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)
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<PAGE>
FINANCIAL FEDERAL CORPORATION
733 THIRD AVENUE, 7th FLOOR
NEW YORK, NEW YORK 10017
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, DECEMBER 8, 1998
---------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Financial Federal Corporation, a Nevada corporation (the
"Company"), will be held at 270 Park Avenue, 11th Floor, New York, New York on
Tuesday, December 8, 1998 at 10:00 a.m. Eastern Time, for the following
purposes:
(1) Electing six directors;
(2) Ratifying the appointment of the Company's independent auditors
for the fiscal year ending July 31, 1999;
(3) Approving an amendment to the Company's Restated Articles of
Incorporation to increase the number of authorized shares of
Common Stock from 25,000,000 to 100,000,000 and the number of
authorized shares of Preferred Stock from 500,000 to 5,000,000;
(4) Approving a new stock option plan (the Company's present stock
option plan expires in September 1999); and
(5) Transacting such other business as may properly come before the
Annual Meeting.
Pursuant to the By-Laws, the Board of Directors of the Company has fixed
the close of business on October 23, 1998 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 purpose related to the
Annual Meeting at the office of Financial Federal Corporation, 733 Third
Avenue, 7th Floor, New York, New York 10017 for the ten days prior to
December 8, 1998.
FINANCIAL FEDERAL CORPORATION
Troy H. Geisser
Secretary
October 30, 1998
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 AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH DOES
NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
FINANCIAL FEDERAL CORPORATION
733 THIRD AVENUE, 7th FLOOR
NEW YORK, NEW YORK 10017
PROXY STATEMENT
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, 11 th Floor, New
York, New York on December 8, 1998 and at any postponements or adjournments
thereof (the "Meeting"). Shares represented by properly executed proxies,
which 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 proxy at any
time prior to its exercise by notice in writing to the Secretary of the
Company indicating that his proxy is revoked or by attending the Meeting and
voting in person.
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 Eisner & Lubin LLP as the Company's
independent public accountants for the fiscal year ending July 31, 1999; (iii)
to approve an amendment to the Company's Restated Articles of Incorporation to
increase the number of authorized shares of Common Stock from 25,000,000
shares to 100,000,000 shares and to increase the number of authorized shares
of Preferred Stock from 500,000 shares to 5,000,000 shares; (iv) to approve a
new stock option plan and to reserve for issuance thereunder 2,500,000 shares
of Common Stock; and (v) to take such other action as may properly come before
the Meeting.
The approximate date on which this proxy statement and accompanying form
of proxy are first being sent or given to stockholders is October 30, 1998.
Holders of the Company's common stock, par value $.50 per share ("Common
Stock"), as of the record date, which is the close of business on October 23,
1998, are entitled to vote at the Meeting. As of October 1, 1998, the Company
had 14,857,053 shares of Common Stock outstanding and had no preferred stock,
par value $1.00 per share ("Preferred Stock") 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. With respect to the approval of any particular proposal, abstentions
are considered present at the Meeting, but since they are not affirmative
votes for the proposal, they will have the same effect as votes against the
proposal. Broker non-votes, on the other hand, are not considered present at
the Meeting for the particular proposal for which the broker withheld
authority to vote.
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
director named below, "FOR" the ratification of the selection of Eisner &
Lubin LLP as independent auditors for the fiscal year ending July 31, 1999,
"FOR" the proposal concerning an increase in the number of authorized shares
of Common Stock and an increase in the number of authorized shares of
Preferred Stock, and "FOR" the proposal concerning a new stock option plan. 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
Corporate Investors Communications, Inc. to assist in the solicitation of
proxies, at an estimated cost of $1,000, plus other reasonable expenses.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, to the knowledge of the Company,
information regarding the ownership of the Company's Common Stock by (i) each
person who may be deemed to be the beneficial owner of more than 5% of the
Company's outstanding Common Stock as of October 1, 1998 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. As of October 1, 1998, the Company had 14,857,053 shares of Common
Stock outstanding.
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner or
Number of Persons in Number of Shares Percentage of
Group 1 Beneficially Owned 2 Ownership
- -------------------- -------------------- -------------
<S> <C> <C>
Clarence Y. Palitz, Jr. 3 3,598,295 22.9%
Bernard G. Palitz 4 1,541,973 10.2%
Wellington Management Company, LLP 5
75 State Street
Boston, MA 02109 912,650 6.1%
Michael C. Palitz 6 578,473 3.8%
Paul R. Sinsheimer 7 364,467 2.4%
William C. MacMillen, Jr. 41,250 8
Lawrence B. Fisher 5,000 8
William M. Gallagher 9 110,344 8
Richard W. Radom 10 62,468 8
All directors and executive officers
as a group (11 persons) 11 6,328,049 38.5%
<FN>
1 Unless otherwise indicated, the address of each person listed is c/o
Financial Federal Corporation, 733 Third Avenue, 7th 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 includes warrants and options that are
exercisable or will become exercisable within 60 days of October 1, 1998 and
shares issuable upon conversion of the Company's convertible subordinated
notes.
3 Includes (i) warrants to purchase 202,500 shares of Common Stock held by
Mr. C. Y. Palitz, Jr., (ii) 2,714,125 shares of Common Stock and warrants to
purchase 562,500 shares of Common Stock held by a limited partnership, the
general partner of which is a corporation owned and controlled by Mr. C. Y.
Palitz, Jr., (iii) 28,125 shares of Common Stock held by such corporation,
(iv) 24,725 shares of Common Stock held by Mr. C. Y. Palitz, Jr.'s wife, as to
which shares Mr. C. Y. Palitz, Jr. disclaims beneficial ownership, and (v)
66,320 shares of Common Stock upon conversion of convertible subordinated
debentures by trusts of which Mr. C. Y. Palitz, Jr. is a Trustee, as to which
shares Mr. C. Y. Palitz, Jr. disclaims beneficial ownership.
4 Includes (i) 1,129,473 shares of Common Stock owned by Mr. B. G. Palitz,
(ii) warrants to purchase 225,000 shares of Common Stock held by Mr. B. G.
Palitz, (iii) 43,125 shares of Common Stock held by Mr. B. G. Palitz's wife,
as to which shares Mr. B. G. Palitz disclaims beneficial ownership, (iv)
28,125 shares of Common Stock held by a Keogh Plan established for Mr. B. G.
Palitz's benefit and of which he is the trustee, and (v) 116,250 shares owned
by a charitable foundation over which Mr. B. G. Palitz has control, as to
which shares Mr. B. G. Palitz disclaims beneficial ownership.
5 Share ownership was provided by the holder to the Company by written
communication as of June 30, 1998.
6 Includes (i) 302,900 shares of Common Stock and warrants to purchase
112,500 shares of Common Stock held by a corporation owned and controlled by
Mr. M. C. Palitz, (ii) options and warrants to purchase 145,968 shares of
Common Stock held by Mr. M. C. Palitz, (iii) 225 shares of Common Stock held
by Mr. M. C. Palitz's wife, as to which shares Mr. M. C. Palitz disclaims
beneficial ownership, (iv) 300 shares held by Mr. M. C. Palitz's children, and
(v) 16,580 shares of Common Stock upon conversion of convertible subordinated
debentures by a trust of which Mr. M. C. Palitz is a Trustee.
7 Includes (i) 146,900 shares of Common Stock owned by Mr. Sinsheimer, and
(ii) options and warrants to purchase 217,567 shares of Common Stock held by
Mr. Sinsheimer.
8 Less than 1% of outstanding shares of Common Stock.
2
<PAGE>
9 Includes (i) Common Stock of 82,312 shares owned by Mr. Gallagher and (ii)
options and warrants to purchase 28,032 shares of Common Stock held by Mr.
Gallagher.
10 Includes (i) Common Stock of 53,187 shares owned by Mr. Radom and (ii)
options and warrants to purchase 9,281 shares of Common Stock held by Mr.
Radom.
11 Includes shares of Common Stock described in notes 3, 4, 6, 7, 9 and 10.
Also includes 14,062 shares of Common Stock and options to purchase 11,717
shares of Common Stock held by executive officers not named in the table.
</FN>
</TABLE>
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires directors, officers and beneficial owners of more
than 10% of the Company's Common Stock ("10% Owners") to file initial and
periodic reports of ownership with the Securities and Exchange Commission (the
"Commission") and the American Stock Exchange and New York Stock Exchange,
Inc. While the rules adopted by the Commission under Section 16 are complex
and difficult to interpret, to the best of the Company's knowledge, all
transactions in the Company's Common Stock by the Company's directors,
officers and 10% Owners during the Company's last fiscal year were reported
promptly and correctly.
MATTERS SUBMITTED TO SHAREHOLDERS
ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
The Board of Directors has designated the persons listed under the
section "Nominees for Election as Directors" of this proxy statement for
nomination 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. It is intended that shares represented
by proxies solicited by the Board of Directors 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 the
nominees are currently directors of the Company.
The election of the six director nominees requires an affirmative vote by the
holders of a majority of the outstanding Common Stock. Any shares not voted (by
abstention, broker non-vote, or otherwise) have no impact on the vote. The
Board of Directors unanimously recommends that stockholders vote "FOR" each of
the nominees listed below.
Nominees for Election as Directors
Lawrence B. Fisher, 60, has served as a director of the Company since 1992.
Mr. Fisher is 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., 85, has served as a director of the Company since
1989. Mr. MacMillen served as a director of Commercial Alliance Corporation,
an equipment finance company ("CAC"), from its inception in 1963 to 1984, and
he is presently a director of Republic New York Corporation and Republic
National Bank of New York, and is the President of William C. MacMillen & Co.,
Inc., an investment banking firm.
Bernard G. Palitz, 74, has served as a director of the Company since its
inception in 1989 and as Chairman of the Board from the Company's inception to
July 31, 1996. From 1963 to 1988, Mr. Palitz served as Chairman of the Board
of CAC, which he founded with Clarence Y. Palitz, Jr. in 1963. He is currently
a director and President of Gregory Capital Corporation, an investment firm.
3
<PAGE>
Clarence Y. Palitz, Jr., 67, has served as Chief Executive Officer and a
director of the Company since its inception in 1989, as Chairman of the Board
of the Company since August 1, 1996 and as President of the Company from its
inception in 1989 to September 1998. From 1963 to 1988, Mr. Palitz served as
President and a director of CAC, which he founded with Bernard G. Palitz in
1963. Since October, 1988, he has been a director of City and Suburban
Financial Corp., a privately owned savings and loan holding company.
Michael C. Palitz, 40, has served as Executive Vice President of the Company
since July 1995 and as a director of the Company since July 1996. Mr. Palitz
served as 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 Chief Financial Officer, Treasurer and
Assistant Secretary of the Company since its inception in 1989.
Paul R. Sinsheimer, 51, has served as President of the Company since September
1998 and as Executive Vice President and a director of the Company since its
inception in 1989. From 1970 to 1989, Mr. Sinsheimer was employed by CAC,
where he served successively as Credit Manager, Collections Manager,
Operations Manager, Houston Branch Manager, Division Manager and, from 1988,
as Executive Vice President.
Bernard G. Palitz and Clarence Y. Palitz, Jr. are brothers. Michael C.
Palitz is the son of Clarence Y. Palitz, Jr.
The Board has established an Executive Committee. The Executive Committee
can exercise all of the powers of the Board between meetings of the Board. The
present members of the Executive Committee are Messrs. MacMillen, C.Y. Palitz,
Jr. and Sinsheimer.
The Board has established an Audit Committee, which consists of three
directors, at least two of whom cannot be officers or employees of the
Company. The Audit Committee is responsible for the engagement of the
Company's independent auditors and will review with them the scope and timing
of their audit services and any other services they are asked to perform,
their report on the Company's financial statements following completion of
their audit, and the Company's policies and procedures with respect to
internal accounting and financial controls. The present members of the Audit
Committee are Messrs. Fisher, MacMillen and B.G. Palitz.
The Board has established an Executive Compensation Committee, which
consists of three directors. The Executive Compensation Committee is
responsible for approving appointments, promotions and fixing salaries of
executives of the Company between meetings of the full Board. All actions of
the Executive Compensation Committee must be ratified by the Board within six
months in order to remain effective. The present members of the Executive
Compensation Committee are Messrs. Fisher, M.C. Palitz and Sinsheimer.
The Board has established a Stock Option Committee, which consists of two
directors. The Stock Option Committee is responsible for administering the
Company's Stock Option Plan, including the granting, modification and
cancellation of options to purchase the Company's Common Stock granted
thereunder. The present members of the Stock Option Committee are Messrs.
MacMillen and C.Y. Palitz, Jr.
The Board has no standing committees other than those described above.
During the Company's fiscal year ended July 31, 1998, the Board of
Directors met twice, the Executive Committee met twice, the Audit
Committee met once, the Executive Compensation Committee met twice, and the
Stock Option Committee twice. Each member of the Board attended 100% of the
total number of meetings of the Board and its committees, either
telephonically or in person, of which they were members during such fiscal
year.
4
<PAGE>
COMPENSATION
Report of Executive Compensation Committee
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act, that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following report and the Performance Graph below shall
not be incorporated by reference into any such filings.
This report to stockholders presents an overview of the role of the
Executive Compensation Committee of the Board of Directors and of the
Company's present compensation philosophy. The Committee's principal function
is to review and approve the salaries of executive officers of the Company and
to approve any officer appointments and promotions. All actions of the
Executive Compensation Committee, to remain effective, must be ratified by a
majority vote of the Board of Directors within six months of such action; and
all such actions to date have been so ratified.
The Company compensates its employees and officers through salary, a
portion of which may be deferred by agreement between the Company and its
officers, and through a stock option program, the Financial Federal
Corporation Stock Option Plan (the "Stock Option Plan"). The Company believes
that through the grant of stock options, the employees' and officers'
objectives are aligned with those of the Company's and its shareholders',
which is to increase stockholders' value. Approximately 70% of the Company's
employees, officers and directors with one or more years of service as of
September 30, 1998 were holders of options under the Company's Stock Option
Plan.
The Company offers a package of fringe benefits to its employees and
officers which may not be as extensive as that which is offered by other
companies. The current benefits offered by the Company are a contributory
health and medical plan, a life insurance program (generally limited to one
times annual salary plus $10,000), a qualified 401(k) savings plan and an
employee contributed long term disability plan. In order to attract
exceptionally high caliber employees and executives, the Company generally
offers a salary which it believes to be competitive with other financial
services companies taking into consideration that the Company does not offer
a wide variety of fringe benefits. The Company evaluates compensation
modifications based upon the performance of the employee, the Company's
earnings level and general economic conditions.
Salary adjustments for executives are reviewed on an annual basis.
The Committee reviews the public filings of the Company's competitors and
makes an informal survey of public and private competitors of the Company
for their executive compensation programs. The Committee, when determining
salary adjustments, also takes into consideration that the Company does not
offer certain fringe benefits that may be part of a competitor's executive
compensation program such as bonuses, commissions, retirement benefits and
profit sharing plans.
For salary adjustment purposes, each executive is evaluated on his or
her contribution to the Company's overall corporate objectives which include
annual profits, loan and lease originations, department operating
efficiencies, the Company's overall performance in respect to return on
earning assets and average equity, as well as the quality of the portfolio of
receivables managed by such executives.
The Committee annually reviews and approves the compensation of Clarence
Y. Palitz, Jr., the Chief Executive Officer and Chairman. The Committee, in
establishing compensation for the Chief Executive Officer, generally uses the
same criteria as it does for other employees and officers, except such
compensation is not directly tied to the Company's performance. The Committee
believes Mr. Palitz is paid a reasonable salary, given his limited operational
and administrative duties and responsibilities. In addition, Mr. Palitz and
his affiliates are significant shareholders of the Company, and to the extent
his performance as Chief Executive Officer translates into an increase in the
value of the Company's stock, all shareholders, including him, share the
benefits. Mr. Palitz defers his entire salary under the Company's executive
deferred compensation program.
Submitted by the Executive Compensation Committee of the Company's Board of
Directors:
Lawrence B. Fisher Michael C. Palitz Paul R. Sinsheimer
Compensation Committee Interlocks and Insider Participation
Michael C. Palitz and Paul R. Sinsheimer, who are members of the
Executive Compensation Committee, are both executive officers of the Company.
Michael C. Palitz, and entities controlled and managed by him, and Paul R.
Sinsheimer, have purchased commercial paper issued by the Company (see
"Certain Transactions").
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 Five Thousand ($5,000) Dollars per year,
payable upon their election by the stockholders after the
Annual Meeting of Stockholders each year. If a director joins
the Board during the year, such stipend will be pro rated.
2. Three Hundred ($300) Dollars per directors meeting attended.
3. Two Hundred ($200) Dollars per committee meeting attended if not
in conjunction with a Board meeting.
5
<PAGE>
Directors who are officers of the Company receive no additional
compensation for attending Board meetings. Directors who are not officers of
the Company may also participate in the Stock Option Plan.
Employment Contracts
The Company has not entered into any contract or arrangement with any
employee or officer which would require the Company to continue compensation
or to provide compensation upon termination of employment. Certain executive
officers have arranged deferred compensation programs with the Company which
provide for deferral of current compensation as earned. Amounts so deferred
earn interest at a rate that is published by the Internal Revenue Service.
No employee or officer has entered into any type of termination or
change-in-control arrangement with the Company.
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation paid to those persons who were, at July 31, 1998, the
Chief Executive Officer ("CEO") and the other four most highly compensated
executive officers of the Company.
<TABLE>
<CAPTION>
Long-term
Annual Compensation
Compensation Awards
------------ ------
Securities
Fiscal Underlying All Other
Name and Principal Position(s) Year Salary ($) Options(#) Compensation ($)
- ------------------------------ ---- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Clarence Y. Palitz, Jr. 1998 289,583 0 0
CEO and Director 1997 243,750 0 0
1996 189,579 0 0
Paul R. Sinsheimer 1998 588,843 0 0
Chief Operating Officer, 1997 555,511 0 0
President and Director 1996 405,479 56,250 0
Michael C. Palitz 1998 245,270 50,000 0
Chief Financial Officer, 1997 202,770 0 0
Executive Vice President 1996 165,270 56,250 0
and Director
Richard W. Radom 1998 225,628 6,000 0
Senior Vice President 1997 216,381 0 0
1996 207,479 13,500 0
William M. Gallagher 1998 218,010 6,000 0
Senior Vice President 1997 200,511 0 0
1996 182,980 13,500 0
</TABLE>
6
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
<CAPTION>
Shares Securities Underlying Value of Unexercised
Acquired on Value Unexercised Options Held In-The-Money Options
Name (1) Exercise (#) Realized($) At July 31, 1998 (#) At July 31, 1998(1)
- ----------------------- ------------ ----------- -------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Clarence Y. Palitz, Jr. 0 0 0 0 0 0
Paul R. Sinsheimer 24,400 467,333 24,818 39,657 420,121 684,733
Michael C. Palitz 0 0 55,968 91,907 999,215 860,936
Richard W. Radom 11,812 148,719 9,281 22,032 159,787 275,916
William M. Gallagher 11,812 136,169 9,281 22,032 159,787 275,916
<FN>
(1) Includes those who in fiscal 1998 were the Chief Executive Officer and the
four other most highly compensated executive officers.
(2) Only the value of unexercised, in-the-money options are reported. Value is
calculated by (i) subtracting the total exercise price per share from the
fiscal year-end value of $24.8125 per share and (ii) multiplying by the number
of shares subject to the option.
</FN>
</TABLE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
----------------------------------------------------------------------
Number of
Shares % of Total Grant
Underlying Options Exercise Date
Options Granted to Price Expiration Present
Name (1) Granted (#) Employees Per Share ($) Date Value (2) ($)
- ----------------------- ------------ ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Clarence Y. Palitz, Jr. 0 0.00 -- -- --
Paul R. Sinsheimer 0 0.00 -- -- --
Michael C. Palitz 50,000 22.68 22.125 3/2/04 399,000
Richard W. Radom 6,000 2.72 22.125 3/2/04 47,880
William M. Gallagher 6,000 2.72 22.125 3/2/04 47,880
<FN>
(1) Includes those who in fiscal 1998 were the Chief Executive Officer and the
four other most highly compensated executive officers.
(2) In accordance with SEC rules, the Black-Scholes option pricing model was
chosen to estimate the grant date present value of the options set forth in
this table. The Company's use of this model should not be construed as an
endorsement of its accuracy at valuing options. All stock option valuation
models, including the Black-Scholes model, require a prediction about the
future movement of the stock price. The following assumptions were made for
purposes of calculating the grant date present value: expected life of five
years, volatility rate of 28% and risk free interest rate of 5.7%. The real
value of the options in this table depends upon the actual changes in the
market price of the Common Shares during the applicable period.
</FN>
</TABLE>
7
<PAGE>
PERFORMANCE GRAPH
The following graph compares the percentage change in cumulative total
stockholder return on Financial Federal Corporation's Common Stock during the
five years ending July 31, 1998 with the cumulative total return on the S & P
Financial Index; the Russell 2000 Index; and the AMEX Market Value Index. The
Company is replacing the AMEX Market Value Index with the Russell 2000 Index
since the Common Stock is no longer listed on the American Stock Exchange and
the Common Stock is included in the Russell 2000 Index. The performance of the
AMEX Market Value Index is displayed here for comparative purposes as required
by SEC Reg. S-K Item 402(I)(4), and will not be provided in the future. The
comparison assumes $100 was invested on July 31, 1993 in each of such indices.
Note that historic stock price is not indicative of future stock price
performance.
Financial Federal Corporation's Common Stock was listed on the New York
Stock Exchange, Inc. on June 22, 1998, and was previously listed on the
American Stock Exchange.
7/93 7/94 7/95 7/96 7/97 7/98
---- ---- ---- ---- ---- ----
Financial Federal Corporation $100 $ 93 $104 $115 $200 $328
S & P Financial 100 101 122 156 271 336
RUSSELL 2000 100 104 131 140 186 194
AMEX Market Value Index 100 100 120 123 153 168
* $100 invested on 7/31/93 in stock or index - including
reinvestment of dividends. Fiscal year ending July 31.
Graph produced by Research Data Group
8
<PAGE>
CERTAIN TRANSACTIONS
Officers, directors and stockholders of the Company or their affiliates
have purchased commercial paper issued by the Company since its inception.
Such commercial paper has been issued at interest rates then prevailing in the
commercial paper markets and on terms customary in such markets. The maximum
aggregate principal amount of commercial paper issued by the Company and held
by them at any one time during fiscal 1998 was $20.3 million. Interest expense
incurred on commercial paper issued to them by the Company was $654,000 in
fiscal 1998. At July 31, 1998, the aggregate face amount of outstanding
commercial paper issued to them by the Company was $20.3 million and the
aggregate amount of accrued interest thereon was $234,000.
Lawrence B. 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.
RATIFICATION OF AUDITORS
(Item 2 on Proxy Card)
The Board of Directors, on the recommendation of the Audit Committee, has
reappointed the firm of Eisner & Lubin LLP, the Company's independent public
accountants for the fiscal year ended July 31, 1998, as the Company's
independent public accountants for the fiscal year ending July 31, 1999 and
recommends that the stockholders vote "FOR" confirmation of such selection.
In the event of a negative vote on such ratification, the Board will
reconsider its selection. A representative of Eisner & Lubin LLP will be
present at the Meeting, will have the opportunity to make a statement and will
be available to respond to appropriate questions. Eisner & Lubin LLP has been
the Company's independent auditors since the Company's inception in 1989.
Ratification of the appointment of auditors requires a majority of the votes
cast thereon. Any shares not voted (by abstention, broker non-vote, or
otherwise) have no impact on the vote. The Board of Directors unanimously
recommends a vote "FOR" the ratification and approval of the appointment of
Eisner & Lubin LLP.
PROPOSAL CONCERNING INCREASE IN AUTHORIZED
SHARES OF COMMON AND PREFERRED STOCK
(Item 3 on Proxy Card)
On September 28, 1998, the Board of Directors unanimously approved and
recommended that the stockholders consider and approve an amendment to Article
FOURTH of the Company's Restated Articles of Incorporation (the "Articles")
that would increase the number of authorized shares of the Company's Common
Stock, from 25,000,000 shares to 100,000,000 shares and increase the number of
authorized shares of the Company's Preferred Stock, from 500,000 shares to
5,000,000 shares. To be adopted, this proposal requires the affirmative vote of
the holders of a majority of all of the outstanding shares of Common Stock
entitled to vote thereon at the Annual Meeting.
It is proposed that Article FOURTH of the Articles be amended by deleting
paragraph A thereof in its entirety and substituting the following in lieu
thereof:
FOURTH:
A. The amount of the total authorized capital stock of the
Corporation shall consist of One Hundred Five Million shares of
which One Hundred Million shall be shares of Common Stock, par
value $.50 per share, and Five Million shall be shares of
Preferred Stock, par value $1.00 per share.
9
<PAGE>
As of October 1, 1998, there were 14,857,053 shares of Common Stock
outstanding and 1,669,107 shares (3,211,750 shares, if the Company's stock
option plan described in this Proxy Statement is approved by the holders of
outstanding shares of Common Stock represented at the Meeting) reserved for
issuance under the Company's stock option plan. In addition, as of October 1,
1998, an additional 1,606,500 shares of Common Stock were reserved for issuance
pursuant to outstanding warrants and an additional 3,266,321 shares of Common
Stock were reserved for issuance pursuant to conversion of the convertible
subordinated notes. Accordingly, an aggregate of 3,601,019 authorized but
unissued shares were available for future use as of October 1, 1998. As of
October 1, 1998, there were no shares of Preferred Stock outstanding or held in
treasury.
The Board of Directors considers the proposed increase in the number of
authorized shares of Common Stock and Preferred Stock desirable because it
would give the Board the necessary flexibility to issue shares of Common Stock
or Preferred Stock in connection with stock dividends and splits, acquisitions,
financings and employee benefits and for other general corporate purposes
without the expense and delay incidental to obtaining stockholder approval of
an increase in the number of authorized shares at the time of such action
(unless such approval is otherwise then required for a particular issuance by
applicable law or by the rules of any stock exchange on which the Company's
securities may then be listed). Under the requirements of the New York Stock
Exchange, Inc., stockholder approval is required as a prerequisite to approval
of applications to list additional shares in connection with, in certain
circumstances, acquisitions, the sale or issuance of common stock for less than
the greater of book or market value of the stock and the reservation of
additional shares for options granted, or to be granted, to officers, directors
or key employees.
An increase in the number of authorized shares of Common Stock or
Preferred Stock will have no immediate dilutive effect on the proportionate
voting power of present stockholders. However, the future issuance of
additional shares of Common Stock or shares of Preferred Stock could have a
dilutive effect on the proportionate voting power, earnings per share and book
value per share of present stockholders.
If the proposed amendment is approved and subject to market conditions,
the Board of Directors may consider, and make a determination concerning the
advisability of, a stock split. A stock split likely could not be effected
without an increase in the number of authorized shares of Common Stock. If the
Board of Directors were to determine that a stock split is advisable, the Board
of Directors does not anticipate seeking further authorization from the
shareholders for the issuance of shares of Common Stock in order to effect a
stock split. Except as described above, the Company has no present plans,
arrangements or understandings to issue additional shares of Common Stock, as a
result of a stock split or otherwise.
The Board has the authority to issue the Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption (including sinking fund provisions), redemption prices and
liquidation preferences, and the number of shares constituting and the
designation of any such series, without further vote or action by the
stockholders. At present, the Company has no plans to issue any of the
Preferred Stock and is not aware of any pending or proposed transaction that
would be affected by such an issuance.
As of October 1, 1998, the Company's directors and executive officers as a
group own approximately 32% of the outstanding shares of Common Stock and,
therefore, may be able to elect the entire Board of Directors and generally
direct the affairs of the Company. Although the Board of Directors has no
present intention of issuing additional shares for such purposes, the proposed
increase in the number of authorized shares of Common Stock and Preferred Stock
could enable the Board of Directors to render more difficult, or discourage, an
attempt by another person or entity to obtain control of the Company in the
future. Such additional shares could be issued by the Board of Directors in a
public or private sale, merger or similar transaction, increasing the number of
outstanding shares and thereby diluting the equity interest and voting power of
a person or entity attempting to obtain control of the Company. The amendment
to the Articles is not being proposed in response to any known effort to
acquire control of the Company.
Adoption of this proposal requires an affirmative vote by the holders of a
majority of the outstanding Common Stock. Any shares not voted (by abstention,
broker non-vote, or otherwise) have no impact on the vote. The Board of
Directors unanimously recommends a vote "FOR" the approval of the amendment to
Article FOURTH of the Company's Restated Articles of Incorporation to increase
the number of authorized shares of Common Stock from 25,000,000 shares to
100,000,000 shares and to increase the number of authorized shares of Preferred
Stock from 500,000 to 5,000,000.
10
<PAGE>
PROPOSAL CONCERNING A NEW STOCK OPTION PLAN
(Item 4 on Proxy Card)
On September 28, 1998, the Board of Directors unanimously approved and
recommended that the stockholders consider and approve a new stock option plan
(the "1998 Stock Option Plan") since the Company's current Stock Option Plan
expires in September 1999. Since the Stock Option Plan's inception in 1989,
options to purchase 1,784,587 shares have been granted and as of October 1,
1998, 957,357 shares of Common Stock are available for future grants of
options.
The purposes of the Stock Option Plan and the 1998 Stock Option Plan are
to enable the Company to provide additional incentives to the Company's
officers, directors and employees to advance the interests of the Company and
to enable the Company to attract qualified new employees in a competitive
marketplace, in each case by giving them an opportunity to participate in an
increase in the market value of the Common Stock. The Board of Directors
believes that the Stock Option Plan has provided such incentives and that the
1998 Stock Option Plan will provide incentives and flexibility for the Company
in meeting competitive developments in the marketplace for retaining and
attracting qualified employees.
At present, the Company believes that stock options are an important part
of the compensation package offered to its officers and employees
("employees"). The Company believes that through the grant of stock options its
employees' interests are more closely aligned with those of its shareholders.
At present, the Company does not have a commission or bonus program, nor does
the Company offer retirement benefits other than a non-contributory 401(k) plan
and a deferred compensation plan for senior officers. The Company believes that
granting stock options is an effective method for motivating and rewarding its
employees and in attracting new marketing and executive employees. In general,
under a stock option grant, there are minimum vesting periods, thus an employee
may have to remain with the Company for five (5) years to earn and receive the
full benefit of a stock option grant. The Company has announced that from time
to time, it may repurchase its Common Stock to mitigate the possible dilutive
effects of its Stock Option Plan. The Company recommends that you vote in favor
of the 1998 Stock Option Plan.
Set forth below is a summary of the material provisions of the 1998 Stock
Option Plan. This summary is qualified by reference to the full terms of the
1998 Stock Option Plan, a copy of which is attached hereto as Exhibit I.
Administration. The 1998 Stock Option Plan will be administered by the
Stock Option Committee of the Board of Directors. The Stock Option Committee
will interpret the terms, and establish administrative regulations to further
the purposes of the 1998 Stock Option Plan, authorize awards to eligible
participants, determine vesting schedules and take any other action necessary
for the proper implementation of the 1998 Stock Option Plan. Members of the
Stock Option Committee will be "disinterested" within the meaning of Rule 16b-3
under the Exchange Act.
Participation. All officers, directors and full time employees of the
Company and its subsidiaries who are selected by the Stock Option Committee
will be eligible to participate in the 1998 Stock Option Plan. Currently, 49
officers, 3 directors and approximately 108 employees would be eligible for
participation in the 1998 Stock Option Plan.
Shares Available for Awards. Upon approval of the 1998 Stock Option Plan,
an aggregate of 2,500,000 shares of Common Stock will be reserved for issuance
under the 1998 Stock Option Plan, subject to adjustment for stock splits, stock
dividends, recapitalizations and similar events occurring after the date of
such approval. Such shares may consist in whole or in part of authorized and
unissued shares or treasury shares. If an option expires unexercised or is
forfeited, surrendered or cancelled, terminated or settled by payment of cash
by the Company in lieu of issuance of shares of Common Stock, the shares of
Common Stock previously subject to such option will be available for future
options granted under the 1998 Stock Option Plan.
Awards. The 1998 Stock Option Plan will permit grants of options,
including incentive stock options ("ISOs") and non-qualified stock options.
ISOs are intended to satisfy the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended, and, accordingly, no ISO may be granted to
directors of the Company who are not also employees of the Company.
11
<PAGE>
The exercise price per share of an option will be established by the Stock
Option Committee in its discretion, but may not be less than the fair market
value (or not less than 110% of such value if the individual to whom an ISO is
granted owns, as of the date of grant, shares of the Company's capital stock
possessing 10% or more of the total voting power of all outstanding shares of
the Company's capital stock) of a share of Common Stock as of the date of
grant. No individual shall be granted options covering more than 100,000 shares
of Common Stock during any fiscal year of the Company. The aggregate fair
market value (determined as of the date of grant) of shares of Common Stock
with respect to which ISOs will be exercisable for the first time by an
individual to whom an ISO is granted during any calendar year (under all
incentive stock option plans of the Company) may not exceed $100,000. Payment
for shares of Common Stock purchased upon the exercise of options may be made
in cash or by check.
Options may be exercisable (subject to such restrictions and vesting
provisions as the Stock Option Committee may determine on the date of grant in
its discretion), in part from time to time or in whole at any time after full
vesting, for a period not to exceed ten years from the date of grant and
terminate upon the date of termination of employment or, in the case of a
director who is not also an employee, association with the Company for any
reason other than death (in which case such options terminate six months
thereafter). Such period will be established by the Stock Option Committee in
its discretion on the date of grant. Options will not be transferable except
upon death (in which case they may be exercised by the decedent's executor or
other legal representative). If approved, the 1998 Stock Option Plan (but not
options then outstanding under the Stock Option Plan) will terminate in
December 2008 or on such earlier date as the Board of Directors may determine
in its discretion.
Estimates of Benefits. The amounts that will be paid pursuant to the 1998
Stock Option Plan are not currently determinable.
Amendment and Termination. The Board of Directors may terminate or amend
the 1998 Stock Option Plan, except that it may not increase the number of
shares of Common Stock available thereunder, decrease the minimum price at
which options may initially be granted or change the class of employees
eligible to receive ISOs under the 1998 Stock Option Plan, without shareholder
approval at a meeting duly held for such purpose.
Market Value of Common Stock. On September 28, 1998, the last reported
sale price of the Common Stock, as reported by the New York Stock Exchange,
Inc., was $22.6875 per share.
Federal Income Tax Consequences. The Company believes that under present
law, the following are the federal income tax consequences generally arising
with respect to options granted under the 1998 Stock Option Plan. The grant of
an option will create no tax consequences for a participant or the Company. A
participant generally will have no taxable income upon exercising an ISO
(except that the alternative minimum tax may apply), and the Company will
receive no deduction when an ISO is exercised. Upon exercising an option other
than an ISO, a participant generally will recognize ordinary income equal to
the difference between the fair market value of the shares on the date of
exercise and the exercise price. The Company generally will be entitled to a
compensation deduction for the same amount, if applicable withholding
requirements are met. The treatment to a participant of a disposition of
shares acquired through the exercise of an option depends on how long the
shares were held and on whether the shares were acquired by exercising an ISO
or by exercising an option other than an ISO. Generally, there will be no tax
consequence to the Company in connection with a disposition of shares acquired
under an option, except that the Company may be entitled to a compensation
deduction in the case of a disposition of shares acquired under an ISO before
the applicable ISO holding periods have been satisfied.
Stockholder approval of the 1998 Stock Option Plan may qualify
compensation relating to stock options granted thereunder as "performance-
based," provided that certain other conditions are met. "Performance-based"
compensation is not subject to the $1 million limitation on the income tax
deduction of certain executive compensation imposed by Section 162(m) of the
Internal Revenue Code of 1986, as amended.
Adoption of this proposal requires a majority of the votes cast thereon. Any
shares not voted (by abstention, broker non-vote, or otherwise) have no impact
on the vote. The Board of Directors unanimously recommends a vote "FOR" the
approval of the 1998 Stock Option Plan.
12
<PAGE>
STOCKHOLDER PROPOSALS
All proposals of stockholders to be presented at the Company's next
Annual Meeting of Stockholders, expected to be held in December 1999, 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 in accordance with the
rules and regulations of the Commission, must be received on or before July 8,
1999.
OTHER BUSINESS
Neither the Company nor the Board of Directors knows 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.
BY ORDER OF THE BOARD OF
DIRECTORS
Troy H. Geisser
Secretary
DATE: October 30, 1998
13
<PAGE>
FINANCIAL FEDERAL CORPORATION
P R O X Y
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Financial Federal Corporation (the
"Corporation") hereby appoints Clarence Y. Palitz, Jr. and Michael C. Palitz,
or either of them, with full power of substitution, as proxies for the
undersigned to attend and act for and on behalf of the undersigned at the
Annual Meeting of Stockholders of the Corporation to be held at 270 Park
Avenue, New York, New York on December 8, 1998 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 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 FINANCIAL FEDERAL CORPORATION
that may be called for, be voted or P.O. BOX 111O2
withheld from voting in accordance with NEW YORK, N.Y. 10203-0102
the instructions given by the stockholder,
in the absence of any contrary instructions,
this proxy will be voted "FOR" the itemized
matters.
(Continued on reverse side)
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., Bernard G. Palitz,
Clarence Y. Palitz, Jr., Michael C. Palitz, Paul R. Sinsheimer.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and strike a line through that nominee's name.)
2. In respect of the resolution on ratifying the appointment of Eisner &
Lubin LLP as auditors of the Corporation for the fiscal year ending 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In respect of the proposal to approve an amendment to the Corporation's
Restated Articles of Incorporation to increase the number of authorized
shares of Common Stock from 25,000,000 to 100,000,000 and the number of
authorized shares of Preferred Stock from 500,000 to 5,000,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In respect of the proposal to approve a new stock option plan (the
Corporation's present stock option plan expires in September 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Change of Address and [ ]
or Comments Mark Here
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.
Dated: , 1998
---------------------------------------
---------------------------------------------------
Signature of Stockholder
---------------------------------------------------
Signature of Stockholder-Joint Tenant
Votes must be indicated
(x) in Black or Blue Ink. [X]
Please mark, sign, date and return this proxy promptly in the envelope
provided.
EXHIBIT I
Financial Federal Corporation
1998 Stock Option Plan
Section 1. Purpose. The purpose of this Financial Federal Corporation 1998
Stock Option Plan (the "Plan") is to promote the interests of Financial Federal
Corporation, a Nevada corporation (the "Company") and any Subsidiary thereof,
and its stockholders by providing an opportunity to selected employees,
officers and Directors of the Company or any Subsidiary thereof, as of the date
of the adoption of this Plan or at any time thereafter, to purchase Common
Stock of the Company. By encouraging such stock ownership, the Company seeks
to attract, retain and motivate such employees and persons, and to encourage
such employees and persons to devote their best efforts to the business and
financial success of the Company. It is intended that this purpose will be
effected by the granting of "non-qualified stock options" and or "incentive
stock options" to acquire the Common Stock of the Company. Under this Plan,
the Committee shall have the authority (in its sole discretion) to grant ISOs
and non-qualified options.
Section 2. Definitions. For purposes of this Plan, the following terms used
herein shall have the following meanings, unless a different meaning is clearly
required by the context.
2.1. "Board of Directors" shall mean the Board of Directors of the Company.
2.2. "Code" shall mean the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
2.3. "Director" means any individual who is a member of the Board of
Directors of the Company.
2.4. "Committee" shall mean the committee of the Board of Directors referred
to in Section 5 hereof.
2.5. "Common Stock" shall mean the Common Stock, $0.50 par value, of the
Company.
2.6. "Disability" means a permanent and total disability within the meaning
of Section 22(e)(3) of the Code, provided that in the case of Options other
than ISOs, the Committee in its discretion may determine whether a permanent
and total disability exists in accordance with uniform and non-discriminatory
standards adopted by the Committee from time to time.
2.7. "Employee" shall mean (i) with respect to an ISO, any person including
an officer or Director of the Company, who at the time an ISO is granted to
such person hereunder, is employed on a full-time basis by the Company or any
Subsidiary of the Company; and (ii) with respect to a Non-Qualified Option any
person employed by, or performing services for the Company or any Subsidiary of
the Company, including, without limitation, Directors and officers.
2.8. "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows. If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source the Committee deems reliable.
If the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the man between the high bid and low asked prices for the Common
Stock on the last market trading day prior to the day of determination, as
reported in The Wall Street Journal or such other source as the Committee deems
reliable. In the absence of an established market for the Common Stock, the
Fair Market Value shall be determined in good faith by the Committee.
2.9. "ISO" shall mean an Option to purchase Common Stock granted under the
Plan, which constitutes and shall be treated as an "incentive stock option" as
defined in Section 422 of the Code.
2.10. "Nonemployee Director" means a Director who is not employed by the
Company or any corporation or any other entity controlling, controlled by, or
under common control with the Company.
2.11. "Non-Qualified Option" shall mean an Option to purchase Common Stock
granted to a Participant pursuant to the Plan, which is not intended to be an
ISO.
2.12. "Option" shall mean any ISO or Non-Qualified Option granted to an
Employee pursuant to this Plan.
2.13. "Participant" shall mean any Employee to whom an Option is granted
under this Plan.
2.14. "Parent" shall have the meaning set forth in Section 424(e) of the
Code.
2.15. "Subsidiary" shall have the meaning set forth in Section 424(f) of the
Code.
Section 3. Eligibility. Subject to Section 4.3, Options may be granted to
any Employee. The Committee shall have the sole authority to select the
person(s) to whom Options are to be granted hereunder, and to determine whether
a person is to be granted a Non-Qualified Option or an ISO or any combination
thereof in accordance with Section 5. The Committee, in its sole discretion,
shall determine the number of shares of Common Stock subject to each Option,
provided that during any fiscal year of the Company, no Participant shall be
granted Options covering more than 100,000 shares of Common Stock. No person
shall have any right to participate in the Plan. Any person selected by the
Committee for participation during any one period will not by virtue of such
participation have the right to be selected as a Participant for any other
period.
Section 4. Common Stock Subject to the Plan.
4.1. The total number of shares of Common Stock for which Options may be
granted under this Plan shall not exceed in the aggregate 2,500,000 shares of
Common Stock.
4.2. The shares of Common Stock that may be subject to Options granted under
this Plan may be either authorized and unissued shares or shares reacquired at
any time and now or hereafter held as treasury stock, as the Board of Directors
shall determine. In the event that any outstanding Option expires or is
terminated for any reason, the shares allocable to the unexercised portion of
such Option may again be subject to an Option granted under this Plan. If any
shares of Common Stock acquired pursuant to the exercise of an Option shall
have been repurchased by the Company, then such shares shall again become
available for issuance pursuant to this Plan.
4.3. Special ISO Limitations.
(a) The aggregate Fair Market Value (determined as of the date an ISO is
granted) of the shares of Common Stock with respect to which ISOs are
exercisable for the first time by an Employee during any calendar year (under
all plans of the Company or any Parent or Subsidiary of the Company) shall not
exceed $100,000.
(b) No ISO shall be granted to an Employee who, at the time the ISO is
granted, owns (actually or constructively under the provisions of Section
424(d) of the Code) stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary of the
Company, unless the Option price is at least 110% of the Fair Market Value
(determined as of the time the ISO is granted) of the shares of Common Stock
subject to the ISO and the ISO by its terms is not exercisable more than five
(5) years from the date it is granted.
(c) No ISO may be exercised after the Employee's termination of employment
for any reason other than Disability or death, unless (a) the Employee dies
while employed by the Company, or (b) the Option agreement or the Committee
permits later exercise. No ISO may be exercised more than one (1) year after
the Employee's termination of employment on account of Disability, unless (i)
the Employee dies during such one-year period; and (ii) the Option agreement or
the Committee permit later exercise.
(d) Except as otherwise provided in Section 4.3(b), no ISO may be exercised
after the expiration of ten (10) years after the date such ISO was granted.
Section 5. Administration of the Plan.
5.1. The Committee. The Plan shall be administered by the Committee. The
Committee shall consist of not less than two (2) Directors. The members of the
Committee shall be appointed from time to time by, and shall serve at the
pleasure of, the Board of Directors.
5.2. Authority of the Committee. It shall be the duty of the Committee to
administer the Plan in accordance with the Plan's provisions. The Committee
shall have all powers and discretion necessary or appropriate to administer the
Plan and to control its operation, including, but not limited to, the power to
(a) determine which Employees shall be granted Options; (b) prescribe the terms
and conditions of the Options (other than the Options granted to Nonemployee
Directors); (c) interpret the Plan and the Options; (d) adopt rules for the
administration, interpretation and application of the Plan as are consistent
therewith; and (e) interpret, amend or revoke any such rules.
5.3. Delegation by the Committee. The Committee, in its sole discretion and
on such terms and conditions as it may provide, may delegate all or any part of
its authority and powers under the Plan to one or more Directors or officers of
the Company.
5.4. Nonemployee Director Options. Notwithstanding any contrary provision
of this Section 5, the Board of Directors shall administer Options granted to
Nonemployee Directors under the Plan, and the Committee shall exercise no
discretion with respect to such Options. In the Board of Directors'
administration of Options granted to Nonemployee Directors, the Board of
Directors shall have all of the authority and discretion otherwise granted to
the Committee with respect to the administration of the Plan.
5.5. Decisions Binding. All determinations and decisions made by the
Committee, the Board of Directors, and any delegate of the Committee pursuant
to the provisions of the Plan shall be final, conclusive, and binding on all
persons, and shall be given the maximum deference permitted by law.
Section 6. Terms and Conditions of Options.
6.1. ISOs. The terms and conditions of each ISO granted under the Plan
shall be specified by the Committee and shall be set forth in an ISO Agreement
between the Company and the Participant in such form as the Committee shall
approve. The terms and conditions of each ISO shall be such that each ISO
issued hereunder shall constitute and shall be treated as an "incentive stock
option" as defined in Section 422 of the Code. The terms and conditions of any
ISO granted hereunder need not be identical to those of any other ISO granted
hereunder.
The terms and conditions of each ISO Agreement shall include the following:
(a) The Option price shall be fixed by the Committee but shall in no event
be less than 100% (or 110% in the case of an Employee referred to in Section
4.3(b) hereof) of the Fair Market Value of the shares of Common Stock subject
to the ISO on the date the ISO is granted.
(b) ISOs, by their terms, shall not be transferable, pledgeable or otherwise
encumberable (whether voluntarily, involuntarily or by operation of law) by a
Participant (other than by will or the laws of descent and distribution) and
may be exercised during a Participant's lifetime only by a Participant and not
by any transferee, pledgee, lienholder, trustee, receiver, conservator or other
fiduciary, custodian or successor to a Participant or of a Participant's assets
and property (including any Trustee in Bankruptcy or Assignee for the Benefit
of Creditors).
(c) The Committee shall fix the term of all ISOs granted pursuant to the
Plan (including the date on which such ISO shall expire and terminate),
provided, however, that such term shall in no event exceed ten years from the
date on which such ISO is granted (or, in the case of an ISO granted to an
Employee referred to in Section 4.3(b) hereof, such term shall in no event
exceed five (5) years from the date on which such ISO is granted). Each ISO
shall be exercisable in such amount or amounts, under such conditions and at
such times or intervals or in such installments as shall be determined by the
Board of Directors (or the Committee) in its sole discretion.
(d) In the event that the Company is required to withhold any Federal,
state, local or employment taxes in respect of any compensation income realized
by the Participant as a result of any "disqualifying disposition" of any shares
of Common Stock acquired upon exercise of an ISO granted hereunder, the Company
shall deduct from any payments of any kind otherwise due to such Participant
the aggregate amount of such Federal, state, local or employment taxes required
to be withheld or, if such payments are insufficient to satisfy such Federal,
state, local or employment taxes, such Participant will be required to pay to
the Company, or make other arrangements satisfactory to the Company regarding
payment to the Company, of the aggregate amount of any such taxes. A
Participant may use issued and outstanding Common Stock for the payment of
taxes. All matters with respect to the total amount of taxes to be withheld in
respect to any such compensation income shall be determined by the Board of
Directors in its sole discretion.
(e) In the sole discretion of the Committee the terms and conditions of any
ISO may (but need not) include any of the following provisions:
(i) In the event a Participant shall cease to be employed by the Company
or a Parent or Subsidiary of the Company on a full-time basis for any reason
other than as a result of his death or Disability, the unexercised portion of
any ISO held by such Participant at that time shall expire.
(ii) In the event a Participant shall cease to be employed by the Company
or any Parent or Subsidiary of the Company on a full-time basis by reason of
his Disability, the unexercised portion of any ISO held by such Participant at
that time may only be exercised within one year after the date on which the
Participant ceased to be so employed, and only to the extent that the
Participant could have otherwise exercised such ISO as of the date on which he
ceased to be so employed; but in no event may such exercise occur after the
date upon which the term of such ISO would have otherwise expired.
(iii) In the event a Participant shall die while a full-time Employee of
the Company or a Parent or Subsidiary of the Company, the unexercised portion
of any ISO held by such Participant at the time of his death may only be
exercised within six (6) months after the date of such Participant's death, and
only to the extent that the Participant could have otherwise exercised such ISO
at the time of his death; but in no event may such exercise occur after the
date upon which such ISO would have otherwise expired. In such event, such ISO
may be exercised by the legal representative of the Participant's estate or by
any person or persons who shall have acquired such Option by bequest or
inheritance.
6.2. Non-Qualified Options. The terms and conditions of each Non-Qualified
Option granted under the Plan shall be specified by the Committee, in its sole
discretion, and shall be set forth in a written Non-Qualified Option Agreement
between the Company and the Participant in such form as the Committee shall
approve. The terms and conditions of each Non-Qualified Option will be such
that each Non-Qualified Option issued hereunder shall not constitute nor be
treated as an "incentive stock option" as defined in Section 422 of the Code
and will be a "non-qualified stock option" for federal income tax purposes.
The terms and conditions of any Non-Qualified Option granted hereunder need not
be identical to those of any other Option granted hereunder.
The terms and conditions of each Non-Qualified Option Agreement shall include
the following:
(a) The Option (exercise) price shall be fixed by the Committee and may be
equal to, more than or less than 100% of the Fair Market Value of the shares of
Common Stock subject to the Non-Qualified Option on the date such Non-Qualified
Option is granted.
(b) The Committee shall fix the term of all Non-Qualified Options granted
pursuant to the Plan (including the date on which such Non-Qualified Option
shall expire and terminate). Such term may, but need not, be more than ten
(10) years from the date on which such Non-Qualified Options are granted. Each
Non-Qualified Option shall be exercisable in such amount or amounts, under such
conditions, and at such times or intervals or in such installments as shall be
determined by the Committee in its sole discretion.
(c) Non-Qualified Options shall not be transferable otherwise than by will
or the laws of descent and distribution, and during a Participant's lifetime a
Non-Qualified Option shall be exercisable only by the Participant.
(d) In the event that the Company is required to withhold any Federal,
state, local or employment taxes in respect of any compensation income realized
by the Participant in respect of a Non-Qualified Option granted hereunder or in
respect of any shares of Common Stock acquired upon exercise of a Non-Qualified
Option, the Company shall deduct from any payments of any kind otherwise due to
such Participant the aggregate amount of such Federal, state, local or
employment taxes required to be so withheld or, if such payments are due or to
become due to such Participant, then, such Participant will be required to pay
to the Company, or make other arrangements satisfactory to the Company
regarding payment to the Company of, the aggregate amount of any such taxes.
All matters with respect to the total amount of taxes to be withheld in respect
of any such compensation income shall be determined by the Committee in its
sole discretion.
(e) In the sole discretion of the Committee the terms and conditions of any
Non-Qualified Option may (but need not) include any of the following
provisions:
(i) In the event a Participant shall cease to be employed by the Company
or a Parent or Subsidiary of the Company on a full-time basis for any reason
other than as a result of his death or Disability, the unexercised portion of
any Non-Qualified Option held by such Participant at that time shall expire.
(ii) In the event a Participant shall cease to be employed by the Company
or any Parent or Subsidiary of the Company on a full-time basis by reason of
his Disability, the unexercised portion of any Non-Qualified Option held by
such Participant at that time may only be exercised within one (1) year after
the date on which the Participant ceased to be so employed, and only to the
extent that the Participant could have otherwise exercised such Non-Qualified
Option as of the date on which he ceased to be so employed; but in no event may
such exercise occur after the date upon which the term of such Non-Qualified
Option would have otherwise expired.
(iii) In the event a Participant shall die while a full-time employee of
the Company or a Parent or Subsidiary of the Company, the unexercised portion
of any Non-Qualified Option held by such Participant at the time of his death
may only be exercised within six (6) months after the date of such
Participant's death, and only to the extent that the Participant could have
otherwise exercised such Non-Qualified Option at the time of his death; but in
no event may such exercise occur after the date upon which such Non-Qualified
Option would have otherwise expired. In such event, such Non-Qualified Option
may be exercised by the legal representative of the Participant's estate or by
any person or persons who shall have acquired such Option by bequest or
inheritance.
6.3. Other Terms. Each ISO Agreement and Non-Qualified Option Agreement may
include any additional provisions as the Committee in its sole discretion may
determine as appropriate and necessary.
Section 7. Adjustments.
(a) In the event that after the adoption of the Plan by the Board of
Directors, the outstanding shares of the Company's Common Stock shall be
increased or decreased or changed into or exchanged for a different number or
kind of shares of stock or other securities of the Company or of another
corporation through reorganization, merger, consolidation, recapitalization,
reclassification, stock split, split-up, combination or exchange of shares or
declaration of any dividends payable in Common Stock, the Board of Directors
shall appropriately adjust (i) the number of shares of Common Stock (and the
Option price per share) subject to the unexercised portion of any outstanding
Option (to the nearest possible full share), provided, however, that the
limitations of Section 424 of the Code shall apply with respect to adjustments
made to ISOs; and (ii) the number of shares of Common Stock for which Options
may be granted under this Plan, as set forth in Section 4.1 hereof, and such
adjustments shall be effective and binding for all purposes of this Plan.
(b) Notwithstanding the foregoing, in the event of (i) any offer to holders
of the Company's Common Stock generally relating to the acquisition of their
shares, including without limitation, through purchases, merger or otherwise;
or (ii) any transaction generally relating to the acquisition of substantially
all of the assets or business of the Company, the Board of Directors may make
such adjustment as it deems equitable in respect of outstanding Options
including, without limitation, the revision or cancellation of any outstanding
Options. Any such determination by the Board of Directors shall be effective
and binding for all purposes of this Plan.
Section 8. Effect of the Plan on Employment Relationship.
Neither this Plan nor any Option granted hereunder to a Participant shall be
construed as conferring upon such Participant any right to continue in the
employ of the Company or the service of the Company or any Subsidiary as the
case may be, or limit in any respect the right of the Company or any Subsidiary
to terminate such Participant's employment or other relationship with the
Company or any Subsidiary, as the case may be, at any time.
Section 9. Amendment of the Plan. The Board of Directors may amend the Plan
from time to time as it deems desirable; provided, however, that, without the
approval of the holders of a majority of the outstanding stock of the Company
entitled to vote thereon at a meeting, the Board of Directors may not amend the
Plan (i) to increase (except for increases due to adjustments in accordance
with Section 7 hereof) the aggregate number of shares of Common Stock for which
Options may be granted hereunder; (ii) to decrease the minimum exercise price
specified by the Plan in respect of ISOs; or (iii) to change the class of
Employees eligible to receive ISOs under the Plan.
Section 10. Termination of the Plan. The Board of Directors may terminate
the Plan at any time. Unless the Plan shall theretofore have been terminated
by the Board of Directors, the Plan shall terminate ten (10) years after the
date of its initial adoption by the Board of Directors. No option may be
granted hereunder after termination of the Plan. The termination or amendment
of the Plan shall not alter or impair any rights or obligations under any
Option theretofore granted under the Plan.
Section 11. Effective Date of the Plan. Subject to approval by the
shareholders of the Company, this Plan shall be effective as of September 28,
1998, the date on which the Plan was adopted by the Board of Directors of the
Company.
IN WITNESS WHEREOF, the Company has caused this Plan to be signed by its duly
authorized officer and duly attested as of the 28th day of September, 1998.
FINANCIAL FEDERAL CORPORATION
By:
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Attest:
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