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
[X] Definitive Proxy Statement permitted by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material under Rule 14a-12
TFC ENTERPRISES, INC.
---------------------
(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
$125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A
Fee computed on table below per Exchange Act Rules 14a-6(i)1 and O-11.
(1) Title of each class of securities to which transaction applies:
_______________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_______________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
_______________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_______________________________________________________________________
(5) Total fee paid:
_______________________________________________________________________
Fee paid previously by written preliminary materials.
___________________________________________________________________________
Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: _______________________________________________
2) Form Schedule or Registration Statement No.: __________________________
3) Filing Party: _________________________________________________________
4) Date Filed: ___________________________________________________________
[LETTERHEAD]
TFC Enterprises, Inc.
Corporate Executive Offices
April 10, 2001
Dear Shareholder:
You are cordially invited to attend the 2001 Annual Meeting of Shareholders
of TFC Enterprises, Inc. that will be held at the Norfolk Airport Hilton Hotel,
1500 North Military Highway, Norfolk, Virginia, 23502, at 2:00 p.m. Eastern
Time, on Tuesday, May 8, 2001.
Enclosed are a Notice of the Annual Meeting, a Proxy Card, and a Proxy
Statement containing information about the matters to be acted upon at the
meeting. Directors and Officers of the Company as well as a representative of
Ernst & Young LLP will be present at the Annual Meeting to respond to any
questions our shareholders may have.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
Accordingly, we urge you to sign and date the enclosed Proxy Card and promptly
return it to us in the enclosed, self-addressed, postage-paid envelope, even if
you are planning to attend the meeting. If you attend the meeting, you may vote
in person, even if you have previously returned a Proxy Card.
We look forward to the 2001 Annual Meeting of Shareholders, and we hope you
will attend the meeting or be represented by proxy.
Sincerely,
/s/ ROBERT S.RALEY, JR.
ROBERT S. RALEY, JR., Chairman of the Board and
Chief Executive Officer
TFC ENTERPRISES, INC.
5425 ROBIN HOOD ROAD
NORFOLK, VIRGINIA 23513
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
TUESDAY, MAY 8, 2001
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of TFC
Enterprises, Inc. will be held at the Norfolk Airport Hilton Hotel, 1500 North
Military Highway, Norfolk, Virginia 23502, at 2:00 p.m. Eastern Time, on
Tuesday, May 8, 2001, for the following purposes:
1. To elect two (2) directors to hold office for a term of three years
and until their respective successors are elected and qualified;
2. To ratify the appointment of McGladrey & Pullen LLP as independent
auditors for 2001; and
3. To act upon such other matters as may properly come before the meeting
or any adjournment thereof.
Information concerning the matters to be acted upon at the meeting is set
forth in the accompanying Proxy Statement. The Board of Directors has
established the close of business on March 16, 2001 as the record date for the
determination of shareholders entitled to notice of, and to vote at, the Annual
Meeting or any adjournments thereof.
By Order of the Board of Directors
/s/ Robert S. Raley, Jr.
_________________________________________________
Robert S. Raley, Jr., Chairman of the Board and
Chief Executive Officer
Norfolk, Virginia
April 10, 2000
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY VOTE EITHER IN PERSON
OR THROUGH YOUR PROXY.
PROXY STATEMENT
This Proxy Statement and the enclosed proxy card ("Proxy") are furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
of TFC Enterprises, Inc. (the "Company") to be voted at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Norfolk Airport Hilton
Hotel, 1500 North Military Highway, Norfolk, Virginia 23502, at 2:00 p.m.
Eastern Time, on Tuesday, May 8, 2001, and at any adjournment thereof, for the
purposes set forth in the accompanying Notice of Meeting.
Only shareholders of record at the close of business on March 16, 2001, the
record date for the Annual Meeting (the "Record Date"), are entitled to notice
of, and to vote at, the Annual Meeting. This Proxy Statement and the enclosed
Proxy are being mailed on or about April 10, 2001 to all stockholders entitled
to vote at the Annual Meeting.
Revocability of Proxy
Any shareholder who executes a proxy has the power to revoke it at any time
by written notice to the Secretary of the Company, by executing a proxy dated as
of a later date or by voting in person at the Annual Meeting. Execution of the
enclosed Proxy will not affect a shareholder's right to attend the Annual
Meeting and vote in person. If your Proxy is properly signed, received by the
Company and not revoked by you, the shares to which it pertains will be voted at
the Annual Meeting in accordance with your instructions. If a shareholder does
not return a signed Proxy, his or her shares cannot be voted by proxy by the
Board of Directors.
Persons Making the Solicitation
The cost of soliciting Proxies will be borne by the Company. The Company
has retained American Stock Transfer & Trust Company to assist in the
solicitation of proxies from brokers and nominees and in the counting of
proxies. The Company pays American Stock Transfer & Trust Company $500 per month
plus out-of-pocket expenses for this assistance as well as for the transfer
agent services it provides to the Company. In addition to solicitation by mail,
the Company will request banks, brokers and other custodians, nominees and
fiduciaries to send proxy materials to the beneficial owners and to secure their
voting instructions if necessary. The Company, upon request, will reimburse them
for their expenses in so doing. Officers of the Company may solicit Proxies
personally, by telephone or by telegram from some shareholders if Proxies are
not received promptly, for which no additional compensation will be paid.
Voting Shares And Vote Required
On the Record Date, the Company had 11,449,559 shares of Common Stock
outstanding. Each share of Common Stock is entitled to one vote on each matter
presented at the Annual Meeting. A majority of the shares entitled to vote,
represented in person or by proxy, will constitute a quorum for the transaction
of business at the Annual Meeting.
Directors are elected by a plurality of shares of Common Stock present in
person or represented by proxy and entitled to vote at the Annual Meeting,
meaning that those nominees receiving the greatest number of votes will be
elected. Under the laws of Delaware, the Company's state of incorporation,
"shares present in person or represented by proxy and entitled to vote" are
determinative of the outcome of the matter subject to vote. Abstentions will,
but broker non-votes will not, be considered "shares present in person or
represented by proxy" based on the Company's understanding of state law
requirements and the Company's Certificate of Incorporation and Bylaws.
All shareholder meeting proxies, ballots and tabulations that identify
individual shareholders are kept confidential, and no such document shall be
available for examination, nor shall the identity or the vote of any shareholder
be disclosed except as may be necessary to meet legal requirements and the laws
of Delaware. Votes will be counted and certified by the Company's general
counsel who will act as the inspector of elections.
Unless specified otherwise, the Proxy will be voted as follows:
1. FOR the election of the two (2) nominees to serve as directors of the
Company for a three-year term and until their respective successors are duly
elected and qualified;
2. FOR the ratification of the appointment of McGladrey & Pullen LLP as
independent auditors for 2001.
3. In the discretion of the Proxy holders, the Proxies will also be voted
for or against such other matters as may properly come before the Annual
Meeting. Management is not aware of any other matters to be presented for
action at the Annual Meeting. If any such matter requiring a vote of
shareholders should properly come before the Annual Meeting, unless otherwise
instructed, it is the intention of the persons named in the Proxy to vote such
Proxy in accordance with their best judgment.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 16, 2001 relating to
the beneficial ownership of the Company's Common Stock by (i) each director
nominee and each of the Company's directors and named executive officers, (ii)
each person (or group of affiliated persons) who is known by the Company to own
beneficially more than 5% of the Common Stock, and (iii) all of the Company's
directors and executive officers as a group.
Name and Address of Beneficial Owner/(1)/ Amount of Beneficial Ownership Percent of Class
- ------------------------------------ ------------------------------ ----------------
Robert S. Raley, Jr. 1,436,359(2) 12.33%
Walter S. Boone, Jr. 406,224(3)(7) 3.54%
Douglas E. Bywater 398,409(4)(7) 3.48%
Peter H. Kamin 355,600(5)(7) 3.10%
Andrew M. Ockershausen 160,000(7) 1.40%
Phillip R. Smiley 45,200(6)(7) *
Linwood R. Watson 16,000(7) *
Ronald G. Tray 143,338(8) 1.24%
Rick S. Lieberman 27,678(9) *
Delma H. Ambrose 25,155(10) *
Craig D. Poppen 81,898(11) *
General Electric Capital Corporation 1,135,280(12) 9.92%
All directors and executive 3,195,669 26.68%
Officers as a group (13 persons)
___________________________________
*Less than 1% beneficial ownership.
(1) All directors and executive officers receive mail at the Company's
corporate executive offices at 5425 Robin Hood Road, Suite 101B, Norfolk,
Virginia 23513.
2
(2) Includes 29,254 shares owned jointly by Mr. Raley and his wife, 10,100
shares owned solely by his wife and 200,000 shares which Mr. Raley has the
right to acquire within 60 days through the exercise of stock options
granted to Mr. Raley in January 1997 under the Company's 1995 Long-Term
Incentive Plan ("Incentive Plan") in connection with his 1997 compensation
package. See "Executive Compensation - Raley Employment Agreement and Stock
Options."
(3) Includes 203,112 shares owned by the Walter S. Boone, Jr. Living Trust and
193,112 shares owned by the Rose K. Boone Living Trust.
(4) Includes 387,224 shares owned jointly by Mr. Bywater and his wife and 1,185
shares owned jointly by Mr. Bywater and his children.
(5) Includes 50,000 shares owned in Mr. Kamin's KEOGH Plan, 96,000 shares in
two separate trusts, 11,100 shares in a foundation and 11,100 shares in a
limited liability company.
(6) Includes 35,200 shares owned jointly by Mr. Smiley and his wife.
(7) Includes 10,000 shares that each has the right to acquire within 60 days
through the exercise of stock options granted under the Non-Employee
Director Stock Option Plan.
(8) Includes 102,805 shares which Mr. Tray has the right to acquire within 60
days through the exercise of stock options granted under the Incentive Plan
and 2,000 shares owned by his wife.
(9) Includes 23,200 shares that Mr. Lieberman has the right to acquire within
60 days through the exercise of stock options granted under the Incentive
Plan.
(10) Includes 20,200 shares that Ms. Ambrose has the right to acquire within 60
days through the exercise of stock options granted under the Incentive
Plan.
(11) Includes 74,800 shares that Mr. Poppen has the right to acquire within 60
days through the exercise of stock options granted under the Incentive
Plan. Mr. Poppen left the Company in April 2001.
(12) Per a Schedule 13D dated April 4, 1997, consists of the right to acquire
shares within 60 days pursuant to two warrants issued to General Electric
Capital Corporation by the Company pursuant to a loan transaction in
December 1996 and a subsequent amendment thereto in April 1997.
PROPOSAL 1. ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for the Board of
Directors to be divided into three classes, with each class serving a staggered
three-year term. The directors for each class are elected at the Annual Meeting
of Shareholders held in the year in which the term of such class expires.
Directors serve for three years and until their successors are duly elected and
qualify. The Company's bylaws currently provide that the size of the Board is
comprised of seven persons.
The terms of Andrew M. Ockerhausen and Peter H. Kamin expire at the Annual
Meeting on May 8, 2001. The Board of Directors recommends that the nominees,
Messrs. Ockerhausen and Kamin, be re-elected and Proxies received will be voted
for the election of these nominees unless marked to the contrary. A shareholder
who desires to withhold voting of the Proxy for any one of the nominees may so
indicate on the Proxy. Each nominee is currently a member of the Board of
Directors, has consented to be named and has indicated his intent to serve if
elected. If a nominee becomes unable to serve, an event that is not anticipated,
the Proxy will be voted for a substitute nominee to be designated by the Board
of Directors, or the number of directors will be reduced.
3
The following information relates to the nominees and the directors whose
terms of office will continue after the Annual Meeting. There are no family
relationships among any of the nominees or directors nor among any of the
nominees or directors and any officer, nor is there any arrangement or
understanding between any nominee or director and any other person pursuant to
which the nominee or director was selected.
Nominees for Terms Expiring in 2004
Andrew M. Ockershausen, 71, has been a director of the Company since 1990.
Mr. Ockershausen is currently the Director of Business Development for the cable
television regional sports network Home Team Sports, Washington, D.C. He is a
director of the Police Boys/Girls Club and Hero's Inc., and a past Chairman of
the National Association of Broadcasters. From 1987 to 1993, Mr. Ockershausen
was Vice President and General Manager of WBSO television in Rockville,
Maryland. Mr. Ockershausen is a member of the Compensation Committee.
Peter H. Kamin, 39, was elected to the Board of Directors effective July
31, 1999. Mr. Kamin is the general partner of Peak Investment, LP, a private
investment partnership. Mr. Kamin also serves as a member of the board of
directors of three other public companies, Acme United Corporation, Data
Transmissions Network Corp. (as Chairman) and Insurance Auto Auctions, Inc. Mr.
Kamin is a member of the Audit and Executive Committees.
The Board of Directors recommends that the shareholders vote FOR the nominees
set forth above.
Directors Whose Terms Expire in 2003
Douglas E. Bywater, 57 has been director of the Company since 1990. Mr.
Bywater is a partner in the law firm of Tate & Bywater, Ltd., with whom he has
practiced law since 1972. He was also director and General Counsel for the Bank
of Vienna. Mr. Bywater is a member of the Executive and Compensation
Committees.
Linwood R. Watson, 64, has been a director of the Company since 1993. Mr.
Watson has been associated with Thompson, Greenspon & Co., P.C. certified public
accountants and management consultants, of Fairfax, Virginia since 1979. Mr.
Watson, a certified public accountant since 1965, was engaged in public
accounting since 1974. Mr. Watson is a member of the Audit and Compensation
Committees.
Directors Whose Terms Expire in 2002
Walter S. Boone, Jr., 74, was director of the Company from 1984 through
1988 and has been a director since 1990. Mr. Boone has been President of
Virginia General Investment, Inc., a private investment firm, since 1978 and is
a director of Herald Newspapers, Inc. He was President of Scope Inc., Reston,
Virginia, a director of First Virginia Bank and a director of Arlington Mortgage
Company. Mr. Boone is a member of the Audit and Executive Committees.
Robert S. Raley, Jr., 63, founded TFC in 1977 and has served as Chairman of
the Board from that time until April 1990 and again from May 1990 to the
present. Additionally, he served as Chief Executive Officer from 1977 to April
1990, from May 1990 to December 1992 and from August 1996 to the present. Mr.
Raley has also served as Chairman of the Board of TFCE since inception in 1984
until April 1990 and again from May 1990 to the present and as its Chief
Executive Officer from 1984 until April 1990 and again from May 1990 through
1992 and from August 1996 to the present. Mr. Raley has served as Chairman of
the Board and Executive Vice President of FCF since inception in 1995. Mr.
Raley initially entered the consumer finance industry in 1959. Mr. Raley is a
member of the Executive Committee.
Phillip R. Smiley, 62, is retired from Lockheed Martin, where he served as
a Field Services Regional Manager, a position for which Mr. Smiley was
responsible for computer hardware installation, documentation and maintenance.
Mr. Smiley had been employed by Lockheed Martin, and its predecessors, UNISYS
and Sperry Corp.in various positions for 25 years. Mr. Smiley has been director
of the Company since 1994. Mr. Smiley is a member for the Audit Committee.
4
Meetings and Committees of the Board of Directors
Meetings
The business of the Company is managed under the direction of the Board of
Directors. The Board of Directors meets on a regularly scheduled basis during
the year to review significant developments affecting the Company and to act on
matters requiring approval by the Board of Directors. It also holds special
meetings when an important matter requires action by the Board of Directors
between scheduled meetings. The Board of Directors held six meetings during
2000. In accordance with the Rules of the NASDAQ Stock Market, Messrs. Boone,
Bywater, Kamin, Ockershausen, Smiley and Watson are independent directors.
During 2000, each member of the Board of Directors participated in at least 75%
of all meetings of the Board of Directors and at least 75% of all meetings of
the applicable committees during the period for which he was a director.
Committees
The Board of Directors has established Executive, Audit, and Compensation
Committees. There is no nominating committee. The members of these committees
are noted in the director biographies set forth above. The Executive Committee
is delegated the power, with certain exceptions, of the Board of Directors to
act in place of the full Board during all periods between regular meetings of
the Board. The Executive Committee did not meet during 2000. The Audit
Committee is empowered by the Board of Directors to, among other things,
recommend the firm to be employed by the Company as its independent auditor and
to consult with such auditor regarding audits and the adequacy of internal
accounting controls. The Audit Committee held five meetings in 2000. The
Compensation Committee makes recommendations to the Board of Directors as to,
among other things, the compensation of the Chief Executive Officer, and
designated other members of senior management, as well as new compensation and
stock plans. The Compensation Committee met three times in 2000.
How do Shareholders recommend directors?
The Company will consider director-nominees recommended by shareholders,
although it has not actively solicited recommendations from shareholders for
nominees nor has the Company established any procedure for this purpose for the
Annual Meeting other than as set forth in the bylaws of the Company. Section
3.03 of the Company's bylaws provides that shareholders who wish to nominate
directors must send the Company a written notice (the "Nomination Notice")
containing the following information: as to each individual nominated, (i) the
name, date of birth, business address, and residence address of such individual,
(ii) the business experience during the past five years of such nominee,
including his or her principal occupations and employment during such period,
the name and principal business of any corporation or other organization for
which such occupations and employment were carried on, and such other
information as to the nature of his or her responsibilities and level of
professional competence as may be sufficient to permit assessment of his or her
prior business experience, (iii) whether the nominee is or has ever been at any
time a director, officer, or owner of 5% or more of any class of capital stock,
partnership interests, or other equity interest of any corporation, partnership,
or other entity, (iv) any directorships held by such nominee in any company with
a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934 (the "Exchange Act"), or subject to the requirements of
Section 15(d) of the Exchange Act or any company registered as an investment
company under the Investment Company Act of 1940 and (v) whether, in the last
five years, such nominee has been subject to any judgments, orders, findings, or
decrees which may be material to an evaluation of the ability or integrity of
the nominee. In addition, the person submitting the Nomination Notice must
provide certain information regarding his beneficial ownership of the Common
Stock of the Company. The nominee must consent to being named in a proxy
statement as a nominee and to serve as a director if elected. The shareholder
must deliver the Nomination Notice to the Secretary of the Company at the
Company's principal executive office not later than 120 days in advance of the
anniversary date of the Company's proxy statement for the previous year's annual
meeting or, in the case of special meetings, at the close of business on the
seventh day following the first date on which notice of the meeting is first
given to shareholders.
5
Directors' Compensation
Each director of the Company who is not also an executive officer of the Company
receives (i) a $5,000 annual retainer, (ii) a $1,000 fee for personal attendance
at each Board Meeting, (iii) a $500 fee for attendance on a telephonic Board
Meeting and (iv) a $500 fee is paid to each director who personally attends
Committee Meetings held on days on which there is no Board meeting. Each Audit
Committee member receives (i) an additional $2,000 annual retainer with the
Chairman receiving a $4,000 annual retainer, and (ii) a $500 fee for each
Committee Meeting regardless of when held. Directors who are also employees of
the Company receive no additional compensation for serving as directors. The
Company reimburses all of its directors for travel and out of pocket expenses in
connection with their attendance at meetings of the Board of Directors.
In 2000, the Board of Directors of the Company adopted the Non-Employee
Director Stock Option Plan ("Director Plan"), reserving up to 200,000 shares of
the Company's Common Stock for issuance under the Director Plan, which was
approved by the shareholders at the 2000 Annual Meeting. Pursuant to the
Director Plan, non-employee directors of the Company are eligible to receive
non-qualified stock options pursuant to a formula that grants existing non-
employee directors and any new non-employee directors an initial grant to
purchase 10,000 shares and existing directors 3,000 additional shares on an
annual basis on the date of each annual meeting of shareholders at which
directors are elected, provided that such director is elected at such annual
meeting, commencing with the 2001 annual meeting. All options granted are
immediately exercisable. The exercise price of all options granted under the
Director's Plan is the fair market value of the Common Stock at the time of the
grant. All options granted under the Director's Plan expire on the first to
occur of: (i) the date the option holder resigns from the Board; (ii) 90 days
after an option holder fails to be elected at a meeting of shareholders called
for the purpose of electing Board members; (iii) one year following the date the
option holder ceases to be a member of the Board because of death or disability;
and (iv) five years from the date of grant. An option holder may not sell or
dispose of any shares of Common Stock acquired pursuant to the exercise of an
option under the plan until at least six months have elapsed from the date of
grant. As of December 31, 2000, options to purchase up to 60,000 shares of
Common Stock were outstanding under the Director Plan at $2.38 per share.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, officers and persons who beneficially own more than 10% of a
registered class of stock of the Company to file initial reports of ownership
(Forms 3) and reports of changes in beneficial ownership (Forms 4 and 5) with
the Securities and Exchange Commission (the "Commission") and the NASDAQ Stock
Market. Such persons are also required under the rules and regulations
promulgated by the Commission to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely upon a review of the copies of
such reports furnished to the Company and in written representations that no
other reports were required, the Company believes that applicable Section 16(a)
filing requirements were satisfied for transactions that occurred.
6
EXECUTIVE COMPENSATION
Summary Executive Compensation Table
The following table sets forth certain information regarding cash and other
compensation earned during the years 2000, 1999, and 1998 by Robert S. Raley,
Jr., the Company's current Chief Executive Officer and the Company's four most
highly compensated other executive officers during 2000 (the "Named Executive
Officers"). In addition, all named executives are reimbursed for travel and
lodging expenses. The reimbursements are not included in the compensation
table.
Long Term
---------
Annual Compensation Compensation
---------------------------------------------- ------------
Securities
Name and Principal Underlying
- ------------------ Other Annual Options All Other
Position Year Salary Bonus(1) Compensation (2) (#s)(3) Compensation
- -------- ---- ------ -------- ---------------- ------ ------------
Robert S. Raley, Jr., 2000 $300,000 $300,000 --- --- $274,407(4)
Chairman of the Board, 1999 300,000 409,423 --- --- 139,903(4)
President and Chief 1998 300,000 300,000 --- --- 3,750
Executive Officer
Ronald G. Tray, President 2000 $191,771 $ 34,235 --- 100,000 $ 3,877
and Assistant Secretary 1999 175,000 45,037 --- --- 3,653
of the Company and Chief 1998 165,000 20,468 --- 54,679 5,000
Operating Officer of TFC
Craig D. Poppen, Vice 2000 $135,104 $ 34,235 --- 50,000 $ 2,251
President, Treasurer 1999 125,750 45,037 --- --- 5,000
Chief Financial Officer (5) 1998 105,502 20,468 --- 8,000 -
Rick S. Lieberman, 2000 $115,569 $ 25,936 --- 50,000 $ 4,142
Executive Vice President 1999 110,031 34,119 --- --- 3,653
And Chief Lending 1998 105,000 13,498 --- 22,000 5,000
Officer Of TFC
Delma H. Ambrose, Senior 2000 $ 96,633 $ 29,684 --- 50,000 $ 4,442
Vice President of TFC 1999 110,031 25,581 --- --- 3,823
and Chief Servicing 1998 105,000 21,110 --- 17,000 4,984
Officer of TFC
(1) Bonuses reported in the table reflect the amount earned by the Named
Executive Officer for each year shown. Payment of such bonuses occurred in
the year following the year in which such bonuses were earned.
(2) The dollar value of perquisites and other personal benefits received by
each of the Named Executive Officers did not exceed the lesser of either
$50,000 or 10% of the total amount of annual salary and bonus reported for
any named individual.
(3) Options granted pursuant to the Company's 1995 Long-Term Incentive Plan
("Incentive Plan").
(4) Includes $269,982 and $135,000 in 2000 and 1999, respectively, related to
the revision to the Raley Note. See "Raley Employment Agreement and Stock
Options.
(5) Mr. Poppen left the Company in April 2001.
7
Option Grants in Last Fiscal Year
The following table contains information concerning grants of stock options to
each of the Named Executive Officers during the fiscal year ended December 31,
2000. No stock appreciation rights ("SARs") were granted during the fiscal year
2000 and there are no outstanding SARs.
Individual Grants
-------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Grant Date
Options Employees in Exercise or Base Expiration Present
Name Granted (#) Fiscal Year Price ($/Sh)(1) Date Value ($/Sh)(2)
- -------- ------------ ----------- --------------- ---------- ---------------
Ronald G. Tray 100,000 29% 3.125 (1) 1.97
Craig D. Poppen 50,000 14% 3.125 (1) 1.97
Rick S. Lieberman 50,000 14% 3.125 (1) 1.97
Delma H. Ambrose 50,000 14% 3.125 (1) 1.97
__________________
(1) The options vest equally over five years beginning with the first
tranche vesting January 1, 2001. The exercise price for the options was the
fair market value on the date of grant. Each tranche expires if unexercised
on the date that is five years after the date the tranche vests. An earlier
expiration date may apply in the event of the optionee's termination of
employment, retirement, death or disability.
(2) The Black-Scholes option pricing model was used to determine the
"Grant Date Present Value" of the options listed in the table. The model
assumed a volatility measure of 1.90 and a risk free interest rate of 6%.
Because the magnitude of any non-transferability discount is extremely
difficult to determine, none was applied in determining the value of the
reported options. The grant date present values set forth in the table are
only theoretical values and may not accurately determine present value. The
actual value, if any, an optionee will realize will depend on the excess of
market value of a share of the Company's Common Stock over the exercise
price on the date the option is exercised.
Fiscal Year End Options Values
The table below sets forth information concerning the value of stock
options held by the Named Executive Officers as of December 31, 2000, all
of which were granted pursuant to the Incentive Plan.
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-The-Money Options at
Fiscal Year-End (#) Fiscal Year-End $ (1)
------------------- ---------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Robert S. Raley 160,000 40,000 --- ---
Ronald G. Tray 61,870 142,809 --- ---
Craig D. Poppen 63,200 94,800 --- ---
Rick S. Lieberman 8,800 63,200 --- ---
Delma H. Ambrose 6,800 60,200 --- ---
8
(1) The value of in-the-money options at fiscal year end was calculated by
determining the difference between the average of the high and low sales
prices of $0.78 per share of the Company's Common Stock on the Nasdaq Stock
Market on December 29 the last trading day of the year, and the exercise
price of the options. There were no in the money options at December 31,
2000.
Option Repricing
The following table sets forth information concerning all repricings of options
held by the Named Executive Officers of the Company since the Company became
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). All such repricings were effected through the
grant of replacement options in exchange for existing options. Messrs. Raley
and Poppen did not participate in the Company's option repricing program in June
1998.
Ten Year Option Repricings
--------------------------
Number of
Securities Length of Original
Underlying Market Price of Exercise Price New Option Term
Options Stock at Time of at Time of Exercise Remaining at Date
Name Date Repriced Repricing ($) Repricing ($) Price ($) of Repricing
---- ---- -------- ------------ ------------- --------- ------------
Ronald G. Tray 06/01/98 39,679 $2.94 $11.50 $2.94 18 months
Rick S. Lieberman 06/01/98 10,000 $2.94 $11.50 $2.94 18 months
Delma H. Ambrose 06/01/98 5,000 $2.94 $11.50 $2.94 18 months
Raley Employment Agreement
Basic Terms of Employment Agreement
TFC and Robert S. Raley, Jr. entered into an employment agreement (the
"Raley Employment Agreement"), commencing January 1, 1993 and, as amended,
expiring December 31, 2002, unless terminated earlier in accordance with its
provisions. Under the terms of the Raley Employment Agreement, TFC agreed to pay
Mr. Raley (i) a base salary of $50,000 per annum and (ii) a bonus, after
deduction of Mr. Raley's base salary payments, equal to 3% of the consolidated
annual net pre-tax income of TFC. The computation of the consolidated annual net
pre-tax income of TFC is made without deducting federal or state income taxes or
bonuses paid by TFC to Mr. Raley or to any other employee. In addition, Mr.
Raley is reimbursed for all reasonable business expenses and is furnished with
two automobiles for his use, the reasonable expenses for the operation of which
are paid by TFC. Further, TFC has agreed to provide Mr. Raley with all other
employee benefits that he enjoyed on the date of such agreement or those
benefits that TFC may approve for employees generally or for its senior
executives.
Notwithstanding the terms of the Raley Employment Agreement, which remains
in effect in its original form, the Board passed a resolution modifying the
salary and bonus components of his compensation. Under the terms of this
resolution Mr. Raley is to receive a base salary of $300,000 per year and a
guaranteed bonus of $300,000 to be credited against the bonus payable to Mr.
Raley in each year pursuant to the Raley Employment Agreement. In the event the
terms of the Raley Employment Agreement result in a bonus in excess of $300,000,
Mr. Raley will be paid such excess. However, should the bonus calculation under
the Raley Employment
9
Agreement result in a bonus of less than $300,000, then Mr. Raley will not be
required to repay any of the $300,000 guaranteed bonus. The salary arrangement
is not guaranteed under the Raley Employment Agreement.
In addition to termination upon the occurrence of Mr. Raley's disability or
death, TFC may terminate the Raley Employment Agreement prior to the expiration
of its term in the event that: (i) Mr. Raley ceases to serve as the Chairman of
TFC's Board of Directors; (ii) all or substantially all of TFC's assets are sold
to a third party; (iii) more than 50% of the then issued and outstanding stock
of TFC or the Company is sold to, or exchanged for equity interests in, any
person or entity, which sale or exchange would not constitute a "continuity of
interest;" (iv) TFC is involved in a business combination in which it is not the
surviving corporation; or (v) TFC is dissolved voluntarily or by operation of
law. Further, the Raley Employment Agreement provides that TFC reserves the
right to terminate such agreement, without notice for "cause," as defined
therein. The Raley Employment Agreement also includes a covenant not to
compete, which continues for as long as Mr. Raley receives payments thereunder.
Bonus Repayment Obligation
Although the Company cannot make a final determination regarding the
amount, if any, of the 3% bonus of net pre-tax income of TFC until the end of
each year, in 1995 and prior years, TFC made estimated bonus payments to Mr.
Raley and other executives throughout the year on a monthly basis. In 1995,
these estimated bonus payments to Mr. Raley totaled $354,982. However, because
TFC did not have any net pre-tax income in 1995, Mr. Raley was obligated to
return to TFC all estimated bonus payments made in 1995. In addition, although
Mr. Raley also received $50,000 in base salary during 1995, Mr. Raley elected to
repay that amount as well. To fulfill this obligation, Mr. Raley delivered a
Promissory Note to TFC dated as of January 1, 1996, in the principal amount of
$404,982 ("Raley Note") and an Excess Compensation Repayment Agreement also
dated as of January 1, 1996 ("Raley Repayment Agreement"). Effective July 1999
the Board voted to revise the terms of the Raley Note whereas the balance of the
note was reduced monthly on a pro rata basis from July 1999 through December
2000 for each month Raley continues in his role as CEO.
Employment Agreements
The named executives entered into a Change of Control agreement with TFC in
September 2000. The agreement terminates on the earlier of (i) the cessation of
the employees employment with the Company for any reason, or (ii) the Company's
notice of termination of employment, irrespective of the effective date of the
termination.
Stock Options
The plan will cover a period of five years with 20% of the shares vesting each
year with the first vesting period set at 01/01/01. Each vested portion will
expire five years from the vesting date.
Compensation Committee Interlocks and Insider Participation
No member of the Company's compensation committee was an officer or
employee of the Company or any of its subsidiaries during 2000. During 2000, no
executive officer of the Company served as a member of the compensation
committee of another entity, nor did any executive officer of the Company serve
as a director of another entity.
Compensation Committee Report Concerning 2000 Compensation of Certain Executive
Officers
This report describes the Company's officer compensation strategy, the
components of the compensation program, and the manner in which the 2000
compensation determinations were made for the Company's senior management team,
including the Chief Executive Officer, Robert S. Raley, Jr.; TFC's President and
Chief Operating Officer, Ronald G. Tray; Chief Financial Officer, Craig D.
Poppen; TFC's Executive Vice President and Chief Lending Officer, Rick S.
Lieberman; and TFC's Senior Vice President and Chief Servicing Officer, Delma H.
Ambrose (collectively referred to as the "Executive Officers") whose 2000
compensation is disclosed in the Summary Compensation table of this Proxy
Statement.
10
In addition to the information set forth under "Executive Compensation" in
this Proxy Statement, the Company's Compensation Committee (the "Compensation
Committee") is required to provide shareholders a report explaining the
rationale and considerations that led to the fundamental executive compensation
decisions affecting the Company's Executive Officers. In fulfillment of this
requirement, the Compensation Committee, at the direction of the Company's Board
of Directors, has prepared the following report for inclusion in this Proxy
Statement. None of the members of the Compensation Committee are executive
officers or employees of the Company.
Compensation Philosophy
The Company's compensation packages are designed to attract, retain,
motivate and reward qualified, dedicated executives, and to directly link
compensation with (i) previous and anticipated performance and (ii) the
Company's profitability. Historically, the principal components of executive
compensation have been (i) a base salary at a stated annual rate, together with
certain other benefits as may be provided from time to time, and (ii) bonuses
keyed to the net pre-tax earnings of TFC.
Unless the Board awards a specified bonus for a uniquely beneficial
contribution to the Company, no bonuses will be paid to Mr. Tray, Mr. Poppen,
Mr. Lieberman, or Ms. Ambrose, individually or collectively, (i) except as a
percentage of TFC and its subsidiaries' earnings before bonus and taxes for the
accounting period on which the bonus is based, or (ii) if the payment of the
bonus will have a material adverse affect the Company's cash flow requirements.
To emphasize the importance of the Company's profitability, bonuses may be paid
monthly on the basis of the Company's performances during the preceding month,
but are limited cumulatively and are subject to adjustment on the basis of the
Company's fiscal year performance as determined by independent auditors.
1995 Long-Term Incentive Plan
In 1994, the Board of Directors adopted the 1995 Long-Term Incentive Plan
(the "Incentive Plan"), which was approved by shareholders of the Company at the
1995 Annual Meeting. The purpose of the Incentive Plan is to support the
business goals of the Company and to attract, retain, and motivate management
officials of high caliber by providing incentives to associate more closely the
interest of certain officers and key executives of the Company with the
interests of the Company's shareholders. Participation is limited to officers
and other key employees of the Company who are in positions in which their
decisions, actions and counsel significantly contribute to the success of the
Company. Directors of the Company who are not otherwise officers or employees of
the Company are not eligible for participation under the Incentive Plan. The
Company has reserved 1,500,000 shares of the Company's Common Stock for issuance
of awards under the Incentive Plan. Awards under the Incentive Plan can be made
in the form of nonqualified stock options, incentive stock options, or
restricted stock, separately or in combination. The Incentive Plan is
administered and interpreted by the Compensation Committee. The Compensation
Committee has full and final authority to make and adopt rules and regulations
for the administration of the Incentive Plan, to interpret the provisions of the
Incentive Plan, to determine the employees to whom awards shall be made under
the Incentive Plan, and to determine the type of award to be made and the
amount, size, and terms of each such award. At December 31, 2000, there were
1,203,729 options outstanding at various option prices, vesting periods and
exercise periods. See "Fiscal Year End Options Table" for options granted to the
Named Executive Officers.
Employee Stock Purchase Plan
The Board adopted the Employee Stock Purchase Plan (the "Stock Purchase
Plan") on December 11, 1993, which provides for awards of Common Stock to
employees, including eligible officers of the Company, TFC, and any future
majority owned subsidiary. Awards under the Stock Purchase Plan are in the form
of options to purchase Common Stock of the Company. The price at which shares of
Common Stock are sold under the Stock Purchase Plan to employees is the lower of
85% of the fair market value of a share of Common Stock on the date of grant or
85% of the fair market value of Common Stock on the date of purchase of the
shares. During 2000, 13,000 options were exercised at prices ranging from $0.80
per share to $1.38 per share, of which 303 options were exercised by the Named
Executive Officers. As of December 31, 2000, there were no outstanding
unexercised options.
11
Awards granted pursuant to the Stock Purchase Plan are intended to increase
the recipients motivation for an interest in the Company's long-term success as
measured by the value of the Company's Common Stock. The Company has reserved
530,000 shares of the Company's Common Stock for issuance of awards under the
Stock Purchase Plan. The Stock Purchase Plan is administered and interpreted by
the Compensation Committee. The Compensation Committee has full and final
authority to make and adopt rules and regulations for the administration of the
Stock Purchase Plan, to interpret the provisions of the Stock Purchase Plan, to
determine the employees to whom awards shall be made under the Stock Purchase
Plan and to determine the type of award to be made and the amount, size and
terms of each such award.
Limitation on Deductibility of Certain Compensation for Federal Income Tax
Purposes
Section 162(m) of the Internal Revenue Code ("162(m)") precludes the
Company from taking a deduction for compensation in excess of $1,000,000 for the
Chief Executive Officer or any of its four other highest paid officers. Certain
performance-based compensation, however, is specifically exempt from the
deduction limit. In adopting the Incentive Plan, the Compensation Committee duly
considered Section 162(m) and structured the Incentive Plan accordingly. The
Compensation Committee believes that the Incentive Plan and the Employee Stock
Purchase Plan will both qualify as performance-based compensation under the
regulations issued under Section 162(m).
Douglas E. Bywater, Compensation Committee Chair
Andrew M. Ockershausen, Compensation Committee Member
Linwood R. Watson, Compensation Committee Member
THE PRECEDING "COMPENSATION COMMITTEE REPORT CONCERNING THE 2000
COMPENSATION OF CERTAIN EXECUTIVE OFFICERS" SHALL NOT BE DEEMED TO BE SOLICITING
MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, OR INCORPORATED BY REFERENCE IN ANY DOCUMENTS SO FILED.
Related Party Transactions
During 2000, 1999, and 1998, the Company issued $0.2 million, $1.3 million,
and $0.7 million, respectively, of unsecured subordinated debt due three years
from origination. The notes bear interest at 15% per year. These notes were
offered for cash pursuant to a private placement to a limited number of
prospective investors, including but not limited to, the Board of Directors,
officers and certain existing shareholders of the Company. Notes outstanding
under this private placement totaled $2.4 million at December 31, 2000.
During 2000, the Company issued $0.7 million of unsecured subordinated debt
due six months from origination. The notes bear interest at 12% per year and
automatically renew for same term unless notice given by investor. These notes
were offered for cash pursuant to a private placement to a limited number of
prospective investors, including but not limited to, the Board of Directors,
officers and certain existing shareholders of the Company. Notes outstanding
under this private placement totaled $0.7 million at December 31, 2000.
12
The following table recaps the Subordinated Notes held or controlled by the
Company's Officers and Directors:
Name Relation with the Company
---- -------------------------
Robert S. Raley, Jr. Chairman of the Board, President, and Chief Executive Officer $1,200,000
Peter H. Kamin Director 300,000
Andrew M. Ockershausen Director 100,000
Linwood R. Watson Director 100,000
Walter S. Boone, Jr. Director 74,035
Ronald G. Tray President and Assistant Secretary of the Company and
President, and Chief Operating Officer of TFC 100,000
----------
$1,874,035
==========
On December 20, 1996, TFC, a subsidiary of the Company, entered into an
Amended and Restated Motor Vehicle Installment Contract Loan Security Agreement
(the "GECC Loan Agreement") with General Electric Capital Corporation ("GECC"),
under which GECC agreed to amend and restate the agreement governing the
previous credit arrangement between GECC and TFC. The GECC Loan Agreement
provided for maximum borrowings by TFC from GECC of $150,000,000. As
consideration for GECC extending credit under the GECC Loan Agreement, the
Company and certain affiliates guaranteed TFC's performance and payment under
the GECC Loan Agreement in separate guarantees made by each and dated December
20, 1996. As further consideration for GECC entering into the GECC Loan
Agreement, the Company issued to GECC a Warrant to Purchase Common Stock, dated
December 20, 1996 (the "First Warrant"), whereby GECC was granted rights to
purchase 567,640 shares of the Common Stock (or 4.79%) of the Company. In
connection with the First Warrant, the Company entered into a Registration
Rights Agreement with GECC dated December 20, 1996 (the "Registration Rights
Agreement"), in order to provide GECC with certain registration rights with
respect to the shares of Common Stock purchasable under the First Warrant.
In early 1997, the Company breached certain restrictive covenants under the
GECC Loan Agreement, and negotiated a loan restructuring with GECC which, among
other things, caused GECC to advance additional monies to TFC to pay certain
amounts to another creditor of TFC (the "Loan Restructure"). The Loan
Restructure was evidenced by an Amendment No. 1 to the GECC Loan Agreement dated
April 4, 1997. As a condition to the Loan Restructure, GECC required that the
Company grant GECC another warrant to purchase shares of Common Stock at an
exercise price of $1.00 per share (the "Second Warrant") under terms
substantially similar to those in the First Warrant which, upon exercise
together with the First Warrant, would give GECC beneficial ownership of the
Company totaling 9.1% at that time. GECC also required that the First Warrant
be amended to reduce the exercise price from $2.00 per share to $1.00 per share
and to extend the expiration date thereof from December 31, 2000 to March 31,
2002 (the same expiration date under the Second Warrant). Furthermore, the
Company amended and restated the Registration Rights Agreement to provide for
registration rights with respect to the Common Stock issuable under both the
First Warrant and the Second Warrant. As a part of the Restructure, the maximum
amount which could be borrowed by TFC under the Loan Agreement was reduced to
$110 million. Although both warrants are immediately exercisable, as of the
date of this Proxy Statement, neither the First Warrant nor the Second Warrant
had been exercised by GECC.
In December 2000, GECC, which is currently the primary lender used by TFC,
announced that it was exiting the automobile financing industry. In March 2001,
TFC signed an agreement with GECC to extend the credit facility through January
1, 2002. The credit line available under the extension terms: (i) declines from
$130 million to $100 million at the earlier of the closing of the Company's next
asset securitization transaction or April 30, 2001; (ii) declines to $75 million
on August 1, 2001; and (iii) terminates January 1, 2002. To fund growth and
manage the credit limits established in the GECC revolving credit facility, TFC
plans to continue to access capital markets through term securitization and
supplement the credit facility with warehouse facilities.
13
COMPANY STOCK PRICE PERFORMANCE
The following graph shows a comparison of cumulative total stockholder
returns for the Company, the Nasdaq Composite Index, the Russell 2000 Index (a
published index which includes companies with market values between $20 million
and $300 million) and the SNL Auto Finance Index (a published industry index)
for December 31, 1995 through December 31, 2000. The total stockholder return
assumes $100 invested at the beginning of the period in the Company's Common
Stock, the Nasdaq Composite Index, the Russell 2000 Index and the SNL Auto
Finance index. In developing each index, the returns of the companies were
weighted according to stock market capitalization at the beginning of each
period for which a return is indicated.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG THE COMPANY, THE NASDAQ COMPOSITE
INDEX, THE RUSSELL 2000 AND THE SNL AUTO FINANCE INDEX
[GRAPH OF TFC ENTERPRISES, INC.]
Period Ending
------------------------------------------------------------------------------
Index 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- -----------------------------------------------------------------------------------------------------------------------
TFC Enterprises, Inc. 100.00 21.31 12.30 21.31 49.18 12.30
NASDAQ - Total US* 100.00 173.89 212.98 300.34 558.15 335.83
Russell 2000 100.00 149.64 183.10 178.44 216.37 209.83
SNL Autofinance Index 100.00 144.63 59.44 42.37 56.68 74.73
*$100 invested on December 31, 1995 in stock or index, including reinvestment of
dividends.
14
AUDIT INFORMATION
The Board of Directors has adopted a written charter for the Audit Committee
that is set forth in Exhibit A to this Proxy Statement. The three members of
the Audit Committee are independent as that term is defined in the listing
standards of the NASDAQ Stock Market.
Changes in Company's Certifying Accountant
At a meeting held on January 23, 2001, the Audit Committee of the Board of
Directors of the Company approved the engagement of McGladrey & Pullen, LLP as
its independent auditors for the fiscal year ending December 31, 2001 to replace
the firm of Ernst & Young, LLP ("E&Y") who declined to stand for reelection.
E&Y declined to stand for reelection due to their perception of the inherent
risks of the subprime auto lending industry, the level of audit fees and
availability of local area human resources. E&Y agreed to complete the audit
for the fiscal year ended December 31, 2000. The Board of Directors ratified
the approval of the change in auditors on January 23, 2001.
The reports of E&Y on the Company's financial statements for the past two
fiscal years did not contain an adverse opinion or a disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope, or accounting
principles.
In connection with the audits of the Company's financial statements for
each of the two years ended December 31, 1999, and in the subsequent interim
period, there were no disagreements with E&Y on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope and
procedures which, if not resolved to the satisfaction of E&Y would have caused
E&Y to make reference to the matter in their report. The Company requested that
E&Y to furnish it a letter addressed to the Commission stating whether it agreed
with the above statements. A copy of such a letter, dated January 25, 2001 is
filed as an Exhibit 16 to a Current Report on Form 8-K filed with the Commission
on January 26, 2001.
There were no "reportable events" as that term is described in Item
304(a)(1)(v) of Regulation S-K.
A representative of E&Y is expected to be present at the Annual Meeting and
will have the opportunity to make a statement if he desires to do so, and is
expected to be available to respond to appropriate questions.
Fees of Independent Public Accountants
Audit Fees
The aggregate amount of fees billed or expected to be billed to the Company
by E&Y for professional services rendered in connection with the audit of the
Company's annual financial statements for the fiscal year ended December 31,
2000, and for the review of the Company's interim financial statements included
in the Company's quarterly reports on Form 10-Q for that fiscal year was
$199,000.
Financial Information System Design and Implementation Fees
There were no professional services rendered to the Company by E&Y for the
design and implementation of financial information systems for the fiscal year
ended December 31, 2000.
All Other Fees
The aggregate amount of fees billed to the Company by E&Y for all other
non-audit services rendered to the Company for the fiscal year ended December
31, 2000, was $159,650, including audit-related services of $75,450 and non-
audit services of $84,200. Audit-related services generally include fees for
statutory and pension audits, business acquisitions, accounting consultations
and Commission registration statements.
15
Audit Committee Report
Management is responsible for the Company's internal controls, financial
reporting process and compliance with laws and regulations and ethical business
standards. The independent auditor is responsible for performing an independent
audit of the Company's consolidated financial statements in accordance with
generally accepted auditing standards and issuing a report thereon. The Audit
Committee's responsibility is to monitor and oversee these processes on behalf
of the Board of Directors.
In this context, the Audit Committee has reviewed the audited financial
statements and held discussions with management and the independent auditors
concerning the quality, not just the acceptability of accounting principles, the
reasonableness of significant judgements, and clarity of disclosures in the
financial statements. with management and the independent auditors. The
Committee met with the Independent Auditors, with and without management
present, to discuss the results of their examinations, their evaluation of the
Company's internal controls and overall quality of the Company's financial
reporting. The Audit Committee has discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). In addition, the Audit Committee has
received from the independent auditors the written disclosures required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees) and discussed with them their independence from the Company and its
management. Moreover, the Audit Committee has considered whether the
independent auditor's provision of information technology services and other
non-audit services to the Company is compatible with maintaining the auditor's
independence. The Committee held five meetings during fiscal year 2000.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, for filing with the Securities and Exchange
Commission. By recommending to the Board of Directors that the audited
financial statements be so included, the Audit Committee is not opining on the
accuracy, completeness or presentation of the information contained in the
audited financial statements.
Audit Committee
Linwood R. Watson, Audit Committee Chair
Peter H. Kamin, Audit Committee Member
Phillip R. Smiley, Audit Committee Member
Norfolk, Virginia
April 2, 2001
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF AUDITORS
As discussed above, the Board of Directors, upon the recommendation of its
Audit Committee, has appointed, subject to ratification by the shareholders, the
firm of McGladrey & Pullen, LLP as the firm of independent certified public
accountants to audit the financial statements of the Company for the fiscal year
ending December 31, 2001. The Board of Directors desires that the appointment be
ratified by the shareholders. A representative of McGladrey & Pullen, LLP is not
expected to be present at the Annual Meeting.
The Board of Directors recommends that the shareholders vote FOR the
ratification of the appointment of McGladrey & Pullen LLP as its auditors for
2001.
16
OTHER MATTERS
The Board of Directors does not know of any matters that will be presented
for action at the Annual Meeting other than those described above or matters
incident to the conduct of the Annual Meeting. If, however, any other matters
not presently known to management should come before the Annual Meeting, it is
intended that the shares represented by the Proxy will be voted on such matters
in accordance with the discretion of the holders of such proxy.
SUBMISSION OF PROPOSALS FOR 2001
Under the regulations of the Commission, any shareholder desiring to make a
proposal to be acted upon at the 2002 Annual Meeting of Shareholders must cause
such proposal to be delivered, in proper form, to Robert S. Raley, Jr., Chief
Executive Officer, whose address is 5425 Robin Hood Road, Suite 101B, Norfolk,
VA 23513 no later than December 17, 2001, in order for the proposal to be
considered for inclusion in the Company's proxy statement and form of proxy for
that meeting. The Company anticipates holding the 2002 Annual Meeting of
Shareholders on May 14, 2002.
GENERAL
The Company's 2000 Annual Report to Shareholders on Form 10-K for the year
ended December 31, 2000, as filed with the Securities and Exchange Commission,
accompanies this Proxy Statement. The 2000 Annual Report to Shareholders does
not form any part of the material for the solicitation of proxies.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY PROMPTLY
By Order of the Board of Directors
April 10, 2001
17
EXHIBIT A
CHARTER
of the
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
of
TFC ENTERPRISES, INC.
I. PURPOSE/MISSION
The Audit Committee shall assist the Board of Directors in fulfilling its
responsibilities to the Corporation's shareholders and the investment community
by reviewing: (i) certain financial reports and other financial information
provided by the Corporation to government bodies or to the public; (ii) the
Corporation's internal systems controlling finance, accounting, legal compliance
and ethics that management and the Board have established; and (iii) the
Corporation's auditing, accounting and financial reporting processes generally.
The Committee shall serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control system, as well
as review and appraise the audit efforts of the Corporation's independent
accountants. Consistent with this function, the Audit Committee should
encourage adherence to, and continuous improvement of the Corporation's
policies, procedures and practices at all levels. In fulfilling its duties, it
is the responsibility of the Audit Committee to maintain free and open
communication among the independent accountants, financial and senior management
and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section III of this Charter.
II. ORGANIZATION
A. COMMITTEE COMPOSITION
---------------------
The Audit Committee shall be comprised of two or more directors as determined by
the Board, each of whom shall be independent directors, and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee. All
members of the Committee shall be familiar with basic finance and accounting
practices, and at least one member of the Committee must have accounting or
related financial management expertise.
The members of the Audit Committee shall be elected at the annual meeting of the
Board of Directors and shall serve until the next annual meeting of the Board or
until their successors shall be duly elected and qualified. Unless a Chair is
elected by the full Board, the members of the Committee may designate a Chair by
a majority vote of the full Committee membership.
B. COMMITTEE MEETINGS
------------------
The Committee shall meet at least three times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, the director of the
internal auditing department and the independent accountants in separate
executive sessions to discuss any matters that the Committee or each of these
groups believe should be discussed privately. In addition, the Committee or at
least its Chair, should meet with the independent accountants and management
quarterly to review the Corporation's 10-K or 10-Q filing.
III. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
A. DOCUMENT REVIEW
---------------
1. Review this Charter periodically, at least annually, and update as
necessary with due regard for pronouncements by the Securities and Exchange
Commission and other regulatory bodies.
2. Review the Corporation's annual financial statements, as well as
significant correspondence, major reports and other financial information
submitted to, or received from, the government, or the public, including, but
not limited to any certification, report, opinion, or review rendered by the
independent accountants.
3. Review with financial management the 10-Q prior to its filing or prior to
the release of earnings, if required by the Securities and Exchange Commission
regulations, or if the Committee deems it prudent to do so.
B. INDEPENDENT ACCOUNTANTS
-----------------------
5. Review and recommend to the Board of Directors the selection of the
independent accountants, considering independence and effectiveness. Consistent
with this duty, the Committee should review and discuss with the accountants on
an annual basis, all significant relationships the accountants have with the
Corporation to determine the accountants' independence.
6. Review the compensation to be paid to the independent accountants.
7. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances warrant.
8. Periodically consult with the independent accountants out of the presence
of management about internal controls and the fullness and accuracy of the
organization's financial statements.
C. FINANCIAL REPORTING PROCESS
---------------------------
9. Review the integrity of the organization's financial reporting processes,
both internal and external, in consultation with the independent accountants.
10. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied in its
financial reporting.
11. Review and approve any necessary major changes to the Corporation's
auditing and accounting principles and financial disclosure practices as
suggested by the independent accountants or management.
D. PROCESS IMPROVEMENT
-------------------
12. Establish regular and separate systems of reporting to the Audit Committee
by each of management and the independent accountants regarding any significant
judgments made in management's preparation of the financial statements and the
view of each as to appropriateness of such judgments.
13. Following completion of the annual audit, review separately with each of
management and the independent accountants any significant difficulties
encountered during the course of the audit, including any restrictions on the
scope or work or access to required information.
14. Review any significant disagreement among management and the independent
accountants in connection with the preparation of the financial statements.
15. Conduct a timely review with the independent accountants and management of
the extent to which changes or improvements in financial or accounting
practices, as approved by the Audit Committee, have been implemented.
E. ETHICAL AND LEGAL COMPLIANCE
----------------------------
16. Establish, review and update periodically a Code of Ethical Conduct and
ensure that management has established a system to enforce this Code.
17. Review, with the Corporation's counsel, legal compliance matters including
corporate securities trading policies, as well as any legal matter that could
have a significant impact on the organization's financial statements.
18. Perform any other activities consistent with the Charter, the Corporation's
Bylaws and governing law, as the Committee or the Board deems necessary or
appropriate.
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
TFC ENTERPRISES, INC.
May 8, 2001
( Please Detach and Mail in this Envelope Provided )
- --------------------------------------------------------------------------------
A [X] Please mark your
votes as in this
example.
FOR all nominees listed WITHHOLD
(except as indicated to AUTHORITY to vote THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
the contrary for all nominees
1. ELECTION OF [___] [___] Nominees: Andrew M. Ockershausen
DIRECTORS Peter H. Kamin
FOR AGAINST ABSTAIN
(INSTRUCTIONS: TO withhold authority to vote for any 2. To ratify the appointment of McGlodrey & [___] [___] [___]
individual nominee, write the nominee's name on the Pullen LLP as Independent auditors for
line provided below.) 2001.
_____________________________________________ 3. IN THEIR DISCRETION, on such other matters as may properly come
before the meeting, or, if any nominee listed in Proposal 1 is
unable to serve for any reason, to vote or refrain from voting
for a substitute nominee or nominees.
This proxy is revocable at any time prior to its exercise. This
proxy when properly executed, will be voted as directed. Where no
direction is given, this proxy will be voted for Proposals 1 and 2.
Please complete, date, sign and return this proxy promptly in the
accompanying envelope.
Signature ___________________________ Date __________________ Signature ___________________________ Date __________________
TFC ENTERPRISES, INC.
Proxy Solicited on Behalf of the Board of Directors
for Annual Meeting of Shareholders to be held on May 8, 2001
The undersigned, having received the Annual Report to Shareholders and the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement dated
April 2, 2001, hereby appoints Robert S. Raley, Jr. and Douglas E. Bywater (each
with power to act alone) as proxies, with full power of substitution, and hereby
authorizes them to represent and vote, as directed on the reverse side, all the
shares of Common Stock of TFC Enterprises, Inc. held of record by the
undersigned on March 16, 2001, at the Annual Meeting of Shareholders to be held
on May 8, 2001, and any adjournment thereof.
(continued and to be signed on other side)