SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Sec. 240.14a-12
PERFORMANCE CAPITAL MANAGEMENT, LLC
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: __________________________________________
2) Form Schedule or Registration Statement No.: _____________________
3) Filing Party: ____________________________________________________
4) Date Filed: ______________________________________________________
[PCMLLC LETTERHEAD]
April 28, 2003
Dear Member:
You are cordially invited to attend the 2003 Annual Meeting of Members of
Performance Capital Management, LLC, which will be held at our offices, located
at 222 South Harbor Blvd., Suite 400, Anaheim, California 92805, on Monday, June
9, 2003, at 10:00 a.m., local time.
The Notice of 2003 Annual Meeting of Members and a Proxy Statement, which
describe the formal business to be conducted at the meeting, accompany this
letter. Our 2002 Annual Report on Form 10-KSB is also enclosed for your
information.
All Members entitled to vote are invited to attend the Annual Meeting.
However, to ensure your representation at the Annual Meeting, you are urged to
complete, date, sign and return the enclosed Proxy Card (a postage-prepaid
envelope is enclosed for that purpose).
YOUR LLC UNITS CANNOT BE VOTED UNLESS YOU DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD OR ATTEND THE ANNUAL MEETING IN PERSON. Regardless of the
number of LLC Units you own, your careful consideration of, and vote upon, the
matters before the Members are important.
I look forward very much to seeing you on June 9th.
Sincerely,
PERFORMANCE CAPITAL MANAGEMENT, LLC
/s/ David J. Caldwell
David J. Caldwell
Chief Operations Officer
PERFORMANCE CAPITAL MANAGEMENT, LLC
222 South Harbor Blvd., Suite 400
Anaheim, California 92805
================================================================================
NOTICE OF 2003 ANNUAL MEETING OF MEMBERS
TO BE HELD ON JUNE 9, 2003
================================================================================
To our Members:
NOTICE IS HEREBY GIVEN that the 2003 Annual Meeting of Members of Performance
Capital Management, LLC, a California limited liability company, will be held on
Monday, June 9, 2003, at 10:00 a.m., local time, at our offices, located at 222
South Harbor Blvd., Suite 400, Anaheim, California 92805. The purposes of the
Annual Meeting are:
1. To approve the Second Amendment to the Operating Agreement to provide
for classes and staggered terms for Performance Capital Management,
LLC directors;
2. To elect seven directors to serve either a two-year term or staggered
terms of one and two years and until each director's successor has
been duly elected and qualified;
3. To ratify the appointment of Moore Stephens Wurth Frazer and Torbet,
LLP, as independent auditors for Performance Capital Management, LLC
for the fiscal year ending December 31, 2003; and
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice. Members of record on the books of Performance Capital
Management, LLC at the close of business on APRIL 15, 2003 will be entitled to
notice of and to vote at the Annual Meeting or any adjournment or postponement
thereof.
ALL MEMBERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON, BUT
EVEN IF YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE REQUESTED TO
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN
THE ENVELOPE PROVIDED TO ENSURE YOUR REPRESENTATION. MEMBERS ATTENDING THE
ANNUAL MEETING MAY VOTE IN PERSON EVEN IF THEY HAVE PREVIOUSLY VOTED BY PROXY.
By Order of the Board of Directors,
/s/ William D. Constantino
William D. Constantino
Chief Legal Officer
Anaheim, California
April 28, 2003
PERFORMANCE CAPITAL MANAGEMENT, LLC
222 SOUTH HARBOR BLVD., SUITE 400
ANAHEIM, CALIFORNIA 92805
================================================================================
PROXY STATEMENT
ANNUAL MEETING OF MEMBERS TO BE HELD ON MONDAY, JUNE 9, 2003
================================================================================
GENERAL
This Proxy Statement is furnished to the Members of Performance Capital
Management, LLC, a California limited liability company, in connection with the
solicitation of proxies by the Board of Directors of Performance Capital
Management, LLC (also referred to as the "Board"). The proxies are to be voted
at the 2003 Annual Meeting of Members of Performance Capital Management, LLC
(the "Annual Meeting") to be held at our offices located at 222 South Harbor
Blvd., Suite 400, Anaheim, California, at 10:00 a.m., local time, on Monday,
June 9, 2003, and any adjournment or postponement thereof, for the purposes set
forth in the accompanying Notice. The Board is not aware of any other matters to
be presented at the Annual Meeting. If any other matter should be presented at
the Annual Meeting upon which a vote properly may be taken, LLC Units
represented by all duly executed proxies received by the Board will be voted
with respect thereto in accordance with the best judgment of the persons
designated as the proxies. This Proxy Statement and the accompanying form of
Proxy Card have been mailed to Members on or about April 28, 2003.
Our principal offices are located at 222 South Harbor Blvd., Suite 400, Anaheim,
California, 92805 and our telephone number is 714.502.3736.
We will pay all costs of solicitation, including the costs of preparing,
assembling, printing and mailing this Proxy Statement, the Proxy Card and any
additional information furnished to Members. No additional compensation will be
paid to directors, officers or other regular employees for their services in
connection with this proxy solicitation.
ANNUAL REPORT
An Annual Report to Members (the "Annual Report"), containing financial
statements for the period from inception, February 4, 2002, through December
31, 2002, accompanies this Proxy Statement. Members are referred to the Annual
Report for financial and other information about the activities of Performance
Capital Management, LLC. The Annual Report is not incorporated by reference into
this Proxy Statement and is not deemed to be a part hereof.
We will furnish to you any exhibit described in the list accompanying the Annual
Report, upon the payment, in advance, of the specified reasonable fees related
to our furnishing of such exhibit(s). Requests for copies of the Annual Report
and/or exhibit(s) should be directed to Harvey "Bud" Webb, Member Relations, at
Performance Capital Management, LLC's principal address at 222 South Harbor
Blvd., Suite 400, Anaheim, California, 92805 or by calling 714.502.3736. In the
alternative, you may find the Annual Report and the exhibits to the Annual
Report on the Security and Exchange Commission's web-site at www.sec.gov.
1
RECORD DATE AND VOTING RIGHTS
Only holders of record of our LLC Units at the close of business on April 15,
2003 (the "Record Date") will be entitled to notice of, and to vote at, the
Annual Meeting. On the Record Date, we had 547,828 voting LLC Units outstanding.
Each LLC Unit is entitled to one vote at the Annual Meeting.
The following table summarizes the voting requirements for the three proposals:
PROPOSAL VOTE REQUIRED
- ------------------------------------------------------------------------------------------------
Proposal No. 1: Approval of the The affirmative vote of a majority of the LLC Units
amendment to our Operating Agreement held by Members present in person or by proxy at the
to provide for staggered terms for our meeting.
directors.
- ------------------------------------------------------------------------------------------------
Proposal No. 2: Election of seven Election of directors is by the affirmative vote of a
directors. majority of the LLC Units held by Members present in
person or by proxy at the meeting.
- ------------------------------------------------------------------------------------------------
Proposal No. 3: Ratification of our The affirmative vote of a majority of the LLC Units
Board's appointment of Moore Stephens held by Members present in person or by proxy at the
Wurth Frazer and Torbet, LLP as the meeting.
company's auditors for fiscal year ending
December 31, 2003.
- ------------------------------------------------------------------------------------------------
QUORUM
Members present in person or by proxy whose aggregate number of voting LLC Units
exceed one-third of our issued and outstanding voting LLC Units constitutes a
quorum for the transaction of business at the Annual Meeting. Abstentions will
be included in determining the presence of a quorum at the Annual Meeting.
However, an abstention will count as a vote AGAINST the proposal.
LIST OF MEMBERS ENTITLED TO VOTE
At least 10 days before the Annual Meeting, our Chief Legal Officer will make a
complete list of the Members entitled to vote at the Annual Meeting arranged in
alphabetical order, with the address of and number of LLC Units held by each
Member. The list will be kept on file at the principal offices of Performance
Capital Management, LLC and will be subject to inspection by any Member at any
time during normal business hours. The list will also be present for inspection
at the Annual Meeting.
ATTENDANCE AND VOTING AT THE ANNUAL MEETING
If you own voting LLC Units of record, you may attend the Annual Meeting and
vote in person, regardless of whether you have previously voted on a Proxy Card.
We encourage you to vote your units in advance of the Annual Meeting date, even
if you plan on attending the Annual Meeting. You may change or revoke your proxy
at the Annual Meeting as described below even if you have already voted.
PROXY VOTING PROCEDURES
LLC Units for which Proxy Cards are properly executed and returned will be voted
at the Annual Meeting in accordance with the directions noted thereon or, in the
absence of directions, will be voted "FOR" the election of each of the nominees
to the Board of Directors, and "FOR" the other proposals to be voted on at the
Annual Meeting. It is not expected that any matters other than those referred to
in the Notice and this Proxy Statement will be brought before the Annual
Meeting. If, however, other matters are properly
2
presented, the persons named as proxies will vote in accordance with their
discretion with respect to such matters.
The manner in which your LLC Units may be voted by proxy depends on how your LLC
Units are held. If you own LLC Units of record, meaning that your LLC Units are
represented by certificates or book entries in your name so that you appear as a
voting Member on our records, a Proxy Card for voting those LLC Units will be
included with this Proxy Statement. YOU MAY VOTE THOSE LLC UNITS BY COMPLETING,
SIGNING AND RETURNING THE PROXY CARD IN THE ENCLOSED ENVELOPE.
REVOCATION
Any Member holding voting LLC Units of record may revoke a previously granted
proxy at any time before it is voted by delivering to our Chief Legal Officer a
written notice of revocation or a duly executed Proxy Card bearing a later date
or by attending the Annual Meeting and voting in person.
DATE AND TIME OF OPENING AND CLOSING OF THE POLLS
The date and time of the opening of the polls for the Annual Meeting shall be
10:00 a.m., local time, on Monday, June 9, 2003. The time of the closing of the
polls for voting shall be announced at the Annual Meeting. No ballot, proxies or
votes, nor any revocations or changes to a vote, shall be accepted after the
closing of the polls unless a court of equity, upon application by a Member,
determines otherwise.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Our directors and executive officers do not have any substantial interest in the
matters to be acted upon at the Annual Meeting except that staggered terms, as
provided in Proposal No. 1, will make it more difficult for Members to effect a
change in control of our Board of Directors.
CHANGE IN CONTROL TRANSACTION
Performance Capital Management, LLC is a new entity that was formed by a U.S.
Chapter 11 Trustee and the Official Committee of Equity Security Holders in
January 2002 for the purpose of reorganizing six entities that had voluntarily
filed bankruptcy petitions in late December 1998 with the United States
Bankruptcy Court for the Central District of California, Santa Ana Division (the
"Bankruptcy Court"). Two of the six reorganized entities had a class of limited
partnership interests registered under Section 12(g) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), prior to the bankruptcy filings.
Performance Capital Management, LLC is considered a successor entity to the six
companies emerging from bankruptcy, including two public companies, Performance
Capital Management Fund III, Ltd. and Performance Capital Management Fund IV,
Ltd. The Bankruptcy Court order approving the Plan of Reorganization was entered
on January 24, 2002 and, following a ten day appeals period, became effective on
February 4, 2002.
We are not aware of any arrangement that would upset the control mechanisms
currently in place over Performance Capital Management, LLC. Although it is
conceivable that a third party could attempt a hostile takeover of Performance
Capital Management, LLC, we have not received notice of any such effort.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To our knowledge, the following table sets forth information with respect to the
beneficial ownership of our securities as of April 15, 2003 by:
- each person known by us to beneficially own more than 5% of our voting
securities;
- each of our executive officers;
- each of our directors; and
- all of our executive officers and directors as a group.
3
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. Unless otherwise indicated, the address for those
listed below is c/o Performance Capital Management, LLC, 222 South Harbor Blvd.,
Suite 400, Anaheim, California 92805. Subject to applicable community property
laws, the persons named in the table have sole voting power with respect to all
LLC Units shown as beneficially owned by them. The number of LLC Units entitled
to vote outstanding as of April 15, 2003 was 547,828. Except as noted otherwise,
the amounts reflected below are based upon information provided to us and in
filings with the Securities and Exchange Commission.
- -------------------------------------------------- --------------- ------------
NUMBER OF UNITS PERCENT OF
NAME OF BENEFICIAL OWNER OUTSTANDING
- -------------------------------------------------- --------------- ------------
Larisa Gadd, Co-Chairperson of the Board 4,777 *
- -------------------------------------------------- --------------- ------------
Lester T. Bishop, Co-Chairperson of the Board 398 *
- -------------------------------------------------- --------------- ------------
Larry C. Smith, Director 995 *
- -------------------------------------------------- --------------- ------------
David Barnhizer, Director 1,094 *
- -------------------------------------------------- --------------- ------------
Rodney Woodworth, Director 2,239 *
- -------------------------------------------------- --------------- ------------
Sanford Lakoff, Director 1,593 *
- -------------------------------------------------- --------------- ------------
Robert R. Price, Director 0 *
- -------------------------------------------------- --------------- ------------
David J. Caldwell, Chief Operations Officer 0 *
- -------------------------------------------------- --------------- ------------
Edward M. Rucker, Accounting Manager 0 *
- -------------------------------------------------- --------------- ------------
Darren S. Bard, Chief Information Officer 0 *
- -------------------------------------------------- --------------- ------------
Wendy L. Curran, Chief Officer of Human Resources 0 *
- -------------------------------------------------- --------------- ------------
William D. Constantino, Chief Legal Officer 0 *
- -------------------------------------------------- --------------- ------------
ALL EXECUTIVE OFFICERS & DIRECTORS AS A GROUP 11,096 2.0%
(12 Persons)
- -------------------------------------------------- --------------- ------------
* Less than 1%.
================================================================================
PROPOSAL NO. 1: AMENDING OUR OPERATING AGREEMENT TO PROVIDE FOR STAGGERED TERMS
FOR OUR DIRECTORS
================================================================================
Our Board of Directors determined that it is in the best interests of
Performance Capital Management, LLC to establish classes of directors with
staggered terms as a means of preserving the continuity of our Board of
Directors. If approved at the Annual Meeting, our directors will be divided into
two classes as described in Proposal No. 2.
Our Operating Agreement provides that special meetings of Members may be called
by our Board or by Members who in aggregate hold at least ten percent (10%) of
our outstanding voting LLC Units. Since our LLC Units are widely held and held
in small increments, our Members may have difficulty convening a special meeting
to remove a director.
A staggered Board affects every election of directors. The staggered system of
electing directors makes it more difficult for Members to change the majority of
directors, even when the only reason for the change may be the performance of
the present directors. Changing the majority of directors under the staggered
system requires two separate annual meetings, while under the current system of
electing directors only one annual meeting is necessary to change all of the
directors. The primary objective is to preserve the continuity of the Board. As
an anti-takeover measure, the effect is to prevent Members from immediately
seizing control of the Board, either through equity acquisitions or a proxy
contest.
4
At a meeting held on April 14, 2002, our Board adopted and approved a Second
Amendment to our Operating Agreement adding a provision for classes of directors
and staggered terms. A copy of the Second Amendment to Operating Agreement is
attached hereto as Appendix B for your review.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE SECOND AMENDMENT TO
OUR OPERATING AGREEMENT.
================================================================================
PROPOSAL NO. 2: ELECTION OF DIRECTORS
================================================================================
Our Board of Directors has proposed that seven nominees be elected at the Annual
Meeting, each of whom shall hold office for one or two years, as provided below,
and until his or her successor shall have been elected and qualified. Unless
otherwise instructed, it is the intention of the persons named as proxies on the
accompanying Proxy Card to vote LLC Units represented by properly executed
proxies for the election of such nominees. Although our Board anticipates that
the seven nominees will be available to serve as directors of Performance
Capital Management, LLC, if any of them should be unwilling or unable to serve,
it is intended that the proxies will be voted for the election of such
substitute nominee or nominees as may be designated by our Board.
NOMINEES FOR THE BOARD OF DIRECTORS
The following persons currently serve and have been nominated to continue to
serve as our directors. If approved at the Annual Meeting, Proposal No. 1 would
amend our Operating Agreement to provide for classes of directors and staggered
terms. The purpose of staggered terms is to avoid the need to replace our entire
Board at each annual meeting of the Members. If Proposal No. 1 is approved by
our Members, our Board will be divided into two classes, with each class to be
as nearly equal in number as possible, as specified by resolution of our Board.
The term of office of directors of the first class shall expire at the first
annual meeting of Members after their election. The term of office of directors
of the second class shall expire at the second annual meeting after their
election. At each annual meeting after such classification, a number of
directors equal to the number of the class whose term expires at the time of
such meeting shall be elected to hold office until the second succeeding annual
meeting. Absent his or her death, resignation or removal, a director shall
continue to serve despite the expiration of the director's term until his or her
successor shall have been elected and qualified or until there is a decrease in
the number of directors.
Assuming Proposal No. 1 is adopted, the nominees for the Board of Directors will
stand for election in the following classes:
Class I - Initial Term of One Year
- ----------------------------------
- Larisa Gadd
- Robert Price
- Rodney Woodworth
Class II - Initial Term of Two Years
- ------------------------------------
- Larry Smith
- David Barnhizer
- Sanford Lakoff
- Lester Bishop
If Proposal No. 1 is not adopted, each of the nominees for the Board of
Directors will stand for election to a two-year term. Biographical information
regarding each of the nominees for the Board of Directors is set forth below.
5
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of our
directors (and nominees for election) and executive officers as of April 15,
2003.
NAME AGE POSITION
---- --- --------
Larisa Gadd 40 Co-Chairperson of the Board
Lester T. Bishop 71 Co-Chairperson of the Board
Larry C. Smith 65 Director
David Barnhizer 59 Director
Rodney Woodworth 65 Director
Sanford Lakoff 71 Director
Robert R. Price 50 Director
David J. Caldwell 49 Chief Operations Officer
Edward M. Rucker 56 Accounting Manager
Darren S. Bard 35 Chief Information Officer
Wendy L. Curran 38 Chief Officer of Human Resources
William D. Constantino 52 Chief Legal Officer
All of the current directors except Mr. Robert Price were appointed to the Board
of Directors on February 4, 2002. Mr. Price was appointed to the Board of
Directors in June 2002 following the resignation of Mr. Lawrence Dodson in May
2002. Our Operating Agreement currently provides that directors serve two-year
terms. All directors hold office until their respective successors are elected
and qualified or until their earlier death, resignation or removal. Executive
officers are duly elected by the Board of Directors to serve until their
respective successors are elected and qualified. Our officers serve at the
discretion of the Board of Directors. There are no family relationships between
or among any of our directors or executive officers.
The following information with respect to the principal occupation or
employment, other affiliations and business experience during the last five
years of our directors and executive officers has been furnished to us by each
director and executive officer.
LARISA GADD. For the past 16 years, Ms. Gadd has been a business partner at
Scenic Express, Inc., in Los Angeles. Scenic Express fabricates theatrical
scenery for stage and screen. Ms. Gadd is also working on obtaining a doctorate
degree in Natural Health and Healing from Clayton College of Natural Health.
From 1987 to 1988, Ms. Gadd was an instructor at Chaffey College in Alta Loma in
the area of Social Sciences. She received a B.S. degree in Psychology and
English from the California State University, Fullerton in 1984 and a M.A.
degree in Organizational and Applied Social Psychology from Claremont Graduate
School in 1986.
LESTER T. BISHOP. Mr. Bishop has taught kindergarten through 12th grade
students for the past 20 years. At the same time, Mr. Bishop owned solely and in
partnership with others a number of privately held businesses, including Whitiok
Day Camp, Good Time Promotions, Mall Munchies, Park Riviera Motel, and Imperial
Executive Suites. He has also owned and managed both residential and commercial
real estate. Mr. Bishop received a B.A. degree in Education from the University
of California, Los Angeles in 1960 and a M.A. degree from the California State
University, Los Angeles in Educational Administration in 1965 with advanced
credentials in reading, counseling and teacher effectiveness.
LARRY C. SMITH. Mr. Smith retired in 1994. Prior to retirement, from 1987 to
1994, Mr. Smith was Senior Systems Engineering Manager of TRW Space Systems. In
that position, Mr. Smith managed the systems engineering teams in support of
classified satellite space systems development and new satellite system studies.
Mr. Smith is a registered U.S. Patent Agent and holds three patents. Mr. Smith
received a B.S. degree in Engineering from the University of Washington in 1959
and completed four years of graduate studies at the University of California,
Los Angeles in Control Systems and Electronics.
6
DAVID BARNHIZER. Mr. Barnhizer is currently Professor of Law at Cleveland State
University College of Law and has held that position since 1972. He teaches or
has taught courses dealing primarily with business and environmental law. From
1997 to 1998, he was a Strategic Consultant to the Government of Mongolia to the
Mongolian Action Programme for the 21st Century. During that same period, he was
also a consultant on sustainable economic development and the creation of a
Central American trade zone to the U.N. Development Program. From 1995 to 1997,
he was a member of the Board of Editors for the Journal of Legal Education. Mr.
Barnhizer has published nine books / manuals and approximately 30 professional
articles. He received a Bachelor of Arts degree from Muskingum College in 1966,
a Juris Doctor degree from Ohio State University College of Law in 1969, and a
Master of Law degree from Harvard Law School in 1972.
RODNEY WOODWORTH. Mr. Woodworth retired in 1998. From 1988 to 1998, Mr.
Woodworth was the Senior Vice President of Operations at Zimmerman Holdings,
Inc., which is in the business of buying troubled manufacturing businesses,
turning them around, growing them and then selling them. Prior to working at
Zimmerman Holdings, Inc., he was the Senior Vice President of Fairchild
Industries and President of its Commercial and Industrial Products Group. Mr.
Woodworth is an alumni of the Stanford Graduate Business School and received a
B.S. degree in Mechanical Engineering from the California State Polytechnical
University, San Luis Obispo in 1960.
SANFORD LAKOFF. Mr. Lakoff is Research Professor of Political Science Emeritus
at the University of California, San Diego. He has taught at UCSD since 1974,
when he was appointed Founding Chair of the Department of Political Science. Mr.
Lakoff has written or edited eleven books and published approximately 50
scholarly articles as well as contributing to entries in the Dictionary of the
History of Ideas, the Encyclopedia of Democracy, the Encyclopedia of U.S.
Foreign Relations, and the Encyclopedia of Nationalism. He received a B.A.
degree from Brandeis University in 1953. In 1959, he received his Ph.D. from
Harvard University.
ROBERT R. PRICE. Mr. Price is currently President and Chief Financial Officer
of Buy.com, Inc., a privately held Internet retailer, where he is responsible
for the day-to-day affairs of the company and reports directly to the company's
Founder, Chairman and CEO. Mr. Price is also responsible for Buy.com's overall
financial strategy and activities, corporate planning and analysis, and human
resources. Mr. Price joined Buy.com in February 2001, as Chief Financial
Officer, and served in that position until August 2001 when he was promoted to
President. From September 1995 to July 2000, Mr. Price worked at PairGain
Technologies, Inc., a publicly held telecommunications equipment manufacturer.
From January 2000 to July 2000, Mr. Price was Senior Vice President, Chief
Financial Officer, from January 1998 to January 2000, he was Vice President and
Corporate Controller, and from September 1995 to January 1998, he was Corporate
Controller of PairGain Technologies. Mr. Price received his B.S. in Business
Administration (emphasis in Accounting) from California Polytechnic University,
Pomona in 1974.
DAVID J. CALDWELL. Mr. Caldwell is a business operations professional with over
20 years of experience in the consumer credit card industry. Before becoming
Chief Operations Officer of Performance Capital Management, LLC on February 4,
2002, Mr. Caldwell was Chief Operating Officer of Performance Capital
Management, Inc., one of the predecessor companies to Performance Capital
Management, LLC, from January 1998 to February 2002. As Chief Operating Officer,
Mr. Caldwell is responsible for the operational activities of Performance
Capital Management, LLC, including management of a collection center and the
sales and acquisitions of charged off portfolios as well as the day-to-day
operations of the business. From 1975 to 1998, Mr. Caldwell worked in various
capacities at General Electric Capital Corporation, including Vice President of
Recovery Operations for the General Electric Capital Services division from
March 1997 to January 1998 and Vice President of Cardholder Operations for the
Consumer Card Services division of General Electric Capital Corporation from May
1994 to March 1997. As Vice President of Recovery Operations, he was responsible
for the successful operation of the Retailer Financial Services Recovery
Operation, including management of the recovery call center, bankruptcy
collections, payment processing unit, mailroom, facilities, petition processing,
legal, probate, compliance, outside attorney collections, skip tracing, and
interface with 12 outlying business centers. As Vice President of Cardholder
Operations, he was responsible for the successful operation of the G.E. Rewards
Mastercard call center, including managing over 500,000 incoming calls per
month, leading a workforce of 215 people, and overseeing a
7
financial budget of $5 million. Mr. Caldwell received a B.S. degree in Business
Administration from Western Michigan University in 1975.
EDWARD M. RUCKER. Before becoming the Accounting Manager of Performance Capital
Management, LLC on February 4, 2002, Mr. Rucker was the Accounting Manager of
Performance Capital Management, Inc., one of the predecessor companies to
Performance Capital Management, LLC, from October 2001 to February 2002. As
Accounting Manager, Mr. Rucker has overall responsibility for preparing the
company's accounting records and financial statements. From 1995 to August 2001,
Mr. Rucker was Controller and the Chief Financial Officer of Pickard
Construction, Inc., a construction firm performing as general contractor for
major national firms. In that position, Mr. Rucker was responsible for the
entire accounting and related financial functions of the firm. Mr. Rucker is a
Certified Public Accountant. Mr. Rucker received a B.S. degree in Accounting
from the California State University, Los Angeles in 1968.
DARREN S. BARD. Before becoming Chief Information Officer of Performance
Capital Management, LLC on February 4, 2002, Mr. Bard was Chief Information
Officer of Performance Capital Management, Inc., one of the predecessor
companies to Performance Capital Management, LLC, from April 1998 to February
2002. As Chief Information Officer, Mr. Bard manages the Information Technology
and Acquisitions/Sales Support Departments. Prior to becoming an officer of
Performance Capital Management, Inc., from April 1996 to April 1998, Mr. Bard
worked as Site Production Planning/Operations Manager at General Electric
Capital Corporation.
WENDY L. CURRAN. Before becoming Chief Officer of Human Resources of
Performance Capital Management, LLC on February 4, 2002, Ms. Curran was Chief
Officer of Human Resources of Performance Capital Management, Inc., one of the
predecessor companies to Performance Capital Management, LLC, from 1997 to
February 2002. As Chief Officer of Human Resources, Ms. Curran manages the
Administration and Human Resources Departments, which entails implementing and
enforcing current company human resources policies, facilities management,
recruitment, providing training programs to build team work and management
skills, payroll processing, and administration of employee benefits. Ms. Curran
is certified in Human Resource Management in the State of California.
WILLIAM D. CONSTANTINO. Mr. Constantino has served as the Chief of Legal Affairs
of Performance Capital Management, LLC since it was formed in January 2002.
Prior to that date, from July 2000 to January 2002, he served as Chief Legal
Compliance Officer of Performance Capital Management, Inc., one of the
predecessor companies to Performance Capital Management, LLC. As in-house
counsel to Performance Capital Management, LLC, Mr. Constantino is responsible
for ensuring that all collection procedures comply with federal and state
consumer protection laws, assisting with the negotiation and purchase of
portfolios, and is the general legal resource for day-to-day corporate
operations. From January 1999 to July 2000, Mr. Constantino practiced law as a
sole practitioner focusing on all aspects of insolvency law, including
commercial and consumer collections, bankruptcy law, and civil litigation. From
January 1982 to December 1998, he was managing partner in the Law Offices of
Leibowitz and Constantino. That firm focused on insolvency law and consumer
protection law. Mr. Constantino received a B.S. degree in Business
Administration from the State University of New York, Albany in 1972 and a Juris
Doctor degree from Western State University School of Law in 1979.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors, our executive officers and persons who own more than ten percent of
our LLC Units to file with the Securities and Exchange Commission and
Performance Capital Management, LLC reports on Forms 3, 4 and 5 reflecting
transactions affecting beneficial ownership. Based solely upon our review of the
copies of such forms received by us, we believe that, for the period from
inception, February 4, 2002 to December 31, 2002, all persons complied with such
filing requirements except Ms. Gadd, Mr. Bishop, Mr. Smith, Mr. Barnhizer, Mr.
Woodworth, Mr. Lakoff, Mr. Price, Mr. Dodson, Mr. Caldwell, Mr. Rucker, Mr.
Bard, Ms. Curran, and Mr. Constantino each did not timely file a Form 3
reporting their initial beneficial ownership. Our directors and officers did not
realize that Performance Capital Management, LLC was a public company successor
to
8
Performance Asset Management Fund III, Ltd. and Performance Asset Management
Fund IV, Ltd., and therefore did not timely file their initial reports of
beneficial ownership on Form 3. Our directors and officers intend to timely file
any future Forms 4 or 5. We have received a written representation from each of
our directors and executive officers that no Forms 5 are required for the period
ended December 31, 2002.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
Our Board of Directors held a total of 11 meetings during the fiscal year ended
December 31, 2002.
Our Board of Directors has established an Audit Committee. It currently has no
other committees. The Audit Committee is responsible to the full Board of
Directors. The functions performed by the Audit Committee are summarized below:
The Audit Committee recommends appointment of our independent auditors, consults
with the auditors concerning the scope of the audit, reviews the results of
their examination, reviews and approves any material accounting policy changes
affecting the company's operating results, and reviews the company's financial
controls. Messrs. Price, Smith and Woodworth are members of the Audit Committee.
The Audit Committee convened 2 times last year.
Each of our directors attended at least 75% of the meetings of the Board of
Directors and the members of the Audit Committee attended at least 75% of the
meetings held by that committee.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of three directors,
each of whom is independent as defined by Nasdaq Market Listing rules. The Audit
Committee operates under a written Audit Committee Charter, which was adopted by
the Board of Directors in February 2003. A copy of the Audit Committee Charter
is attached as Appendix A to this Proxy Statement.
The Audit Committee is responsible for, among other things, monitoring the
integrity and adequacy of Performance Capital Management, LLC's financial
information, control systems, and reporting practices, and for recommending to
the Board of Directors for ratification by the Members the Audit Committee's
appointment of independent auditors for Performance Capital Management, LLC. The
Audit Committee has appointed and the Board of Directors has recommended to the
Members ratification of the appointment of Moore Stephens Wurth Frazer and
Torbet, LLP as Performance Capital Management, LLC's independent auditor for the
fiscal year ending December 31, 2003.
The Board of Directors designated Robert R. Price as an "audit committee
financial expert" as defined by the Securities and Exchange Commission rules;
however, the members of the Audit Committee are not professionally engaged in
the practice of accounting or auditing. The Audit Committee relies, without
independent verification, on the information provided to it and on the
representations made by management and the independent auditors that the
financial statements have been prepared with integrity and objectivity and on
the representations of management and the opinion of the independent auditors
that such financial statements have been prepared in conformity with generally
accepted accounting principles.
The Audit Committee has reviewed and discussed the company's audited financial
statements for the period from February 4, 2002 (inception) to December 31, 2002
with management, which has primary responsibility for the financial statements.
The Audit Committee has discussed with Moore Stephens Wurth Frazer and Torbet,
LLP the matters that are required to be discussed by Statement on Auditing
Standards No. 61, "Communication with Audit Committees." The Audit Committee has
discussed with Moore Stephens Wurth Frazer and Torbet, LLP the auditors'
independence from Performance Capital Management, LLC and management and has
received from Moore Stephens Wurth Frazer and Torbet, LLP the written
disclosures and the letter required by Independence Standards Board Standard No.
1, "Independence Discussions with Audit Committees."
9
The Audit Committee has considered whether the services provided by Moore
Stephens Wurth Frazer and Torbet, LLP are compatible with maintaining the
independence of Moore Stephens Wurth Frazer and Torbet, LLP and has concluded
that the independence of Moore Stephens Wurth Frazer and Torbet, LLP is
maintained and not compromised by the services provided.
Based on the review and discussion referred to above, the Audit Committee
recommended to the Board of Directors, and the Board of Directors has approved,
that the audited financial statements be included in Performance Capital
Management, LLC's Annual Report on Form 10-KSB for the year ended December 31,
2002, for filing with the Securities and Exchange Commission.
Respectfully Submitted by the Audit Committee,
Robert R. Price
Larry C. Smith
Rodney Woodworth
EXECUTIVE COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the compensation that we have paid to our Named
Executive Officers for the period from February 4, 2002 (Inception) to December
31, 2002. We do not currently have a long-term compensation plan and do not
grant any long-term compensation to our executive officers. No other
compensation was granted for the periods covered.
============================================================================================================
SUMMARY COMPENSATION TABLE
============================================================================================================
Annual Compensation Long-Term Compensation
---------------------------- -----------------------------
Awards Pay-Outs
------------------- --------
Other Securities All
Annual Restricted Under- Other
Name and Fiscal Compen- Equity lying LTIP Compen-
Principal Year Salary Bonus sation Award(s) Options/ Payouts sation
Position Ended ($) ($) ($) ($) SARs (#) ($) ($)
============================================================================================================
David 2002 $ 187,413 $ 25,000 - - - - -
Caldwell
Chief Operations
Officer
============================================================================================================
William 2002 $ 130,482 $ 25,000 - - - - -
Constantino
Chief Legal Officer
============================================================================================================
Darren 2002 $ 132,839 $ 25,000 - - - - -
Bard
Chief Information
Officer
============================================================================================================
Wendy 2002 $ 94,650 $ 25,000 - - - - -
Curran
Chief Officer of
Human Resources
============================================================================================================
10
OPTION GRANTS
We do not have an employee option plan, nor have we granted any options to our
officers or directors.
COMPENSATION OF DIRECTORS
Our directors receive $1,500 per scheduled meeting of the Board of Directors.
The Board of Directors has regularly scheduled meetings once per month.
All directors receive reimbursement for travel and out-of-pocket expenses
incurred in connection with attendance at all meetings. Except as described
above, none of our directors receive any other compensation for performance of
services as a director of Performance Capital Management, LLC or a member of any
committee of our Board of Directors.
EMPLOYMENT CONTRACTS
We have entered into employment agreements with certain of our executive
officers, including each of the Named Executive Officers. The employment
agreements provide for initial base salaries for David Caldwell, William
Constantino, Darren Bard and Wendy Curran of $200,000, $135,000, $135,000 and
$100,000, respectively. Base salaries are to be adjusted periodically by the
Board of Directors. The four agreements provide for a $12,500 bonus payment in
February and October 2002 for each of the officers. The agreements also provide
for an annual bonus at the end of the first year of employment as follows: each
shall share in an equal amount with all other executives the sum of the total of
all executive annual salaries times two and one half percent for each and every
percentage point for which the ratio of operating expenses to gross revenues
derived directly from collection activity (e.g. sales revenues collections) is
less than 55% for a specific calendar year as calculated on a cash flow basis.
The bonus may be amended or cancelled by the Board of Directors on the
anniversary of the effective date of the employment agreements. In addition, the
officers will receive in lieu of any outstanding equity or equivalent interest
in Performance Capital Management, LLC, a sum equal to the total of all
executive annual salaries divided by the total number of executive officers
employed by us at the time of (a) Performance Capital Management, LLC becoming a
"C" corporation or (b) Performance Capital Management, LLC selling substantially
all of its membership units or assets. For purposes of the compensation section
of the agreements, the executive officers shall be confined to the Chief
Operations Officer, Chief Officer of Information Technology, Chief Officer of
Legal Affairs and the Chief Human Resource Officer. The agreements provide that
the executive officers shall receive the following benefits: three weeks of
vacation, paid holidays, sick days and health care benefits.
The term of each employment agreement is five years commencing on July 31. On
July 31 of each successive year, the term of each employment agreement is
automatically extended for an additional year unless we or the officer gives 90
days advance termination notice. We reserve the right to terminate the agreement
"for cause" if the officer willfully breaches or habitually neglects the duties
that he or she is required to perform pursuant to the provisions of the
agreement, or commits acts of dishonesty, fraud, misrepresentation or other acts
of moral turpitude as would prevent the effective performance of his or her
duties. If we terminate the agreement "for cause", we shall pay to the officer
any compensation due under the agreement, including any unused vacation,
prorated through the date of termination, and we shall have the option to
purchase the entire ownership interest of the officer, if any, in accordance
with the agreement. The executive officer may terminate the agreement by giving
us at least 30 days notice in advance. Such a termination will be considered
"for cause".
The agreements will not be terminated by any voluntary or involuntary
dissolution of Performance Capital Management, LLC resulting from either a
merger or consolidation in which Performance Capital Management, LLC is not the
consolidated or surviving company, or a transfer of all or substantially all of
the assets of Performance Capital Management, LLC. Any rights, benefits and
obligations under the agreements are to be assigned to the surviving or
resulting company or the transferee of Performance Capital Management, LLC's
assets.
Each of the agreements provides that we will indemnify the executive officer, if
he or she is made a party to or threatened to be made a party to, or otherwise
involved in, any proceeding commenced during the employment
11
term, or after the employment term, because the officer is or was an employee or
agent of Performance Capital Management, LLC. The indemnification includes any
and all expenses, judgments, fines, penalties, settlements, and other amounts,
actually and reasonably incurred by the executive officer in connection with the
defense or settlement of any such proceeding. The executive officer must have
acted in good faith and in a manner that the officer reasonably believes to be
in the best interests of Performance Capital Management, LLC and, in a criminal
proceeding, the officer must have no reasonable cause to believe that his or her
conduct was unlawful. Any and all expenses, including filing fees, costs of
investigation, attorney's fees, messenger and delivery expenses, postage, court
reporters' fees and similar fees and expenses, incurred by the executive officer
in any proceeding are to be advanced by Performance Capital Management, LLC
prior to the final disposition of the proceeding and subject to considerations
of reasonableness at the written request of the officer, but only if the officer
undertakes to repay the advanced expenses to the extent he or she is entitled to
indemnification. The indemnification contemplated by the agreements is not to be
deemed exclusive of any other rights the officers may have to indemnification.
We have been advised that the SEC takes the position that these indemnification
provisions do not affect the liability of any officer or director under
applicable federal and state securities laws.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No transactions with our directors, management or other parties occurred since
February 4, 2002 (inception) that would otherwise be reported under this
section.
It is our current policy that all transactions with officers, directors, 5% LLC
Unit holders and their affiliates be entered into only if they are approved by a
majority of the disinterested directors, are on terms no less favorable to
Performance Capital Management, LLC than could be obtained from unaffiliated
parties, and are reasonably expected to benefit Performance Capital Management,
LLC.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE NAMED ABOVE.
================================================================================
PROPOSAL NO. 3: RATIFY APPOINTMENT OF INDEPENDENT AUDITORS FOR 2003
================================================================================
Moore Stephens Wurth Frazer and Torbet, LLP served as our independent auditors
for the period ended December 31, 2002, and has been selected by our Board of
Directors to continue as our independent auditors for the fiscal year ending
December 31, 2003.
Although the appointment of Moore Stephens Wurth Frazer and Torbet, LLP is not
required to be submitted to a vote of the Members, the Board believes it
appropriate as a matter of policy to request that the Members ratify the
appointment of the independent public accountants for the fiscal year ending
December 31, 2003. In the event that the votes in opposition to ratification
exceed the votes in favor of ratification, the adverse vote will be considered
as a direction to our Board of Directors to select other auditors for the fiscal
year ending December 31, 2003.
A representative from Moore Stephens Wurth Frazer and Torbet, LLP is expected to
be present at the Annual Meeting. The representative will have the opportunity
to make a statement and will be able to respond to appropriate questions
submitted either orally or in writing at the meeting.
Prior to engaging Moore Stephens Wurth Frazer and Torbet, LLP, we, or someone on
our behalf, did not consult with Moore Stephens Wurth Frazer and Torbet, LLP
regarding the application of accounting principles to a specific completed or
contemplated transaction, or the type of audit opinion that might be rendered on
our financial statements, and no written or oral advice was provided by Moore
Stephens Wurth Frazer and Torbet, LLP that was an important factor considered by
us in reaching a decision as to an accounting, auditing or financial reporting
issue. We have furnished the above disclosure, made in response to Item 304 of
Regulation S-B, to Moore Stephens Wurth Frazer and Torbet, LLP for their review.
12
During the period ended December 31, 2002, Moore Stephens Wurth Frazer and
Torbet, LLP billed us the fees set forth below in connection with services
rendered by that firm to us.
AUDIT FEES. For professional services rendered by Moore Stephens Wurth Frazer
and Torbet, LLP for the audit of our Balance Sheet as of February 4, 2002
(inception), Moore Stephens Wurth Frazer and Torbet, LLP billed us fees in the
amount of $31,000. For the review of our unaudited quarterly financial
statements during the period from February 4, 2002 through December 31, 2002,
Moore Stephens Wurth Frazer and Torbet, LLP billed us fees in the aggregate
amount of $30,000. For the audit of our financial statements for the period from
February 4, 2002 to December 31, 2002, Moore Stephens Wurth Frazer and Torbet,
LLP has billed us fees in the amount of $69,379.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. For the period
ended December 31, 2002, Moore Stephens Wurth Frazer and Torbet, LLP did not
render professional services to us in connection with (i) directly or indirectly
operating, or supervising the operation of our information system or managing
our local area network, (ii) designing or implementing a hardware or software
system that aggregates source data underlying our financial statements or
generates information that is significant to our financial statements taken as a
whole or (iii) assessing, designing and implementing internal accounting
controls and risk management controls. Therefore, Moore Stephens Wurth Frazer
and Torbet, LLP did not bill us fees for such types of services because no such
services were rendered.
ALL OTHER FEES. For professional services other than those described above
rendered by Moore Stephens Wurth Frazer and Torbet, LLP to us in connection with
the period ended December 31, 2002, Moore Stephens Wurth Frazer and Torbet, LLP
billed us fees in the aggregate amount of $51,716 for attendance at Board
meetings, review of SEC filings and tax services.
Pursuant to Item 9(e) of Schedule 14A, our Audit Committee has considered the
provision of services provided in the above referenced items and has determined
that the provision of these services is compatible with maintaining Moore
Stephens Wurth Frazer and Torbet, LLP's independence.
There were no hours expended on Moore Stephens Wurth Frazer and Torbet, LLP's
engagement to audit our financial statements for the most recent fiscal period
that were attributed to work performed by persons other than the Moore Stephens
Wurth Frazer and Torbet, LLP's full-time, permanent employees.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
MOORE STEPHENS WURTH FRAZER AND TORBET, LLP, CERTIFIED PUBLIC ACCOUNTANTS, AS
OUR INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2003.
____________________________________
PROPOSALS OF MEMBERS
A Member proposal is a Member's recommendation or requirement that we and/or our
Board of Directors take certain action, which the Member intends to present at a
meeting of our Members. The proposal should state as clearly as possible the
course of action that the Member believes we should follow and should be
accompanied by a supporting statement. The proposal, including the accompanying
supporting statement, may not exceed 500 words.
Proposals received from Members are given careful consideration by us in
accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as
amended. Member proposals are eligible for consideration for inclusion in the
proxy statement for the 2004 Annual Meeting of Members if they are received by
us on or before January 4, 2004. Any Member proposal should be directed to the
attention of the Chief Legal Officer, Performance Capital Management, LLC, at
222 South Harbor Blvd., Suite 400, Anaheim, California, 92805.
13
In order for a Member proposal submitted OUTSIDE of Rule 14a-8 to be considered
"timely" within the meaning of Rule 14a-4(c), such proposal must be received by
us on or before March 15, 2004. We will have discretionary authority with
respect to Member proposals submitted for consideration at the 2004 Annual
Meeting of Members that are not "timely" within the meaning of Rule 14a-4(c). We
reserve the right to reject, rule out of order, or take other appropriate action
with respect to any proposal that does not comply with these and other
applicable requirements.
ADDITIONAL INFORMATION
Members should direct communications regarding change of address, requests for
transfer of LLC Unit ownership or lost LLC Unit certificates to Performance
Capital Management, LLC, Attn: Harvey "Bud" Webb, Member Relations, 222 South
Harbor Blvd., Suite 400, Anaheim, California, 92805. Mr. Webb may also be
reached by telephone at 714.502.3736 or by facsimile at (714) 502-3733.
OTHER MATTERS
We know of no other matters that are likely to be brought before the Annual
Meeting. If, however, other matters not presently known or determined properly
come before the Annual Meeting, the persons named as proxies in the enclosed
Proxy Card or their substitutes will vote such proxy in accordance with their
discretion with respect to such matters.
By Order of the Board of Directors,
/s/ David J. Caldwell
David J. Caldwell
Chief Operations Officer
Anaheim, California
April 28, 2003
14
INDEX TO APPENDICES
Appendix Description
- -------- -----------------------------------------------------------------
A Audit Committee Charter
B Second Amendment to Operating Agreement for Performance Capital
Management, LLC
15
APPENDIX A
----------
AUDIT COMMITTEE CHARTER
OF
PERFORMANCE CAPITAL MANAGEMENT, LLC
This Audit Committee Charter ("Charter") is the duly adopted governing
document of the Performance Capital Management, LLC (the "Company") Audit
Committee, a duly constituted committee of the Company's Board of Directors
("Board").
PURPOSE. The Audit Committee is appointed by the Board to assist the Board
in monitoring: (1) the integrity of the financial statements of the Company; (2)
the independent auditor's qualifications and independence; (3) the performance
of the Company's internal audit function and independent auditors; and (4) the
compliance by the Company with legal and regulatory requirements.
The Audit Committee shall prepare the report required by the rules of the
Securities and Exchange Commission (the "Commission") to be included in the
Company's annual proxy statement.
COMMITTEE MEMBERSHIP. The Audit Committee shall be comprised of at least
two members. The members of the Audit Committee shall meet the independence and
experience requirements of the securities laws and the rules and regulations of
the Securities and Exchange Commission. At least one member of the Audit
Committee shall be a financial expert as defined by the Commission. Audit
Committee members may be replaced by the Board. The following persons shall not
be considered independent:
a. A director who is employed by the Company or any of its
affiliates for the current year or any of the past three years;
b. A director who accepts any compensation from the Company or
any of its affiliates during the previous fiscal year, other than compensation
for Board service, benefits under a tax-qualified retirement plan, or
non-discretionary compensation;
c. A director who is a member of the immediate family of an
individual who is, or has been in any of the past three years, employed by the
Company or any of its affiliates as an executive officer. Immediate family
includes a person's spouse, parents, children, siblings, mother-in-law,
father-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law, and
anyone who resides in such person's home;
d. A director who is a partner in, or a controlling shareholder
or an executive officer of, any for-profit business organization to which the
Company made, or from which the Company received, payments (other than those
arising solely from investments in the Company's securities) that exceed 5% of
the Company's or business organization's consolidated gross revenues for that
year, or $200,000, whichever is more, in any of the past three years;
Performance Capital Management, LLC
Audit Committee Charter
1 OF 6
e. A director who is employed as an executive of another
entity where any of the Company's executives serve on that entity's compensation
committee.
In order to be considered to be independent, a member of the Audit Committee may
not accept any consulting, advisory or other compensatory fee from the Company
or be an affiliated person of the Company or any of its subsidiaries.
MEETINGS. The Audit Committee shall meet as often as it determines, but
not less frequently than quarterly. The Audit Committee shall meet periodically
with management, the internal auditors and the independent auditor in separate
executive sessions. The Audit Committee may request any officer or employee of
the Company or the Company's outside counsel or independent auditor to attend a
meeting of the Audit Committee or to meet with any members of, or consultants
to, the Audit Committee.
COMMITTEE AUTHORITY AND RESPONSIBILITIES. The Audit Committee shall have
the sole authority to appoint or replace the independent auditor (subject, if
applicable, to ratification by the Company's members). The Audit Committee shall
be directly responsible for the compensation and oversight of the work of the
independent auditor (including resolution of disagreements between management
and the independent auditor regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work. The independent auditor
shall report directly to the Audit Committee.
The Audit Committee shall preapprove all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Company by its independent auditor, subject to the de minimus exceptions for
non-audit services which are approved by the Audit Committee prior to the
completion of the audit. The Audit Committee may form and delegate authority to
subcommittees consisting of one or more members when appropriate, including the
authority to grant preapprovals of audit and permitted non-audit services,
provided that decisions of such subcommittees to grant preapprovals shall be
presented to the full Audit Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate, to retain independent legal, accounting or other advisors. The
Company shall provide for appropriate funding, as determined by the Audit
Committee, for payment of compensation to the independent auditor for the
purpose of rendering or issuing an audit report and to any advisors employed by
the Audit Committee.
The duties and responsibilities of a member of the Audit Committee are in
addition to those duties set out for a member of the Board. The Audit Committee
shall make regular reports to the Board. The Audit Committee shall review and
assess the adequacy of this Charter annually and recommend any proposed changes
to the Board for approval. The Audit Committee shall annually review the Audit
Committee's own performance.
Performance Capital Management, LLC
Audit Committee Charter
2 OF 6
The Audit Committee, to the extent it deems necessary or appropriate, shall:
Financial Statement and Disclosure Matters
- ------------------------------------------
1. Review and discuss with management and the independent auditor the annual
audited financial statements, including disclosures made in management's
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Company's Form 10-KSB.
2. Review and discuss with management and the independent auditor the
Company's quarterly financial statements prior to the filing of its Form
10-QSB, including the results of the independent auditor's review of the
quarterly financial statements.
3. Discuss with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of
the Company's financial statements, including any significant changes in
the Company's selection or application of accounting principles, any major
issues as to the adequacy of the Company's internal controls and any
special steps adopted in light of material control deficiencies.
4. Review and discuss quarterly reports from the independent auditors on:
(a) All critical accounting policies and practices to be used.
(b) All alternative treatments of financial information within generally
accepted accounting principals that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditor.
(c) Other material written communications between the independent auditor
and management, such as any management letter or schedule of
unadjusted differences.
5. Discuss with management the Company's earnings press release, if any,
including the use of "pro forma" or "adjusted" non-GAAP information, as
well as financial information and earnings guidance provided to analysts
and rating agencies. Such discussion may be done generally (consisting of
discussing the types of information to be disclosed and the types of
presentations to be made).
6. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
7. Discuss with management the Company's major financial risk exposures and
the steps management has taken to monitor and control such exposures,
including the Company's risk assessment and risk management policies.
Performance Capital Management, LLC
Audit Committee Charter
3 OF 6
8. Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of the
audit, including any difficulties encountered in the course of the audit
work, any restrictions on the scope of activities or access to requested
information, and any significant disagreements with management.
9. Prepare a letter that complies with Item 7 of Schedule 14A under the
Securities Exchange Act of 1934, as amended, for inclusion in the annual
report and/or proxy statement that describes the Committee's composition
and responsibilities, and how they were discharged;
10. Review disclosures made to the Audit Committee by the Company's principal
executive officer and principal financial officer during their
certification process for the Form 10-KSB or Form 10-QSB about any
significant deficiencies in the design or operation of internal controls or
material weaknesses therein and any fraud involving management or other
employees who have a significant role in the Company's internal controls.
Oversight of the Company's Relationship with the Independent Auditor
- --------------------------------------------------------------------
11. Review and evaluate the lead partner of the independent auditor team.
12. Obtain and review a report from the independent auditor at least annually
regarding (a) the independent auditor's internal quality-control
procedures, (b) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities within the
proceeding five years respecting one or more independent audits carried out
by the firm, (c) any steps taken to deal with such issues, and (d) all
relationships between the independent auditor and the Company. Ensure
receipt from the independent auditors of a formal written statement
delineating all relationships between the auditor and the Company,
consistent with Independence Standards Board Standard 1. Evaluate the
qualifications, performance and independence of the independent auditor,
including considering whether the auditor's quality controls are adequate
and the provision of permitted non-audit services is compatible with
maintaining the auditor's independence, and taking into account the
opinions of management and internal auditors. The Audit Committee shall
present its conclusions with respect to the independent auditor to the
Board.
13. Ensure the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible for
reviewing the audit as required by law. Consider whether, in order to
assure continuing auditor independence, it is appropriate to adopt a policy
of rotating the independent auditor firm on a regular basis.
Performance Capital Management, LLC
Audit Committee Charter
4 OF 6
14. Recommend to the Board policies for the Company's hiring of employees or
former employees of the independent auditor who participated in any
capacity in the audit of the Company.
15. Discuss with the national office of the independent auditor issues on which
they were consulted by the Company's audit team and matters of audit
quality and consistency.
16. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.
Oversight of the Company's Internal Audit Function, If Any
- ----------------------------------------------------------
17. Review the appointment and replacement of the senior internal auditing
executive.
18. Review the significant reports to management prepared by the internal
auditing department and management's responses.
19. Discuss with the independent auditor and management the internal audit
department responsibilities, budget and staffing and any recommended
changes in the planned scope of the internal audit.
Compliance Oversight Responsibilities
- ---------------------------------------
20. Obtain reports from management, the Company's senior internal auditing
executive and the independent auditor that the Company and its subsidiary
affiliated entities are in conformity with applicable legal requirements
and the Company's policies and procedures. Review reports and disclosures
of insider and affiliated party transactions. Advise the Board with respect
to the Company's compliance with applicable laws and regulations and its
policies and procedures.
22. Discuss with management and the independent auditor any correspondence with
regulators or governmental agencies and any published reports which raise
material issues regarding the Company's financial statements or accounting
policies.
23. Discuss with the Company's General Counsel legal matters that may have a
material impact on the financial statements or the Company's compliance
policies.
LIMITATION OF AUDIT COMMITTEE'S ROLE. While the Audit Committee has the
responsibilities and powers set forth in this Charter, it is not the duty of the
Audit Committee to plan or conduct audits or to determine that the Company's
financial statements and disclosures are complete and accurate and are in
accordance with generally accepted accounting principles and applicable rules
and regulations. These are the responsibilities of management and the
independent auditor.
Performance Capital Management, LLC
Audit Committee Charter
5 OF 6
IN WITNESS WHEREOF, the undersigned hereby evidences the adoption of this
Audit Committee Charter by the Board on the 10 day of February 2003.
-- ----------------
Signature: /s/ William D. Constantino
--------------------------------------
Print Name: William D. Constantino
-------------------------------------
Title: Secretary
------------------------------------------
Performance Capital Management, LLC
Audit Committee Charter
6 OF 6
APPENDIX B
SECOND AMENDMENT TO
OPERATING AGREEMENT
FOR
PERFORMANCE CAPITAL MANAGEMENT, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
THIS SECOND AMENDMENT TO THE OPERATING AGREEMENT FOR PERFORMANCE CAPITAL
MANAGEMENT, LLC, a California limited liability company (this "Second
Amendment") is made by and among PERFORMANCE ASSET MANAGEMENT FUND, LTD., a
California limited liability company, PERFORMANCE ASSET MANAGEMENT FUND II,
LTD., a California limited liability company, PERFORMANCE ASSET MANAGEMENT FUND
III, LTD., a California limited liability company, PERFORMANCE ASSET MANAGEMENT
FUND IV, LTD., a California limited liability company, and PERFORMANCE ASSET
MANAGEMENT FUND V, LTD. This Second Amendment amends that certain Operating
Agreement for PERFORMANCE CAPITAL MANAGEMENT, LLC, a California limited
liability company (the "Operating Agreement"). Except as otherwise amended
hereby, the Operating Agreement shall continue in full force and effect.
Capitalized terms that are used in this Second Amendment and are defined in the
Operating Agreement, as amended, shall have the same meanings herein as therein
unless otherwise provided herein. The Operating Agreement is hereby amended in
the following respects only.
THE FOLLOWING SECTION IS HEREBY ADDED TO THE OPERATING AGREEMENT TO READ IN FULL
AS SET FORTH HEREIN:
5.2.8 Classification of Directors. The Directors shall be divided
---------------------------
into two classes, with each class to be as nearly equal in number as possible,
as specified by resolution of the Board of Directors or, if the Directors in
office constitute fewer than a quorum of the Board of Directors, by the
affirmative vote of a majority of all the Directors in office. The term of
office of the initial Directors of the first class shall expire at the first
annual meeting of Members after their election. The term of office of the
initial Directors of the second class shall expire at the second annual meeting
after their election. At each annual meeting after such classification, a number
of Directors equal to the number of the class whose term expires at the time of
such meeting shall be elected to hold office until the second succeeding annual
meeting. Absent his or her death, resignation or removal, a Director shall
continue to serve despite the expiration of the Director's term until his or her
successor shall have been elected and qualified or until there is a decrease in
the number of Directors.
Second Amendment to Operating Agreement - Page 1
IN WITNESS WHEREOF, the Members of PERFORMANCE CAPITAL MANAGEMENT, LLC, a
California limited liability company, adopted and approved this Second
Amendment, in accordance with the Operating Agreement, as amended, on the _____
day of ________________, 2003.
------------------------------------
William D. Constantino
Chief Legal Officer
Second Amendment to Operating Agreement - Page 2
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PERFORMANCE CAPITAL MANAGEMENT, LLC
2003 ANNUAL MEETING OF MEMBERS - JUNE 9, 2003
The undersigned Member(s) of PERFORMANCE CAPITAL MANAGEMENT, LLC, a California
limited liability company (the "Company"), hereby acknowledges receipt of the
Notice of Annual Meeting of Members and the Proxy Statement, and hereby appoints
David Caldwell and Darren Bard, or either of them, as proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 2003 Annual Meeting
of Members of the Company to be held on Monday, June 9, 2003, and at any
adjournment(s) or postponement(s) thereof, and to vote all LLC Units that the
undersigned would be entitled to vote, if then and there personally present, on
the matters set forth below and, in accordance with their discretion, on any
other business that may come before the meeting:
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE PROPOSALS
DESCRIBED IN THE PROXY STATEMENT. IF A PROXY IS SIGNED AND DATED BUT NOT MARKED,
YOU WILL BE DEEMED TO HAVE VOTED "FOR" THE PROPOSALS DESCRIBED IN THE PROXY
STATEMENT. THIS PROXY REVOKES ALL PROXIES GIVEN BY THE UNDERSIGNED WITH RESPECT
TO THE LLC UNITS COVERED HEREBY.
PROPOSAL NO. 1 - TO APPROVE THE SECOND AMENDMENT TO THE OPERATING AGREEMENT TO
PROVIDE FOR CLASSES AND STAGGERED TERMS FOR THE COMPANY'S DIRECTORS.
[ ] For [ ] Against [ ] Abstain
PROPOSAL NO. 2 - TO ELECT SEVEN DIRECTORS TO SERVE EITHER A TWO-YEAR TERM OR
STAGGERED TERMS OF ONE AND TWO YEARS AND UNTIL EACH DIRECTOR'S SUCCESSOR HAS
BEEN DULY ELECTED AND QUALIFIED.
Nominees: Class I - One Year Term Class II - Two Year Term
----------------------- ------------------------
Larisa Gadd Larry Smith
Robert Price David Barnhizer
Rodney Woodworth Sanford Lakoff
Lester Bishop
[ ] For the Nominees Listed above (except as indicated below)
[ ] Withhold Authority to Vote for All Nominees
Instruction: To withhold authority to vote for any Nominee, write that
Nominee's name on the line immediately below.
- --------------------------------------------------------------------------------
PROPOSAL NO. 3 - TO RATIFY THE APPOINTMENT OF MOORE STEPHENS WURTH FRAZER AND
TORBET, LLP, AS INDEPENDENT AUDITORS FOR THE COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2003.
[ ] For [ ] Against [ ] Abstain
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
Page 1 of 2
NOTE: THIS PROXY SHOULD BE MARKED, DATED AND SIGNED BY EACH MEMBER(S) EXACTLY
AS HIS OR HER OR ITS NAME APPEARS ON THE LLC UNIT CERTIFICATE(S), AND RETURNED
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned Member(s). If you do not sign and return this proxy or attend
the meeting and vote by ballot, your LLC Units cannot be voted. If you wish to
vote in accordance with the Board of Directors' recommendations, just sign where
indicated. You need not mark any boxes.
When LLC Units are held of record by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name as its
authorized officer. If a partnership, please sign in partnership name as its
authorized person.
DATED: , 2003.
--------------------
-----------------------------------------------------------------
Print name(s) exactly as shown on LLC Unit Certificate(s)
-------------------------------- -------------------------------
Signature (and Title, if any) Signature (if held jointly)
Page 2 of 2