<PAGE> 1
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 240.14a-11(c) or 240.14a-12
CENTRAL FINANCIAL ACCEPTANCE 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:
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(2) Aggregate number of securities to which transaction applies:
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(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
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[ ] 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
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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<PAGE> 2
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
-----------------------------
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
---------------------------
DATE: Tuesday, June 20, 2000
TIME: 10:00 a.m.
PLACE: Central Financial Acceptance Corporation
5480 East Ferguson Drive
Commerce, California 90022
<PAGE> 3
[CENTRAL FINANCIAL ACCEPTANCE CORPORATION LETTERHEAD]
May 17, 2000
Dear Stockholder:
It is my pleasure to invite you to Central Financial Acceptance
Corporation's 2000 annual meeting of stockholders.
We will hold the meeting on Tuesday, June 20, 2000, at 10:00 a.m. at our
corporate headquarters, 5480 East Ferguson Drive in Commerce, California. In
addition to the formal items of business, I will review the major developments
of 1999 and answer your questions.
This booklet includes the notice of annual meeting and the proxy statement.
The proxy statement describes the business that we will conduct at the meeting
and provides information about CFAC.
Your vote is important. Whether you plan to attend the meeting or not,
please complete, date, sign and return the enclosed proxy card promptly. If you
received more than one proxy card because you own shares registered in different
names or at different addresses, please be sure to separately complete and
return each proxy card. If you attend the meeting and prefer to vote in person,
you may do so.
Please indicate on the proxy card whether or not you expect to attend the
meeting so that we can provide adequate seating.
We look forward to seeing you at the meeting.
Sincerely,
/s/ GARY CYPRES
Gary M. Cypres
Chairman of the Board
<PAGE> 4
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
---------------------------
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
---------------------------
Date: Tuesday, June 20, 2000
Time: 10:00 a.m.
Place: Central Financial Acceptance Corporation
5480 East Ferguson Drive
Commerce, California 90022
Dear Stockholders:
At our annual meeting, we will ask you to:
o Elect four directors to each serve for a term of one year;
o Ratify the selection of Arthur Andersen LLP as independent public
accountants for the year ending December 31, 2000; and
o Transact any other business that may properly be presented at the
annual meeting.
For ten days prior to the annual meeting, a complete list of our
stockholders entitled to vote at the meeting will be available for inspection by
any stockholder for any purpose relating to the meeting during ordinary business
hours at our offices at 5480 East Ferguson Drive, Commerce, California. This
list will also be available for inspection at the annual meeting.
If you were a stockholder of record at the close of business on May 1,
2000, you may vote at the annual meeting.
By order of the board of directors,
/s/ GARY CYPRES
Gary M. Cypres
Chairman of the Board
May 17, 2000
Commerce, California
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING................................................................... 1
Why Did You Send Me This Proxy Statement?................................................................ 1
Who Is Entitled To Vote?................................................................................. 1
What Constitutes A Quorum?............................................................................... 1
How Many Votes Do I Have?................................................................................ 1
How Do I Vote By Proxy?.................................................................................. 2
May I Change My Vote After I Return My Proxy?............................................................ 2
How Do I Vote In Person?................................................................................. 2
What Vote Is Required To Approve Each Proposal?.......................................................... 3
What Are The Costs Of Soliciting These Proxies?.......................................................... 3
How Do I Obtain An Annual Report On Form 10-K?........................................................... 3
INFORMATION ABOUT CFAC COMMON STOCK OWNERSHIP..................................................................... 4
Which Stockholders Own at Least 5% of CFAC?.............................................................. 4
How Much Stock Is Owned By Directors And Executive Officers?............................................. 5
Compensation Committee Interlocks and Insider Participation.............................................. 6
Did Directors, Executive Officers and Greater Than 10% Stockholders Comply With Section 16(a)
Beneficial Ownership Reporting in 1999?......................................................... 6
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS................................................................ 6
The Board of Directors................................................................................... 6
The Committees of the Board.............................................................................. 6
How Do We Compensate Directors?.......................................................................... 7
Certain Relationships and Related Transactions........................................................... 7
Financing Agreement...................................................................................... 8
Operating Agreement...................................................................................... 8
Tax Sharing Agreement.................................................................................... 9
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
Indemnification Agreement................................................................................ 10
Executive Officers and Key Employees..................................................................... 10
How We Compensate Executive Officers..................................................................... 11
Employment Agreements.................................................................................... 14
Supplemental Executive Retirement Plan................................................................... 15
Compensation Committee's Report on Executive Compensation and Repricing of Stock Options................. 16
The Report............................................................................................... 16
Performance Graph........................................................................................ 17
Comparison of Total Return to Stockholder Among CFAC, Nasdaq Stock Market and SNL Subprime
Lenders Index................................................................................... 18
DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD.................................................................. 18
Proposal 1: Elect Four Directors........................................................................ 18
Proposal 2: Ratify Selection of Independent Public Accountants for 2000................................. 19
INFORMATION ABOUT STOCKHOLDER PROPOSALS........................................................................... 20
</TABLE>
<PAGE> 7
PROXY STATEMENT FOR CENTRAL FINANCIAL ACCEPTANCE CORPORATION
2000 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
WHY DID YOU SEND ME THIS PROXY STATEMENT?
We sent you this proxy statement and the enclosed proxy card because our
board of directors is soliciting your proxy to vote at the 2000 annual meeting
of stockholders. This proxy statement summarizes the information you need to
know to cast a vote at the annual meeting. However, you do not need to attend
the annual meeting to vote your shares. Instead, you may simply complete, sign
and return the enclosed proxy card.
WHO IS ENTITLED TO VOTE?
We will begin sending this proxy statement, the attached notice of annual
meeting and the enclosed proxy card on or about May 17, 2000 to all stockholders
entitled to vote at the annual meeting. Stockholders who owned CFAC voting
common stock at the close of business on May 1, 2000 are entitled to vote. On
this record date, there were 7,177,000 shares of CFAC voting common stock, par
value $0.01 per share, outstanding. CFAC has only this one class of voting
stock. We are also authorized to issue up to 3,000,000 shares of non-voting
common stock, par value $0.01 per share and 5,000,000 shares of preferred stock,
par value $0.01 per share. We do not presently have any shares of non-voting
common stock or preferred stock issued and outstanding. We are also sending
along with this proxy statement the CFAC 1999 Annual Report, which includes our
financial statements.
WHAT CONSTITUTES A QUORUM?
The holders of a majority of the issued and outstanding shares of CFAC
voting common stock entitled to vote at the meeting must be present, in person
or by proxy, in order to constitute a quorum. We can only conduct the business
of the meeting if a quorum has been established. We will include proxies marked
as abstentions and broker non-votes in determining the number of shares present
at the meeting.
HOW MANY VOTES DO I HAVE?
Each share of CFAC voting common stock that you own entitles you to one
vote. The proxy card indicates the number of shares of CFAC voting common stock
that you own. In the election of directors, under California law as applied to
the Company, you have the right to cumulate your votes. This means that you may
give one properly nominated candidate a number of votes equal to the number of
directors to be elected, multiplied by the number of shares you are entitled to
vote, or you may divide that total number of shares among the candidates as you
see fit.
1
<PAGE> 8
HOW DO I VOTE BY PROXY?
Whether you plan to attend the annual meeting or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
postage-prepaid envelope provided. Returning the proxy card will not affect your
right to attend the annual meeting and vote.
If you properly fill in your proxy card and send it to us in time to vote,
your "proxy" (one of the individuals named on your proxy card) will vote your
shares as you have directed. If you sign the proxy card but do not make specific
choices, your proxy will vote your shares as recommended by the board of
directors as follows:
o "FOR" the election of all four nominees for director (see page 18 ),
and
o "FOR" ratification of the selection of Arthur Andersen LLP as
independent public accountants for 2000 (see page 19).
If any other matter is presented, your proxy will vote in accordance with
the recommendation of the board of directors or, if no recommendation is given,
in their own discretion. At the time this proxy statement went to press, we knew
of no matters that needed to be acted on at the annual meeting, other than those
discussed in this proxy statement.
MAY I CHANGE MY VOTE AFTER I RETURN MY PROXY?
Yes. If you give a proxy, you may change your vote at any time before it is
exercised. You may change your vote in any one of three ways:
o You may send our Corporate Secretary another proxy with a later date.
o You may notify our Corporate Secretary in writing before the annual
meeting that you have revoked your proxy.
o You may attend the annual meeting and vote in person.
HOW DO I VOTE IN PERSON?
If you plan to attend the annual meeting and vote in person, we will give
you a ballot form when you arrive. However, if your shares are held in the name
of your broker, bank or other nominee, you must bring the proxy card, an account
statement or a letter from the nominee indicating that you are the beneficial
owner of the shares on May 1, 2000, the record date for voting, and a written
instruction from the nominee authorizing you to vote the shares.
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<PAGE> 9
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
PROPOSAL 1:
ELECT FOUR DIRECTORS Under California law, as it applies to CFAC,
you may cumulate your votes for the election of
directors as described above under the caption
"How Many Votes Do I Have?" The four nominees
for director who receive the most votes will be
elected. So, if you do not vote for a
particular nominee, or you indicate "WITHHOLD
AUTHORITY" to vote for a particular nominee on
your proxy card, your vote will not count
either "for" or "against" the nominee. Our
Certificate of Incorporation does not authorize
cumulative voting.
PROPOSAL 2:
RATIFY SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS The affirmative vote of a majority of the votes
cast at the annual meeting on this proposal is
required to ratify the selection of independent
public accountants. So, if you "ABSTAIN" from
voting, it has the same effect as if you voted
"against" this proposal.
THE EFFECT OF BROKER NON-VOTES If your broker holds your shares in its name,
the broker will be entitled to vote your shares
on Proposals 1 and 2 even if it does not
receive instructions from you.
WHAT ARE THE COSTS OF SOLICITING THESE PROXIES?
We will pay all of the costs of soliciting these proxies. In addition to
mailing proxy soliciting material, our directors, officers and employees also
may solicit proxies in person, by telephone or by other electronic means of
communication for which they will receive no compensation. We will ask banks,
brokers and other institutions, nominees and fiduciaries to forward the proxy
material to their principals and to obtain authority to execute proxies. We will
then reimburse them for their reasonable expenses. In addition, we may pay for
and use the services of individuals or companies that we do not regularly employ
in connection with the solicitation of proxies if the board of directors
determines this is advisable.
HOW DO I OBTAIN AN ANNUAL REPORT ON FORM 10-K?
IF YOU WOULD LIKE A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1999, THAT WE FILED WITH THE SEC, WE WILL SEND YOU ONE
WITHOUT CHARGE. PLEASE WRITE TO CENTRAL FINANCIAL ACCEPTANCE CORPORATION, 5480
EAST FERGUSON DRIVE, COMMERCE, CALIFORNIA 90022, ATTENTION: CORPORATE SECRETARY.
3
<PAGE> 10
INFORMATION ABOUT CFAC COMMON STOCK OWNERSHIP
WHICH STOCKHOLDERS OWN AT LEAST 5% OF CFAC?
The following table shows, as of May 1, 2000, all persons or entities we
know to be "beneficial owners" of more than five percent of our common stock.(1)
This information is based on Schedules 13D and 13G reports filed with the SEC by
each of the persons and entities listed in the table below. If you wish, you may
obtain these reports from the SEC.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(2) NUMBER OF SHARES(3) PERCENT OF CLASS(4)
-------------------------------------------------------- ------------------------------------------
<S> <C> <C>
Gary M. Cypres(5)................................... 5,292,500 73.3%
Banner Holdings, Inc.(6)............................ 5,150,000 71.8%
West Coast Private Equity Partners, L.P.(6) 5,150,000 71.8%
Wellington Management Company, LLP(7)............... 684,200 9.5%
</TABLE>
- - - - - - ----------------------
(1) "Beneficial ownership" is a technical term broadly defined by the SEC to
mean more than ownership in the usual sense. So, for example, you
"beneficially" own CFAC common stock not only if you hold it directly, but
also if you directly or indirectly (through a relationship, a position as a
director or trustee, or a contract or understanding), have (or share) the
power to vote the stock, to invest it, to sell it or you currently have the
right to acquire it or the right to acquire it within 60 days of May 1,
2000.
(2) The address for Mr. Cypres, Banner Holdings, Inc. ("Holdings") and West
Coast Private Equity Partners, L.P. ("West Coast") is 5480 East Ferguson
Drive, Commerce, California 90022, and the address for Wellington
Management Company, LLP ("WMC"), is 75 State Street, Boston, Massachusetts
02109.
(3) Except as otherwise noted below, each person and entity named in the table
directly or indirectly has sole voting and investment power with respect to
the shares shown which each such person or entity beneficially owns.
(4) Shares of CFAC common stock issuable upon exercise of stock options
exercisable within 60 days of May 1, 2000 are considered outstanding for
computing the percentage of the person or entity holding those options but
are not considered outstanding for computing the percentage of any other
person or entity.
(5) Consists of 5,150,000 shares held of record by Holdings, 77,500 shares held
directly by Mr. Cypres, 12,500 shares owned by Mr. Cypres' spouse and
12,500 shares held by or in trust by Mr. Cypres and his spouse for their
children. An additional 40,000 shares is included representing options
exercisable within 60 days of May 1, 2000. Of the 5,292,500 shares, Mr.
Cypres shares voting and investment power of 25,000 shares with his spouse
and 5,150,000 shares with West Coast.
(6) Holdings is the record owner of 5,150,000 shares. West Coast controls
Holdings and beneficially owns 5,150,000 shares through its control of
Holdings. Mr. Cypres is Chairman of the Board, Chief Executive Officer and
President of Holdings and managing general partner of West Coast. He
controls CFAC through West Coast.
(7) Based on a Schedule 13G filed with the SEC on February 11, 2000. These
shares are held of record by WMC's clients. Of the 684,200 shares, WMC
shares the power to vote 436,000 of these shares and shares the power to
dispose of all of these shares in its capacity as investment advisor to
these clients.
4
<PAGE> 11
HOW MUCH STOCK IS OWNED BY DIRECTORS AND EXECUTIVE OFFICERS?
The following table shows, as of May 1, 2000, the CFAC common stock that
our directors and executive officers beneficially own and those shares of common
stock owned by all executive officers and directors as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
--------------------------------
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES(2) CLASS(3)
------------------------------------------------- --------------- ---------------
<S> <C> <C>
Gary M. Cypres (4).............................. 5,292,500 73.3%
Anthony S. Fortunato (5)........................ 29,500 *
Edward Valdez (6)............................... 8,500 *
A. Keith Wall (7)............................... 7,000 *
William R. Sweet (8)............................ 3,800 *
Jose de Jesus Legaspi (9)....................... 2,800 *
Salvatore J. Caltagirone (9).................... 2,800 *
All directors and executive officers as a group
(8 persons) (10)................................ 5,346,900 73.7%
</TABLE>
- - - - - - ----------------------
* Less than 1%.
(1) See footnote 1 in table included above at page 4.
(2) Except as otherwise noted below, each individual named in the table
directly or indirectly has sole voting and investment power with respect to
the shares shown which each such individual beneficially owns.
(3) Shares of CFAC common stock issuable upon exercise of stock options
exercisable within 60 days of May 1, 2000 are considered outstanding for
computing the percentage of the person holding those options but are not
considered outstanding for computing the percentage of any other person.
(4) Consists of 5,150,000 shares held of record by Holdings, 77,500 shares held
directly by Mr. Cypres, 12,500 shares owned by Mr. Cypres' spouse and
12,500 shares held by or in trust by Mr. Cypres and his spouse for their
children. An additional 40,000 shares is included representing options
exercisable within 60 days of May 1, 2000. Of the 5,292,500 shares, Mr.
Cypres shares voting and investment power of 25,000 shares with his spouse
and 5,150,000 shares with West Coast.
(5) Consists of 5,500 shares directly owned by Mr. Fortunato and 24,000 shares
issuable upon exercise of stock options exercisable within 60 days of May
1, 2000.
(6) Consists of 2,100 shares directly owned by Mr. Valdez and 6,400 shares
issuable upon exercise of stock options exercisable within 60 days of May
1, 2000.
(7) Consists of 1,000 shares directly owned by Mr. Wall and 6,000 shares
issuable upon exercise of stock options exercisable within 60 days of May
1, 2000.
(8) Consists of 1,000 shares directly owned by Mr. Sweet and 2,800 shares
issuable upon exercise of stock options exercisable within 60 days of May
1, 2000.
(9) Consists of 2,800 shares issuable upon exercise of stock options
exercisable within 60 days of May 1, 2000.
(10) Consists of 91,200 shares issuable upon exercise of stock options
exercisable within 60 days of May 1, 2000.
5
<PAGE> 12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
The compensation committee consists of Messrs. Sweet and Caltagirone. None
of the members of the compensation committee is or has been an officer or
employee of CFAC or any of its subsidiaries. None of our executive officers
currently serves as a director or member of the compensation committee of
another entity or of any other committee of the board of directors of another
entity performing similar functions.
DID DIRECTORS, EXECUTIVE OFFICERS AND GREATER THAN 10% STOCKHOLDERS COMPLY WITH
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING IN 1999?
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors, executive officers, and greater-than-10% stockholders to file
reports with the SEC reflecting changes in their beneficial ownership of CFAC
stock and to provide us with copies of the reports.
Based on our review of these reports and of certifications furnished to us,
except for A. Keith Wall who filed one late report involving the purchase of
CFAC stock on Form 4, we believe that all of these reporting persons complied
with their filing requirements for 1999.
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
THE BOARD OF DIRECTORS
The board of directors oversees our business and affairs and monitors the
performance of management. In accordance with corporate governance principles,
the board does not involve itself in day-to-day operations. The directors keep
themselves informed through, among other things, discussions with the chairman,
other key executives and our principal external advisers (legal counsel, outside
auditors, investment bankers and other consultants), reading reports and other
materials that we send them and participating in board and committee meetings.
The board met four times during fiscal 1999. Each incumbent director
attended at least 75% of the total number of board and committee meetings, of
which he was a member, held in fiscal 1999.
THE COMMITTEES OF THE BOARD
The board has an audit committee and a compensation committee. The full
board of directors nominates our officers and directors for election.
THE AUDIT COMMITTEE The audit committee reviews and reports to the
board of directors on various auditing and
accounting matters, including the annual
report from our independent public
accountants. Messrs. Caltagirone, Legaspi and
Sweet currently serve as members of the
audit committee. The audit committee met one
time during 1999.
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<PAGE> 13
THE COMPENSATION COMMITTEE The compensation committee determines the
salary and bonus structure for our executive
officers and supervises the compensation
scheme for our other officers. In addition,
the compensation committee determines
appropriate awards under our 1996 Stock Option
Plan (the "1996 Plan") and administers our
retirement plan. Messrs. Caltagirone and Sweet
currently serve as members of the compensation
committee. The compensation committee met
three times during 1999.
HOW DO WE COMPENSATE DIRECTORS?
In 1999, we paid our non-employee directors an annual fee of $15,000 for
board and committee meetings. Mr. Cypres, our Chairman, however, received no
fees for serving as a director. In addition, the compensation committee may in
its sole discretion grant to our non-employee directors options to purchase
shares of CFAC common stock. All options granted to non-employee directors vest
in equal annual installments over five-year periods beginning on the date of
grant, subject to continued service on the board of directors. We have entered
into agreements with all directors pursuant to which we have agreed to indemnify
them against certain claims arising out of their services as directors.
Directors are also entitled to the protection of certain indemnification
provisions in our Certificate of Incorporation and Bylaws.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We were formed on April 11, 1996. We entered into an agreement with
Banner's Central Electric, Inc. ("Banner"), an affiliate of ours, and Banner
Holdings, Inc. ("Holdings"), another affiliate, on June 24, 1996, which was
subsequently amended (the "Reorganization Agreement") under which Holdings
contributed to Banner its investments in its subsidiaries that operate the small
loan, travel, automobile sales, and related businesses (the "Holdings
Subsidiaries"). Under this Agreement, Banner then contributed to CFAC its
investments in the Holdings Subsidiaries and in its subsidiary that holds the
Consumer Product Portfolio (collectively, the "Subsidiaries") and cash in such
amount so as to leave us with $500,000 on hand upon consummation of such
transaction (the "Reorganization"). The Reorganization Agreement also provides
that the intercompany accounts between CFAC, Banner and Holdings were forgiven,
except with respect to income taxes. As a result, we had $500,000 of cash on
hand upon the completion of the Reorganization.
In connection with the Reorganization and under the Reorganization
Agreement, we entered into various agreements with Banner and Holdings for the
purpose of defining our ongoing relationships among each other. Because Holdings
controls us and Banner (see "Which Stockholders Own at Least 5% of CFAC?" at
page 4), these agreements did not result from arm's-length negotiations. We
believe, however, that these agreements are at least as favorable to us as those
that could have been obtained from independent third parties.
7
<PAGE> 14
FINANCING AGREEMENT
We have entered into an agreement with Banner and Holdings, which was
subsequently amended (the "Financing Agreement") under which Banner granted us
the exclusive right, at our option, (1) to purchase consumer finance receivables
which Banner originates for sales of merchandise at its stores in operation on
the date of the Financing Agreement and for all stores which Banner may
determine to open in the future during the term of the Financing Agreement (and
any extension thereof), or (2) to provide financing directly to Banner's
customers at all of such locations. We are not obligated to provide financing to
any particular Banner customer, or to offer financing at any Banner location or
locations. The Financing Agreement has a term of 15 years commencing on June 24,
1996. We may terminate the Financing Agreement at any time upon one year's prior
written notice to Banner.
During the term of the Financing Agreement, as long as Banner originates
its consumer finance receivables, we will have the right to purchase consumer
finance receivables at face value less a transaction fee. This transaction fee
is subject to renegotiation at six-month intervals to reflect our costs
associated with providing financing under the Financing Agreement. Through June
30, 1999, the transaction fee was computed based upon 2.5% of the net
receivables written in the consumer product portfolio. On July 1, 1999, the
transaction fee was changed to 1.75% of the net receivables written in the
consumer product portfolio. On December 31, 1999, the transaction fee was
discontinued.
As a result of increasing delinquencies in the Consumer Product Portfolio,
the Financing Agreement was amended, effective July 1, 1997, to permit us for
the year ended December 31, 1997 to return to Banner $5.8 million of the balance
of the Consumer Product Portfolio at December 31, 1997. In 1998, the Financing
Agreement was again amended and allowed Banner to repurchase $1.5 million of the
balance in the Consumer Product Portfolio at December 31, 1998. In 1999, Banner
repurchased $0.2 million of the Consumer Product Portfolio. Banner does not
charge us for the space we occupy in its locations in recognition of the value
provided by the presence of our financial products and services in its retail
locations.
OPERATING AGREEMENT
We have entered into an agreement with Banner and Holdings (the "Operating
Agreement") setting forth certain rights and obligations of the parties
following the Reorganization. The Operating Agreement covers the following
matters:
Allocation of Business Opportunities. Due to the potential conflicts
of interest resulting from the relationships among us, Banner and Holdings,
the Operating Agreement provides that Holdings and its subsidiaries (other
than CFAC and its subsidiaries) will not, without our prior written
consent, directly or indirectly engage in or enter into any business
competing with us and involving the financing of consumer products, travel
products, small loans, automobiles or insurance (the "Restricted
Businesses"). If Holdings shall acquire a company engaged in a Restricted
Business or shall otherwise directly or indirectly engage in a Restricted
Business, Holdings shall be obligated to sell, at our election, such
Restricted Business to us at a purchase price equal to the fair market
value of such Restricted Business, as determined through an
8
<PAGE> 15
independent appraisal process. The foregoing restriction shall terminate on
December 31, 2002, or, if earlier, on the date on which Holdings ceases to
own, directly or indirectly, at least 25% of CFAC's outstanding voting
stock.
Management and Other Services. The Operating Agreement provides that
Banner, Holdings or their affiliates are obligated to provide to us, and we
are obligated to use, certain services, including accounting, management
information systems and employee benefits. Except for management
information systems, these arrangements will continue until terminated by
us, Banner, Holdings or such affiliate upon one year's prior written
notice. Termination may be made on a service-by-service basis or in its
entirety. To the extent that such services directly relate to the finance
portion of the consumer products business Banner contributes to us, or to
the extent that Banner, Holdings or their affiliates incur other costs that
directly relate to us, we are obligated to pay Banner's, Holdings' or their
affiliates' actual cost of providing such services or incurring such costs.
Employee benefit expenses are allocated to us based on the ratio of actual
employer payroll expenses in the consumer products business Banner
contributes to us compared to total actual payroll expenses of Banner
before such allocation. Accounting expenses are allocated approximately 50%
to us. The operating costs of Banner's management information systems
function are allocated approximately 50% to us for a period of five years,
subject to adjustment from time to time to reflect changing costs and
usage. Such allocated expenses totaled $1.2 million in 1999, $1.3 million
in 1998, and $1.4 million in 1997. It is anticipated that the cost
allocated to us in the year ending December 31, 2000 will be significantly
increased to reflect our increasing use of the management information
system and the cost of providing the service.
Employee Benefits. Under the Operating Agreement, we assumed all
liabilities of Banner, Holdings and the Subsidiaries under existing
employee welfare benefit and profit-sharing plans with respect to the
employees of Banner, Holdings and the Subsidiaries who became our
employees.
TAX SHARING AGREEMENT
We have entered into an agreement with Holdings and Banner (the "Tax
Sharing Agreement") providing for (1) the payment of federal, state and other
income tax remittances or refunds for periods during which we and Holdings were
included in the same consolidated group for federal income tax purposes, (2) the
allocation of responsibility for the filing of such tax returns, (3) the conduct
of tax audits and the handling of tax controversies and (4) various related
matters. For periods during which we were included in Holdings' consolidated
federal income tax returns, we are required to pay Holdings its allocable
portion of the consolidated federal, state and other income tax liabilities and
are entitled to receive refunds determined as if we and our subsidiaries had
filed separate income tax returns. With respect to Holdings' liability for
payment of taxes for all periods during which we were so included in Holdings'
consolidated federal income tax returns, we will indemnify Holdings for all
federal, state and other income tax liabilities for such periods. The date of
the consummation of the initial public offering was the last day on which we
were included in Holdings' consolidated federal income tax returns.
9
<PAGE> 16
INDEMNIFICATION AGREEMENT
We have entered into an indemnification agreement with Holdings and Banner
(the "Indemnification Agreement") under which we will indemnify and hold
harmless Holdings and Banner with respect to any and all claims, losses,
damages, liabilities, costs and expenses (except when arising from Holdings' or
Banner's intentional misconduct or gross negligence or to the extent any
liability arises from Banner's breach of its fiduciary duty to our other
stockholders) that arise from or are based on the operations of the business of
CFAC and its subsidiaries after the date of the Reorganization. We will also
indemnify and hold harmless Holdings and Banner with respect to any and all
claims, losses, damages, liabilities, costs and expenses that arise from or are
based on guarantees or undertakings which Holdings or Banner makes to third
parties in respect of our liabilities or obligations, whether or not such
obligations arose before or after the Reorganization. Holdings and Banner will
indemnify and hold harmless CFAC with respect to any and all claims, losses,
damages, liabilities, costs and expenses that arise from or are based on the
operations of Holdings or Banner, other than the business of CFAC and its
subsidiaries, before or after the date of the Reorganization. The rights of any
party under the Indemnification Agreement are not assignable or transferable
without the prior written consent of the other parties.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
These are the biographies of the Company's current executive officers,
except for Mr. Cypres, the Chairman, whose biography is included below at page
18 under "Proposal 1: Elect Four Directors." There are no arrangements or
understandings among these individuals or any other person relating to their
election as officers.
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- - - - - - ------------------------------ ------------------------------------------------
Anthony S. Fortunato (51) Mr. Fortunato has been the Company's President
since March 18, 1998. From October 18, 1996 to
March 18, 1998, Mr.Fortunato was our Executive
Vice President of Operations. Prior to joining
the Company Mr.Fortunato was Executive Vice
President of Citibank, F.S.B. California from
November 1993 to October 1996, and Vice President
of Citibank, N.A./Citicorp from September 1976
to November 1993.
Edward Valdez (48) Mr. Valdez has been the Company's Senior Vice
President of Credit since its formation, Senior
Credit Manager of the consumer product finance
business since 1986, Senior Credit Manager of the
small loan business since November 1992 and
Senior Vice President of Operations since 1998.
Mr. Valdez has been working for the Company or
its predecessors for over 30 years.
Alan E. Scheneman (48) Mr. Scheneman resigned from CFAC on April 7,
2000. Mr. Scheneman was the Company's Senior Vice
President since its formation. Mr. Scheneman
joined our consumer product finance business in
1992 as Vice President of Management Information
Services. From 1988 to 1992, Mr. Scheneman was
the director of Product Development at JDA
Software Services where, in 1989, he managed the
implementation of our management information
system.
A. Keith Wall (47) Mr. Wall has been the Company's Vice President
and Chief Financial Officer since July 1998. From
June 1996 to July 1998, Mr. Wall was Vice
President and Chief Financial Officer of Central
Rents, Inc., an affiliate of the Company. From
July 1995 to March 1996, Mr. Wall was Vice
President and Controller of Thorn Americas, Inc.,
and from January 1994 to July 1995, the Vice
President and Chief Financial Officer of Remco
America, Inc.
10
<PAGE> 17
Set forth below are biographies of certain other significant employees of
the Company.
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- - - - - - ------------------------------ ------------------------------------------------
Stephen J. Olmon (45) Mr. Olmon has been the President of the Company's
travel division, Centravel, Inc., since joining
the Company on May 10, 1999. Prior to joining the
Company, Mr. Olmon was Vice President and General
Manager of Maritz Travel Company, Western Region
from 1997 to 1998 and Vice President Maritz
Travel Company from 1974 to 1997.
Marvin A. Torres (38) Mr.Torres has been President of the Company's
travel finance business since December 1995.
From April 1995 to December 1995, Mr.Torres was
Vice President of Operations for our travel
finance business. From 1984 to 1995, Mr. Torres
was Vice President of Operations and General
Manager at Solano Travel Service and Costa Rica
Holiday Tours in Los Angeles, California.
Donald Keys (47) Donald Keys has been Senior Vice President of
Credit and Collections since September 1998 for
Central Consumer Finance Company. Prior to that,
he held the position of Vice President of
Collections from February 1998 to September 1998
for Central Consumer Finance Company. From April
1997 to February 1998 he was Director of Special
Accounts for Sterling, Inc. From August 1996 to
March 1997 he was Vice President of Credit for
Barrys, Inc. and from July 1991 to July 1997
he was Director of Credit for Barrys, Inc.
Howard Weitzman (38) Howard Weitzman has been the Chief Financial
Officer of the Company's travel division,
Centravel, Inc. since December 1996. From October
1994 to December 1996, Mr. Weitzman was
Controller of Central Rents, Inc., an affiliate
of the Company. From 1984 to 1994, Mr. Weitzman
spent ten years as a certified public accountant
with Coopers & Lybrand LLP in Los Angeles,
California, most recently as Senior Manager.
None of the directors or officers are related to each other by blood or
marriage and none of the directors or officers are involved in any legal
proceedings as described in Section 401(f) of Regulation S-K.
HOW WE COMPENSATE EXECUTIVE OFFICERS
The following table sets forth information concerning compensation for each
of the last three years paid or awarded to or earned by the Chief Executive
Officer of the Company and the five other most highly compensated executive
officers of the Company and its subsidiaries who received salary and bonus in
excess of $100,000 in 1999 (collectively, the "Named Executive Officers").
11
<PAGE> 18
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation(1) Compensation
-------------------------------- Awards All Other
Name and Principal Position Year Salary Bonus Options/SARS Compensation
- - - - - - --------------------------- ----- --------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Gary M. Cypres (2) 1999 $227,291 $ 30,000 180,000 (7) $ 77,000 (10)
Chairman of the Board, and 1998 $191,875 $ 500 120,000 $ 77,000
Chief Executive Officer 1997 $175,000 $ 500 - $ 77,000
Anthony Fortunato (3) 1999 $275,000 $ 500 - -
President 1998 $255,208 $ 500 120,000 (8) -
1997 $230,000 $ 500 - -
Gerard T. McMahon (4) 1999 $173,496 $ - - -
Former Executive Vice President of Credit 1998 $160,000 $ 500 30,000 (9) -
and Collections 1997 $160,000 $ 500 - -
Alan E. Scheneman (5) 1999 $148,250 $ - - -
Senior Vice President Management 1998 $142,000 $ 500 32,000 -
Information Systems 1997 $131,167 $ 14,000 - -
A. Keith Wall (6) 1999 $145,000 $ 500 - -
Vice President and Chief 1998 $ - $ - 30,000 -
Financial Officer 1997 $ - $ - - -
Edward Valdez 1999 $105,000 $ 15,000 - -
Senior Vice President of Operations 1998 $ 98,750 $ 2,519 32,000 (7) -
1997 $ 95,000 $ 500 - -
</TABLE>
(1) Certain of our executive officers receive benefits in addition to salary and
cash bonuses. The aggregate amount of such benefits, do not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus of such Named
Executive.
(2) Mr. Cypres also served as president until Mr. Fortunato assumed such
position in March 1998 and as Chief Financial Officer until Mr. Wall
assumed such position in July 1998.
(3) Mr. Fortunato joined CFAC in October 1996. Mr. Fortunato served as
Executive Vice President of Operations until he was appointed President in
March 1998.
(4) Mr. McMahon left CFAC on July 1, 1999.
(5) Mr. Scheneman resigned from CFAC on April 7, 2000.
(6) Mr. Wall joined CFAC in July 1998. Mr. Wall was previously employed as Vice
President Chief Financial Officer of Central Rents, Inc., an affiliate of
CFAC, and his compensation for all of 1998 was paid by Central Rents, Inc.
(7) Consists of 80,000 options granted on April 21, 1999 and 100,000 options
granted on July 14, 1999, both at $5.00 per share. The market price on
April 21, 1999 was $4.38 and the market price on July 14, 1999 was $4.00
per share.
(8) Consists of options regranted at an exercise price of $5.00 per share on
December 1, 1998.
(9) Consists of options regranted at an exercise price of $12.00 per share on
March 4, 1998.
(10) Represents amounts accrued under the Supplemental Executive Retirement Plan
for Mr. Cypres.
12
<PAGE> 19
The following table sets forth information concerning stock options
granted to Mr. Cypres during 1999. No other Named Executive Officers received
stock options during 1999.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
---------------------------------------------------- Potential Realizable Value
Percent of at Assumed Annual Rates
Number of Total Options of Stock Appreciation for
Securities Granted to Option Term (1)
Underlying Employees Exercise Expiration ----------------------------
Name Granted (2) in 1999 Price (3) Date 5% 10%
- - - - - - ----------------- --------------- ------------ --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gary M. Cypres 80,000 (4) 27.8% $ 5.00 04/21/09 170,113 507,810
100,000 (5) 34.8% $ 5.00 07/14/09 151,558 537,497
</TABLE>
- - - - - - -------------------
(1) The amounts shown are hypothetical gains based on the indicated assumed
rates of appreciation of the common stock, compounded annually over a
ten-year period and assuming that the closing price was the market value of
the grant. The actual value (if any) that an executive officer receives
from a stock option will depend upon the amount by which the market price
of our common stock will appreciate at any particular rate or at all in
future years.
(2) The options granted are exercisable 20% per year beginning on each of the
first five anniversary dates of grant, subject to certain performance
standards.
(3) The exercise price may be paid in cash, or at the discretion of the
Compensation Committee, by tendering shares of CFAC common stock, or the
delivery of an irrevocable direction to a securities broker to sell shares
and deliver the sale proceeds to CFAC in payment of all or part of the
exercise price, instead of cash.
(4) Represents options granted on April 21, 1999 at $5.00 per share.
(5) Represents options granted on July 14, 1999 at $5.00 per share.
13
<PAGE> 20
The following table sets forth the number and value stock options held
by the Named Executive Officers at December 31, 1999. No stock options were
exercised by the Named Executive Officers during 1999.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options at 12/31/99 Options at 12/31/99 (1)
Acquired Value ------------------------- -----------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- - - - - - --------------------- ----------- -------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gary M. Cypres - - 40,000 260,000 $ 95,000 $ 617,500
Anthony S. Fortunato - - 24,000 96,000 $ 57,000 $ 228,000
Alan E. Scheneman - - 6,400 25,600 $ 15,200 $ 60,800
Edward Valdez - - 6,400 25,600 $ 15,200 $ 60,800
A. Keith Wall - - 6,000 24,000 $ 14,250 $ 57,000
</TABLE>
- - - - - - ------------------
(1) The stock price of the Company at December 31, 1999 was $7.375. All shares
indicated above are exercisable
EMPLOYMENT AGREEMENTS
In July of 1999, we entered into a new employment agreement with Mr.
Cypres. Under the agreement, Mr. Cypres will serve as our Chairman of the Board
for a period of five years at a base salary of $245,000 for the period from
September 16, 1999 to September 15, 2000, and then receive yearly increases of
$25,000 per annum until September 15, 2004. Mr. Cypres' agreement also provides
that he will participate in our defined benefit Supplemental Executive
Retirement Plan (the "SERP Plan") and be credited with nine and one-half years
of service for his contribution to us since 1991 when we were acquired by our
current management.
If Mr. Cypres is terminated "for cause," which definition generally
includes termination due to his willful failure to perform his duties under the
employment agreement, Mr. Cypres' personal dishonesty or breach of his fiduciary
duties or the employment agreement, then the Company will be obligated to pay
him only his base salary up to the date upon which we notify him of his
termination "for cause." If Mr. Cypres is terminated without "cause," becomes
disabled or dies, then the Company will be obligated to pay him or his estate,
commencing immediately, a lump sum payment equal to his base salary for the
remaining term of the employment agreement and to pay him or his estate under
the SERP Plan as if he had worked to his normal retirement date, which the
employment agreement provides is December 31, 2000.
Mr. Cypres has agreed not to solicit our employees or compete with the
Company in any manner following his resignation or termination from the Company
for any period for which he has received a lump sum in accordance with his
employment agreement, which period shall be no less than 12 months.
14
<PAGE> 21
Except as described above, we have not entered into employment agreements
with any other of our executive officers or other members of management.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In June 1996, we adopted the Supplemental Executive Retirement Plan ("SERP
Plan"), which provides supplemental retirement benefits to certain key
management employees.
To vest in the SERP Plan, an employee must have at least 10 years of
service with us, including five years subsequent to the adoption of the plan.
Upon completion of our initial public offering, Mr. Cypres was credited with 10
years of service with us and was treated as having fulfilled his post-adoption
service on December 31, 1997 by acting as our President and Chief Executive
Officer through such date. The board of directors determines participation in
the SERP Plan. The SERP Plan benefits are a function of length of service with
us and final average compensation (average monthly compensation during the 36
consecutive months of the last 60 months of the participant's employment that
produces the highest average compensation, including salary and bonus).
Benefits are equal to a targeted percentage of final average compensation
as determined by the board of directors upon selection of the employee to
participate in the SERP Plan. In no case will the rate exceed fifty percent
(50%) of the final average compensation as of the date of the participant's
retirement or termination of employment, multiplied by the ratio of the actual
years of service as of the applicable event to the participant's years of
service projected to the participant's normal retirement date (the first day of
the month after the participant attains age 60). A vested participant who
terminates employment at or after his normal retirement date will receive the
full targeted percentage of his final average compensation. The SERP Plan
benefit is reduced, however, by the annuity value of the participant's benefit
under the Profit Sharing Plan. At December 31, 1999, only Mr. Cypres was a
participant in the SERP Plan.
The following table shows the estimated annual retirement benefits that
would be payable under the SERP Plan upon a participant's normal retirement date
on a straight life annuity basis, before any applicable offset for benefits
received under the Profit Sharing Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------
REMUNERATION 10 15 20 25 30 OR MORE
- - - - - - ------------ --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
$175,000....................... $ 87,500 $ 87,500 $ 87,500 $ 87,500 $ 87,500
200,000....................... 100,000 100,000 100,000 100,000 100,000
225,000....................... 112,500 112,500 112,500 112,500 112,500
250,000....................... 125,000 125,000 125,000 125,000 125,000
</TABLE>
As of December 31, 1999, Mr. Cypres was fully vested under the SERP Plan.
15
<PAGE> 22
COMPENSATION COMMITTEE'S REPORT
ON EXECUTIVE COMPENSATION AND REPRICING OF STOCK OPTIONS
The following Compensation Committee's Report on Executive Compensation and
Repricing of Stock Options shall not be deemed to be "soliciting material" or to
be "filed" with the SEC or subject to Regulations 14A or 14C of the SEC or to
the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and shall not be deemed incorporated by reference into any
filing under the Securities Act of 1933 or the Exchange Act, notwithstanding any
general incorporation by reference of this proxy statement into any other
document.
THE REPORT
The compensation committee of the board of directors (the "Committee") is
composed of the two directors who are not also our employees. The Committee
establishes our overall compensation and employee benefits and the specific
compensation of our executive officers. One of the Committee's goals is to
implement executive officer compensation programs that further our business
objectives and that attract, retain and motivate the best qualified executive
officers.
We adopt and administer our executive compensation policies and specific
executive compensation programs in accordance with the principal goal of
maximizing return on stockholders' equity. The Committee believes that we best
achieve this performance goal, and the long-term interests of our stockholders
generally, by attracting and retaining management of high quality, and that such
management will require commensurate compensation. We believe that our executive
officer compensation policies are consistent with this policy.
Our Chairman has a written employment agreement with us which was
established concurrent with our initial public offering and was amended on July
14, 1999 (see "Employment Agreements" at page 14, above). The Committee
determines the levels of compensation we grant in such employment agreements,
and the levels of compensation we grant to other executive officers from time to
time, based on factors it deems appropriate.
The Committee determines annual compensation levels for executive officers
and compensation levels to be implemented from time to time in written
employment agreements with executive officers based primarily on its review and
analysis of the following factors: (1) the responsibilities of the position, (2)
the performance of the individual and his or her general experience and
qualifications, (3) our overall financial performance (including return on
equity, levels of general and administrative expense and budget variances) for
the previous year and the contributions the individual or his or her department
made to such performance measures, (4) the officer's total compensation during
the previous year, (5) compensation levels comparable companies pay in similar
industries, (6) the officer's length of service with us, and (7) the officer's
effectiveness in dealing with external and internal audiences. In addition, the
Committee receives the recommendations of the Chairman with respect to the
compensation of other executive officers, which the Committee reviews in light
of the above factors. The Committee believes that the base compensation of the
executive officers is competitive with companies of similar size and with
comparable operating results in similar industries.
16
<PAGE> 23
In addition, Mr. Cypres' compensation for 1999 was based in part on his
progress in achieving certain additional criteria. These criteria included
results in meeting our strategic business plan, and leadership abilities
(including developing an effective senior management team).
While the Committee establishes salary and bonus levels based on the
above-described criteria, the Committee also believes that encouraging equity
ownership by executive officers further aligns the interests of the officers
with the performance objectives of our stockholders and enhances our ability to
attract and retain highly qualified personnel on a basis competitive with
industry practices. Stock options that we granted under our 1996 Plan help
achieve this objective, and provide additional compensation to the officers to
the extent that the price of the common stock increases over fair market value
on the date of grant. We have granted stock options to each of the Named
Executives and to our other officers or key employees. Through the 1996 Plan,
there will be an additional direct relationship between our performance and
benefits to executive officer Plan participants.
On April 21, 1999, and again on July 14, 1999, the Committee reviewed the
options held by our executive officers and noted that the options granted to Mr.
Cypres no longer served to sufficiently incentivize him to continue his
significant efforts and commitment to CFAC. Considering these factors, the
Committee determined that it was in the Company's and our stockholders' best
interest to increase the incentives for Mr. Cypres to remain as the chairman and
to exert his maximum efforts on behalf of the Company by granting on April 21,
1999 and July 14, 1999 options to purchase 80,000 and 100,000 shares,
respectively, at $5.00 per share.
Dated: May 17, 2000 COMPENSATION COMMITTEE
William R. Sweet, Chairman
Salvatore J. Caltagirone
PERFORMANCE GRAPH
The following graph compares, for the period from June 26, 1996 (the date
of our initial public offering) through December 31, 1999, the percentage change
in our cumulative total stockholder return of CFAC common stock with the
cumulative total return of the Nasdaq Total Return Index and the SNL Subprime
Lenders Index. The graph assumes an initial investment of $100 and reinvestment
of dividends. The graph is not necessarily indicative of future price
performance.
The 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 under the Securities Exchange Act of 1934, as
amended, except to the extent that we specifically incorporate the information
by reference, and shall not otherwise be deemed filed under such acts.
17
<PAGE> 24
Comparison of Total Return to Stockholder
Among CFAC, Nasdaq Stock Market and SNL Subprime Lenders Index
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
Total Return Performances
PERIOD ENDING
----------------------------------------------
INDEX 6/26/96 12/31/96 12/31/97 12/31/98 12/31/99
- - - - - - --------------------------------------------------------------------------------
Central Financial Acceptance Corp. 100.00 166.67 80.21 36.46 61.46
NASDAQ - Total US * 100.00 111.76 136.94 192.97 348.62
SNL Subprime Lenders Index 100.00 113.78 68.28 37.07 40.87
DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD
PROPOSAL 1: ELECT FOUR DIRECTORS
Our bylaws provide that the exact number of directors will be fixed from
time to time by action of our stockholders or board of directors. The number of
directors currently is fixed at four.
The board has nominated four directors for election at the annual meeting.
Each nominee is currently serving as one of our directors. If you re-elect them,
they will hold office until the annual meeting in 2001 or until their successors
have been elected or until they resign.
We know of no reason why any nominee may be unable to serve as a director.
If any nominee is unable to serve, your proxy may vote for another nominee
proposed by the board, or the board may reduce the number of directors to be
elected. If any director resigns, dies or is
18
<PAGE> 25
otherwise unable to serve out his term, or the board increases the number of
directors, the board may fill the vacancy until the next annual meeting.
NOMINEES
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- - - - - - ----------------------------- -------------------------------------------------
Gary M. Cypres (56) Mr.Cypres has been the Company's Chairman of the
Board since its formation. Mr. Cypres also served
as CFAC's President and Chief Executive Officer
from its formation to March 18, 1998 and its Chief
Financial Officer from its formation to July 1998.
Mr. Cypres has been Chairman of the Board, Chief
Executive Officer, President and Chief Financial
Officer of Banner Holdings, Inc. ("Holdings") and
Banner's Central Electric, Inc. ("Banner") since
February 1991, Chairman of the Board and Chief
Executive Officer of Central Rents, Inc. since
June 1994 and managing general partner of West
Coast Private Equity Partners, L.P. ("West
Coast") since March 1990. Prior to that,
Mr. Cypres was a general partner of SC Partners,
a private investment banking and consulting firm.
From 1983 to 1985, Mr. Cypres was Chief Financial
Officer of The Signal Companies. From 1973 to
1983, Mr. Cypres was Senior Vice President of
Finance at Wheelabrator-Frye Inc. Mr. Cypres was
a member of the Board of Trustees and a faculty
member of The Amos Tuck School of Business at
Dartmouth College.
Salvatore J. Caltagirone (57) Mr. Caltagirone has been a director of the Company
since September 1997. Mr. Caltagirone has been
retired since October 1994. From the fall of 1990
to October 1994, he was an employee of G.M. Cypres
& Company. From March 1987 to June 1990, he was
employed as the Managing Director of
Henley Group.
Jose de Jesus Legaspi (47) Mr.Legaspi has been a director of the Company
since July 1996. Since 1980, (47) Mr. Legaspi has
been a principal of and broker at The Legaspi
Company, a full-service commercial real estate
brokerage firm. In addition, since 1992, Mr.
Legaspi has been a principal of the FINCA
Property Management Company, a residential and
commercial real estate management company.
Mr. Legaspi is also a Commissioner of the Los
Angeles Department of Water and Power.
William R. Sweet (62) Mr. Sweet has been a director of the Company since
September 1997. In July 1996, Mr. Sweet retired
from his position of Executive Vice President--
Wholesale Banking at Union Bank of California,
N.A., a position he had held since July 1985.
Mr. Sweet currently serves as a trustee of
Berkeley Capital Management Funds.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF ALL FOUR NOMINEES FOR
DIRECTOR.
PROPOSAL 5: RATIFY SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS FOR 2000
We are asking you to ratify the board's selection of Arthur Andersen LLP,
certified public accountants, as independent public accountants for 2000. The
audit committee recommended the selection of Arthur Andersen to the Board. All
professional services Arthur Andersen rendered to us during 1998 were furnished
at customary rates and terms. Arthur Andersen has served as the independent
public accountants of CFAC since October 1996.
A representative of Arthur Andersen will attend the Annual Meeting and be
able to make a statement and to answer your questions.
We are submitting this proposal to you because the board believes that such
action follows sound corporate practice. If you do not ratify the selection of
independent public accountants, the board will consider it a direction to
consider selecting other public accountants. However, even if you ratify the
selection, the board may still appoint new independent public accountants at any
time during the year if it believes that such a change would be in the best
interests of CFAC and our stockholders.
19
<PAGE> 26
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE SELECTION OF ARTHUR ANDERSEN AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR 2000.
INFORMATION ABOUT STOCKHOLDER PROPOSALS
If you wish to submit proposals to be included in our 2001 proxy statement,
we must receive them, in a form which complies with the applicable securities
laws, on or before January 15, 2001. In addition, in the event a stockholder
proposal is not submitted to us prior to February 21, 2001, the proxy to be
solicited by the board of directors for the 2001 annual meeting will confer
authority on the holders of the proxy to vote the shares in accordance with
their best judgment and discretion if the proposal is presented at the 2001
annual meeting without any discussion of the proposal in the proxy statement for
such meeting. Please address your proposals to: Central Financial Acceptance
Corporation, 5480 East Ferguson Drive, Commerce, California 90022, Attention:
Corporate Secretary.
By order of the board of directors,
/s/ JONI MAGGIO
Joni Maggio
May 17, 2000 Assistant Corporate Secretary
20
<PAGE> 27
REVOCABLE PROXY CENTRAL FINANCIAL ACCEPTANCE CORPORATION REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 20, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder(s) of Central Financial Acceptance Corporation
(the "Company") hereby nominate(s), constitute(s) and appoint(s) Salvatore J.
Caltagirone, Gary M. Cypres, Jose de Jesus Legaspi and William R. Sweet, and
each of them, the attorney, agent and proxy of the undersigned, with full power
of substitution, to vote all stock of the Company which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company (the
"Meeting") to be held at the Company's corporate headquarters, 5480 East
Ferguson Drive, Commerce, California 90022 at 10:00 a.m., Tuesday, June 20,
2000, and any adjournments thereof, as fully and with the same force and effect
as the undersigned might or could do if personally present thereon, as follows:
1. ELECTION OF DIRECTORS.
<TABLE>
<S> <C>
[ ] FOR all the nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
Salvatore J. Caltagirone, Gary M. Cypres, Jose de Jesus Legaspi
and William R. Sweet
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
- - - - - - --------------------------------------------------------------------------------
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS. To ratify the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for the year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. OTHER BUSINESS. In their discretion, the proxyholders are authorized to
transact such other business as may properly come before the Meeting, and any
adjournment or adjournments thereof.
The Board of Directors recommends a vote "FOR" the election of the Board of
Directors' nominees listed, and "FOR" ratification of the appointment of Arthur
Andersen LLP as the Company's independent public accountants for the year ending
December 31, 2000.
Please Sign and Date on Reverse Side
<PAGE> 28
(Continued from Front Side of Proxy Card)
This Proxy will be voted "FOR" the election of the Board of Directors'
nominees unless authority to do so is withheld and "FOR" ratification of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants, unless "AGAINST" or "ABSTAIN" is marked on the Proxy. If any other
business is presented at the Meeting, this Proxy shall be voted by the
proxyholders in accordance with the recommendations of a majority of the Board
of Directors.
The undersigned hereby ratifies and confirms all that said attorneys and
proxyholders, or any of them, or their substitutes, shall lawfully do or cause
to be done by virtue hereof, and hereby revokes any and all proxies heretofore
given by the undersigned to vote at the Meeting. The undersigned hereby
acknowledges receipt of the Notice of Annual Meeting and the Proxy Statement
accompanying said notice.
Date: ---------------, 2000
---------------------------
Signature
---------------------------
Signature
NOTE: Please date this
Proxy and sign your name
exactly as it appears on
your stock certificates.
Executors, administrators,
trustees, etc., should give
their full titles. All
joint owners should sign.
I (we) [ ] do [ ] do not
expect to attend the
Meeting.
PLEASE SIGN, DATE AND RETURN THIS PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE
PREPAID ENVELOPE PROVIDED.
