus, Jr.(13) 16,500 *
Michael J. Zimmerman(14) 1,000 *
All directors and executive officers as a group (14 persons)(15) 1,447,352 8.3
* 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, New
York 10017.
(2) Unless otherwise noted, each person listed has the sole power to vote, or
direct the voting of, and power to dispose, or direct the disposition of,
all such shares. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and includes options that
are exercisable or will become exercisable within 60 days of October 27,
2004 and shares of restricted stock.
(3) Share ownership as recently communicated by the beneficial owner.
(4) Mr. Fisher's holdings include options to purchase 5,000 shares of Common
Stock.
2
(5) Mr. Gallagher's holdings include (i) 89,263 shares of Common Stock, (ii)
options to purchase 10,000 shares of Common Stock, and (iii) 20,625 shares
of restricted stock that are subject to forfeiture.
(6) Mr. Geisser's holdings include (i) 24,920 shares of Common Stock and (ii)
81,250 shares of restricted stock that are subject to forfeiture.
(7) Mr. Golio's holdings include (i) 9,432 shares of Common Stock, (ii)
options to purchase 37,500 shares of Common Stock, and (iii) 81,250 shares
of restricted stock that are subject to forfeiture.
(8) Mr. Groth's holdings include (i) 20,560 shares of Common Stock, (ii)
options to purchase 7,780 shares of Common Stock, and (iii) 65,250 shares
of restricted stock that are subject to forfeiture.
(9) Mr. MacMillen's holdings include options to purchase 5,000 shares of
Common Stock.
(10) Mr. Palitz's holdings include (i) 205,847 shares of Common Stock, (ii)
options to purchase 5,000 shares of Common Stock, (iii) 218,830 shares of
Common Stock held by a corporation owned and controlled by Mr. Palitz of
which 100,000 shares are subject to a prepaid forward variable sale
contract with settlement occurring in 2005 and (iv) 225 shares of Common
Stock held by Mr. Palitz's wife.
(11) Mr. Robards' holdings include (i) 1,000 shares of Common Stock, and (ii)
options to purchase 10,000 shares of Common Stock.
(12) Mr. Sinsheimer's holdings include (i) 307,964 shares of Common Stock held
by a limited partnership of which the general partner is controlled by Mr.
Sinsheimer, and (ii) 80,838 shares of restricted stock that are subject to
forfeiture. Mr. Sinsheimer's holdings do not include 118,056 stock units
held that do not constitute beneficially owned securities.
(13) Mr. Timanus' holdings include (i) 11,500 shares of Common Stock, and (ii)
options to purchase 5,000 shares of Common Stock.
(14) Mr. Zimmerman's holdings include 1,000 shares of Common Stock.
(15) Includes (i) 890,541 shares of Common Stock, options to purchase 85,280
shares of Common Stock, 329,213 shares of restricted stock that are
subject to forfeiture as described in notes 4 through 14 above, as well as
(ii) 20,836 shares of Common Stock, options to purchase 37,982 shares of
Common Stock, and 83,500 shares of restricted stock that are subject to
forfeiture 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 (the "Section 16 Reporting Persons") 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,
Inc., and to furnish the Company with all copies of Section 16(a) forms they
file. Based solely on a review of copies of such reports and written
representations from the reporting persons, we believe that for the fiscal year
ended July 31, 2004, our executive officers, directors and greater than ten
percent stockholders filed on a timely basis all reports due under Section 16(a)
of the Securities Exchange Act of 1934.
3
ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
The Corporate Governance and Nominating Committee and the Board of
Directors have 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. Mr.
Zimmerman, who is standing for election to the Board for the first time, was
initially recommended to the Corporate Governance and Nominating Committee as a
possible nominee by Mr. Robards who is an independent director of the Board and
also a security holder.
It is intended that shares represented by proxies solicited by the Board
will, unless authority to vote for some or all of the 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 provides for a lesser number of directors. All
directors who were serving as a director at the time of the 2003 Annual Meeting
of Stockholders attended the 2003 meeting. Directors are encouraged to attend
each Annual Meeting of Stockholders. All nominees listed below are currently
directors of the Company.
The election of the seven director nominees requires an affirmative vote
by a plurality of votes cast at the meeting of stockholders by the stockholders
entitled to vote in the election. Any shares not voted (by abstention, broker
non-vote, or otherwise) have no impact on the vote.
The Board of Directors recommends that stockholders vote "FOR" each of the
nominees listed below.
Nominees for Election as Directors
The name, age, principal occupation or employment, and other data
regarding each nominee, based on information received from the respective
nominees, are set forth below:
Lawrence B. Fisher, 66, has served as a director of the Company since
1992. Mr. Fisher has been a partner of Orrick, Herrington & Sutcliffe LLP, a law
firm, since December 1995. He had previously been a partner of Kelley Drye &
Warren LLP, a law firm, from 1985 to December 1995. He is also a director of
National Bank of New York City, a privately owned commercial bank.
William C. MacMillen, Jr., 91, has served as a director of the Company
since 1989. Mr. MacMillen was formerly the President of William C. MacMillen &
Co., Inc., an investment banking firm which was dissolved in June 2003. He
served as a director of Republic New York Corporation and Republic National Bank
of New York until December 1999 and as a director of Commercial Alliance
Corporation, an equipment finance company, from its inception in 1963 to 1984.
Michael C. Palitz, 46, has served as a director of the Company since July
1996. He is currently a Managing Director of Preston Partners LLC, a Manhattan
based merchant banking firm. He is also a director of City and Suburban
Financial Corporation and is the Chair of its Audit Committee. 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 has 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.
Thomas F. Robards, 58, has served as a director of the Company since 2000
and is currently a principal of Robards & Co. From January 2003 until June 2004,
Mr. Robards was the Chief Financial Officer and a Senior Vice President of the
American Museum of Natural History, New York, New York. From April 2000 until
September 2002, Mr. Robards was the Chief Financial Officer of Datek Online
Holdings Corp., until it was acquired by Ameritrade Holding Corp. From 1976
until December 1999, he was employed by Republic New York Corporation. He served
as its Chief Financial Officer from March 1995 through March 1999 and as a
director from 1998 until March 1999.
4
Paul R. Sinsheimer, 57, 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 in 1989. From 1970 to 1989, Mr. Sinsheimer was employed by
Commercial Alliance Corporation, where he served in various positions including
Executive Vice President.
H. E. Timanus, Jr., 59, has served as a director of the Company since
1999. Mr. Timanus is the President and Chief Operating Officer of Prosperity
Bank, Houston, Texas; Executive Vice President and Chief Operating Officer of
Prosperity Bancshares, Inc., Houston, Texas; and Executive Vice President and
Chief Operating Officer of Prosperity Holdings, Inc., Wilmington, Delaware. He
was formerly 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, 54, has served as a director of the Company since
June 7, 2004. Mr. Zimmerman is Executive Vice President and Chief Financial
Officer of ContiGroup Companies, Inc. and President of its ContiInvestments
subsidiary. Prior to joining ContiGroup in 1996, Mr. Zimmerman was a Managing
Director at Salomon Brothers, where he served in a variety of 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 is Chairman of Premium Standard Farms, a
majority-owned affiliate of ContiGroup.
Independent and Non-Management Directors
The Board of Directors has affirmatively determined that each member of
the Board other than Mr. Sinsheimer (who is the Chief Executive Officer) and Mr.
Palitz (who is a non-management director) meets the independence criteria
established by the New York Stock Exchange for independent board members. The
Board has also affirmatively determined that 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
determining Mr. Fisher's independence, the Board considered (i) that the
Company's payments to the law firm that Mr. Fisher is a partner of were
substantially less than one percent of the law firm's annual revenues and (ii)
that an immediate family member of Mr. Fisher is employed by the Company in a
non-executive position. The Board assessed the significance of these
relationships and determined that they do not interfere with Mr. Fisher's
exercise of independent judgment because the payments made by the Company for
these services are well within the applicable numerical thresholds set forth in
the New York Stock Exchange's corporate governance rules for classifying
directors as independent. In addition, the Board of Directors has determined
that the members of the Audit Committee meet the additional independence
criteria required for audit committee membership.
The non-management directors meet regularly each year without any
management directors or employees present. If the meeting is in conjunction with
a committee meeting, then the respective chair of the committee that is meeting
acts as the presiding director. If the meeting is not in conjunction with a
committee meeting, then the non-management directors rotate acting as the
presiding director. In addition, the independent directors meet without any of
the other directors present on at least an annual basis. Interested parties may
communicate with the non-management directors as described below in the section
entitled "Communications with the Board of Directors."
Board of Directors Meetings and Committees
The Board has established an Executive Committee, which currently consists
of four directors. The Executive Committee can exercise all of the powers of the
Board between meetings of the Board. The current members of the Executive
Committee are Messrs. Fisher, Palitz, Robards and Sinsheimer.
The Board has established an Audit Committee, which currently consists of
three independent directors. The Audit Committee is responsible for monitoring
(i) the integrity of the financial statements of the Company, (ii) the
independent registered public accounting firm's qualifications and independence,
(iii) the performance of the Company's internal audit function and independent
registered public accounting firm, and (iv) the compliance by the Company with
legal and regulatory requirements. The Audit Committee is also responsible for
the engagement of the Company's independent registered public accounting firm.
The Audit Committee also establishes procedures for (i) the receipt, retention
and treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, and
5
for (ii) the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters. The Audit Committee
operates under a written charter approved by the Board. The charter is attached
to this proxy statement as Appendix A and is also available in the Investor
Relations section of the Company's website at http://www.financialfederal.com.
The current members of the Audit Committee are Messrs. Robards, Timanus and
Zimmerman. Mr. Robards is the Chair of the Audit Committee. Upon consideration
of the attributes of an audit committee financial expert as set forth in Item
401(h) of Regulation S-K promulgated by the SEC, the Board determined that Mr.
Robards possesses these attributes through his experience as Chief Financial
Officer of the American Museum of Natural History, Datek Online Holdings Corp.
and Republic New York Corporation, and he is designated as the Audit Committee
financial expert. In addition, the Board also determined that Mr. Zimmerman
possesses the attributes of an audit committee financial expert through his
experience as the Chief Financial Officer of ContiGroup Companies, Inc.
The Board has established an Executive Compensation and Stock Option
Committee, which currently consists of three independent directors. The
Executive Compensation and Stock Option Committee reviews and approves the
goals, objectives and performance relevant to the Chief Executive Officer's
compensation and determines such compensation including the awarding of any
equity compensation. The Executive Compensation and Stock Option Committee
similarly reviews and approves the goals, objectives and performance relevant to
the compensation for the executive officers that report to the Chief Executive
Officer and determines their compensation including the awarding of any equity
compensation. The Executive Compensation and Stock Option Committee also is
responsible for administering the Company's 2001 Management Incentive Plan (the
"MIP") and the Amended and Restated 1998 Stock Option/Restricted Stock Plan (the
"1998 Plan"). The Executive Compensation and Stock Option Committee is
responsible for approving appointments and promotions between meetings of the
full Board and such committee actions, to remain effective, must be ratified by
a majority vote of the Board within six months of such action. The Executive
Compensation and Stock Option Committee operates under a written charter
approved by the Board. The charter is available in the Investor Relations
section of the Company's website at http://www.financialfederal.com. The current
members of the Executive Compensation and Stock Option Committee are Messrs.
MacMillen, Robards and Timanus. Mr. Robards is the Chair of the Committee.
The Board has established a Corporate Governance and Nominating Committee,
which currently consists of three independent directors. The Corporate
Governance and Nominating Committee is responsible for nominating qualified
candidates for appointments to the Board, recommending to the Board the code of
business conduct and ethics and corporate governance guidelines for the Company
and for overseeing the evaluation of the Board and management. The
Board-approved code of business conduct and ethics and corporate governance
guidelines are available in the Investor Relations section of the Company's
website at http://www.financialfederal.com. The Corporate Governance and
Nominating Committee operates under a written charter approved by the Board. The
charter is available in the Investor Relations section of the Company's website
at http://www.financialfederal.com. The current members of the Corporate
Governance and Nominating Committee are Messrs. MacMillen, Robards and Timanus.
Mr. Timanus is the Chair of the Committee.
The Corporate Governance and Nominating Committee annually makes
recommendations for director nominations and also annually reviews the
appropriate skills and characteristics required of Board members in the context
of the current composition of the Board, the operating requirements of the
Company and the long-term interests of stockholders. In conducting this
assessment, the Corporate Governance and Nominating Committee focuses
particularly on a candidate's financial expertise and finance company experience
and also considers knowledge, skills, experience in business, administration and
relevant technical disciplines, social experience and such other factors as it
deems appropriate given the current needs of the Board and the Company, to
maintain a balance of knowledge, experience and capability. Nominees for the
Board should possess 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 a practical judgment on the
issues at hand. The Corporate Governance and Nominating Committee may engage
consultants or third-party search firms to assist in identifying and evaluating
potential nominees. In fiscal 2004, the Corporate Governance and Nominating
Committee engaged a third party service provider to assist in the due diligence
process for the candidate-nominees for director.
In recommending candidates for election to the Board, the Corporate
Governance and Nominating Committee considers nominees recommended by directors,
officers, employees, 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 selection of a qualified candidate, the Corporate
Governance and Nominating Committee recommends the candidate for consideration
by the full Board.
Stockholders may recommend a nominee by writing to the Company's Secretary
specifying the nominee's name and the qualifications for Board membership. All
recommendations are brought to the attention of the Corporate Governance and
Nominating Committee. Each submission must include (i) a brief description of
the candidate, (ii) the candidate's name, age,
6
business address and residence address, (iii) the candidate's principal
occupation and the number of shares of the Company's common stock beneficially
owned by the candidate and (iv) any other information that would be required
under the rules of the SEC in a proxy statement listing the candidate as a
nominee for director. Recommended candidates may be required to provide
additional information.
During the Company's fiscal year ended July 31, 2004, the Board of
Directors met six times, the Executive Committee met once, the Audit Committee
met seven times, the Executive Compensation and Stock Option Committee met five
times and the Corporate Governance and Nominating Committee met four times. Each
current director attended, either in person or telephonically, at least 90% of
the total number of meetings of the Board and its committees of which they were
members during fiscal 2004. 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, New York 10017. The Company's Secretary will forward all correspondence to
the Board, except for spam, junk mail, mass mailings, product complaints or
inquiries, job inquiries, surveys, business solicitations or advertisements, or
patently offensive or otherwise inappropriate material. The Company's Secretary
may forward certain correspondence, such as product-related inquiries, elsewhere
within the Company for review and possible response.
Interested parties may report any concerns they have to the non-management
directors by directly writing to the chair of the Corporate Governance and
Nominating Committee c/o Financial Federal Corporation, 733 Third Avenue, 24th
Floor, New York, New York 10017. Such communications may be confidential or
anonymous. All such communications shall be reviewed and any concerns relating
to accounting, internal controls, or auditing shall also be forwarded to the
chair of the Audit Committee.
Compensation Committee Interlocks and Insider Participation
No interlocking relationships exist between any member of the Executive
Compensation and Stock Option Committee and any member of any other company's
Board of Directors or compensation committee.
Compensation of Directors
Directors who are not officers or employees of the Company or any of its
subsidiaries receive stipends, as follows:
1. Annual stipend of $35,000 payable upon their election by the
stockholders after the annual meeting of stockholders each year. If
a director joins the Board during the year, the stipend will be pro
rated.
2. Additional annual stipend of $5,000 to the Audit Committee Chair,
$3,000 to the Executive Compensation and Stock Option Committee
Chair and $2,000 to the Corporate Governance and Nominating
Committee Chair.
3. Additional stipend of $1,000 for each Board meeting attended.
4. Additional stipend of $1,000 for each Committee meeting attended.
The Company does not have a formal policy of granting stock options to
directors but the Board may make discretionary grants pursuant to the 1998 Plan.
Current directors were each granted a nonqualified stock option, shortly after
joining the Board as an outside director, to purchase 5,000 shares of Common
Stock at the fair market value on the date of grant. No stock options were
granted to outside directors during fiscal 2004 other than a grant of a
non-qualified stock option to purchase 5,000 shares of Company Common Stock at
the fair market value on the date of grant to Mr. Zimmerman upon his joining the
Board.
Directors who are officers of the Company receive no additional
compensation upon election to the Board or for attending Board or committee
meetings.
7
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the annual and
long-term compensation paid to those persons who were, at July 31, 2004, the
Chief Executive Officer ("CEO") and the other four most highly compensated
executive officers of the Company.
Annual Long-term Compensation
Compensation ($) Awards
------------------- -----------------------------
Restricted Securities
Fiscal Stock Underlying All Other
Name and Principal Position(s) Year Salary Bonus Award (1) ($) Options (#) Compensation ($)
------------------------------ ---- ------ ----- ------------- ----------- ----------------
Paul R. Sinsheimer 2004 750,000 530,000 369,700(2) 0 0
CEO, President and 2003 750,634 508,375 0 0 0
Chairman 2002 757,350 750,000 6,290,000 0 0
John V. Golio 2004 300,000 0 156,500 0 0
Executive Vice President 2003 303,416 0 0 0 0
2002 307,545 0 2,925,000 0 0
William M. Gallagher 2004 290,000 0 156,500 0 0
Senior Vice President 2003 290,633 0 0 0 0
2002 290,633 0 585,000 0 0
Troy H. Geisser 2004 280,000 0 626,000 0 0
Senior Vice President 2003 291,135 0 0 0 0
and Secretary 2002 290,254 0 2,340,000 0 0
Steven F. Groth 2004 280,000 0 156,500 0 0
Senior Vice President and 2003 293,548 0 0 0 0
Chief Financial Officer 2002 344,608 0 2,340,000 0 0
(1) Amounts were determined by multiplying the number of shares of
restricted stock and stock units granted by the fair market value of
the Common Stock on the date of the award. Shares of restricted
stock were granted to Mr. Sinsheimer under the MIP as follows:
10,000 in October 2004 and 100,000 in March 2002. Mr. Sinsheimer
also received a grant of 100,000 stock units in June 2002 as a
supplemental retirement benefit. The stock units will be paid out in
the form of an equivalent number of shares of Common Stock reserved
for issuance under the 1998 Plan. Shares of restricted stock were
granted in April 2004 under the 1998 Plan as follows: Mr. Golio
5,000; Mr. Gallagher 5,000; Mr. Geisser 20,000 and Mr. Groth 5,000.
Shares of restricted stock were granted in March 2002 under the 1998
Plan as follows: Mr. Golio 100,000; Mr. Gallagher 20,000; Mr.
Geisser 80,000 and Mr. Groth 80,000. The restricted stock and stock
units granted in fiscal 2004 and 2002 vest ratably in annual
increments over eight years of service subject to earlier vesting
upon a sale of the Company or qualifying terminations of employment.
If the Company decided to pay dividends on the Common Stock,
dividends would be paid to holders of restricted stock. The
aggregate holdings of restricted stock and stock units as of July
31, 2004 follow: Mr. Sinsheimer 174,450 (excludes the October 2004
grant of 10,000 shares of restricted stock); Mr. Golio 81,250; Mr.
Gallagher 20,625; Mr. Geisser 81,250 and Mr. Groth 65,250. The
values of such restricted stock and stock units as of July 31, 2004
follow: Mr. Sinsheimer $5,610,312 (excludes the October 2004 grant
of 10,000 shares of restricted stock); Mr. Golio $2,613,000; Mr.
Gallagher $663,300; Mr. Geisser $2,613,000 and Mr. Groth $2,098,440.
(2) The 10,000 shares of restricted stock granted to Mr. Sinsheimer in
October 2004 had a grant date value of $369,700 based on the fair
market value of the Common Stock on the date of the award. This
grant represented partial payment of Mr. Sinsheimer's fiscal 2004
bonus under the MIP. Such restricted stock vests ratably in annual
increments over five years of service subject to earlier vesting
upon a sale of the Company or qualifying terminations of employment.
8
Option Grants In Last Fiscal Year
No options to purchase Company securities or stock appreciation rights
were granted to any of the named executive officers in the last fiscal year.
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year-End Option Value
Number of
Securities Underlying Value of Unexercised
Unexercised Options Held In-the-Money Options
Shares At July 31, 2004 (#) At July 31, 2004 (1) ($)
Acquired on Value ------------------------------ -----------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
-------------------- ------------ ------------ ----------- ------------- ----------- -------------
Paul R. Sinsheimer 200,000 3,105,000 0 0 0 0
John V. Golio 15,000 174,300 34,875 27,625 347,658 249,529
William M. Gallagher 6,000 71,310 18,750 12,250 204,031 116,054
Troy H. Geisser 16,500 214,663 25,000 28,250 214,000 257,989
Steven F. Groth 25,280 359,163 19,440 5,000 233,726 42,800
(1) Only the value of unexercised, in-the-money options is reported.
Value was calculated by (i) subtracting the total exercise price per
share from the fiscal year-end value of $32.16 per share and (ii)
multiplying by the number of shares subject to the option. All of
the options held by the named executive officers at July 31, 2004
were in the money.
REPORT OF THE EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE
The Executive Compensation and Stock Option Committee (the "Committee") is
pleased to present its report on executive compensation. The current members of
the Committee are William C. MacMillen, Jr., Thomas F. Robards and H. E.
Timanus, Jr. Each member of the Committee is an independent director of the
Company. This report to stockholders presents an overview of the role of the
Committee and of the Company's present compensation philosophy. The Committee
reviews and approves the goals, objectives and performance relevant to the Chief
Executive Officer's compensation and determines such compensation including the
awarding of any equity compensation. The Committee similarly reviews and
approves the goals, objectives and performance relevant to the compensation for
the executive officers that report to the Chief Executive Officer and determines
their compensation including the awarding of any equity compensation.
It is the Committee's philosophy that a significant portion of executive
compensation be linked directly to the Company's success in meeting profit,
growth and other corporate performance goals, operating efficiencies, success in
handling non-performing assets, the Company's overall performance regarding its
return on earning assets and average equity, as well as the quality and
integrity of the Company's receivables. The Company compensates officers through
salary, a portion of which may be deferred , and through grants of restricted
stock, stock units and/or stock options. The Committee believes granting
restricted stock, stock units and stock options to officers and other employees
further aligns their objectives with those of the Company and its stockholders.
The Committee, in its discretion, determines the proportion of the equity awards
to grant to officers and other employees in order to maximize long-term
incentives.
The Committee reviews the Company's compensation programs and consults
with independent experts to ensure that the compensation and benefits offered to
executive officers are competitive and reflect the Company's performance. In
order to attract and retain high caliber employees and executives, the Company
offers competitive salaries and long-term incentives compared to other financial
services companies of similar size.
The Committee's compensation evaluation procedures also include reviewing
public filings of other financial services companies and performing an informal
survey as well as a comparison and review of its competitors and other
companies.
9
The Committee, in establishing compensation for the CEO, generally uses
the same criteria it uses for other officers and employees and also provides the
CEO with an annual bonus opportunity. Competitive CEO pay practices were
assessed using proxy statements of a comparison group of publicly traded
financial institutions and a report by an independent compensation consultant as
well as its proprietary database of compensation survey sources.
Compensation of the Chief Executive Officer
The CEO's annual rate of salary for fiscal 2004 was $750,000 and is
unchanged as of the date of the mailing of this proxy. The Committee established
a fiscal 2004 target bonus of $750,000 for the CEO under the MIP subject to the
Company's future performance and the Committee's evaluation of the
accomplishment of performance goals established by the Committee. The maximum
possible award under the MIP for fiscal 2004 was equal to the lesser of (i)
$2,250,000 or (ii) 5% of the Company's pre-tax income ($2,557,000 for fiscal
2004). Based upon the Company's fiscal 2004 performance in the areas of, among
other things, earnings, revenue and asset growth, loan-loss levels, returns on
equity and assets, expenses/costs and financial/stock performance relative to
comparator companies, the Committee determined the incentive bonus for Mr.
Sinsheimer under the MIP for fiscal 2004 to be: (i) a cash payment of $530,000
and (ii) a grant of 10,000 shares of restricted stock (with a grant date value
of $369,700) that vests ratably in annual increments over five years of service
subject to earlier vesting upon a sale of the Company or qualifying terminations
of employment.
Policy with Respect to Qualifying Compensation for Deductibility
Section 162(m) of the Internal Revenue Code of 1986, as amended ("Section
162(m)") limits the deduction allowable to the Company for compensation paid to
the CEO and each of the named executive officers listed in the Summary
Compensation Table to $1.0 million per individual per fiscal year. Qualified
performance-based compensation is excluded from this limitation if certain
requirements are met. The Committee's policy is generally to preserve the
federal income tax deductibility of compensation paid. The Committee believes
that awards to the CEO under the MIP, as previously approved by the
stockholders, and its award of options made under the stock option plans for
employees, will qualify as performance-based compensation and thereby be
excluded from the $1.0 million limitation. Notwithstanding the Committee's
desire to generally preserve the federal income tax deductibility of
compensation payments, under certain circumstances in the interests of offering
competitive compensation, the Committee, in its discretion, may authorize
payments that are not deductible under Section 162(m).
This report is submitted by the members of the Executive Compensation and
Stock Option Committee of the Board of Directors:
William C. MacMillen, Jr.
Thomas F. Robards
H. E. Timanus, Jr.
10
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in cumulative total
stockholder return on Financial Federal Corporation's Common Stock during the
five-year period ending July 31, 2004 with the cumulative total return on the
Russell 2000 Index and on the S&P Financial Index. The comparison assumes $100
was invested on July 31, 1999 in each of such indices. Note that historical
stock price is not indicative of future stock price performance. All amounts
have been calculated as if all dividends were reinvested.
[LINE CHART OMITTED]
7/99 7/00 7/01 7/02 7/03 7/04
----- ----- ----- ----- ----- -----
Financial Federal Corporation 100.0 85.9 115.2 126.1 131.7 139.8
Russell 2000 100.0 113.8 111.8 91.7 112.9 146.2
S&P Financial 100.0 107.9 118.6 99.3 113.0 126.3
Copyright (C) 2004, Standard & Poor's, a division of
The McGraw-Hill Companies, Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
The Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933, or the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
11
CERTAIN TRANSACTIONS
The Company's Chairman, Chief Executive Officer and President, Paul R.
Sinsheimer, and director Michael C. Palitz (including his affiliates) held
$120,570.53 and $5,970,524.39, respectively, of the Company's commercial paper
at July 31, 2004. Such debt was issued at prevailing interest rates and on
customary terms. Mr. Fisher, a director of the Company, is a partner of the law
firm of Orrick, Herrington & Sutcliffe LLP which has been retained by the
Company in connection with certain legal matters.
AUDIT COMMITTEE REPORT
The current members of the Audit Committee are Thomas F. Robards, H.E.
Timanus, Jr. and Michael J. Zimmerman. Each member of the Audit Committee meets
the independence and experience requirements of the New York Stock Exchange,
Section 10A(m)(3) of the Exchange Act and the rules and regulations of the SEC.
The Audit Committee operates under a written charter approved by the Board of
Directors. The charter is attached as Appendix A to this proxy statement.
Management is responsible for the Company's internal financial controls
and the financial reporting process. The Company's independent registered public
accounting firm, KPMG, is responsible for performing an independent audit of the
Company's consolidated financial statements and to express an opinion as to
whether those financial statements fairly present the financial position,
results of operations and cash flows of the Company, in conformity with
accounting principles generally accepted in the United States. The Audit
Committee's responsibility is to monitor and oversee these processes. The Audit
Committee pre-approves all fees charged and work performed by KPMG.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the year ended July 31, 2004, with the Company's
management. The Audit Committee has discussed with KPMG the matters required to
be discussed by Statement on Auditing Standards No. 61, "Communication with
Audit Committees."
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 and
considered whether the non-audit services provided by KPMG are compatible with
maintaining its independence.
Based on the Audit Committee's review and discussions noted above, the
Audit Committee recommended to the Board (and the Board approved) that the
Company's audited financial statements be included in the Company's Annual
Report on Form 10-K for the year ended July 31, 2004, for filing with the SEC.
This report is submitted by the members of the Audit Committee of the
Board of Directors:
Thomas F. Robards
H.E. Timanus, Jr.
Michael J. Zimmerman
12
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Item 2 on Proxy Card)
General
The Audit Committee has appointed KPMG as the Company's independent
registered public accounting firm for the fiscal year ending July 31, 2005. KPMG
has audited the Company's financial statements since fiscal 2002. It is expected
that a representative of KPMG will be present at the Meeting and will have the
opportunity to make a statement and will 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 requirement. However, the Board is submitting the
appointment of KPMG to the stockholders for ratification as a matter of good
corporate practice. If the stockholders fail to ratify the appointment, the
Audit Committee will reconsider whether or not to retain KPMG. Even if the
appointment is ratified, the Audit Committee may direct the appointment of a
different independent registered public accounting firm at any time during the
year if it determines that such a change would be in the Company's and its
stockholders' best interests.
Ratification of the appointment of the Company's independent registered
public accounting firm requires a majority of the votes cast thereon.
Abstentions with respect to this proposal have the same effect as a vote against
the proposal. Broker non-votes with respect to this proposal will not be counted
with regard to this proposal.
Principal Accountant Fees and Services
For the fiscal years ended July 31, 2004 and 2003, the fees related to
services performed by KPMG follow:
Fee Category Fiscal 2004 Fiscal 2003
------------------ ----------- -----------
Audit Fees $425,000 $240,000
Audit-Related Fees 78,500 0
Tax Fees 0 0
All Other Fees 58,000 40,000
----------- -----------
Total Fees $561,500 $280,000
=========== ===========
Audit Fees. Consists of fees billed for professional services rendered for
the audit of the Company's consolidated financial statements and review of the
interim consolidated financial statements included in quarterly reports and
services that are normally provided in connection with statutory and regulatory
filings or engagements.
Audit-Related Fees. In fiscal 2004, services were provided for a comfort
letter associated with the filing of a Form S-3 registration statement for
convertible securities and for Sarbanes-Oxley Act of 2002 Section 404 advisory
work.
Tax Fees. There were no fees billed in fiscal 2004 and 2003 for
professional services for tax compliance, tax advice and tax planning.
All Other Fees. Consists of fees for products and services other than the
services reported above. Services were provided for agreed-upon procedures
reports required by one of the Company's debt agreements.
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 may include audit-related services, tax
services and other services. The independent registered public accounting firm
and management are required to periodically report to the Audit Committee
regarding the extent of services provided by the independent registered public
accounting firm in accordance with this pre-approval, and the fees for the
services performed to date.
The Board of Directors recommends that stockholders vote "FOR" the
ratification of the appointment of KPMG LLP as the Company's independent
registered public accounting firm.
13
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 next Annual Meeting of Stockholders, expected to
be held on December 13, 2005, must be directed to the Secretary of the Company
at the Company's principal executive office and, if they are to be considered
for possible inclusion in the Proxy Statement and form of proxy for such Annual
Meeting of Stockholders in accordance with the rules and regulations of the SEC,
must be received on or before July 11, 2005.
The attached proxy card grants the proxy holders discretionary authority
to vote on any matter raised at the Meeting. If you intend to submit a proposal
at the Company's next Annual Meeting of Stockholders, which is not eligible for
inclusion in the Proxy Statement and form of proxy relating to that meeting, you
must do so no later than September 26, 2005. If you fail to comply with the
foregoing notice provision, the proxy holders will be allowed to use their
discretionary voting authority when the proposal is raised at the Company's next
Annual Meeting of Stockholders, without any discussion of the matter in the
Proxy Statement.
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 in accordance with their judgment.
ANNUAL REPORT
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED JULY
31, 2004 WAS MAILED TOGETHER WITH THE PROXY STATEMENT AND IS AVAILABLE ON THE
INTERNET IN THE INVESTOR RELATIONS SECTION OF THE COMPANY'S WEBSITE AT
HTTP://WWW.FINANCIALFEDERAL.COM. ADDITIONAL COPIES OF THE ANNUAL REPORT MAY BE
OBTAINED BY CALLING THE COMPANY AT (212) 599-8000. UPON RECEIPT OF A WRITTEN
REQUEST, THE COMPANY ALSO WILL FURNISH TO ANY STOCKHOLDER, WITHOUT CHARGE, A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL 2004 REQUIRED TO BE
FILED WITH THE SEC UNDER THE SECURITIES EXCHANGE ACT OF 1934. WRITTEN REQUESTS
SHOULD BE DIRECTED TO INVESTOR RELATIONS AT FINANCIAL FEDERAL CORPORATION, 733
THIRD AVENUE, NEW YORK, NY 10017.
BY ORDER OF THE BOARD OF DIRECTORS
Troy H. Geisser
Secretary
DATE: November 8, 2004
14
APPENDIX A
AUDIT COMMITTEE CHARTER
As Approved By The Board of Directors on October 4, 2004
Purpose:
The Audit Committee (the "Committee") is appointed by the Board of Directors
(the "Board") of Financial Federal Corporation (the "Company") to assist the
Board in monitoring (1) the integrity of the financial statements of the
Company, (2) the independent auditor's qualifications and independence, (3) the
performance of the Company's internal audit function and independent auditors,
and (4) the compliance by the Company with legal and regulatory requirements.
The Committee shall prepare the report required by the rules of the Securities
and Exchange Commission (the "Commission") to be included in the Company's
annual proxy statement.
Committee Authority and Responsibilities:
The Committee shall have the sole authority to appoint or replace the
independent auditor (subject to stockholder ratification, if applicable). The
Committee shall be directly responsible for the compensation and oversight of
the work of the independent auditor (including resolution of disagreements
between management and the independent auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work. The
independent auditor shall report directly to the Committee.
The Committee shall pre-approve all auditing services and permitted non-audit
services (including the fees and terms thereof) to be performed for the Company
by its independent auditor, subject to the de minimis exceptions for non-audit
services described in Section 10(A)(i)(1)(B) of the Securities Exchange Act of
1934 (the "Exchange Act") which are approved by the Committee prior to the
completion of the audit.
The Committee shall have the authority, in its sole discretion and to the extent
it deems necessary or appropriate, to retain independent legal counsel and
accounting experts or other advisors. The Company shall provide for appropriate
funding, as determined by the Committee, for payment of compensation to the
independent auditor for the purpose of rendering or issuing an audit report, to
any advisors used by the Committee and for ordinary administrative expenses of
the Committee that are necessary or appropriate in carrying out its duties.
The Committee shall report regularly to the Board. The Committee shall review
and reassess the adequacy of this Charter annually and recommend any proposed
changes to the Board for approval. The Committee shall conduct and present to
the Board an annual performance evaluation of the Committee.
The Committee may delegate authority to any one or more of its members when
appropriate, including the authority to grant pre-approvals of audit and
permitted non-audit services, provided that decisions of such member or members
to grant pre-approvals shall be presented to the full Committee at its next
scheduled meeting.
In furtherance of the Committee's purpose, the Committee shall have the
following authority and responsibilities:
Financial Statement and Disclosure Matters
1. Review and discuss with management and the independent auditor the
annual audited financial statements and quarterly financial
statements, including disclosures made in management's discussion
and analysis and matters required to be reviewed under applicable
legal, regulatory or New York Stock Exchange requirements.
2. Review and discuss with management and the independent auditor any
significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial
statements, including any significant changes in the Company's
selection or application of accounting principles, any major issues
as to the adequacy of the Company's internal controls and any
special steps adopted in light of material control deficiencies.
A-1
3. Discuss with management and the independent auditor, as appropriate,
the Company's earnings press releases, including the use of "pro
forma" or "adjusted" non-GAAP information, as well as financial
information and earnings guidance provided to analysts and rating
agencies.
4. Discuss with management and the independent auditor, as appropriate,
any audit problems or difficulties and management's response, and
the Company's major financial risk exposures and the steps
management has taken to monitor and control such exposures,
including the Company's risk assessment and risk management
policies.
5. Review with management results from internal audits and the
Company's internal system of audit and financial controls, including
any significant deficiencies in the design or operation of such
internal controls or material weaknesses therein and any fraud
involving management or other employees.
6. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit including any difficulties encountered in the
course of the audit work, any restrictions on the scope of
activities or access to requested information, and any significant
disagreements with management.
7. Review and discuss quarterly reports from the independent auditors
on critical accounting policies and practices, alternative
treatments of financial information and ramifications of their use
including the treatment preferred by the independent auditor, and
other material written communications between the independent
auditor and management, such as any management letter or schedule of
unadjusted differences.
8. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
Oversight of the Company's Relationship with the Independent Auditor
1. Evaluate the auditor's qualifications, performance and independence.
2. Obtain and review a report from the independent auditor at least
annually regarding (a) the independent auditor's internal
quality-control procedures, (b) any material issues raised by the
most recent internal quality-control review, or peer review, of the
firm, or by any inquiry or investigation by governmental or
professional authorities within the preceding five years respecting
one or more independent audits carried out by the firm, and (c) any
steps taken to deal with any such issues. In order to assess the
auditor's independence, the Committee will also review at least
annually all relationships between the independent auditor and the
Company. The evaluation should include the review and evaluation of
the lead partner of the independent auditor team. The Committee
shall present its conclusions with respect to the independent
auditor to the Board.
3. Set policies for the Company's hiring of employees or former
employees of the independent auditor who participated in any
capacity in the audit of the Company.
4. Ensure the rotation of the lead (or coordinating) audit partner
having primary responsibility for the audit and the audit partner
responsible for reviewing the audit as required by law. Consider
whether, in order to assure continuing auditor independence, it is
appropriate to adopt a policy of rotating the independent auditing
firm on a regular basis.
5. As needed, discuss with the national office of the independent
auditor issues on which they were consulted by the Company's audit
team and matters of audit quality and consistency.
6. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.
Oversight of the Company's Internal Audit Functions
1. Review the appointment and replacement of the senior internal
auditing executive.
2. Review the significant reports to management prepared by the
internal auditing department and management's responses.
A-2
3. Discuss with the independent auditor, the internal audit department
and management the internal audit department responsibilities,
budget and staffing and any recommended changes in the planned scope
of the internal audit.
Compliance Oversight Responsibilities
1. Obtain from the independent auditor assurance that Section 10A(b) of
the Exchange Act has not been implicated.
2. Review and investigate any matters pertaining to the integrity of
management, including conflicts of interest or adherence to standard
of business conduct as required by the policies of the Company. This
should regular reviews of the compliance processes in general. In
connection with these reviews, the Committee will meet, as it deems
appropriate in its sole discretion, with the general counsel and
other Company officers and employees.
3. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
4. Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and any
published reports which raise material issues regarding the
Company's financial statements or accounting policies.
5. Discuss with the Company's General Counsel legal matters that may
have a material impact on the financial statements or the Company's
compliance policies.
Limitation of Audit Committee's Role
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements and disclosures are complete
and accurate and are in accordance with generally accepted accounting principles
and applicable rules and regulations. These are the responsibilities of
management and the independent auditor.
Committee Composition and Meetings:
The Committee shall consist of no fewer than three members. The members of the
Committee shall meet the independence and experience requirements of the New
York Stock Exchange, Section 10A(m)(3) of the Exchange Act and the rules and
regulations of the Commission. At least one member of the Committee shall be a
financial expert as defined by the Commission. Committee members shall not
simultaneously serve on the audit committees of more than two other public
companies.
The members of the Committee shall be appointed by the Board on the
recommendation of the Corporate Governance Committee and Nominating Committee.
Committee members may be replaced by the Board in its discretion.
The Committee shall meet as often as it determines, but not less frequently than
quarterly. The Committee shall meet periodically with management, the internal
auditors and the independent auditor in separate executive sessions. The
Committee may request any officer or employee of the Company or the Company's
outside counsel or independent auditor to attend a meeting of the Committee or
to meet with any members of, or consultants to, the Committee.
Effective Date and Approval:
This Audit Committee Charter was approved by Resolution dated October 4, 2004 at
a meeting of the Board of Directors of Financial Federal Corporation. The
effective date of this Charter is October 4, 2004.
A-3
FINANCIAL FEDERAL CORPORATION
P R O X Y
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON DECEMBER 14, 2004
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 14, 2004 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 below.
Notes:
(1) This form of proxy must be executed by the stockholder or his attorney
authorized in writing or, if the stockholder is a corporation, under the
corporate seal or by an officer or attorney thereof duly authorized.
Joint holders should each sign. Executors, administrators, trustees, etc.
should so indicate when signing. If undated, this proxy is deemed to bear
that date it was mailed to the stockholder.
(2) The shares represented by this proxy
will, on a show of hands or any ballot
that may be called for, be voted or FINANCIAL FEDERAL CORPORATION
withheld from voting in accordance P.O. BOX 111O2
with the instructions given by the NEW YORK, N.Y. 10203-0102
stockholder, in the absence of any
contrary instructions, this proxy will
be voted "FOR" the itemized matters.
(Continued on reverse side)
Whether or not you plan to attend [X]
---- the meeting, please mark, sign,
| | date and return this proxy promptly Votes must be indicated
---- in the envelope provided. (x) in Black or Blue ink.
The Board of Directors recommends a vote FOR proposals 1 and 2:
1. ELECTION OF DIRECTORS
FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below.
Nominees: Lawrence B. Fisher, William C. MacMillen, Jr., Michael C. Palitz,
Thomas F. Robards, Paul R. Sinsheimer, H.E. Timanus, Jr.,
Michael J. Zimmerman
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and strike a line through that nominee's name.)
FOR AGAINST ABSTAIN
2. In respect of the resolution on ratifying the
appointment of KPMG LLP as the Corporation's
independent public accountants for the [ ] [ ] [ ]
fiscal year ending ending July 31, 2005.
To change your address, please mark this box. [ ]
To include any comments, please mark this box. [ ]
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,
Administrator, Trustee or Guardian should give their
full title.
------------------------------------ ---------------------
Date Share Owner sign here Co-Owner sign here