CFNB Proxy 2001

DEF 14A 1 cfnbproxy01.htm PROXY STATEMENT 2001 CFNB Proxy 2001

CALIFORNIA FIRST NATIONAL BANCORP
5 Hutton Centre Drive, Suite 250
Santa Ana, CA 92707

ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 9, 2001

PROXY STATEMENT
SOLICITATION OF PROXIES

The accompanying proxy is solicited by the Board of Directors of California First National Bancorp (the "Company") for use at the Company's Annual Meeting of Shareholders to be held at the Company's corporate offices at 5 Hutton Centre Drive, Suite 250, Santa Ana, California on Friday, November 9, 2001, 10:00 a.m., local time, and at any and all adjournments thereof. All shares represented by each properly executed, unrevoked proxy received in time for the Annual Meeting will be voted in the manner specified therein. Where no specification is made on a properly executed and returned proxy, and unless otherwise indicated in this proxy statement, the shares will be voted FOR the election of all nominees for Directors named in the proxy. Any shareholder has the power to revoke his or her proxy at any time before the Annual Meeting. A proxy may be revoked by delivering a written notice of revocation to the Secretary of the Company, by a subsequent proxy executed by the person executing the proxy and presented to the Annual Meeting or by attendance at the Annual Meeting and voting in person by the person executing the proxy.

This Proxy Statement is being mailed to the Company's shareholders on or about October 26, 2001. The solicitation of proxies will be made by mail and expenses will be paid by the Company, and will include forwarding solicitation materials regarding the meeting to beneficial owners of the Company's Common Stock. Further solicitation of proxies may be made by telephone or oral communication with some shareholders. All such further solicitation will be made by the Company's regular employees who will not receive additional compensation for that solicitation. The mailing address of the Company's principal executive office is 5 Hutton Centre Drive, Suite 250, Santa Ana, California 92707.

OUTSTANDING SHARES AND VOTING RIGHTS

Only holders of record of the 11,235,328 shares of the Company's Common Stock outstanding at the close of business on October 19, 2001, the record date with respect to this solicitation, will be entitled to notice of and to vote at the Annual Meeting and any adjournments thereof. In order to constitute a quorum for the conduct of business at the Annual Meeting, a majority of the outstanding shares of Common Stock of the Company entitled to vote at the meeting must be represented in person or by proxy at the Meeting. Shares represented by proxies that reflect abstentions or "broker non-votes" (shares held by a broker or nominee which are represented at the Meeting, but with respect to which the broker or nominee is not empowered to vote on a particular proposal) will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum. Abstentions are counted in tabulations of the votes cast on proposals presented to shareholders, and therefore will have the same effect as a negative vote, whereas broker non-votes are not counted for purposes of determining whether a proposal has been approved.

No shareholder will be entitled to cumulate votes (i.e., cast for any candidate for election to the Board of Directors, a number of votes greater than the number of the shareholders' shares) unless the names of the candidate or candidates for whom votes will be cumulated have been placed in nomination prior to the voting and the shareholder has given notice at the meeting, prior to voting, of the shareholder's intention to cumulate votes. If any one shareholder has given such notice, all shareholders may cumulate their votes for candidates who have been nominated. If voting for directors is conducted by cumulative voting, each share will be entitled to a number of votes equal to the number of directors to be elected and the votes may be cast for a single candidate or may be distributed among two or more candidates in such proportions as the shareholder may determine. In the event of cumulative voting, the proxy holders intend to distribute the votes represented by the proxies solicited hereby in such proportions as they see fit. If the voting is not conducted by cumulative voting, each share will be entitled to one vote and the holders of the majority of the shares voting at the meeting will be able to elect all of the directors if they choose to do so. The candidates receiving the highest number of votes, up to the number of directors to be elected, will be elected. On all other matters, each share is entitled to one vote.

PRINCIPAL SHAREHOLDERS

The following table sets forth, as of October 19, 2001, certain information as to the number of shares of the Company's Common Stock beneficially owned by each person who is known by the Company to beneficially own more than five percent of the outstanding shares of the Company's Common Stock and by all directors and officers as a group.


Name and Address of Beneficial Owners	Amount of the Company's Common Stock Beneficially Owned	Percent of the Company's Common Stock Beneficially Owned
Patrick E. Paddon c/o California First National Bancorp 5 Hutton Centre Drive Santa Ana, CA 92707	6,336,478 (1)		56.1%
Glen T. Tsuma c/o California First National Bancorp 5 Hutton Centre Drive Santa Ana, CA 92707	1,356,772		12.1%
Donald P. Moriarty c/o McGrath, Doyle & Phair 150 Broadway New York, NY 10038	1,087,650		9.7%
All Directors and Officers as a Group (7 persons)	7,876,459 (1,2)		68.9%

(1) Does not include 34,065 shares of Common Stock held by Mr. Paddon's children, as to which Mr. Paddon disclaims any beneficial interest. Includes options to purchase 60,000 shares which are exercisable within 60 days of October 19, 2001.
(2) Includes options to purchase 204,224 shares which are exercisable within 60 days of October 19, 2001.

ITEM 1

ELECTION OF DIRECTORS

Directors are elected at each Annual Meeting of Shareholders and hold office until their respective successors are duly elected and qualified. It is the intention of the persons named in the enclosed form of proxy, unless the proxy specifies otherwise, to vote the shares represented by the proxy FOR the election of the nominees set forth below. Although it is anticipated that each nominee will be available to serve as a director, should any nominee become unavailable to serve, the proxies will be voted for such other person as may be designated by the Company's Board of Directors.

The nominees for the Board of Directors are Patrick E. Paddon, Glen T. Tsuma, Michael H. Lowry, Harris Ravine and Danilo Cacciamatta. Certain information as of October 19, 2001 with respect to the nominees for election as directors, including the number of shares of the Company's Common Stock beneficially owned by each of them as of October 19, 2001, is set forth under "Directors and Executive Officers" below.

The Board of Directors met five times during the year ended June 30, 2001. The Board has established an Audit Committee. The Audit Committee consists of Messrs. Cacciamatta, Lowry and Ravine. The Audit Committee has responsibility for overviewing: (a) the financial reports and other financial information provided by the Company to any governmental or regulatory body, the public or other users thereof, (b) the Company's systems of internal accounting and financial controls, and (c) the annual independent audit of the Company's financial statements . The Audit Committee met two times during the year ended June 30, 2001. The entire Board of Directors reviews and approves executive compensation and the granting of stock options. Three stock option meetings were held during the year ended June 30, 2001. All board and committee meetings were attended by each director. The entire Board of Directors of the Company serves as the Compensation Committee.

Directors who are employees of the Company do not receive any fees for their services as directors. Directors of the Company who are not employees receive annual compensation of $20,000 payable quarterly, plus expenses, for service on the Company and any subsidiary Board. Directors are entitled to participate in the Company's 1995 Stock Option Plan.

DIRECTORS AND EXECUTIVE OFFICERS

Current members of the Board of Directors and executive officers, together with certain information regarding them, are as follows:

Name	Age	Position	Shares of Common Stock Beneficially Owned	Percent of Common Stock Beneficially Owned
Patrick E. Paddon	50	Chief Executive Officer, President, Director	6,336,478 (1)	56.1%
Glen T. Tsuma	48	Chief Operating Officer, Secretary, Director	1,356,772	12.1%
Michael H. Lowry	56	Director	32,000 (2)	*
Harris Ravine	58	Director	26,000 (3)	*
Danilo Cacciamatta	55	Director	22,000 (4)	*
S. Leslie Jewett	46	Chief Financial Officer	66,209 (5)	*
Neil G. Kenduck	46	General Counsel	37,000 (6)	*

* Less than one percent
1)     Excludes 34,065 shares held by Mr. Paddon's children, as to which Mr. Paddon disclaims any beneficial interest. Includes options to purchase 60,000 shares which are exercisable within 60 days of October 19, 2001.
2)     Includes options to purchase 28,000 shares which are exercisable within 60 days of October 19, 2001.
3)     Includes options to purchase 25,890 shares which are exercisable within 60 days of October 19, 2001.
4)     Includes options to purchase 2,000 shares which are exercisable within 60 days of October 19, 2001.
5)     Includes options to purchase 53,334 shares which are exercisable within 60 days of October 19, 2001.
6)     Includes options to purchase 35,000 shares which are exercisable within 60 days of October 19, 2001.

Patrick E. Paddon founded the Company in 1977 and has served as the President and a Director of the Company since its inception. Prior to 1977, Mr. Paddon was the Manager of Corporate Planning and Budgets at Business Systems Technologies, a manufacturer of IBM plug-compatible peripheral equipment. Mr. Paddon is the spouse of Ms. Jewett.

Glen T. Tsuma joined the Company in May 1981 and has been Chief Operating Officer since August 1989 and Secretary since October 1991. Prior to joining the Company, he was an audit manager with Arthur Young & Company.

Michael H. Lowry was elected to the Board of Directors in August 1992. Mr. Lowry is a Managing Director of Nomura Securities International, Inc., an investment banking firm. Prior to joining Nomura Securities in February 1994, Mr. Lowry had been employed by the investment banking firm of Bear Stearns & Co., Inc. from 1991 to 1993 and by the investment banking firm of Kidder, Peabody & Co. Incorporated from 1970 to 1990.

Harris Ravine was elected to the Board of Directors in February 1994. Mr. Ravine became a member of Telecom Partners, a venture capital group, in April 2001. From June 2000 until March 2001, he was a partner of In_Fusion, an advisory services firm. From May 1997 to January 2000, Mr. Ravine was the Chairman and Chief Executive Officer of Andataco/IPL Systems, Inc. Mr. Ravine had been Managing Director of BI Capital, Limited and Technology Investment Officer with The Broe Companies, a real estate investment company from June 1994 to April 1997. Prior thereto, Mr. Ravine was employed by Storage Technology Corporation, a computer manufacturer, in various capacities, including Executive Vice President, Chief Administrative Officer and Group Officer for Midrange Markets from June 1992 to January 1994.

Danilo Cacciamatta was elected to the Board of Directors in June 2001. Mr. Cacciamatta is the Chief Executive Officer of Cacciamatta Accountancy Corporation, a position he has held for more than the past five years. Prior to forming Cacciamatta Accountancy Corporation, Mr. Cacciamatta was employed by KPMG Peat Marwick from 1972 to 1988 in a variety of positions, including audit partner from 1980 to 1988. Mr. Cacciamatta is a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Mr. Cacciamatta also serves as co-founder and Chairman of the Board, Chief Executive Officer and Chief Financial Officer of the following public shell corporations: Bergamo Acquisition Corp., Clusone Acquisition Corp., Cork Acquisition Corp., Lombardia Acquisition Corp., and Meelick Acquisition Corp.

S. Leslie Jewett joined the Company in September 1991 as Vice President - Finance. In April 1994, Ms. Jewett was named Chief Financial Officer of the Company. From 1981 to 1990, she held various management positions at Kidder, Peabody & Co. Incorporated, including Senior Vice President, Corporate Finance. Ms. Jewett has a BA from Swarthmore College and an MBA from Stanford University. Ms. Jewett is the spouse of Mr. Paddon.

Neil G. Kenduck joined the Company in September 1991 as General Counsel. From 1986 to 1991 he was an attorney with the law firm of Rutter, O'Sullivan, Greene & Hobbs. Prior to that, he was an attorney with O'Melveny & Myers from 1982 to 1986. Mr. Kenduck graduated with honors from Hofstra Law School and was editor of the law review.

EXECUTIVE COMPENSATION

The following table discloses compensation paid by the Company to the Chief Executive Officer and the remaining most highly-paid executive officers for the three fiscal years ended June 30, 2001:

		Annual Compensation		Long-term Compensation	Other
Name and Principal Position	Year	Salary	Bonus	Options	Compensation (1)
Patrick E. Paddon	2001	$326,250	--	--	$2,000
Chief Executive Officer	2000	375,000	--	--	2,000
	1999	375,000	--	--	2,000
Glen T. Tsuma	2001	$180,000	--	--	$2,000
Chief Operating Officer	2000	180,000	--	--	2,000
	1999	180,000	--	--	2,000
S. Leslie Jewett	2001	$170,000	--	--	$2,000
Chief Financial Officer	2000	180,000	--	--	2,000
	1999	120,000	--	--	2,000
Neil G. Kenduck	2001	$235,000	$45,903	--	$2,000
General Counsel	2000	220,000	48,369	--	2,000
	1999	205,000	52,460	--	2,000

1) Company contribution under the Company's 401(k) Plan, subject to certain vesting restrictions.

Option Grants in Last Fiscal Year

The table below lists those named executive officers to receive stock option grants during fiscal 2001.

Name	Options Granted	% of Total Options Granted to Employees in Fiscal Year	Exercise Price	Expiration Date	Grant Date Present Value (1)
Patrick E. Paddon	300,000	53.9%	$9.25	8/4/10	$1,345,328
Neil G. Kenduck	25,000	4.3%	$9.25	8/4/10	$ 112,111
Neil G. Kenduck	10,000	1.8%	$6.00	4/26/11	$ 23,713
S. Leslie Jewett	100,000	18.0%	$6.00	4/26/11	$ 237,124

1) Based on the Black-Scholes Option Pricing model. The Company's use of this model should not be construed as an endorsement of its accuracy in valuing options or of the assumptions used in the model. The actual value, if any, an executive may realize from any option depends upon the actual performance of the Company's common stock during the applicable period.

Aggregate Option Exercises and Fiscal Year End Option Value

The following table sets forth information with respect to the unexercised options held by the executive officers as of the end of the fiscal year:

	Number of Unexercised Options at June 30, 2001		Value of Unexercised In-the-Money Options at June 30, 2001 (1)
Name	Exercisable	Unexercisable	Exercisable	Unexercisable
Patrick E. Paddon	--	300,000	--	$957,000
Glen T. Tsuma	--	--	--	--
S. Leslie Jewett	43,334	140,000	$81,568	661,600
Neil G. Kenduck	24,000	56,000	40,165	148,735

__________________________

Represents the difference between the most recent closing price of the Common Stock as of June 30, 2001 as reported by NASDAQ and the exercise price of the options.

BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION

The Company has not established a standing compensation committee but instead all executive compensation issues are subject to the review of the entire Board of Directors. The compensation of the Company's Chief Executive Officer has been reviewed and approved by the Company's Board of Directors. The compensation of other key officers has generally been established by the Chief Executive Officer, subject to the review of the Board of Directors.

The Company's compensation practices have generally been designed to bind the interests of the Company's key executives to the long-term performance of the Company and its shareholders. Compensation for all executives is comprised primarily of 1) base salary and 2) equity participation through common stock ownership or common stock options. Bonus compensation has been paid to certain executives from time to time. Base salaries are established according to the particular position of the individual executive, the current economic and business circumstances of the Company, and competitive conditions in the employment marketplace. Bonus amounts are determined based upon an analysis of individual and Company performance, but generally are not tied to any direct quantitative or qualitative performance factors. To assess the 2001 compensation level of the Company's key executives relative to their peers, the Company examined the compensation plans of other public leasing companies, comparable financial service firms and similar emerging growth companies. In July 2000, Mr. Kenduck's salary was increased by 7% from the prior year, which increase reflected efforts to maintain his compensation at competitive levels. In April 2001, in response to declining earnings during fiscal 2001 and in an effort to reduce overhead expenses, the base salaries for Mr. Paddon and Ms. Jewett were reduced by 52% and 22%, respectively, and at July 1, 2001, Mr. Kenduck's overall compensation package was similarly reduced.

The Company believes that the cash compensation paid to the Company's executive officers is generally less than that paid to others in comparable positions. However, the equity participation of the Company's executive officers, both through direct ownership and common stock options, is generally greater than other comparable companies. The executive officers of the Company beneficially own approximately 69% of the Company's common stock outstanding. Through having a substantial portion of each executive's long-term compensation derived from participation in the Company's common stock, the Board of Directors believe that the Company has aligned the financial interests of the executive officers with those of the Company's other shareholders.

CEO Compensation

Patrick E. Paddon's, Chief Executive Officer, cash compensation was set at $375,000 at the beginning of fiscal 2001, however, this compensation was reduced to $180,000 effective April 1, 2001. Mr. Paddon's compensation in fiscal 2001 was not specifically tied to any measures of return on equity or earnings targets. Mr. Paddon's compensation was set at $375,000 by the Board of Directors several years ago based upon a review of compensation levels at comparable public companies. Following the most recent review, the Board of Directors believes Mr. Paddon's compensation is below that of most chief executive officers at other comparable companies. Mr. Paddon has requested and the Board of Directors has agreed to accept his decision to keep his compensation in fiscal 2002 at $180,000.

Compensation Committee Interlocks and Insider Participation

Mr. Paddon and Mr. Tsuma, as executive officers and directors of the Company, participate in all board compensation decisions. Mr. Paddon and Mr. Tsuma also review all stock option grants. Mr. Tsuma has not received any stock option grants in the last five years. Mr. Paddon was granted an option on August 4, 2000 to purchase 300,000 shares at $9.25 with a five year vesting schedule, which replaced an option to purchase 300,000 shares at $3.50 which expired unexercised in September 2000.

AUDIT COMMITTEE REPORT

The audit committee of the Company's board of directors consists of three directors who have been determined to be "independent" as defined in Rule 4200(a)(15) of the National Association of Security Dealers ("NASD") listing standards. In December 1999, the SEC and the NASD adopted new guidelines regarding audit committees. In consideration of these new guidelines, at a meeting on June 9, 2000, the Audit Committee unanimously adopted an Audit Committee Charter, which is attached as an Appendix to this Proxy Statement.

The Audit Committee has reviewed and discussed the audited financial statements with management; received written disclosures and the letter from our independent accountants, PriceWaterhouseCoopers LLP ("PWC"), required by Independence Standards Board Standard No. 1, as modified or supplemented; and discussed with PWC the auditors' independence. The Audit Committee also discussed with PWC the matters required by Statement on Auditing Standards No. 61, Communication with Audit Committees.

Based on the review and discussions above, the Audit Committee has recommended to the Board of Directors that the audited consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended June 30, 2001 be filed with the Securities and Exchange Commission.

Submitted by the Audit Committee of the Company's Board of Directors,
Harris Ravine
Michael Lowry
Danilo Cacciamatta

Fees Billed for Services Rendered by Principal Accountant

For the fiscal year ended June 30, 2001, PWC billed the approximate fees set forth below.

Audit Fees	$	119,000
Financial Information Systems Design and Implementation Fees	$	0
All Other Fees	$	114,000

COMMON STOCK PERFORMANCE GRAPH

The graph below shows a comparison of the five-year cumulative return among the Company, the NASDAQ Composite Index and a peer group of public leasing companies comprised of Comdisco, Inc., DVI, Inc. and Electro Rent Corporation, each of which are engaged in the equipment leasing industry as a substantial part of their business, and whose shares have traded publicly for at least five years.

Performance Graph

INDEPENDENT PUBLIC ACCOUNTANTS

The Company has not yet selected its independent public accountants for the year ended June 30, 2002 because its Audit Committee has not yet made a recommendation. Representatives of PricewaterhouseCoopers LLP, the Company's independent public accountants for the year ended June 30, 2001, are expected to be present at the Annual Meeting and will be available to respond to appropriate questions and to make such statements as they may desire.

ANNUAL REPORT AND OTHER SEC FILINGS

The Annual Report on Form 10-K for the fiscal years ended June 30, 2001 and 2000, including the financial statements and schedule thereto, as filed with the Securities and Exchange Commission, has been included in the Company's Annual Report which accompanies this Proxy Statement.

Section 16 of the 34 Act

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's Directors, executive officers and any persons holding 10% or more of the Company's Common Stock to report their ownership of Common Stock and any changes in that ownership to the Securities and Exchange Commission. Based upon a review of information furnished to the Company during the fiscal year ended June 30, 2001, Mr. Paddon was late in filing a Form 4 and a Form 5 and Mr. Ravine was late in filing a Form 4.

PROPOSALS OF SHAREHOLDERS

All proposals of shareholders intended to be presented at the Company's 2002 Annual Meeting of Shareholders must be directed to the attention of and received by the Secretary of the Company, at the address of the Company set forth on the first page of this Proxy Statement, before June 30, 2002 if they are to be considered for inclusion in the Proxy Statement and form of Proxy used in connection with the meeting, in accordance with the rules and regulations of the Securities and Exchange Commission.

OTHER MATTERS

At the time of the preparation of this Proxy Statement, the Board of Directors knows of no other matters which will be acted upon at the Annual Meeting. If any other matters are properly presented for action at the Annual Meeting or any adjournment thereof, proxies will be voted with respect thereto in accordance with the best judgment and in the discretion of the proxy holders.

By Order of the Board of Directors

Glen T. Tsuma
Secretary

Santa Ana, California
October 26, 2001

APPENDIX

CALIFORNIA FIRST NATIONAL BANCORP

AUDIT COMMITTEE CHARTER

Purpose

The primary purpose of the California First National Bancorp Audit Committee (the "Audit Committee") is to assist the Board of Directors of California First National Bancorp (the "Board") in fulfilling its responsibility to oversee management's conduct of the Company's financial reporting process, including overviewing: (a) the financial reports and other financial information provided by the Company to any governmental or regulatory body, the public or other users thereof, (b) the Company's systems of internal accounting and financial controls, and (c) the annual independent audit of the Company's financial statements.

In discharging its oversight role, the Audit Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company and the power to retain outside counsel, auditors or other experts for this purpose. The Board and the Audit Committee are in place to represent the Company's shareholders; accordingly, the independent auditor is ultimately accountable to the Board and the Audit Committee. In order to accomplish this, the Audit Committee must maintain free and open means of communication between the directors, the independent auditors and the financial management of the Company.

The Audit Committee shall review the adequacy of this Charter on an annual basis.

Membership

The Audit Committee shall be comprised of not less than three members of the Board, and the Audit Committee's composition will meet the requirements of the Audit Committee Policy of the National Association of Securities Dealers ("NASD"). Accordingly, all of the members will be directors:

Who have no relationship to the Company that may interfere with the exercise of their independence from management and the Company; and

Who are financially literate or who become financially literate within a reasonable period of time after appointment to the Audit Committee. In addition, at least one member of the Audit Committee will have accounting or related financial management expertise.

Key Responsibilities

The Audit Committee's job is one of oversight and it recognizes that the Company's management is responsible for preparing the Company's financial statements and that the outside auditors are responsible for auditing those financial statements. Additionally, the Audit Committee recognizes that financial management, as well as the outside auditors, have more time, knowledge and more detailed information on the Company than do Audit Committee members; consequently, in carrying out its oversight responsibilities, the Audit Committee is not providing any expert or special assurance as to the Company's financial statements or any professional certification as to the outside auditor's work.

The following functions shall be the common recurring activities of the Audit Committee in carrying out its oversight function. These functions are set forth as a guide with the understanding that the Audit Committee may diverge from this guide as appropriate given the circumstances.

The Audit Committee shall review with management and the outside auditors the audited financial statements to be included in the Company's Annual Report on Form 10-K (or the Annual Report to Shareholders if distributed prior to the filing of Form 10-K) and review and consider with the outside auditors the matters required to be discussed by Statement of Auditing Standards ("SAS") No. 61.

As a whole, or through the Audit Committee chair, the Audit Committee shall review with the outside auditors the Company's interim financial results to be included in the Company's quarterly reports to be filed with Securities and Exchange Commission and the matters required to be discussed by SAS No. 61; this review will occur prior to the Company's filing of the Form 10-Q.

The Audit Committee shall discuss with management and the outside auditors the quality and adequacy of the Company's internal controls.

The Audit Committee shall:

request from the outside auditors annually, a formal written statement delineating all relationships between the auditor and the Company consistent with Independence Standards Board Standard Number 1;

discuss with the outside auditors any such disclosed relationships and their impact on the outside auditor's independence; and

recommend that the Board take appropriate action to oversee the independence of the outside auditor.

The Audit Committee, subject to any action that may be taken by the full Board, shall have the ultimate authority and responsibility to select (or nominate for shareholder approval), evaluate and, where appropriate, replace the outside auditor.