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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
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BANNER CENTRAL FINANCE COMPANY
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BANNER CENTRAL FINANCE COMPANY
(BCFN)
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
---------------------------
DATE: Friday, June 25, 2001
TIME: 9:30 a.m.
PLACE: Banner Central Finance Company
5480 East Ferguson Drive,
3rd Floor
Commerce, California 90022
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BANNER CENTRAL FINANCE COMPANY
5480 FERGUSON DRIVE, COMMERCE, CA 90022 (323) 720-8600 FAX (323) 702-8647
May 15, 2001
Dear Fellow Stockholder:
It is my pleasure to invite you to Banner Central Finance Company's
first annual meeting of stockholders.
We will hold the meeting on Friday, June 25, 2001, at 9:30 a.m. at our
corporate headquarters, 5480 East Ferguson Drive in Commerce, California. In
addition to the formal items of business, I will review the major developments
of 2000 and answer your questions.
This booklet includes the notice of annual meeting and the proxy
statement. The proxy statement describes the business that we will conduct at
the meeting and provides information about Banner Central Finance Company
Your vote is important. Whether you plan to attend the meeting or not,
please complete, date, sign and return the enclosed proxy card promptly. If you
received more than one proxy card because you own shares registered in different
names or at different addresses, please be sure to separately complete and
return each proxy card. If you attend the meeting and prefer to vote in person,
you may do so.
Please indicate on the proxy card whether or not you expect to attend
the meeting so that we can provide adequate seating.
We look forward to seeing you at the meeting.
Sincerely,
Gary M. Cypres
Chairman of the Board
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BANNER CENTRAL FINANCE COMPANY
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NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
---------------------------
Date: Friday, June 25, 2001
Time: 9:30 a.m.
Place: Banner Central Finance Company
5480 East Ferguson Drive, 3rd Floor
Commerce, California 90022
Dear Stockholders:
At our annual meeting, we will ask you to:
- Elect three directors to each serve for a term of one year;
- Ratify the selection of Arthur Andersen LLP as independent public
accountants for the year ending December 31, 2001; and
- Transact any other business that may properly be presented at the
annual meeting.
For ten days prior to the annual meeting, a complete list of our
stockholders entitled to vote at the meeting will be available for inspection by
any stockholder for any purpose relating to the meeting during ordinary business
hours at our offices at 5480 East Ferguson Drive, Commerce, California. This
list will also be available for inspection at the annual meeting.
If you were a stockholder of record at the close of business on May 1,
2001, you may vote at the annual meeting.
By order of the board of directors,
Gary M. Cypres
Chairman of the Board
May 15, 2001
Commerce, California
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TABLE OF CONTENTS
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING ................................................................. 1
Why Did You Send Me This Proxy Statement? .............................................................. 1
Who Is Entitled To Vote? ............................................................................... 1
What Constitutes A Quorum? ............................................................................. 1
How Many Votes Do I Have? .............................................................................. 1
How Do I Vote By Proxy? ................................................................................ 2
May I Change My Vote After I Return My Proxy? .......................................................... 2
How Do I Vote In Person? ............................................................................... 2
What Vote Is Required To Approve Each Proposal? ........................................................ 3
What Are The Costs Of Soliciting These Proxies? ........................................................ 3
How Do I Obtain An Annual Report On Form 10-K? ......................................................... 3
INFORMATION ABOUT BCFN COMMON STOCK OWNERSHIP ................................................................... 4
Which Stockholders Own at Least 5% of BCFN? ............................................................ 4
How Much Stock Is Owned By Directors And Executive Officers? ........................................... 5
Compensation Committee Interlocks and Insider Participation ............................................ 5
Did Directors, Executive Officers and Greater Than 10% Stockholders Comply With Section 16(a)
Beneficial Ownership Reporting in 2000? ............................................................ 6
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS .............................................................. 6
The Board of Directors ................................................................................. 6
The Committees of the Board ............................................................................ 6
How Do We Compensate Directors? ........................................................................ 6
Certain Relationships and Related Transactions ......................................................... 7
Contribution Agreement ................................................................................. 7
Financing Agreement .................................................................................... 7
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Operating Agreement .................................................................................... 8
Tax Sharing Agreement .................................................................................. 9
Service Mark Licensing Agreements ...................................................................... 9
Executive Officers and Key Employees ................................................................... 10
How We Compensate Executive Officers ................................................................... 10
Stock Option Plan ...................................................................................... 11
Compensation Committee's Report on Executive Compensation and Repricing of Stock Options ............... 15
The Report ............................................................................................. 15
Audit Committee ........................................................................................ 16
Audit Committee Report ................................................................................. 16
DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD ................................................................ 18
Proposal 1: Elect Three Directors ...................................................................... 18
Proposal 2: Ratify Selection of Independent Public Accountants for 2001 ................................ 19
INFORMATION ABOUT STOCKHOLDER PROPOSALS ......................................................................... 20
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PROXY STATEMENT FOR BANNER CENTRAL FINANCE COMPANY
2001 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
WHY DID YOU SEND ME THIS PROXY STATEMENT?
We sent you this proxy statement and the enclosed proxy card because
our board of directors is soliciting your proxy to vote at the 2001 annual
meeting of stockholders. This proxy statement summarizes the information you
need to know to cast a vote at the annual meeting. However, you do not need to
attend the annual meeting to vote your shares. Instead, you may simply complete,
sign and return the enclosed proxy card.
WHO IS ENTITLED TO VOTE?
We will begin sending this proxy statement, the attached notice of
annual meeting and the enclosed proxy card on or about May 15, 2001 to all
stockholders entitled to vote at the annual meeting. Stockholders who owned BCFN
voting common stock at the close of business on May 1, 2001 are entitled to
vote. On this record date, there were 7,166,000 shares of BCFN voting common
stock, par value $0.01 per share, outstanding. BCFN has only this one class of
voting stock. We are also sending along with this proxy statement the BCFN 2000
Annual Report, which includes our financial statements.
WHAT CONSTITUTES A QUORUM?
The holders of a majority of the issued and outstanding shares of BCFN
voting common stock entitled to vote at the meeting must be present, in person
or by proxy, in order to constitute a quorum. We can only conduct the business
of the meeting if a quorum has been established. We will include proxies marked
as abstentions and broker non-votes in determining the number of shares present
at the meeting.
HOW MANY VOTES DO I HAVE?
Each share of BCFN voting common stock that you own entitles you to one
vote. The proxy card indicates the number of shares of BCFN voting common stock
that you own. In the election of directors, under California law as applied to
the Company, you have the right to cumulate your votes. This means that you may
give one properly nominated candidate a number of votes equal to the number of
directors to be elected, multiplied by the number of shares you are entitled to
vote, or you may divide that total number of shares among the candidates as you
see fit.
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HOW DO I VOTE BY PROXY?
Whether you plan to attend the annual meeting or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
postage-prepaid envelope provided. Returning the proxy card will not affect your
right to attend the annual meeting and vote.
If you properly fill in your proxy card and send it to us in time to
vote, your "proxy" (one of the individuals named on your proxy card) will vote
your shares as you have directed. If you sign the proxy card but do not make
specific choices, your proxy will vote your shares as recommended by the board
of directors as follows:
- "FOR" the election of all three nominees for director (see page
18), and
- "FOR" ratification of the selection of Arthur Andersen LLP as
independent public accountants for 2001 (see page 19).
If any other matter is presented, your proxy will vote in accordance
with the recommendation of the board of directors or, if no recommendation is
given, in their own discretion. At the time this proxy statement went to press,
we knew of no matters that needed to be acted on at the annual meeting, other
than those discussed in this proxy statement.
MAY I CHANGE MY VOTE AFTER I RETURN MY PROXY?
Yes. If you give a proxy, you may change your vote at any time before
it is exercised. You may change your vote in any one of three ways:
- You may send our Corporate Secretary another proxy with a later
date.
- You may notify our Corporate Secretary in writing before the
annual meeting that you have revoked your proxy.
- You may attend the annual meeting and vote in person.
HOW DO I VOTE IN PERSON?
If you plan to attend the annual meeting and vote in person, we will
give you a ballot form when you arrive. However, if your shares are held in the
name of your broker, bank or other nominee, you must bring the proxy card, an
account statement or a letter from the nominee indicating that you are the
beneficial owner of the shares on May 1, 2001, the record date for voting, and a
written instruction from the nominee authorizing you to vote the shares.
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WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
PROPOSAL 1:
ELECT THREE DIRECTORS Under California law, as it applies to
BCFN, you may cumulate your votes for the
election of directors as described above
under the caption "How Many Votes Do I
Have?" The three nominees for director
who receive the most votes will be
elected. So, if you do not vote for a
particular nominee, or you indicate
"WITHHOLD AUTHORITY" to vote for a
particular nominee on your proxy card,
your vote will not count either "for" or
"against" the nominee. Our Certificate of
Incorporation does not authorize
cumulative voting.
PROPOSAL 2:
RATIFY SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS The affirmative vote of a majority of the
votes cast at the annual meeting on this
proposal is required to ratify the
selection of independent public
accountants. So, if you "ABSTAIN" from
voting, it has the same effect as if you
voted "against" this proposal.
THE EFFECT OF BROKER NON-VOTES If your broker holds your shares in its
name, the broker will be entitled to
vote your shares on Proposals 1 and
2 even if it does not receive
instructions from you.
WHAT ARE THE COSTS OF SOLICITING THESE PROXIES?
We will pay all of the costs of soliciting these proxies. In addition
to mailing proxy soliciting material, our directors, officers and employees also
may solicit proxies in person, by telephone or by other electronic means of
communication for which they will receive no compensation. We will ask banks,
brokers and other institutions, nominees and fiduciaries to forward the proxy
material to their principals and to obtain authority to execute proxies. We will
then reimburse them for their reasonable expenses. In addition, we may pay for
and use the services of individuals or companies that we do not regularly employ
in connection with the solicitation of proxies if the board of directors
determines this is advisable.
HOW DO I OBTAIN AN ANNUAL REPORT ON FORM 10-K?
IF YOU WOULD LIKE A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 2000, THAT WE FILED WITH THE SEC, WE WILL SEND YOU ONE
WITHOUT CHARGE. PLEASE WRITE TO BANNER CENTRAL FINANCE COMPANY, 5480 EAST
FERGUSON DRIVE, COMMERCE, CALIFORNIA 90022, ATTENTION: CORPORATE SECRETARY.
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INFORMATION ABOUT BCFN COMMON STOCK OWNERSHIP
WHICH STOCKHOLDERS OWN AT LEAST 5% OF BCFN?
The following table shows, as of May 1, 2001, all persons or entities
we know to be "beneficial owners" of more than five percent of our common
stock.(1) This information is based on Company information and Schedules 13D and
13G reports filed with the SEC by each of the persons and entities listed in the
table below. If you wish, you may obtain these reports from the SEC.
COMMON STOCK
BENEFICIALLY OWNED(1)
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NAME AND ADDRESS OF BENEFICIAL OWNER(2) NUMBER OF SHARES(3) PERCENT OF CLASS(4)
--------------------------------------- ------------------- -------------------
WFC Holdings Corporation.......................... 1,287,484 18.0%
Gary M. Cypres(5)................................. 1,167,999 16.3%
Carpenters Pension Trust for Southern California.. 702,115 9.8%
Wellington Management Company, LLP(6)............. 684,200 9.6%
GIC Special Investments PTE LTD................... 380,020 5.3%
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(1) "Beneficial ownership" is a technical term broadly defined by the SEC to
mean more than ownership in the usual sense. So, for example, you
"beneficially" own BCFN common stock not only if you hold it directly,
but also if you directly or indirectly (through a relationship, a
position as a director or trustee, or a contract or understanding), have
(or share) the power to vote the stock, to invest it, to sell it or you
currently have the right to acquire it or the right to acquire it within
60 days of May 1, 2001.
(2) The address for WFC Holdings Corporation is 555 Montgomery Street, 17th
Floor, San Francisco, CA 94111, the address for Mr. Cypres is 5480 East
Ferguson Drive, Commerce, California 90022, the addresses, the address
for Carpenters Pension Trust for Southern California is 520 Virgil
Avenue, 3rd Floor, Los Angeles, CA 90022, the address for Wellington
Management Company, LLP ("WMC"), is 75 State Street, Boston,
Massachusetts 02109, and the address for GCI Special Investments PTE LTD
is 255 Shoreline Drive, Suite 600, Redwood City, CA 90465.
(3) Except as otherwise noted below, each person and entity named in the
table directly or indirectly has sole voting and investment power with
respect to the shares shown which each such person or entity
beneficially owns.
(4) Shares of BCFN common stock issuable upon exercise of stock options
exercisable within 60 days of May 1, 2001 are considered outstanding for
computing the percentage of the person or entity holding those options
but are not considered outstanding for computing the percentage of any
other person or entity.
(5) Consists of 723,182 shares held of record Cypres Investment Holdings LP,
105,317 shares held directly by G.M. Cypres Investments, LP, 77,500
shares directly held by Mr. Cypres, 12,500 shares directly held by Mr.
Cypres' spouse and 12,500 shares held by or in trust by Mr. Cypres and
his spouse for their children. An additional 237,000 shares is included
representing options exercisable within 60 days of May 1, 2001. Of the
1,167,999 shares, Mr. Cypres shares voting and investment power of
25,000 shares with his spouse.
(6) Based on a Schedule 13G filed with the SEC on February 14, 2001. These
shares are held of record by WMC's clients. Of the 684,200 shares, WMC
shares the power to vote 114,000 of these shares and shares the power to
dispose of all of these shares in its capacity as investment advisor to
these clients.
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HOW MUCH STOCK IS OWNED BY DIRECTORS AND EXECUTIVE OFFICERS?
The following table shows, as of May 1, 2001, the BCFN common stock
that our directors and executive officers beneficially own and those shares of
common stock owned by all executive officers and directors as a group.
COMMON STOCK
BENEFICIALLY OWNED(1)
---------------------------
NUMBER OF PERCENT
NAME OF BENEFICIAL OWNER SHARES(2) OF CLASS(3)
------------------------ ----------- -----------
Gary M. Cypres(4)............................... 1,167,999 16.3%
Arturo Ochoa(5)................................. 5,000 *
William R. Sweet(6)............................. 8,200 *
Salvatore J. Caltagirone(7)..................... 7,200 *
All directors and executive officers as a
group (4 persons)(8).......................... 1,188,399 16.6%
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* Less than 1%.
(1) See footnote 1 in table included above at page 4.
(2) Except as otherwise noted below, each individual named in the table
directly or indirectly has sole voting and investment power with respect
to the shares shown which each such individual beneficially owns.
(3) Shares of BCFN common stock issuable upon exercise of stock options
exercisable within 60 days of May 1, 2001 are considered outstanding for
computing the percentage of the person holding those options but are not
considered outstanding for computing the percentage of any other person.
(4) Consists of 723,182 shares held of record by Cypres Investments
Holdings, L.P., 105,317 shares held of record by G.M. Cypres
Investments, L.P., 77,500 shares held directly by Mr. Cypres, 12,500
shares held directly by Mr. Cypres' spouse and 12,500 shares held by or
in trust by Mr. Cypres and his spouse for their children. An additional
237,000 shares is included representing options exercisable within 60
days of May 1, 2001. Of the 1,167,999 shares, Mr. Cypres shares voting
and investment power of 25,000 shares with his spouse.
(5) Consists of 5,000 shares issuable upon exercise of stock options
exercisable within 60 days of May 1, 2001.
(6) Consists of 1,000 shares directly owned by Mr. Sweet and 10,800 shares
issuable upon exercise of stock options exercisable within 60 days of
May 1, 2001.
(7) Consists of 10,800 shares issuable upon exercise of stock options
exercisable within 60 days of May 1, 2001.
(8) Consists of 257,400 shares issuable upon exercise of stock options
exercisable within 60 days of May 1, 2001.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
The compensation committee consists of Messrs. Sweet and Caltagirone.
None of the members of the compensation committee is or has been an officer or
employee of BCFN or any of its subsidiaries. None of our executive officers
currently serves as a director or member of the compensation committee of
another entity or of any other committee of the board of directors of another
entity performing similar functions.
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DID DIRECTORS, EXECUTIVE OFFICERS AND GREATER THAN 10% STOCKHOLDERS COMPLY WITH
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING IN 2000?
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors, executive officers, and greater-than-10% stockholders to
file reports with the SEC reflecting changes in their beneficial ownership of
BCFN stock and to provide us with copies of the reports.
Based on our review of these reports and of certifications furnished to
us, we believe that all of these reporting persons complied with their filing
requirements for 2000.
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
THE BOARD OF DIRECTORS
The board of directors oversees our business and affairs and monitors
the performance of management. In accordance with corporate governance
principles, the board does not involve itself in day-to-day operations. The
directors keep themselves informed through, among other things, discussions with
the chairman, other key executives and our principal external advisers (legal
counsel, outside auditors, investment bankers and other consultants), reading
reports and other materials that we send them and participating in board and
committee meetings.
THE COMMITTEES OF THE BOARD
The board has an audit committee and a compensation committee. The full
board of directors nominates our officers and directors for election.
THE AUDIT COMMITTEE The audit committee reviews and reports to
the board of directors on various auditing
and accounting matters, including the
annual report from our independent public
accountants. Messrs. Caltagirone and
Sweet currently serve as members of the
audit committee.
THE COMPENSATION COMMITTEE The compensation committee determines the
salary and bonus structure for our
executive officers and supervises the
compensation scheme for our other
officers. In addition, the compensation
committee determines appropriate awards
under our 2000 Stock Option Plan (the
"2000 Plan") and administers our
retirement plan. Messrs. Caltagirone and
Sweet currently serve as members of the
compensation committee.
HOW DO WE COMPENSATE DIRECTORS?
We pay our Board of Directors who are not also employees of Banner Central
Finance Company, referred to as the Non-Employee Directors, an annual fee of
$5,000. Members of the Board of Directors who are our employees will not be paid
any Directors' fees. In addition, we may reimburse members of the Board of
Directors for expenses incurred in connection with their
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activities on our behalf. Non-Employee Directors also each receive options to
purchase 18,000 shares of Common Stock at an exercise price of $1.00 per share
as determined by the Board of Directors on February 28, 2001, under the 2000
Stock Option Plan. All options granted to the Non-Employee Directors are 40%
vested with remaining balance to vest in equal annual installments over 3 years
beginning on the date of grant, subject to continued service on the Board of
Directors; however, no option can be exercised until at least six months after
the date of grant. We have entered into agreements with all directors pursuant
to which we have agreed to indemnify them against certain claims arising out of
their services as directors. Directors are also entitled to the protection of
certain indemnification provisions in our Certificate of Incorporation and
Bylaws.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 6, 2000, the Board of Directors of Central Financial
Acceptance Corporation, or Central Financial, approved a Plan of Complete
Dissolution, Liquidation and Distribution, or the Plan, which provides for the
dissolution and liquidation of Central Financial, and the liquidating
distribution to its stockholders of all the common stock of its two wholly-owned
subsidiaries, one of which is our company, Banner Central Finance Company, or
Banner Central Finance and the other of which is Hispanic Express, Inc. or
Hispanic Express. Banner Central Finance and Hispanic Express were formed on
September 5, 2000 to accomplish the Plan. On February 28, 2001, the Plan was
completed and Central Financial was dissolved and liquidated.
In connection with the Plan, we entered into various agreements with
Central Financial and Hispanic Express for the purpose of defining our ongoing
relationships among the entities. Because Central Financial controlled Hispanic
Express and us, these agreements did not result from arm's-length negotiations.
We believe, however, that these agreements are at least as favorable to us as
those that could have been obtained from independent third parties.
CONTRIBUTION AGREEMENT
We entered into a contribution agreement, referred to as the
Contribution Agreement, with Central Financial. The Contribution Agreement
covers the following:
Contribution of Central Financial Subsidiaries. The Contribution
Agreement provides for the contribution of certain of the assets and businesses
of Central Financial to us. Specifically: Central Financial contributed to our
company all of the issued and outstanding capital stock of Central Installment
Credit Corporation, Central Financial Acceptance/Insurance Agency and Central
Premium Finance Company. In addition, Central Financial contributed to Central
Installment Credit Corporation the assets and liabilities of the mortgage
business owned by a subsidiary of Central Finance.
FINANCING AGREEMENT
Banner's Central Electric and Banner Central Finance have entered into
an agreement, referred to as the Financing Agreement, pursuant to which Banner's
Central Electric grants Banner Central Finance the exclusive right, at Banner
Central Finance's option, to purchase without recourse consumer finance
receivables originated by Banner's Central Electric for sales
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of merchandise at Banner's Central Electric stores in operation on the date of
the Financing Agreement and for all stores which Banner's Central Electric may
determine to open in the future during the term of the Financing Agreement.
Banner Central Finance is not obligated to provide financing to any particular
Banner's Central Electric customers, or to offer financing at any Banner's
Central Electric location or locations. As part of this agreement, Banner
Central Finance agrees to provide Banner's Central Electric with up to $6
million of inventory or inventory financing as long as the Financing Agreement
remains in effect and Banner's Central Electric agrees to provide Banner Central
Finance, at no charge, an amount of floor space at Banner's Central Electric's
stores as Banner Central Finance may from time to time request. The Financing
Agreement has a term of 10 years. Banner Central Finance or Banner's Central
Electric may terminate the Financing Agreement at any time upon one-year's prior
written notice to either party.
OPERATING AGREEMENT
Banner Central Finance and Hispanic Express have entered into an
agreement, referred to as the Operating Agreement, which covers the following
matters:
Allocation of Business Opportunities. Due to the potential conflicts of
interest resulting from the relationships among Banner Central Finance and
Hispanic Express, the Operating Agreement provides that Banner Central Finance
and its subsidiaries and Hispanic Express and its subsidiaries will not, without
prior written consent of each other, directly or indirectly, engage in or enter
any business which the other is currently engaged in.
Management and Other Services. The Operating Agreement provides that
Hispanic Express and its subsidiaries are obligated to provide to Banner Central
Finance and its subsidiaries and Banner Central Finance and its subsidiaries are
obligated to utilize, certain services, including management information
systems, employee benefit plans, legal and accounting, insurance, computer and
data processing systems. These arrangements will continue until terminated by
Hispanic Express or Banner Central Finance upon one-year's prior written notice.
Termination may be made on a service-by-service basis or in its entirety. Banner
Central Finance agrees to pay Hispanic Express its actual cost of providing
services to Banner Central Finance. If such services involve an allocation of
expenses, Hispanic Express shall determine the allocation on the basis of the
percentage utilization of such service or Hispanic Express's management's best
estimate thereof.
Employee Benefits. The Operating Agreement provides that Hispanic
Express and Banner Central Finance will assume all liabilities under the
existing employee welfare benefit and profit sharing plans of Central Financial
with respect to the employees of Hispanic Express and Banner Central Finance and
their subsidiaries who have become employees of each company. The Operating
Agreement also provides that the employment by Hispanic Express and Banner
Central Finance of individuals who were employees of Central Financial and the
subsidiaries prior to the Distribution will not be deemed a severance of
employment from Central Finance and the subsidiaries for the purpose of any
policy, plan, program or agreement that provides for the payment of severance,
salary continuation or similar benefits. The Operating Agreement also provides
for Hispanic Express to assume Central Financial's Supplemental Executive
Retirement Plan.
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Guaranty of Banner Central Finance Debt. The Operating Agreement
provides that so long as the Financing Agreement is in effect Hispanic Express
will guarantee up to $4 million of bank or similar financing which Banner
Central Finance may borrow in connection with the purchases of consumer
receivables generated from Banner's Central Electric.
TAX SHARING AGREEMENT
Central Financial, Hispanic Express and Banner Central Finance have
entered into a tax sharing agreement, referred to as the Tax Sharing Agreement,
providing for:
- - the payment of federal, state and other income tax remittances or refunds
for periods during which Hispanic Express and Banner Central Finance are
included in the same consolidated group for federal income tax purposes;
- - the allocation of responsibility for the filing of such tax returns;
- - the conduct of tax audits and the handling of tax controversies; and
- - various related matters.
For periods during which Hispanic Express and Banner Central Finance
were included in Central Financial's consolidated federal and state income tax
returns, Hispanic Express and Banner Central Finance are each be required to pay
its allocable portion of the consolidated federal, state and other income tax
liabilities and are entitled to receive refunds determined as if Hispanic
Express and Banner Central Finance and its subsidiaries had filed separate
income tax returns. With respect to Central Financial's liability for payment of
taxes for all periods during which Hispanic Express and Banner Central Finance
were so included in Central Financial's consolidated federal income tax returns,
Hispanic Express and Banner Central Finance will indemnify Central Financial for
all federal, state, and other income tax liabilities for such periods. February
28, 2001 is the last day on which Hispanic Express and Banner Central Finance
are required to be included in Central Financial's consolidated federal income
tax returns.
SERVICE MARK LICENSE AGREEMENTS
Banner's Central Electric, on the one hand, and each of Hispanic
Express, Banner Central Finance and Central Rents, Inc., an affiliate of Central
Financial, on the other hand, have entered into separate service mark license
agreements, collectively referred to as the Service Mark License Agreements.
Under the Service Mark License Agreements, Banner's Central Electric grants to,
as applicable, Hispanic Express, Banner Central Finance and Central Rents, Inc.
and each of their subsidiaries, whether such subsidiaries exist now or come into
existence at a later time, the right to license the federally registered
trademark "CFAC." The Service Mark License Agreements are non-exclusive and each
has an initial term of one year. The Service Mark License Agreements can be
terminated by any applicable party to it upon one year's written notice, and
Banner's Central Electric can terminate the Service Mark License Agreements at
any time if there is a change in control of Hispanic Express, Banner Central
Finance or Central Rents, Inc.
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EXECUTIVE OFFICERS AND KEY EMPLOYEES
These are the biographies of the Company's current executive officers,
except for Mr. Cypres, the Chairman, whose biography is included below under
"Proposal 1: Elect Three Directors." There are no arrangements or understandings
among these individuals or any other person relating to their election as
officers.
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ------------------- ----------------------------------------------------------------------------------
Arturo Ochoa (39) ARTURO J. OCHOA has been our President since our formation. Since August 1998,
Mr. Ochoa has been President of Central Financial's mortgage business. Prior to
joining Central Financial, Mr. Ochoa was Area Manager and then Regional Vice
President with Home Savings of America. From 1983 to 1992 he served as a
District Manager with Transamerica Financial Services. Mr. Ochoa graduated from
the University of Southern California, School of Business
None of the directors or officers are related to each other by blood or
marriage and none of the directors or officers are involved in any legal
proceedings as described in Section 401(f) of Regulation S-K.
HOW WE COMPENSATE EXECUTIVE OFFICERS
The following table sets forth information concerning compensation for
each of the last three years paid or awarded to or earned by the Chief Executive
Officer of the Company and the five other most highly compensated executive
officers of the Company and its predecessors who received salary and bonus in
excess of $100,000 in 2000 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
------------------------- AWARDS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(2)
- --------------------------- ----- -------- ------- ------------
Gary M. Cypres(2) 2000 $ 25,000 -- 395,000
Chairman of the Board, 1999 $ 25,000 -- --
Chief Executive Officer and 1998 $ 25,000 -- --
Chief Financial Officer
Arturo Ochoa 2000 $140,000 $ 5,000 50,000
President 1999 $140,000 $20,000 --
1998 -- -- --
(1) Certain of our executive officers receive benefits in addition to salary
and cash bonuses. The aggregate amount of such benefits, do not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus of such Named
Executive.
(2) Consists of options granted at an exercise price of $1.00 per share on
February 28, 2001.
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STOCK OPTION PLAN
Concurrent with the completion of the Plan on February 28, 2001,
Central Financial has terminated its Stock Option Plan and all options granted
under the plan were terminated. The 2000 Stock Option Plan of Banner Central
Finance, or the 2000 Plan, has been approved by our Board of Directors and
stockholders. The 2000 Plan provides that it is to be administered by a
committee of the Board of Directors, referred to as the Option Committee,
consisting of at least two independent directors. The Compensation Committee
functions as the Option Committee. The Option Committee has the authority,
within limitations as set forth in the 2000 Plan, to establish rules and
regulations concerning the 2000 Plan, to determine the persons to whom options
may be granted, the number of shares of Common Stock to be covered by each
option, and the terms and provisions of the option to be granted, provided, that
such grants shall conform with Section 260.140.41 of the California Securities
Code. Subject to the terms set forth in the 2000 Plan, the Option Committee has
the right to cancel any outstanding options and to issue new options on such
terms and upon such conditions as may be consented to by the optionee affected.
A total of 1,100,000 shares are reserved for issuance under the 2000
Plan. No individual may be granted options under the 2000 Plan with respect to
more than 550,000 shares during the duration of the 2000 Plan. Banner Central
Finance granted 491,000 shares of Common Stock of to eligible participants under
the 2000 Plan effective February 28, 2001, including options to certain
executive officers as set forth below. Options granted pursuant to the 2000 Plan
vest over two different time periods. Options granted which equal the number of
options granted to executive officers and employees under the Central Financial
Stock Option Plan vest as they would have been vested under the Central
Financial Stock Option Plan at the time of distribution, except for those
officers and employees which had been with Central Financial or its predecessor
company for a period in excess of 5 years, which shall be 60% vested in total
options granted to them. Options granted to executive officers and employees
which exceed the amounts granted to them under the Central Financial Stock
Option Plan vest in such options over a five-year period in equal annual
amounts. Upon the effectiveness of these grants, 609,000 shares of Common Stock
remain available for future grants of options under the 2000 Plan.
The number of shares which may be granted under the 2000 Plan or under
any outstanding options will be proportionately adjusted in the event of any
stock dividend or if the Common Stock shall be split up, combined,
recapitalized, converted, exchanged, reclassified or in any way substituted.
Subject to the terms of the 2000 Plan, and in the event of a recapitalization,
merger, consolidation, rights offering, separation, reorganization or
liquidation, or any other change in our corporate structure or outstanding
shares, the Option Committee may make such equitable adjustments to the number
and class of shares available under the 2000 Plan or to any outstanding options
as it shall deem appropriate to prevent dilution or enlargement of rights. The
maximum term of any option granted pursuant to the 2000 Plan is ten years. In
general, shares subject to options granted under the 2000 Plan which expire,
terminate or are canceled without having been exercised in full become available
again for options grants.
The class of eligible persons under the 2000 Plan consists of directors
and employees of, and consultants to, us or a parent or subsidiary of ours, as
determined by the Option Committee, except that Non-Employee Directors can only
receive fixed grants of options under the terms set
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forth in the 2000 Plan. See "Compensation of the Board of Directors." Options
granted under the 2000 Plan may be incentive stock options, or ISOs, or
non-qualified options, at the discretion of the Option Committee; however, ISOs
can only be granted to our employees or a parent or subsidiary. The 2000 Plan
provides that the exercise price of an option (other than Non-Employee
Director's option) is fixed by the Option Committee on the date of grant;
however, the exercise price of an ISOs must be not less than the fair market
value of the Common Stock on the date of the grant. The exercise price of an
ISOs granted to any participant who owns stock possessing more than 10% of the
total combined voting power of all classes of our outstanding stock must be at
least equal to 110% of the fair market value of the Common Stock on the date of
grant and the rate of exercise shall be at least twenty percent per year over
five years. Any ISOs granted to such participants also must expire within five
years from the date of grant. Additionally, options granted under the 2000 Plan
will not be ISOs to the extent that aggregate fair market value of the shares
with respect to which ISOs under the 2000 Plan (or under any other plan
maintained by us or a parent or subsidiary of ours) first become exercisable in
any year exceeds $100,000. No options shall be granted under the 2000 Plan or
after the tenth anniversary of the adoption of the 2000 Plan.
Options are be non-transferable and non-assignable except by will, the
laws of descent and distribution, by instrument to an inter vivos or
testamentary trust in which the Options are to be passed to beneficiaries upon
the death of the trustor (settlor), or by gift to "immediate family" as defined
in 17 C.F.R. 240.16a-1(e). Options (other than Non-Employee Director's options)
are exercisable by the holder thereof subject to terms fixed by the Option
Committee. However, no option can be exercised until at least six months after
the date of grant.
Notwithstanding the above, an option is exercisable immediately upon
the happening of any of the following (but in no event during the six-month
period following the date of grant or subsequent to the expiration of the term
of an option): (1) the holder's retirement on or after attainment of age 65; (2)
the holder's disability or death; (3) a "change of control" (as defined in the
2000 Plan) of us while the holder is in the employ or service of Banner Central
Finance Company; or (4) the occurrence of such special circumstances or events
as the Option Committee determines merits special consideration, except with
respect to Non-Employee Directors' options, by such other method as the Option
Committee may permit from time to time.
If an option holder terminates employment with us or service as one of
our directors or as our consultant while holding an unexercised option, the
option is terminated 30 days after such termination of employment or service
unless the option holder exercises the option within such 30-day period.
However, all options held by an option holder terminate immediately if the
termination is a result of a violation of such holder's duties. If cessation of
employment or service is due to retirement on or after attainment of age 65,
disability or death, the option holder or such holder's successor-in-interest,
as the case may be, is permitted to exercise any option within three months
after retirement or within one year after disability or death.
The 2000 Plan may be terminated and may be modified or amended by the
Option Committee or the Board of Directors at any time; provided, however, that
(1) no modification or amendment either increasing the aggregate number of
shares which may be issued under options or to any individual or modifying the
requirements as to eligibility to receive options will be
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effective without stockholder approval within one year of the adoption of such
amendment; and, (2) no such termination, modification or amendment of 2000 Plan
will alter or affect the terms of any then outstanding options without the
consent of the holders thereof.
OPTION GRANTS ON FEBRUARY 28, 2001
INDIVIDUAL GRANTS
------------------------------------------------ POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
NUMBER OF TOTAL OPTIONS OF STOCK APPRECIATION FOR
SECURITIES GRANTED TO OPTION TERM(1)
UNDERLYING EMPLOYEES EXERCISE EXPIRATION ---------------------------
NAME GRANTED IN 2001 PRICE(2) DATE 5% 10%
- ---- ----------- ----------- -------- ---------- --------- ----------
Gary M. Cypres 395,000 80.45% $1.00 02/28/11 47,400 308,100
Arturo Ochoa 50,000 10.18% $1.00 02/28/11 6,000 39,000
William Sweet 18,000 3.67% $1.00 02/28/11 2,160 14,040
Salvatore Caltagirone 18,000 3.67% $1.00 02/28/11 2,160 14,040
- ----------
(1) The amounts shown are hypothetical gains based on the indicated assumed
rates of appreciation of the common stock, compounded annually over a
ten-year period and assuming that the first trading price of $0.69 was the
market value of each share on the date of the grant. The actual value, if
any, that an executive receives from a stock option will depend upon the
amount by which the market price of our common stock will appreciate at any
particular rate or at all in future years.
(2) The exercise price may be paid in cash, or at the discretion of the
Compensation Committee, by tendering shares of BCFN common stock, or the
delivery of an irrevocable direction to a securities broker to sell shares
and deliver the sale proceeds to BCFN in payment of all or part of the
exercise price, instead of cash.
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The following table sets forth information concerning stock options
granted to certain Executive Officers under the 2000 Plan.
FISCAL YEAR-END 2000 OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at 02/28/01 Options at 02/28/01(1)
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Gary M. Cypres 237,000 158,000 -- --
Arturo Ochoa 5,000 45,000 -- --
William Sweet 7,200 10,800 -- --
Salvatore Caltagirone 7,200 10,800 -- --
- --------------
(1) None of the options were in the money based upon the $0.69 per share stock
price of BCFN common stock on March 20, 2001, the first day the Company's
stock traded.
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COMPENSATION COMMITTEE'S REPORT
ON EXECUTIVE COMPENSATION AND REPRICING OF STOCK OPTIONS
The following Compensation Committee's Report on Executive Compensation
and Repricing of Stock Options shall not be deemed to be "soliciting material"
or to be "filed" with the SEC or subject to Regulations 14A or 14C of the SEC or
to the liabilities of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and shall not be deemed incorporated by reference
into any filing under the Securities Act of 1933 or the Exchange Act,
notwithstanding any general incorporation by reference of this proxy statement
into any other document.
THE REPORT
The compensation committee of the board of directors (the "Committee")
is composed of the two directors who are not also our employees. The Committee
establishes our overall compensation and employee benefits and the specific
compensation of our executive officers. One of the Committee's goals is to
implement executive officer compensation programs that further our business
objectives and that attract, retain and motivate the best qualified executive
officers.
We adopt and administer our executive compensation policies and
specific executive compensation programs in accordance with the principal goal
of maximizing return on stockholders' equity. The Committee believes that we
best achieve this performance goal, and the long-term interests of our
stockholders generally, by attracting and retaining management of high quality,
and that such management will require commensurate compensation. We believe that
our executive officer compensation policies are consistent with this policy.
Our Chairman has a written employment agreement with us which was
established concurrent with (see "Employment Agreements" at page 14, above). The
Committee determines the levels of compensation we grant in such employment
agreements, and the levels of compensation we grant to other executive officers
from time to time, based on factors it deems appropriate.
The Committee determines annual compensation levels for executive
officers and compensation levels to be implemented from time to time in written
employment agreements with executive officers based primarily on its review and
analysis of the following factors: (1) the responsibilities of the position, (2)
the performance of the individual and his or her general experience and
qualifications, (3) our overall financial performance (including return on
equity, levels of general and administrative expense and budget variances) for
the previous year and the contributions the individual or his or her department
made to such performance measures, (4) the officer's total compensation during
the previous year, (5) compensation levels comparable companies pay in similar
industries, (6) the officer's length of service with us, and (7) the officer's
effectiveness in dealing with external and internal audiences. In addition, the
Committee receives the recommendations of the Chairman with respect to the
compensation of other executive officers, which the Committee reviews in light
of the above factors. The
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Committee believes that the base compensation of the executive officers is
competitive with companies of similar size and with comparable operating results
in similar industries.
In addition, Mr. Cypres' compensation for 2000 was based in part on his
progress in achieving certain additional criteria. These criteria included
results in meeting our strategic business plan, and leadership abilities
(including developing an effective senior management team).
While the Committee establishes salary and bonus levels based on the
above-described criteria, the Committee also believes that encouraging equity
ownership by executive officers further aligns the interests of the officers
with the performance objectives of our stockholders and enhances our ability to
attract and retain highly qualified personnel on a basis competitive with
industry practices. Stock options that we granted under our 2000 Plan help
achieve this objective, and provide additional compensation to the officers to
the extent that the price of the common stock increases over fair market value
on the date of grant. We have granted stock options to each of the Named
Executives and to our other officers or key employees. Through the 2000 Plan,
there will be an additional direct relationship between our performance and
benefits to executive officer Plan participants.
On January 18, 2001, and again on February 13, 2001, the Committee
reviewed the options to be granted to our executive officers. Considering these
factors, the Committee determined that it was in the Company's and our
stockholders' best interest to purchase options at $1.53 per share.
Dated: April 13, 2001
COMPENSATION COMMITTEE
William R. Sweet, Chairman
Salvatore J. Caltagirone
AUDIT COMMITTEE
The audit committee of the board is composed of two members and
operates under a written charter adopted by the board of directors. The
responsibilities of the audit committee are contained in the Audit Committee
Report. The audit committee during fiscal year 2000 consisted of Messrs.
Caltagirone and Sweet. Each of the members is "independent," as defined by
Banner Central Finance Company policy and the National Association of Securities
Dealers, Inc. listing standards. The audit committee held a meeting on April 13,
2001, but did not hold any meeting during fiscal year 2000 because Banner
Central Finance Company did not commence operations as a stand-alone company
until February 28, 2001.
AUDIT COMMITTEE REPORT
The following Report of the Audit Committee does not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other Company filings under the Securities Act of 1933 or under the
Securities Act of 1934, except to the extent we specifically incorporate this
Report by reference.
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The audit committee reports to the board and is responsible for
overseeing and monitoring financial accounting and reporting, the system of
internal controls established by management and the audit process of Banner
Central Finance Company.
The Audit Committee Charter adopted by the board sets out the
responsibilities, authority and specific duties of the audit committee. A copy
of the Audit Committee Charter is attached to this Proxy Statement as Appendix
A.
Pursuant to the charter, the audit committee has the following
responsibilities:
- To monitor the preparation of quarterly and annual financial
reports;
- To review the adequacy of internal control systems and financial
reporting procedures with management and independent auditors; and
- To review the general scope of the annual audit and the fees
charged by the independent auditors.
In discharging its oversight responsibility the audit committee has met
and held discussions with management and Arthur Andersen LLP, the independent
auditors for Banner Central Finance Company. Management represented to the audit
committee that all consolidated financial statements were prepared in accordance
with generally accepted accounting principles, and the audit committee has
reviewed and discussed the consolidated financial statements with management and
the independent auditors. The audit committee discussed with the independent
auditors matters required to be discussed by Statement on Auditing Standards No.
61 (Communications with Audit Committees).
The audit committee also obtained from the independent auditors a
formal written statement describing all relationships between Banner Central
Finance Company and the auditors that bear on the auditors' independence
consistent with Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committee. The audit committee discussed with the
independent auditors any relationships that may impact on the firm's objectivity
and independence and satisfied itself as to the auditors' independence.
Based on these discussions and reviews, the audit committee recommended
that the Board of Directors approve the inclusion of the Company's audited
consolidated financial statements in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2000, for filing with the Securities and
Exchange Commission.
Respectfully submitted by the members of the audit committee of the Board of
Directors:
Dated: April 13, 2001
AUDIT COMMITTEE
William R. Sweet, Chairman
Salvatore J. Caltagirone
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DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD
PROPOSAL 1: ELECT THREE DIRECTORS
Our bylaws provide that the exact number of directors will be fixed
from time to time by action of our stockholders or board of directors. The
number of directors currently is three.
The board has nominated three directors for election at the annual
meeting. Each nominee is currently serving as one of our directors. If you
re-elect them, they will hold office until the annual meeting in 2002 or until
their successors have been elected or until they resign.
We know of no reason why any nominee may be unable to serve as a
director. If any nominee is unable to serve, your proxy may vote for another
nominee proposed by the board, or the board may reduce the number of directors
to be elected. If any director resigns, dies or is otherwise unable to serve out
his term, or the board increases the number of directors, the board may fill the
vacancy until the next annual meeting.
NOMINEES
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ----------------------------- ---------------------------------------------------------------------------------
Gary M. Cypres (57) Mr. Cypres has been our Chairman of the Board, Chief Executive Officer and Chief
Financial Officer since our formation. Mr. Cypres also currently serves as Hispanic
Express, Inc.'s Chairman of the Board, Chief Executive Officer and President. Mr.
Cypres has also served as Central Financial's Chairman of the Board, and Chief
Executive Officer since its formation. Mr. Cypres has been Chairman of the Board,
Chief Executive Officer, President and Chief Financial Officer of Banner Holdings and
Banner's Central Electric since February 1991, Chairman of the Board and Chief
Executive Officer of Central Rents, Inc. since June 1994 and managing general partner
of West Coast since March 1990. Prior to that, Mr. Cypres was a general partner of
SC Partners, a private investment banking and consulting firm. From 1983 to 1985,
Mr. Cypres was Chief Financial Officer of The Signal Companies. From 1973 to 1983,
Mr. Cypres was Senior Vice President of Finance at Wheelabrator-Frye Inc. Mr. Cypres
was a member of the Board of Trustees and a faculty member of The Amos Tuck School of
Business at Dartmouth College.
Mr. Cypres will spend that portion of his business time as may be required to oversee
our operations and to direct or implement our business strategies. Mr. Cypres will
continue to spend a portion of his business time as the managing general partner of
West Coast, as Chairman of the Board, Chief Executive Officer and Chief Financial
Officer of Banner's Central Electric, and as Chairman of the Board and Chief
Executive Officer of Central Rents, Inc. See "Certain Relationships."
Salvatore J. Caltagirone (58) Mr. Caltagirone has been one of our directors since our formation and a director of
Central Financial since September 1997. Mr. Caltagirone has been retired since
October 1994. From the fall of 1990 to October 1994, he was an employee of G.M.
Cypres & Company. From March 1987 to June 1990, he was employed as the Managing
Director of Henley Group.
William R. Sweet (63) Mr. Sweet has been one of our directors since our formation and a director of Central
Financial since September 1997. In July 1996, Mr. Sweet retired from his position of
Executive Vice President -- Wholesale Banking at Union Bank of California, N.A., a
position he had held since July 1985. Mr. Sweet currently serves as a trustee of CNI
Charter Funds.
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THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF ALL THREE NOMINEES FOR
DIRECTOR.
PROPOSAL 5: RATIFY SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS FOR 2001
We are asking you to ratify the board's selection of Arthur Andersen
LLP, certified public accountants, as independent public accountants for 2001.
The audit committee recommended the selection of Arthur Andersen to the Board.
Arthur Andersen has served as the independent public accountants of Central
Financial since October 1996.
INDEPENDENT AUDITORS
FEES
The following table sets forth the aggregate fees that Banner Central
Finance Company incurred for audit and non-audit services provided by Arthur
Andersen LLP, which acted as independent auditors for the fiscal year ending
2000 and performed Banner Central Finance Company's audit services in fiscal
year 2000. The table lists audit fees, financial information systems design and
implementation fees, and other fees.
AUDIT FEES. The audit fees include only fees that are customary under
generally accepted auditing standards and are the aggregate fees that Banner
Central Finance Company incurred for professional services rendered for the
audit of Banner Central Finance Company's annual financial statements for fiscal
year 2000.
ALL OTHER FEES. All other fees include the aggregate fees billed for
services rendered by Arthur Andersen LLP, other than those services covered
above.
DECEMBER 31, 2000
-----------------
Audit Fees ........................................ $44,000
Other Fees.......................................... $16,500
A representative of Arthur Andersen will attend the Annual Meeting and
be able to make a statement and to answer your questions.
We are submitting this proposal to you because the board believes that
such action follows sound corporate practice. If you do not ratify the selection
of independent public accountants, the board will consider it a direction to
consider selecting other public accountants. However, even if you ratify the
selection, the board may still appoint new independent public accountants at any
time during the year if it believes that such a change would be in the best
interests of BCFN and our stockholders.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE SELECTION OF ARTHUR ANDERSEN AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR 2001.
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INFORMATION ABOUT STOCKHOLDER PROPOSALS
If you wish to submit proposals to be included in our 2002 proxy
statement, we must receive them, in a form which complies with the applicable
securities laws, on or before January 15, 2002. In addition, in the event a
stockholder proposal is not submitted to us prior to March 29, 2002, the proxy
to be solicited by the board of directors for the 2002 annual meeting will
confer authority on the holders of the proxy to vote the shares in accordance
with their best judgment and discretion if the proposal is presented at the 2002
annual meeting without any discussion of the proposal in the proxy statement for
such meeting. Please address your proposals to: Banner Central Finance Company,
5480 East Ferguson Drive, Commerce, California 90022, Attention: Corporate
Secretary.
By order of the board of directors,
Joni Maggio
May 15, 2001 Assistant Corporate Secretary
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APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to provide
independent and objective oversight of the accounting functions and internal
controls of Banner Central Finance Company. (the "Company"), its subsidiaries
and affiliates and to ensure the objectivity of the Company's financial
statements. The Committee and the Board shall have the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the
independent accountants. The Committee's function is one of oversight and
review, and it is not expected to audit the Company, to define the scope of the
audit, to control the Company's accounting practices, or to define the standards
to be used in preparation of the Company's financial statements. The Audit
Committee shall perform the following functions:
- Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.
- Monitor the independence and performance of the Company's independent
accountants.
- Provide an avenue of communication among independent accountants,
management, and the Board of Directors.
- Report to the Board of Directors.
- Encourage adherence to, and continuous improvement of, the Company's
policies, procedures, and practices of all levels.
- Review areas of potential significant financial risk to the Company.
- Monitor compliance with legal and regulatory requirements.
The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities, and it has direct access to the independent
accountants and everyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.
II. Audit Committee Composition
The Audit Committee shall be comprised of not less than two directors appointed
by the Board of Directors, each of whom shall be independent non-executive
directors, free from any relationship that would interfere with the exercise of
his or her independent judgment. All members of the Committee shall have a basic
understanding of finance and accounting and be able to read and understand
fundamental financial statements or within a reasonable period of
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time after the appointment to the Committee develop such skills. At least one
member of the Committee shall have accounting related financial management
expertise or other comparable experience or background sufficient to provide the
individual with financial sophistication. No member of the Committee shall be
employed or have any other relationship with the Company's independent
accountants.
In the event that a Committee member faces a potential or actual conflict of
interest with respect to a matter before the Committee, that Committee member
shall be responsible for alerting the Committee Chair, and in the case where the
Committee Chair faces a potential or actual conflict of interest, the Committee
Chair shall advise the Chairman of the Board of Directors. In the event that the
Committee Chair, or the Chairman of the Board of Directors, concurs that a
potential or actual conflict of interest exists, an independent substitute
director shall be appointed as a Committee member until the matter, posing the
potential or actual conflict of interest, is resolved.
III. MEETINGS
If an Audit Committee Chair is not designated or present, the members of the
Committee may designate a Chair by majority vote. The Committee members shall
meet at least four times annually, or more frequently as circumstances dictate.
The Audit Committee Chair shall prepare or approve, as the case may be, an
agenda in advance of each meeting. The Committee should meet privately in
executive session at least annually with management, the independent
accountants, and as a Committee to discuss any matter that the Committee or any
of these groups believe should be discussed.
A quorum of the Committee shall be declared when a majority of the appointed
members of the Committee are in attendance. Meetings shall be scheduled at the
discretion of the Chair. Notice of the meetings shall be provided at least three
days in advance. The Committee may ask members of management or others to attend
the meeting and provide pertinent information as necessary.
The Committee shall maintain minutes of the meetings and periodically report to
the Board of Directors on significant activities.
IV. Audit Committee Responsibilities and Duties
1. Charter. Review and reassess the adequacy of this Charter at
least annually. Submit the charter to the Board of Directors
for approval and have the document published at least every
three years in accordance with Securities and Exchange
Commission ("SEC") regulations.
2. Financial Disclosure Documents. Review with management and the
independent accountants the Company's financial disclosure
documents, including all financial statements and reports
filed with the SEC or sent to stockholders and, following the
satisfactory completion of each year-end review, recommend to
the Board of
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Directors the inclusion of the audited financial statements in
the Company's filing on Form 10-K. The review shall include
any significant problems and material disputes between
management and the independent accountants and a discussion
with the independent accountants out of management's presence
of the quality of the Company's accounting principles as
applied in its financial reporting, the clarity of the
Company's financial disclosures and degree of aggressiveness
or conservatism of the Company's accounting principles and
underlying estimates, and a frank and open discussion of other
significant decisions made by management in preparing the
financial disclosure and reviewed by the independent
accountants.
3. Quarterly Reports. Review with management and the independent
accountants the Company's quarterly financial statements prior
to filing or distribution. Discuss any significant changes to
the Company's accounting principles and any items required to
be communicated by the independent accountants in accordance
with SAS 61. The Chair of the Committee may represent the
entire Audit Committee for purposes of this review.
4. Internal Control Systems. In consultation with management and
the independent accountants, the Committee shall consider the
integrity of the Company's financial reporting process and
controls to ensure reliability of the financial reporting and
compliance with applicable codes of conduct, laws and
regulations. Review significant findings prepared by the
independent accountants together with management's responses.
5. Oversight of Independent Accountants. Evaluate the independent
accountants on an annual basis and where appropriate recommend
to the Board of Directors the need for replacement of the
independent accountants. In such evaluation, the Committee
shall ensure that the independent accountants deliver to the
Committee a formal written statement delineating all
relationships between the accountants and the Company. The
Committee also shall engage in a dialogue with the accountants
with respect to any disclosed relationships or services that
may impact the objectivity and independence of the independent
accountants and in response to the independent accountants'
report take, or recommend that the Board of Directors take,
appropriate action to satisfy itself of the independent
accountants' independence.
6. Compensation. Approve fees and other significant compensation
to be paid to the independent accountants.
7. Plan of Audit. Consult with the independent accountants
regarding the plan of audit, including scope and staffing. The
Committee also shall review the independent accountants'
report on the audit and review with management the
iii
30
independent accountants' suggested changes or improvements in
the Company's accounting practices or controls.
8. Accounting Principles and Disclosure. Review significant
developments in accounting rules. The Committee shall review
with management recommended changes in the Company's methods
of accounting or financial statements. The Committee also
shall review with the independent accountants any significant
proposed changes in accounting principles and financial
statements. Discuss certain matters required to be
communicated to audit committees in accordance with AICPA SAS
61.
9. Consultation with Legal Counsel. On at least an annual basis,
review with the Company's counsel, any legal matters that
could have a significant impact on the Company's financial
statements, or the Company's compliance with applicable laws
and regulations, and any inquiries received from the
regulators or governmental agencies.
10. Report to Shareholders. Annually prepare a report to
shareholders as required by the SEC. The report shall be
included in the Company's annual proxy statement.
11. Adequacy of Personnel. Review periodically the adequacy of the
Company's accounting, financial and auditing personnel
resources.
12. Risk Management. Review and evaluate risk management policies
in light of business strategy, capital strength, and overall
risk tolerance. The Committee also shall evaluate on a
periodic basis the Company's investments and derivatives risk
management policies, including the internal system to review
operational risks, procedures for derivatives investment and
trading, and safeguards to ensure compliance with procedures.
13. Tax Policies. Review periodically the Company's tax policies,
reserves and pending audits or assessments.
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31
REVOCABLE PROXY BANNER CENTRAL FINANCE COMPANY REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 25, 2001
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder(s) of Banner Central Finance Company (the
"Company") hereby nominate(s), constitute(s) and appoint(s) Salvatore J.
Caltagirone, Gary M. Cypres, and William R. Sweet, and each of them, the
attorney, agent and proxy of the undersigned, with full power of substitution,
to vote all stock of the Company which the undersigned is entitled to vote at
the Annual Meeting of Stockholders of the Company (the "Meeting") to be held at
the Company's corporate headquarters, 5480 East Ferguson Drive, Commerce,
California 90022 at 9:30 a.m., Monday, June 25, 2001, and any adjournments
thereof, as fully and with the same force and effect as the undersigned might or
could do if personally present thereon, as follows:
1. ELECTION OF DIRECTORS.
[ ] FOR all the nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
Salvatore J. Caltagirone, Gary M. Cypres, and William R. Sweet
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS. To ratify the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for the year ending December 31, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. OTHER BUSINESS. In their discretion, the proxyholders are authorized to
transact such other business as may properly come before the Meeting, and
any adjournment or adjournments thereof.
The Board of Directors recommends a vote "FOR" the election of the Board of
Directors' nominees listed, and "FOR" ratification of the appointment of Arthur
Andersen LLP as the Company's independent public accountants for the year ending
December 31, 2001.
Please Sign and Date on Reverse Side
32
(Continued from Front Side of Proxy Card)
This Proxy will be voted "FOR" the election of the Board of Directors'
nominees unless authority to do so is withheld and "FOR" ratification of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants, unless "AGAINST" or "ABSTAIN" is marked on the Proxy. If any other
business is presented at the Meeting, this Proxy shall be voted by the
proxyholders in accordance with the recommendations of a majority of the Board
of Directors.
The undersigned hereby ratifies and confirms all that said attorneys and
proxyholders, or any of them, or their substitutes, shall lawfully do or cause
to be done by virtue hereof, and hereby revokes any and all proxies heretofore
given by the undersigned to vote at the Meeting. The undersigned hereby
acknowledges receipt of the Notice of Annual Meeting and the Proxy Statement
accompanying said notice.
Date: , 2001
----------------------------
----------------------------------------
Signature
----------------------------------------
Signature
NOTE: Please date this Proxy and sign
your name exactly as it appears on your
stock certificates. Executors,
administrators, trustees, etc., should
give their full titles. All joint owners
should sign.
I (we) [ ] do [ ] do not expect to
attend the Meeting.
PLEASE SIGN, DATE AND RETURN THIS PROXY AS PROMPTLY AS POSSIBLE IN
THE POSTAGE PREPAID ENVELOPE PROVIDED.