PRE 14A
CONSUMER PORTFOLIO SERVICES, INC.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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/X/ Definitive Proxy Statement
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/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
CONSUMER PORTFOLIO SERVICES, INC.
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(Name of Registrant as Specified In Its Charter)
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
CONSUMER PORTFOLIO SERVICES, INC.
16355 Laguna Canyon Road, Irvine California 92618
Phone: 949-753-6800
The annual meeting of the shareholders of Consumer Portfolio Services, Inc. (the
"Company") will be held at 10:00 a.m., local time, on Wednesday, May 28, 2003 at
the Company's offices, 16355 Laguna Canyon Road, Irvine, California for the
following purposes:
o To elect the Company's entire Board of Directors for a one-year
term.
o To approve an amendment to the Company's 1997 Long-Term Incentive
Stock Plan, which increases the number of shares issuable from
3,400,000 to 4,900,000, thereby ratifies grants of 1,498,450
options, and otherwise amends said Plan.
o To ratify the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending December 31, 2003.
o To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on May 12, 2003 are
entitled to notice of and to vote at the meeting.
Whether or not you expect to attend the meeting in person, please complete,
date, and sign the enclosed proxy exactly as your name appears thereon and
promptly return it in the envelope provided, which requires no postage if mailed
in the United States. Proxies may be revoked at any time and, if you attend the
meeting in person, your executed proxy will be returned to you upon request.
By Order of the Board of Directors
Mark Creatura, Secretary
Dated: May 13, 2003
CONSUMER PORTFOLIO SERVICES, INC.
16355 Laguna Canyon Road
Irvine, California 92618
949-753-6800
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 2003
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INTRODUCTION
This proxy statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Consumer Portfolio Services, Inc. (the "Company" or
"CPS") for use at the annual meeting of the shareholders to be held at 10:00
A.M. local time on Wednesday, May 28, 2003 at the Company's offices, 16355
Laguna Canyon Road, Irvine, California 92618, and at any adjournment thereof
(the "Annual Meeting").
All shares represented by properly executed proxies received in time will be
voted at the Annual Meeting and, where the manner of voting is specified on the
proxy, will be voted in accordance with such specifications. Any shareholder who
executes and returns a proxy may revoke it at any time prior to the voting of
the proxy by giving written notice to the Secretary of the Company, by executing
a later-dated proxy, or by attending the meeting and giving oral notice of
revocation to the Secretary of the Company.
The Board of Directors of the Company has fixed the close of business on May 12,
2003, as the record date for determining the holders of outstanding shares of
the Company's Common Stock, without par value ("CPS Common Stock") entitled to
notice of, and to vote at the Annual Meeting. On that date, there were
20,239,176 shares of CPS Common Stock issued and outstanding. Each such share of
CPS Common Stock is entitled to one vote on all matters to be voted upon at the
meeting, except that holders of CPS Common Stock have the right to cumulative
voting in the election of directors, as described herein under the heading
"Voting of Shares."
The notice of the Annual Meeting, this proxy statement and the form of proxy are
first being mailed to shareholders of the Company on or about May 13, 2003. The
Company will pay the expenses incurred in connection with the solicitation of
proxies. The proxies are being solicited principally by mail. In addition,
directors, officers and regular employees of the Company may solicit proxies
personally or by telephone, for which they will receive no payment other than
their regular compensation. The Company will also request brokerage houses,
nominees, custodians and fiduciaries to forward soliciting material to the
beneficial owners of Common Stock of the Company and will reimburse such persons
for their expenses so incurred.
1
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
NOMINATIONS
The individuals named below have been nominated for election as directors of the
Company at the Annual Meeting, and each has agreed to serve as a director if
elected. The entire board of directors of the Company is elected annually.
Directors serve until the next annual meeting of shareholders and until their
successors are duly elected and qualified.
The names of the nominees, their principal occupations, and certain other
information regarding them set forth below are based upon information furnished
to the Company by them.
NAME AGE POSITION(S) WITH THE COMPANY
Charles E. Bradley, Jr. 43 President, Chief Executive Officer, and
Chairman of the Board of Directors
Thomas L. Chrystie 69 Director
E. Bruce Fredrikson 65 Director
John E. McConnaughy, Jr. 74 Director
John G. Poole 60 Vice Chairman of the Board of Directors
William B. Roberts 65 Director
John C. Warner 55 Director
Daniel S. Wood 44 Director
CHARLES E. BRADLEY, JR. has been the President and a director of the Company
since its formation in March 1991, and was elected Chairman of the Board of
Directors in July 2001. In January 1992, Mr. Bradley was appointed Chief
Executive Officer of the Company. From April 1989 to November 1990, he served as
Chief Operating Officer of Barnard and Company, a private investment firm. From
September 1987 to March 1989, Mr. Bradley, Jr. was an associate of The Harding
Group, a private investment banking firm. Mr. Bradley does not currently serve
on the board of directors of any other publicly-traded companies.
THOMAS L. CHRYSTIE has been a director of the Company since April 1995. He has
been self-employed as an investor, through Wycap Corporation, since 1988. His
previous experience includes 33 years at Merrill Lynch & Co. in various
capacities including heading Merrill Lynch's investment banking, capital markets
and merchant banking activities. In addition, he served as Chief Financial
Officer of Merrill Lynch & Co.
E. BRUCE FREDRIKSON has been a director of the Company since March 2003. He is a
Professor of Finance at the Syracuse University School of Management, where he
has taught since 1966. Mr. Fredrikson has published numerous papers on topics on
the theory and practice of corporate finance. He is also a director of Track
Data Corp.
JOHN E. MCCONNAUGHY, JR. has been a director of the Company since 2001. He is
the Chairman and Chief Executive Officer of JEMC Corporation. From 1981 to 1992
he was the Chairman and Chief Executive Officer of GEO International Corp, a
company in the business of nondestructive testing, screen-printing and oil field
services. Mr. McConnaughy was previously and concurrently Chairman and Chief
Executive Officer of Peabody International Corp., from 1969 to 1986. He
currently serves as a director of Levcor International, Inc., Varsity Brands,
Inc., Wave Systems, Inc., Fortune Natural Resources and Overhill Farms, Inc. Mr.
McConnaughy is also Chairman of the Board of Trustees of the Strang Clinic and
is the Chairman Emeritus of the Board of the Harlem School of the Arts.
2
JOHN G. POOLE has been a director of the Company since November 1993 and its
Vice Chairman since January 1996. He is now a private investor, having
previously been a director and Vice President of Stanwich Partners ("SPI") until
July 2001. SPI, which Mr. Poole co-founded in 1982, acquired controlling
interests in companies in conjunction with their existing management. Mr. Poole
is a director of Reunion Industries, Inc. and Sanitas, Inc.
WILLIAM B. ROBERTS has been a director of the Company since its formation in
March 1991. Since 1981, he has been the President of Monmouth Capital Corp., an
investment firm that specializes in management buyouts.
JOHN C. WARNER was elected a director of the Company in April 2003. Mr. Warner
is chief executive officer of O'Neill Clothing, a manufacturer and marketer of
apparel and accessories. He has held those positions since 1996.
DANIEL S. WOOD has been a director of the Company since July 2001. Mr. Wood is
president and chief executive officer of CTP Carrera, a manufacturer of custom
injection moldings. Previously, from 1988 to September 2000, he was the chief
operating officer and co-owner of CTP Carrera Corporation.
BANKRUPTCY PROCEEDINGS. In December 2001 Mr. Bradley resigned from his position
as chairman of the board of LINC Acceptance Company, LLC ("LINC"). LINC was a
limited liability company organized under the laws of Delaware, and its board of
members has certain management authority. The operating agreement of LINC
designated the chairman of the board of members as LINC's chief executive
officer. LINC was a majority-owned subsidiary of the Company, which engaged in
the business of purchasing retail motor vehicle installment purchase contracts,
and selling such contracts to the Company or other affiliates. LINC ceased
operations in the second quarter of 1999. On October 29, 1999, three former
employees of LINC filed an involuntary petition in the United States Bankruptcy
Court for the District of Connecticut seeking LINC's liquidation under Chapter 7
of the United States Bankruptcy Code. Mr. McConnaughy was the Chairman of the
Board of the Excellence Group, LLC, which on January 13, 1999, filed a voluntary
petition for in the United States Bankruptcy Court for the District of
Connecticut for reorganization under Chapter 11 of the United States Bankruptcy
Code. The Excellence Group's subsidiaries produced labels for a variety of
customers.
The Board of Directors has established an Audit Committee and a Compensation and
Stock Option Committee. The members of the Audit Committee are Thomas L.
Chrystie (chairman), John E. McConnaughy, Jr. and John G. Poole. The Audit
Committee is empowered by the Board of Directors to review the financial books
and records of the Company in consultation with the Company's accounting and
auditing staff and its independent auditors and to review with the accounting
staff and independent auditors any questions raised with respect to accounting
and auditing policy and procedure.
The members of the Compensation and Stock Option Committee are Daniel S. Wood
(chairman), Thomas L. Chrystie, John E. McConnaughy, Jr. and William B. Roberts.
This Committee makes recommendations to the Board of Directors as to general
levels of compensation for all employees of the Company, the annual salary of
each of the executive officers of the Company, authorizes the grants of options
to employees under the Company's 1997 Long-Term Stock Incentive Plan, and
reviews and approves compensation and benefit plans of the Company.
The Company does not have a Nominating Committee. Shareholders who wish to
suggest individuals for possible future consideration for board positions should
direct recommendations to the Board of Directors at the Company's principal
offices.
The Board of Directors held five meetings during 2002. The Audit Committee met
four times during 2002 and acted once by written consent, while the Compensation
and Stock Option Committee met twice and acted twelve times by written consent.
Each nominee attended at least 75% of the meetings of the Board of Directors and
its committees that such individual was eligible to attend in 2002.
The Board of Directors recommends a vote "FOR" each of the nominees above.
3
PROPOSAL NO. 2 - AMENDMENT OF 1997 LONG-TERM INCENTIVE STOCK PLAN
The Board of Directors proposes that the shareholders approve an amendment (the
"Amendment") to the Company's 1997 Long-Term Incentive Stock Plan (the "Plan").
The Amendment would increase the maximum number of shares issuable under the
Plan from 3,400,000 to 4,900,000. One effect of the Amendment will be to ratify
and validate the issuance of options with respect to 1,498,450 shares, which
otherwise would cause the limits of the Plan to be exceeded. Of such 1,498,450
options (the "Contingent Options"), 495,500 are held by directors and executive
officers of the Company.
A copy of the proposed amended Plan is attached to this Proxy Statement as
Appendix A.
The number of shares of Common Stock reserved for issuance under the Plan prior
to the proposed Amendment is 3,400,000. Of such shares, approximately 2,261,099
are the subject of outstanding valid options, and approximately 585,450 have
been issued upon exercise of options. In addition, the Company has conditionally
issued the Contingent Options, with respect to 1,498,450 shares, which would
cause the limits of the Plan to be exceeded by 838,999 shares. If the Amendment
is approved, then such 1,498,450 Contingent Options will be made effective, and
approximately 661,001 shares will remain available for grant under the Plan. If
the Amendment is not approved, then such 1,498,450 Contingent Options will be
invalid, and approximately 659,451 shares will be available under the Plan for
future stock option grants. It should be noted that the Company previously
maintained a 1991 Stock Option Plan, under which a total of 2,419,420 shares
were issued to directors, officers and other employees. That prior plan has
expired, but there remain outstanding thereunder options to purchase an
additional 211,850 shares of Common Stock.
The Board believes that stock options are essential to attract and retain the
most talented personnel available for positions of substantial responsibility,
to encourage ownership of the Common Stock by employees of the Company and its
subsidiaries and to promote the Company's success by providing both rewards for
exceptional performance and long-term incentives for future contributions. The
Board of Directors believes that the number of shares currently available for
issuance will be insufficient to achieve the purposes of the Plan unless
additional shares are authorized. The Board, acting through its Compensation
Committee, on July 24, 2002, approved the issuance of the Contingent Options,
and amended the Plan (the "Amendment") to increase by 1,500,000 the total number
of shares subject to the Plan. The Board of Directors as a whole ratified the
action of the Compensation Committee on April 23, 2003, and directed that the
Amendment be submitted to the shareholders for approval. The Board recommends
that the shareholders approve the Amendment, in order to allow the Company to
continue to offer stock options to key employees and directors as part of its
overall compensation package.
DESCRIPTION OF THE PLAN
The Plan provides for the grant of incentive stock options, nonqualified stock
options, stock appreciation rights and stock awards (as those terms are
described below) to employees and directors of the Company and its subsidiaries.
From the inception of the Plan in 1997 to the present, no awards other than
stock options have been granted under the Plan, and there are no current plans
to issue any awards other than stock options.
The Board or a Committee of the Board consisting of two or more non-employee
directors may administer the Plan. Currently, the Compensation Committee of the
Board administers the Plan. The Board or the Committee has authority to
administer and interpret the Plan and to determine the form and substance of
agreements, instruments and guidelines for the administration of the Plan. The
Board or the Committee has authority to determine the employees and directors to
be granted stock options under the Plan and to determine the size, type and
applicable terms and conditions of such grants.
4
Because the employees and directors who may receive stock option grants and the
amount of such grants are determined by the Board or the Committee from time to
time, it is not possible to state the names or positions of, or the number of
options that may be granted to, such employees and directors of the Company and
its subsidiaries. However, the maximum number of shares of Common Stock that may
subject to awards granted to any one individual over the life of the Plan is
currently 1,000,000, and will be increased, if the Amendment is approved, to
1,500,000. One effect of that increase will be to permit the Company to grant
additional options under the Plan to its incumbent chief executive officer, who
has been granted under the Plan options to purchase an aggregate of 754,999
shares, of which 185,000 are part of the group of contingent grants subject to
shareholder approval under the Amendment. The Amendment also clarifies that
options that are canceled, expire, or are surrendered without exercise, are not
counted against that limit.
The Board or the Committee is authorized to establish, at the time each grant is
made, the time or times at which stock options may be exercised and whether all
of the stock options become exercisable at one time or in increments over time.
The exercise price of stock options is set by the Board or the Committee at the
time of the granting of an option. In the event of a stock dividend, stock
split, reverse stock split or similar capital adjustment, the Plan provides for
appropriate adjustments to the number of shares reserved for issuance pursuant
to the exercise of stock options, the number of stock options previously granted
and the exercise price of stock options previously granted.
The closing price of the Company's Common Stock on the Nasdaq Stock Market, Inc.
on May 9, 2003 was $1.92 per share.
The term of stock options granted under the Plan may not be more than ten (10)
years from the date of grant. Options expire upon the earliest to occur of (i)
three months following termination of employment, (ii) immediately upon the
discharge of an optionee for misconduct that is willfully or wantonly harmful to
the Company or any subsidiary, (iii) twelve months after an optionee's death or
disability that renders the optionee incapable of continuing employment, (iv)
upon the expiration date specified in the optionee's grant agreement, or (v) ten
years after the date of grant.
The aggregate exercise price of options may be paid in cash or by cashier's
check, or otherwise as provided in specific option agreements. Stock options
granted under the Plan may not be transferred by the optionee or by operation of
law other than (i) by will of or by the laws of descent and distribution
applicable to a deceased optionee, or (ii) pursuant to a domestic relations
order.
The Plan and all rules, guidelines and regulations adopted with respect thereto
may be terminated, suspended, modified or amended at any time by action of the
Board or the Committee, provided, however, that any increase in the number of
shares reserved for issuance pursuant to options granted under the Plan must be
approved by the shareholders of the Company. The Board or the Committee may
amend the terms and conditions of outstanding stock options as long as such
amendments do not (i) adversely affect the holders of such stock options without
such holders' consent, (ii) change the length of the term of such stock options
or (iii) change the provisions of such stock options so that they are not
permitted under the Plan.
EFFECT OF THE PROPOSED AMENDMENT ON OFFICERS & DIRECTORS
As noted above, one effect of the proposed amendment will be to ratify and
validate the issuance of the Contingent Options, with respect to 1,498,450
shares, of which 495,500 are held by directors and executive officers of the
Company. In particular, a material portion of such options are held by the
Company's chief executive officer and the four other most-highly compensated
officers, as detailed in the following table, which also shows the number of
such options held by all executive officers, by directors who are not officers,
and by non-officer employees of the Company. All such Contingent Options become
exercisable in five equal annual installments on January 1 of 2003-2007, at an
exercise price of $1.50 per share.
5
1997 Long-Term Incentive Stock Plan
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NAME & POSITION NUMBER OF SHARES
SUBJECT TO CONTINGENT
OPTIONS
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Charles E. Bradley, Jr. 185,000
President & Chief Executive Officer
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Nicholas P. Brockman 25,000
Senior Vice President - Collections
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Curtis K. Powell
Senior Vice President - Originations 25,000
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William L. Brummund, Jr.
Senior Vice President - Administration 25,000
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Rod Rifai
Senior Vice President - Marketing 48,000
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Executive Group (all executive officers, 9 persons) 385,500
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Non-Executive Director Group (all directors other
than officers, 6 persons) 110,000
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Non-Executive Officer Employee Group (all 1,002,950
employees other than executive officers, 462
persons, of whom 106 hold Contingent Options)
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FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE PLAN
The federal income tax consequences of an optionee's participation in the Plan
are complex and subject to change. The following discussion is a summary of the
general rules applicable to stock options. Recipients of stock options under the
Plan should consult their own tax advisors because a taxpayer's particular
situation may be such that some variation of the general rules would apply.
INCENTIVE STOCK OPTIONS
Incentive stock options qualify for favorable tax treatment for the optionee
under Section 422 of the Internal Revenue Code of 1986 as amended (the "Code").
Nonqualified stock options are any stock options that do not qualify as
"incentive stock options" and will not qualify for any special tax benefits to
the optionee. The federal income tax consequences of an employee's participation
in the Plan are discussed below.
Optionees will not recognize any income upon either the grant or the exercise of
incentive stock options and the Company may not take a deduction for federal tax
purposes with respect to such grant or exercise. Upon the sale of the shares of
Common Stock obtained through the exercise of incentive stock options by the
optionee, the tax treatment to the optionee and the Company will depend
primarily upon whether the optionee has met certain holding period requirements
at the time he or she sells the shares. In addition, as discussed below, the
exercise of incentive stock options may subject the optionee to alternative
minimum tax liability.
If an optionee exercises incentive stock options and does not dispose of the
shares received within two years after the date of the grant of such stock
options or within one year after the issuance of the shares to him or her, any
gain realized upon disposition will be characterized as long-term capital gain.
In such case, the Company will not be entitled to a federal tax deduction. If
the optionee disposes of the shares either within two years after the date that
the options are granted or within one year after the issuance of the shares to
6
him or her, such disposition will be treated as a disqualifying disposition and
an amount equal to the lesser of (i) the fair market value of the shares on the
date of exercise minus the exercise price, or (ii) the amount realized on the
disposition minus the exercise price, will be taxed as ordinary income to the
optionee in the taxable year in which the disposition occurs. The excess, if
any, of the amount realized upon disposition over the fair market value at the
time of the exercise of the stock options will be treated as long-term capital
gain if the shares have been held for more than one year following the exercise
of the stock options. In the event of a disqualifying disposition, the Company
may withhold income taxes from the optionee's compensation with respect to the
ordinary income realized by the optionee as a result of the disqualifying
disposition.
The exercise of incentive stock options may subject an optionee to alternative
minimum tax liability because the excess of the fair market value of the shares
at the time incentive stock options are exercised over the exercise price of the
stock options is included in income for purposes of the alternative minimum tax,
even though it is not included in the taxable income for purposes of determining
the regular tax liability of an optionee. Consequently, an optionee may be
obligated to pay alternative minimum tax in the year he or she exercises
incentive stock options.
In general, there will be no federal income tax deductions allowed to the
Company upon the grant, exercise, or termination of incentive stock options.
However, in the event an optionee sells or disposes of stock received upon the
exercise of incentive stock options in a disqualifying disposition, the Company
is entitled to a deduction for federal income tax purposes in an amount equal to
the ordinary income, if any, recognized by the optionee upon disposition of the
shares, provided that the deduction is not otherwise disallowed under the Code.
NONQUALIFIED STOCK OPTIONS
Nonqualified stock options granted under the Plan do not qualify for any special
tax benefits to the optionee. An optionee will not recognize any taxable income
at the time he or she is granted nonqualified stock options. Upon the exercise
of nonqualified stock options, however, the optionee will recognize ordinary
income for federal tax purposes measured by the excess of the then fair market
value of the shares acquired over the aggregate option exercise price. The
income realized by the optionee will be subject to income tax withholding by the
Company out of the current earnings paid to the optionee. If such earnings are
insufficient to pay the tax, the optionee will be required to make a direct
payment to the Company for tax liability.
The optionee's basis for determination of gain or loss upon the subsequent
disposition of shares acquired upon the exercise of nonqualified stock options
will be the amount paid for such shares plus any ordinary income recognized as a
result of the exercise of such stock options. Upon a disposition of any shares
acquired pursuant to the exercise of nonqualified stock options, the difference
between the aggregate sale price and the optionee's basis in the shares will be
treated as a capital gain or loss and will be characterized as long-term capital
gain or loss if the shares have been held for more than one year at the date of
their disposition.
In general, there will be no federal tax consequences to the Company upon the
grant or termination of nonqualified stock options or a sale or disposition of
the shares acquired upon the exercise of nonqualified stock options. Upon the
exercise of nonqualified stock options, however, the Company will be entitled to
a deduction for federal income tax purposes equal to the amount of ordinary
income that an optionee is required to recognize as a result of the exercise,
provided that the deduction is not otherwise disallowed under the Code.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT OF
THE PLAN.
7
PROPOSAL NO. 3 - RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has appointed the accounting firm
of KPMG LLP to be the Company's independent auditors for the year ending
December 31, 2003.
A proposal to ratify that appointment will be presented to shareholders at the
Annual Meeting. If the shareholders do not ratify the selection of KPMG LLP at
the Annual Meeting, the Audit Committee will select another firm of independent
public accountants. Representatives of KPMG LLP will be present at the Annual
Meeting. Such representatives will have an opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions
from shareholders in attendance.
AUDIT FEES
The aggregate fees billed by KPMG for professional services rendered for the
audit of the Company's annual financial statements for the fiscal year ended
December 31, 2002, and for the review of the financial statements included in
the Company's quarterly reports on Form 10-Q for that fiscal year were $309,250.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not incur any fees billed by KPMG for professional services
rendered for information technology services relating to financial information
systems design and implementation for the fiscal year ended December 31, 2002.
ALL OTHER FEES
The aggregate fees billed by KPMG for services rendered to the Company,
including the services described above under "Audit Fees," for the fiscal year
ended December 31, 2002, were $1,001,210, consisting of audit related fees in
the amount of $309,250 and non-audit fees in the amount of $691,960. Audit
related services included accounting consultation and services related to review
of quarterly reports. The non-audit services consisted primarily of tax services
related to the Company's March 2002 acquisition of MFN Financial Corp. and its
subsidiaries, and services related to the Company's securitization transactions.
In the course of its meetings, the Audit Committee has considered whether KPMG's
provision of these other services is compatible with maintaining KPMG's
independence, and concluded that KPMG's independence is not impaired.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE SELECTION OF
KPMG LLP.
8
INFORMATION REGARDING THE COMPANY
EXECUTIVE COMPENSATION
The following table summarizes all compensation earned during the three fiscal
years ended December 31, 2002, 2001, and 2000 by the Company's chief executive
officer and by the four most highly compensated individuals (such five
individuals, the "named executive officers") who were serving as executive
officers at December 31, 2002.
SUMMARY COMPENSATION TABLE
------------------------------------------- --------------------------- ------------------- --------------
Compensation for Long Term All Other
period shown Compensation Compensation
Awards (1) ($) (2)
------------------------------------------- --------------------------- -------------------
Name and Principal Position Year Salary ($) Bonus ($) Options/SARs
------------------------------- ----------- ----------- --------------- ----------------------------------
CHARLES E. BRADLEY, JR. 2002 600,000 850,000 185,000 450
President & Chief 2001 565,000 1,100,000 166,666 846
Executive Officer 2000 525,000 750,000 333,333 1,446
----------------------------------------------------------------------------------------------------------
NICHOLAS P. BROCKMAN 2002 222,000 174,792 25,000 450
Senior Vice President - 2001 206,000 117,000 20,000 692
Collections 2000 165,000 116,000 10,000 1,292
----------------------------------------------------------------------------------------------------------
CURTIS K. POWELL 2002 222,000 154,734 25,000 450
Senior Vice President - 2001 206,000 124,000 20,000 830
Originations 2000 191,000 105,000 10,000 1,430
----------------------------------------------------------------------------------------------------------
WILLIAM L. BRUMMUND, JR. 2002 196,000 144,452 25,000 450
Senior Vice President - 2001 172,000 100,000 20,000 702
Administration 2000 161,000 89,000 10,000 1,302
----------------------------------------------------------------------------------------------------------
ROD RIFAI 2002 190,000 117,990 48,000 450
Senior Vice President - 2001 335,000 44,000 52,500 183
Marketing (3) 2000 373,000 -- 2,500 --
----------------------------------------------------------------------------------------------------------
(1) Number of shares that might be purchased upon exercise of options that
were granted in the period shown.
(2) Amounts in this column represent (a) any Company contributions to the
Employee Savings Plan (401(k) Plan), and (b) premiums paid by the Company
for group life insurance, as applicable to the named executive officers.
Company contributions to the 401(k) Plan were $600 per individual in 2000,
and zero in 2001 and 2002.
(3) Mr. Rifai became an executive officer as Senior Vice President -
Marketing, in July 2001. All of the salary amount for 2000 and $228,000 of
the salary amount for 2001 represents salary and commissions earned while
Mr. Rifai was serving as a regional vice president for CPS Marketing,
Inc., a subsidiary of the Company.
OPTION AND SAR GRANTS
The Company in the year ended December 31, 2002, did not grant any stock
appreciation rights to any of the named executive officers. The Company has from
time to time granted options to substantially all of its management and
marketing employees, and did so in July 2002. As noted in the discussion of
Proposal No. Two, above, the grants approved in July 2002 would cause the
limitations of the Company's 1997 Long-Term Incentive Stock Plan to be exceeded.
The grants from July 2002, therefore, with respect to an aggregate of 1,498,450
shares, were made contingent on shareholder approval of an increase in the
maximum number of shares that may be issued under the Plan. All of the 2002
grants to the named executive officers are contingent on shareholder approval of
such amendment. Messrs. Brockman. Powell and Brummund received contingent grants
with respect to 25,000 shares, Mr. Rifai received a contingent grant with
respect to 48,000 shares, and the chief executive officer received a contingent
grant with respect to 185,000 shares. All such options are exercisable, if at
all, at $1.50 per share, and all are scheduled to become exercisable in five
equal annual increments, from 2003 through 2007.
9
------------------------------------------------------------------------------------------------------------------
OPTIONS/GRANTS IN LAST FISCAL YEAR - Potential Realizable
INDIVIDUAL GRANTS Value at Assumed Annual
Rates
of Stock Price
Appreciation for Option
Term
------------------------------------------------------------------------------------------------------------------
Name Number of Percent of
Shares Total Options Exercise
Underlying Granted to or Base
Options Employees Price Expiration
Granted in 2002 ($/Share) Date 5% ($) 10% ($) NOTES
-------------------------------------------------------------------------------------------------------------------
Charles E. Bradley, Jr. 185,000 10.29% $1.50 7/23/12 174,518 442,264 (1)
------------------------------------------------------------------------------------------------------------------
Nicholas P. Brockman 25,000 1.39% $1.50 7/23/12 23,584 59,765 (1)
------------------------------------------------------------------------------------------------------------------
Curtis K. Powell 25,000 1.39% $1.50 7/23/12 23,584 59,765 (1)
------------------------------------------------------------------------------------------------------------------
William L. Brummund, Jr. 25,000 1.39% $1.50 7/23/12 23,584 59,765 (1)
------------------------------------------------------------------------------------------------------------------
Rod Rifai 48,000 2.67% $1.50 7/23/12 45,280 114,749 (1)
------------------------------------------------------------------------------------------------------------------
(1) Becomes exercisable in five equal installments on each January 1,
2003-2007, provided however that these options have been granted subject
to shareholder approval, as outlined in Proposal No. 2 in this Proxy
Statement.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUE TABLE
The following table sets forth, as of December 31, 2002, and for the year then
ended, the number of unexercised options held by each of the named executive
officers, the number of shares subject to then exercisable and unexercisable
options held by such persons and the value of all unexercised options held by
such persons. Each option referred to in the table was granted under the
Company's 1991 Stock Option Plan, or under the 1997 Long-Term Incentive Stock
Plan, at an option price per share no less than the fair market value per share
on the date of grant.
===================================================================================================
Name Number of Unexercised Options Value of Unexercised In-the-
at December 31, 2002 Money Options
at December 31, 2002 (1)
Exercisable Unexercisable Exercisable ($) Unexercisable ($)
---------------------------------------------------------------------------------------------------
Charles E. Bradley, Jr. 283,334 285,399 96,334 199,986
---------------------------------------------------------------------------------------------------
Nicholas P. Brockman 4,000 54,900 1,360 51,804
---------------------------------------------------------------------------------------------------
Curtis K. Powell 71,000 67,000 99,515 69,530
---------------------------------------------------------------------------------------------------
William L. Brummund, Jr. 4,000 48,700 1,360 42,721
---------------------------------------------------------------------------------------------------
Rod Rifai 23,500 94,500 24,165 65,705
===================================================================================================
(1) Valuation based on the last sales price on December 31, 2002 of $2.09 per
share, as reported by Nasdaq. BONUS PLAN
10
The named executive officers and other officers participate in a management
bonus plan, pursuant to which such employees are entitled to earn cash bonuses,
if the Company achieves certain net income levels or goals established by the
Board of Directors, and if such employees achieve certain individual objectives.
The amount of bonus payable to each officer is determined by the Board of
Directors upon recommendation of the Compensation Committee.
DIRECTOR COMPENSATION
During the year ended December 31, 2002, the Company paid all directors,
excluding Mr. Bradley, a retainer of $1,000 per month and an additional fee of
$1,000 PER DIEM for attendance at meetings of the board, and $500 for meetings
of committees. Mr. Bradley received no additional compensation for his service
as a director. The Board also approved a policy applicable to all of its
non-employee members, which awards each such director upon joining the board an
option to purchase 30,000 shares of the Company's common stock, and annually
thereafter an option to purchase an additional 10,000 shares. Applying that
policy, and recognizing that Messrs. McConnaughy and Wood had joined the Board
in 2001, the Board on July 24, 2002, issued options with respect to 10,000
shares to each non-employee director, and with respect to an additional 30,000
shares to Messrs. McConnaughy and Poole. All such options are exercisable at
$1.50 per share, the market price prevailing at date of grant. Effective January
2003, the Board increased the monthly retainer to $2,000.
11
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES IN GENERAL
The Company's objectives with respect to compensation are several. The
significant objectives are to cause compensation (i) to be sufficient in total
amount to provide reasonable assurance of retaining key executives, (ii) to
include a significant contingent component, so as to provide strong incentives
to meet designated Company objectives, and (iii) to include a significant
component tied to the price of the Common Stock, so as to align management's
incentives with shareholder interests.
The Committee considers an executive's base salary to be the most critical
component with respect to the retention objective. Acting on the recommendations
of the chief executive officer, the Committee adjusts other officers' salaries
annually, with the adjustment generally consisting of a 3% to 10% increase from
the prior year's rate. Where extraordinary circumstances apply, such as a
promotion to executive officer status or a special need to retain an individual
officer, the chief executive officer may recommend, and the Committee may
approve, a larger increase.
The Company has made a practice of paying annual bonuses to encourage executive
officers and key management personnel to exercise their best efforts and
management skills toward achieving the Company's objectives. Under the Company's
bonus plan as applied to the year ended December 2002, executive officers of the
Company other than its chief executive officer were eligible to receive a cash
bonus of up to 100% of their base salaries. The amount of such bonus is
determined initially by the Compensation Committee, acting on the recommendation
of the chief executive officer, and is then made definite by action of the Board
of Directors as a whole. Factors in determining the amount of bonus are whether
the executive and his department have met individual objectives set by the chief
executive officer, whether the Company as a whole has met or exceeded budget
targets, whether certain objectives for the management group as a whole have
been met, and a subjective evaluation of the officer's performance. Numerical
scores are assigned to each of these factors, and weighed pursuant to a formula
that can result in a maximum bonus of 100% of base compensation.
Applying the above principles, the Compensation Committee in January 2003
approved bonus compensation to the named executive officers, other than the
chief executive officer, of approximately 62% to 79% of their respective base
salaries for the year ended December 31, 2002. The variation in the percentages
awarded is generally reflective of the extent to which the named executive
officers met their individual and department objectives.
The Compensation Committee also makes awards of incentive and non-qualified
stock options under the Company's 1997 Long-Term Incentive Stock Plan. Such
awards are designed to assist in the retention of key executives and management
personnel and to create an incentive to create shareholder value over a
sustained period of time. The Company believes that stock options are a valuable
tool in compensating and retaining employees.
In exercising its discretion as to the level of executive compensation and its
components, the Compensation Committee considers a number of factors. Financial
factors considered include the Company's revenue and income (or loss) and cash
flow. Operational factors considered include the Company's cost of funds;
indicators of the credit quality of the Company's servicing portfolio, including
levels of delinquencies and charge-offs; and indicators of successful management
of personnel, including the number of employees hired and employee stability.
All of such factors are assessed with reference to the judgment of the
Compensation Committee as to the degree of difficulty of achieving desired
outcomes.
The Company also maintains certain broad-based employee benefit plans in which
executive officers are permitted to participate on the same terms as
non-executive personnel who meet applicable eligibility criteria, subject to any
legal limitations on the amounts that may be contributed or the benefits that
may be payable under the plans.
12
COMPENSATION OF THE COMPANY'S CHIEF EXECUTIVE OFFICER
The Company's general approach in setting the annual compensation of its chief
executive officer is to set that officer's base compensation by reference to his
base rate for the preceding year, to pay an annual bonus that is reflective of
the quality of that officer's performance during the year, and to grant
significant equity incentives, to date in the form of stock options, intended to
align the officer's interests with those of the shareholders. During the year
ended December 2002, the Company's chief executive officer, Charles E. Bradley,
Jr., received $600,000 in base salary. In setting that rate in the spring of
2002, the Compensation Committee considered the base salary rate that the
Company had paid in the prior year ($565,000), the desirability of providing an
annual increase (which in this case was 6.19%), the desirability of ensuring
retention of the services of the Company's incumbent chief executive officer,
and the levels of chief executive officer compensation prevailing among other
financial services companies.
The Company's policy regarding cash bonuses paid to its chief executive officer
has been similar to its policy regarding cash bonuses for other executive
officers, except that the Compensation Committee exercises a greater degree of
discretion with respect to award of a bonus to the chief executive officer than
it exercises with respect to bonuses paid to other executive officers, and a
formula is not used.
The Compensation Committee in January and February 2003 reviewed the Company's
and the chief executive officer's performance in 2002, and approved bonus
compensation in the amount of $850,000, representing 141% of that executive's
base salary for the year ended December 31, 2002. In determining to award such a
bonus, the Compensation Committee considered the Company's improved financial
performance, the Company's success in re-entering the securitization market on a
regular basis, the successful deployment of assets acquired in March 2002, the
comparative performance of CPS Common Stock with that of the stock of other
companies engaged in similar business, the levels of compensation paid to chief
executives of other financial services companies, the chief executive's success
in retaining a second financial guaranty insurance provider for the Company's
securitizations, and the fact that a number of companies competitive with the
Company have been unable to remain in business.
/s/ THE COMPENSATION COMMITTEE
Daniel S. Wood (chairman)
Thomas L. Chrystie
John E. McConnaughy, Jr.
William B. Roberts
13
INCORPORATION BY REFERENCE
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate by reference future filings, including this Proxy
Statement, in whole or in part, the preceding report of the Compensation
Committee, the following Performance Graph and the report of the Audit
Committee, below, shall not be incorporated by reference into any such filings.
PERFORMANCE GRAPH
The following graph compares the yearly change in the Company's cumulative total
shareholder return on its common stock from December 31, 1997 through December
31, 2002, with (i) the cumulative total return of the Center for Research in
Security Prices ("CRSP") Index for the Nasdaq Stock Market (U.S. Companies), and
(ii) the cumulative total return of the CRSP Index for Nasdaq Financial Stocks.
The graph assumes $100 was invested on December 31, 1997 in the Company's common
stock, and in each of the two indices shown, and that all dividends were
reinvested. Data are presented for the last trading day in each of the Company's
fiscal years.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG CONSUMER PORTFOLIO SERVICES, INC.,
NASDAQ STOCK MARKET (U.S. COMPANIES) AND NASDAQ FINANCIAL STOCKS.
[graph depicted here]
DEC 1997 DEC 1998 DEC 1999 DEC 2000 DEC 2001 DEC 2002
-------- -------- -------- -------- -------- --------
Consumer Portfolio Services, Inc. 100.0 40.2 16.2 14.9 14.2 21.7
Nasdaq Stock Market (U.S) 100.0 138.5 258.2 156.1 123.1 84.8
Nasdaq Financial Stocks (U.S & Foreign) 100.0 97.2 96.5 104.2 114.5 117.9
14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of CPS Common
Stock (its only class of voting securities) owned beneficially as of April 30,
2003, by (i) each person known to CPS to own beneficially more than 5% of the
outstanding Common Stock, (ii) each director, nominee or named executive officer
of CPS, and (iii) all directors, nominees and executive officers of CPS as a
group. Except as otherwise indicated, and subject to applicable community
property and similar laws, each of the persons named has sole voting and
investment power with respect to the shares shown as beneficially owned by such
persons. The address of Messrs. Bradley, Jr., Brockman, Brummund, Jr., Powell
and Rifai is c/o Consumer Portfolio Services, Inc., 16355 Laguna Canyon Road,
Irvine, CA 92618.
Amount and Nature
of Beneficial Percent
Name and Address of Beneficial Owner Ownership (1) of Class
------------------------------------ ------------- --------
Charles E. Bradley, Jr. ......................................................... 2,723,931 (2) 13.2%
Thomas L. Chrystie............................................................... 192,100 0.9%
P.O. Box 640, Wilson, WY 83014
E. Bruce Fredrikson.............................................................. 0 0.0%
34437 N. 93rd Place, Scottsdale, AZ 85262
John E. McConnaughy, Jr.......................................................... 200,337 1.0%
Atlantic Capital Partners, 3 Parkland Drive, Darien, CT 06820
John G. Poole.................................................................... 667,193 (3) 3.2%
1 Rye Road, Port Chester, NY 10573
William B. Roberts............................................................... 1,073,982 5.3%
Monmouth Capital Corp., 126 East 56th Street, New York, NY 10022
John C. Warner................................................................... 0 0.0%
17 Pasteur, Irvine, CA 92618
Daniel S. Wood................................................................... 40,000 0.2%
600 Depot St., Latrobe, PA 05650
Nicholas P. Brockman............................................................. 186,191 0.9%
William L. Brummund, Jr.......................................................... 173,873 0.9%
Curtis K. Powell................................................................. 162,716 0.8%
Rod Rifai........................................................................ 39,359 0.2%
All directors, nominees and executive officers combined (15 persons) 5,628,376 (4) 26.4%
Charles E. Bradley, Sr........................................................... 1,931,819 (5) 9.5%
Stanwich Partners, Inc., 62 Southfield Avenue, Stamford, CT 06902
Levine Leichtman Capital Partners II, L.P........................................ 4,553,500 (6) 22.5%
335 North Maple Drive, Suite 240, Beverly Hills, CA 90210
FSA Portfolio Management Inc. ................................................... 1,702,334 (7) 7.8%
(1) Includes certain shares that may be acquired within 60 days after April
24, 2003 from the Company upon exercise of options, as follows: Mr.
Bradley, Jr., 403,582 shares; Mr. Chrystie, 10,000 shares; Mr.
McConnaughy, 40,000 shares; Mr. Poole, 10,000 shares; Mr. Roberts, 10,000
shares; Mr. Wood, 40,000 shares; Mr. Brockman, 29,100 shares; Mr.
Brummund, 25,100 shares; Mr. Powell, 97,000 shares; and Mr. Rifai, 36,100
shares. Shares deemed held by officers include shares underlying certain
options that are contingent on shareholder approval, which will be sought
at the Company's 2003 annual meeting of shareholders.
15
(2) Includes 1,058,818 shares held by trusts of which Mr. Bradley is the
co-trustee, and as to which shares Mr. Bradley has shared voting and
investment power. One such trust holds 211,738 shares for the benefit of
Mr. Bradley. The co-trustee, who has shared voting and investment power as
to all such shares (representing 5.4% of outstanding shares), is Kimball
Bradley, whose address is 11 Stanwix Street, Pittsburgh, PA 15222.
(3) Includes 333,333 shares issuable upon conversion of $1,000,000 of Company
debt held by the named person.
(4) Includes 1,703,034 shares that may be acquired within 60 days after April
30, 2003, upon exercise of options and conversion of convertible
securities.
(5) Includes 207,490 shares owned by the named person's spouse, as to which he
has no voting or investment power, and 697,791 shares owned by two
corporations (Stanwich Financial Services Corp. and Stanwich Partners,
Inc.) of which the named person is controlling stockholder, president and
a director.
(6) Comprises 4,552,500 issued shares and 1,000 shares that are issuable upon
exercise of an outstanding warrant. (7) Represents shares issuable upon
exercise of a presently exercisable warrant.
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors, executive officers and holders of in excess of 10% of the Company's
common stock are required to file reports concerning their transactions in and
holdings of equity securities of the Company. Based on a review of reports filed
by each such person, and inquiry of each regarding holdings and transactions,
the Company believes that all reports required with respect to the year 2002
were timely filed, except, except that Mr. Bradley filed four reports late,
relating to a total of 21 transactions.
AUDIT COMMITTEE REPORT
The Audit Committee reviews the Company's financial reporting process on behalf
of the Board. Management has the primary responsibility for the financial
statements and the reporting process. The Company's independent auditors are
responsible for expressing an opinion on the conformity of the Company's audited
financial statements to accounting principles generally accepted in the United
States of America.
In this context, the Audit Committee reviewed and discussed with management and
the independent auditors the audited financial statements for the year ended
December 31, 2002 (the "Audited Financial Statements"). The Audit Committee has
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees). In
addition, the Audit Committee has received from the independent auditors the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and discussed with them their
independence from the Company. Following the reviews and discussions referred to
above, the Audit Committee recommended to the Board that the Audited Financial
Statements be included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2002, for filing with the Securities and Exchange Commission.
The Audit Committee members do not serve as professional accountants or auditors
and their functions are not intended to duplicate or to certify the activities
of management and the independent auditors. The Committee serves a board-level
oversight role where it receives information from, consults with, and provides
its views and directions to, management and the independent auditors on the
basis of the information it receives and the experience of its members in
business, financial and accounting matters.
/s/ The Audit Committee
Thomas L. Chrystie (chairman)
John E. McConnaughy, Jr.
John G. Poole
16
CERTAIN TRANSACTIONS
CPS LEASING. The Company holds 80% of the outstanding shares of the capital
stock of CPS Leasing, Inc. ("CPSL"). The remaining 20% of CPSL is held by
Charles E. Bradley, Jr., who is the President and a director of the Company.
CPSL engaged in the equipment leasing business, and is currently in the process
of liquidation as its leases come to term. CPSL financed its purchases of the
equipment that it leases to others through either of two lines of credit.
Amounts borrowed by CPSL under one of those two lines of credit have been
guaranteed by the Company. As of March 31, 2003, the total amount outstanding
under the two lines of credit was approximately $504,000, of which the Company
had guarantied approximately $180,000. The Company has also financed the
operations of CPSL by making operating advances and by advancing to CPSL the
fraction of the purchase prices of its leased equipment that CPSL did not borrow
under its lines of credit. The aggregate amount of advances made by the Company
to CPSL as of March 31, 2003, is approximately $2.0 million. The advances
related to operations bear interest at the rate of 8.5% per annum. The advances
related to the fraction of the purchase price of leased equipment are not
interest bearing.
CARS USA. In the ordinary course of its business operations, the Company from
time to time purchases retail automobile installment contracts from an
automobile dealer, Cars USA, which until August 2002 was owned by a corporation
of which Mr. Bradley, Sr., and Mr. Bradley, Jr., are the principal shareholders.
During the year 2002 and prior to the date of sale, the Company purchased 16
such contracts, with an aggregate principal balance of approximately $233,431
All such purchases were on the Company's normal business terms. Cars USA is
indebted to the Company in the amount of approximately $669,000 as of December
31, 2002. Cars USA ceased operations in August 2002, and has no apparent ability
to repay its debt.
LEVINE LEICHTMAN. At December 31, 2001, the Company was indebted to Levine
Leichtman Capital Partners II, L.P. ("LLCP") in the amount of approximately $26
million. Such debt (the "Term B Notes") is due November 2003, and bears interest
at 14.50% per annum. The interest rate is subject to increase by 2.0% in the
event of a default by the Company.
In March 2002, the Company and LLCP entered into a series of agreements under
which LLCP provided additional funding to enable the Company to acquire MFN
Financial Corporation. Under the March 2002 agreements, the Company borrowed $35
million from LLCP as "Bridge Notes," bearing interest at 13.50% per annum and
due February 2003, and approximately $8.5 million as "Term C Notes," bearing
interest on a deemed principal amount of approximately $11.2 million at 12.00%
per annum and due in March 2008. At December 31, 2002, the Company was indebted
to LLCP in the amount of approximately $50.1 million, comprising $21,8 million
of the Term B Notes, $21.0 million of the Bridge Notes, and $7.3 million of the
Term C Notes. The Bridge Notes were paid in full on February 21, 2003.
The Company borrowed an additional $25 million (the "Term D Notes" ) from LLCP
on February 3, 2003. The Term D Notes are due April 30, 2003; provided, however,
that the Company by payment of two successive extension fees, each in the amount
of $125,000, may extend the maturity to May 31, 2003 and January 14, 2004. The
Term D Notes bear interest at pre-determined rates that are 4.00% to 5.14% per
annum for the months of February through June 2003, and thereafter 12.00% per
annum. In connection with the issuance and sale of the Term D Notes, the Company
paid LLCP a structuring fee of $1,000,000, and paid LLCP's out-of-pocket
expenses of approximately $50,000.
The Term B Notes include terms that require partial prepayment, in amounts
representing a portion of cash releases from the Company's securitized pools.
One effect of such prepayment provisions is that it is not possible to predict
with assurance the amount of interest and principal that the Company will pay to
LLCP in any given year; however, the Company's payments on its indebtedness to
LLCP in the year 2002 comprised $22.2 million of principal and $7.8 million of
interest. In connection with the March 2002 agreements and the acquisition of
MFN Financial Corporation, the Company paid LLCP a structuring fee of $1.75
million and an investment banking fee of $1.0 million, and paid LLCP's
out-of-pocket expenses of approximately $315,000. In addition, the Company paid
LLCP certain other fees and interest amounting to $426,181. All of the Company's
indebtedness to LLCP is secured by a blanket security interest in favor of LLCP.
The terms of the transactions between the Company and LLCP were determined by
negotiation.
17
SFSC. At December 31, 2002, the Company was indebted to Stanwich Financial
Services Corp. ("SFSC") in the principal amount of $16.5 million. SFSC is a
corporation wholly-owned by Stanwich Holdings, Inc., which in turn is
wholly-owned by Charles E. Bradley, Sr. Mr. Bradley, Sr. holds in excess of 5%
of the Company's common stock, is the father of the Company's president, Charles
E. Bradley, Jr., and was the chairman of the Company's Board of Directors from
March 1991 until June 2001. The Company pays interest monthly with respect to
its debt to SFSC. Such interest payments totaled $1.6 million in 2002, and are
estimated to be the same for the current year. In June 2001 SFSC filed for
reorganization under the Bankruptcy Code, in the United States Bankruptcy Court
for the District of Connecticut. The Company also throughout 2002 was indebted
to John G. Poole, a director, in the principal amount of $1,000,000, and paid
interest monthly with respect to that debt. Such interest payments totaled
$125,000 in 2002, and are estimated to be the same in the current year.
EMPLOYEE INDEBTEDNESS. To assist certain officers in exercising stock options,
the Company or a subsidiary has lent to such officers the exercise price of
options such officers exercised in May and July 2002. The loans are fully
secured by common stock of the Company, bear interest at 5% per annum and are
due in 2007. The chief executive officer (Mr. Bradley), one other executive
officer (Mr. Brockman) and five officers other than executive officers borrowed
money on those terms. The highest balances of the loans for the period January
1, 2002 through April 15, 2003, were $350,000 for Mr. Bradley and $45,000 for
Mr. Brockman, which were the balances as of April 15, 2003, inclusive of accrued
interest. As a result of recent legislation, the Company has ceased providing
any loans to its executive officers.
FSA. In November 1999 the Company entered into a revolving note purchase
facility, using the proceeds of sale of such notes to purchase automotive
receivables. That facility was extended through July 2002, and was renewed for a
one-year term in January 2003. Financial Security Assurance Inc. ("FSA"), which
is the beneficial holder of in excess of 5% of the Company's stock, issued a
financial guaranty insurance policy with respect to all payments of principal
and interest called for by such notes, for which FSA receives fees and insurance
premiums. FSA has also issued financial guaranty insurance policies with respect
to payments of interest and principal due under specified asset-backed
securities sponsored by the Company and issued at various times since 1994,
including transactions in September 2001 and March 2002, for which it also
receives fees and insurance premiums. The amounts of such fees and premiums have
been determined by negotiation between the Company and FSA.
The agreements and transactions described above (other than those between the
Company and LLCP or the Company and FSA) were entered into by the Company with
parties who personally benefited from such transactions and who had a control or
fiduciary relationship with the Company. In each case such agreements and
transactions have been reviewed and approved by the members of the Company's
Board of Directors who are disinterested with respect thereto.
VOTING OF SHARES
The Board of Directors recommends that an affirmative vote be cast in favor of
each of the nominees and proposals listed on the proxy card.
The Board of Directors knows of no other matters that may be brought before the
meeting which require submission to a vote of the shareholders. If any other
matters are properly brought before the meeting, however, the persons named in
the enclosed proxy or their substitutes will vote in accordance with their best
judgment on such matters.
18
Holders of CPS Common Stock are entitled to one vote per share on each matter
other than election of directors. As to election of directors, each holder of
CPS Common Stock may cumulate such holder's votes and give any nominee an
aggregate number of votes equal to the number of directors to be elected
multiplied by the number of shares of CPS Common Stock held of record by such
holder as of the record date, or distribute such aggregate number of votes among
as many nominees as the holder thinks fit. However, no such holder shall be
entitled to cumulate votes for any nominee unless such nominee's name has been
placed in nomination prior to the voting and the holder has given notice at the
annual meeting prior to the voting of the holder's intention to cumulate votes.
If any one holder has given such notice, all holders may cumulate their votes
for nominees. Discretionary authority is sought hereby to cumulate votes of
shares represented by proxies.
Votes cast in person or by proxy at the Annual Meeting will be tabulated by the
Inspector of Elections with the assistance of the Company's transfer agent. The
Inspector of Elections will also determine whether or not a quorum is present.
The affirmative vote of a majority of shares represented and voting on the
proposal at a duly held meeting at which a quorum is present is required for
approval of Proposal No. 2 (Amendments to the 1997 Long-Term Incentive Stock
Plan), and Proposal No. 3 (Selection of Independent Auditors). In general,
California law provides that a quorum consists of a majority of the shares
entitled to vote, represented either in person or by proxy. The Inspector of
Elections will treat abstentions as shares that are present and entitled to vote
for purposes of determining the presence of a quorum but as not voting for
purposes of determining the approval of any matter submitted to the shareholders
for a vote. Any proxy that is returned using the form of proxy enclosed and
which is not marked as to a particular item will be voted FOR election of the
nominees for director named herein; FOR approval of the amendments to the 1997
Long-Term Incentive Stock Plan; and FOR the ratification of the appointment of
KPMG LLP as the Company's independent auditors for the year ending December 31,
2003; and will be deemed to grant discretionary authority to vote upon any other
matters properly coming before the meeting. If a broker indicates on the
enclosed proxy or its substitute that it does not have discretionary authority
as to certain shares to vote on a particular matter ("broker non-votes"), those
shares will be considered as abstentions with respect to that matter. While
there is no definitive specific statutory or case law authority in California
concerning the proper treatment of abstentions and broker non-votes, the Company
believes that the tabulation procedures to be followed by the Inspector of
Elections are consistent with the general statutory requirements in California
concerning voting of shares and determination of a quorum.
SHAREHOLDER PROPOSALS
The Company expects to hold its year 2004 Annual Meeting of Shareholders on May
27, 2004. In order to be considered for inclusion in the Company's proxy
statement and form of proxy for the 2004 Annual Meeting, any proposals by
shareholders intended to be presented at such meeting must be received by the
Secretary of the Company at 16355 Laguna Canyon Road, Irvine, California 92618
by no later than January 14, 2004.
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APPENDIX A
CONSUMER PORTFOLIO SERVICES, INC.
1997 Long-Term Incentive Stock Plan (as Amended)
(CURRENT THROUGH MAY 28, 2003)
1. PURPOSES OF THE PLAN
The purposes of the 1997 Long-Term Incentive Stock Plan (the "Plan") of
Consumer Portfolio Services, Inc., a California corporation (the "Company") are
to: promote the interests of the Company and its stockholders by strengthening
the Company's ability to attract and retain highly competent officers and other
key employees; permit the awarding of opportunities for Plan participants to be
rewarded using stock-based incentives; and to provide a means to encourage stock
ownership and proprietary interest in the Company by the recipients of awards
made under the Plan.
2. DEFINITIONS
a) "1934 Act" means the Securities and Exchange Act of 1934, as
amended, including the rules and regulations promulgated thereunder.
b) "Award" means an Option (including an ISO), an SAR, a stock Award, a
stock payment, any other award made pursuant to the terms of the Plan, or any
combination of them, as described in and granted under the Plan.
c) "Board" means the board of directors of the Company.
d) "Change of Control" is defined in Section 11.
e) "Code" means the Internal Revenue Code of 1986, as amended,
including any rules and regulations promulgated thereunder.
f) "Committee" means the Compensation Committee of the Board or such
other committee as may be appointed by the Board to administer the Plan.
g) "Company" means Consumer Portfolio Services, Inc., a California
corporation.
h) "Eligible Person" means any natural person who at the time of an
Award (i) is an employee, consultant or director of the Company or any
Subsidiary, or (ii) is an employee of a business acquired by or an entity merged
into the Company or any Subsidiary; provided, however, that with respect to an
Award of ISOs, an "Eligible Person" means only a natural person who is at the
time of grant an employee of the Company or of a corporation to which the
Company is a parent corporation as defined in Section 424 of the Code, or
successor provision.
i) "Fair Market Value" means the average of the high and low selling
prices of a Share as reported in The Wall Street Journal (or other readily
available public source designated by the Committee) for the last trading day
for which such prices are available prior to the applicable transaction date
under the Plan. If the Committee determines that there is no readily available
source of information regarding transactions in Shares, then Fair Market Value
shall mean the fair market value of a Share as determined by the Committee.
j) "ISO" means an incentive stock option as defined in Section 422 of
the Code.
k) "Option" means an Award under the Plan of an option to purchase
Shares, and includes ISO Awards and options that do not meet the requirements of
Section 422 of the Code.
l) "Participant" means an Eligible Person who has been granted an Award
under the Plan.
m) "Plan Year" means a twelve-month period beginning with January 1 of
each year, commencing with January 1, 1997.
n) "Prior Plan" means the Consumer Portfolio Services, Inc. 1991 Stock
Option Plan.
o) "SAR" means a stock appreciation right.
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p) "Shares" means the common stock of the Company, no par value.
q) "Subsidiary" mean any entity that is directly or indirectly
controlled by the Company, or any entity, including an acquired entity, in which
the Company has a significant equity interest, as determined by the Committee.
3. EFFECTIVE DATE OF PLAN AND DURATION OF PLAN
The Plan shall become effective upon its adoption by the Board. Any
Awards hereunder may be made immediately upon such effectiveness; provided,
however, (i) that the Plan and any such Awards shall be void AB INITIO if the
shareholders of the Company do not approve the Plan within one year after its
adoption by the Board, and (ii) no ISO or SAR may be exercised prior to
shareholder approval. Unless previously terminated by the Board of Directors,
the Plan shall expire at the close of business on April 30, 2007.
4. PLAN ADMINISTRATION
a) COMMITTEE -- The Committee shall administer the Plan. The Committee
shall comprise two or more members of the Board, each of whom shall be both (i)
a non-employee director within the meaning of Rule 16b-3 under the 1934 Act and
(ii) an outside director within the meaning of Section 162(m) of the Code;
provided, however, that the Board may by resolution specifically declaring that
compliance with said restrictions of Rule 16b-3 or Section 162(m), or both, is
no longer necessary or advisable, name to the Committee individuals who do not
meet such definitions. Each member of the Committee shall serve for such term as
the Board may determine, subject to removal by the Board at any time.
b) COMMITTEE AUTHORITY -- The Committee shall have full and exclusive
authority to interpret the Plan and to adopt such rules, regulations and
guidelines for carrying out the Plan as it may deem necessary or proper, all of
which authority shall be executed in the best interests of the Company and in
keeping with the provisions and objectives of the Plan. Without limiting the
preceding grant of authority, the Committee shall have the authority (i) to
select Award recipients, (ii) to establish all Award terms and conditions, (iii)
to adopt procedures and regulations governing Awards, (iv) to approve forms of
Award agreements for use under this Plan, (v) to amend the terms of any
outstanding Award, including a reduction in the exercise price of any Option or
SAR to reflect a decrease in Fair Market Value, subject to consent of the
Participant to the extent required by the applicable Award agreement, (vi) to
construe and interpret the Plan and any Award agreements, and (vii) to make all
other determinations necessary or advisable for the administration of this Plan,
including the authority in the event of a spin-off or other corporate
transaction to replace an Award under the Plan with an award from another issuer
or plan or an award relating to property other than Shares. All decisions made
by the Committee shall be conclusive, final and binding on all persons affected
by such decisions.
c) No member of the Committee shall be liable for any action or
determination with respect to the Plan, and the members shall be entitled to
indemnification and reimbursement in the manner provided in the Company's
Articles of Incorporation and its bylaws, as amended. In the performance of its
functions under the Plan, the Committee shall be entitled to rely upon
information and advice furnished by the Company's officers, accountants, counsel
and any other party the Committee deems necessary, and no member of the
Committee shall be liable for any action taken or not taken in reliance upon any
such advice.
5. PARTICIPATION
The Committee may from time to time grant Awards under the Plan to any
Eligible Person. The Committee may impose such terms and conditions on any such
Award as the Committee may find advisable.
6. AVAILABLE SHARES OF COMMON STOCK
a) Subject to any adjustment pursuant to Section 6(c), grants of Awards
are subject to the following limitations:
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(i) the aggregate number of Shares as to which Awards may be
granted shall not exceed 4,900,000 over the life of the Plan,
disregarding any Awards that are canceled, expire or are surrendered
without exercise.
(ii) In addition, awards may be granted with respect to the
following: any Shares available for grants under the Prior Plan that
have not been committed for issuance under grants made under the Prior
Plan; any Shares that are represented by grants or portions of grants
made under the Plan or the Prior Plan that are forfeited, expire or are
canceled without the issuance of Shares; and any Shares that may be
tendered, either actually or by attestation, by a person as full or
partial payment made to the Company in connection with the exercise of
any stock option under the Plan or the Prior Plan.
(iii) The aggregate number of Shares that may be represented
by Awards granted to any one individual under Sections 7(b), 7(c), 7(d)
and 7(e) of the Plan shall not exceed 1,500,000 over the life of the
Plan, disregarding any Awards that are canceled, expire or are
surrendered without exercise.
(iv) The aggregate number of Shares that may be used in
settlement of Awards pursuant to Section 7(d) of the Plan shall not
exceed 30% of total number of Shares available under this Section 6(a).
b) EXCLUSIONS AND SOURCE OF SHARES -- Any Shares issued, and any Awards
that are granted through the assumption of, or in substitution for, outstanding
awards previously granted by an acquired entity shall not be counted against the
Shares available for Awards under the Plan. No fractional Shares shall be issued
under the Plan. Cash may be paid in lieu of any fractional Shares in settlements
of awards under the Plan.
c) ADJUSTMENTS -- In the event of any stock dividend, stock split,
combination or exchange of equity securities, merger, consolidation,
recapitalization, spin-off or other distribution (other than normal cash
dividends) of Company's assets to stockholders, or any other change affecting
Shares or Share price the Committee in its discretion may make such
proportionate adjustments as it may deem appropriate to reflect such change with
respect to: (i) the limitations on the numbers of Shares that may be issued and
represented by Awards as set forth in Section 6(a); (ii) each outstanding Award;
and (iii) the exercise price per Share for any outstanding Options, SARs or
similar Awards.
7. AWARDS
a) General -- The Committee shall determine the type or types of
Award(s), if any, to be made to each Eligible Person. Awards may be granted
singly, in combination or in tandem. Awards also may be made in combination or
in tandem with, in replacement of, as alternatives to grants or rights under the
Plan or any other employee compensation plan of the Company, including the plan
of any acquired entity. The types of Awards that may be granted under the Plan
are:
b) Stock Options -- An Option shall represent a right to purchase a
specified number of Shares during a specified period as determined by the
Committee. The purchase price per Share shall be as specified in the Committee
resolution granting same, or, in the absence of any specification, shall be the
Fair Market Value of one Share. The Committee shall designate each Option as an
ISO or as an Option other than an ISO. The Shares covered by an Option may be
purchased, in accordance with the applicable Award agreement , by cash payment
or any other method permitted by the Committee, which other methods may include
(i) tender (either actually or by attestation) of Shares valued at the Fair
Market Value at the date of exercise; (ii) authorizing a third party to sell the
Shares (or a sufficient portion thereof) acquired upon exercise of a stock
option, and assigning for delivery to the Company a sufficient amount of the
sale proceeds to pay for all the Shares acquired through such exercise and any
tax withholding obligations resulting from such exercise; (iii) delivery of the
Participant's promissory note with such recourse, interest, term, security and
other provisions as the Committee deems appropriate, or (iv) any combination of
the above. Unless some other method of payment is explicitly authorized, either
by resolution of the Committee or the terms of the written Option agreement,
payment for Shares shall be by delivery of cash to the Company prior to the
issuance of such Shares. The Committee may grant Options that provide for the
grant of a subsequent restoration Option if the exercise price has been paid for
by tendering Shares to the Company. Any restoration Option may cover up to the
number of Shares tendered in exercising the predecessor Option, with the Option
purchase price set at the then-current Fair Market Value, and the term of such
restoration Option may not extend beyond the remaining term of the original
option.
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c) SARs -- An SAR shall represent a right to receive a payment, in
cash, Shares or a combination, equal to the excess of the Fair Market Value of a
specified number of Shares on the date the SAR is exercised over the Fair Market
Value on the date the SAR was granted as set forth in the applicable Award
agreement; except that if an SAR is granted retroactively in tandem with or in a
substitution for a stock option, the designated Fair Market Value in the
applicable Award agreement may be the Fair Market Value on the date such stock
option was granted.
d) Stock Awards -- A stock Award shall represent an Award made in
Shares or denominated in units equivalent in value to Shares. All or part of any
stock Award may be subject to conditions and restrictions established by the
Committee, and set forth in the Award agreement, which may include, but are not
limited to, continuous service with the Company, the achievement of performance
goals, or both. The vesting period of any stock Award will be not less than six
months. The performance criteria that the Committee may use in granting stock
Awards contingent on performance goals for officers to whom Section ss.162(m) of
the Code is applicable shall consist of Fair Market Value of Shares, earnings,
return on equity, and revenues. The Committee may select one criterion or
multiple criteria for measuring performance, and the measurement may be based on
absolute Company or business unit performance or based on performance as
compared with other companies.
e) Stock Payment -- A Stock Payment shall represent an issuance of
Shares as payment for compensation which otherwise would have been delivered in
cash (including without limitation any compensation that is intended to qualify
as performance-based compensation for purposes of Section 162(m) of the Code).
No minimum vesting period need apply to Shares issued as a Stock Payment. Any
Shares used for such payment will be valued at their Fair Market Value at the
time of payment and shall be subject to such restrictions (including without
limitation restrictions on transfer), if any, and other terms and conditions as
may be determined by the Committee at the time of payment.
8. DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that any Awards may earn dividends or
dividend equivalents, which shall not be deemed earned in the absence of
explicit provision therefor. Such dividends or dividend equivalents may be paid
currently or may be credited to a Participant's account. Any crediting of
dividends or dividend equivalents may be subject to such restrictions and
conditions as the Committee may establish, including reinvestment in additional
Shares or share equivalents.
9. PAYMENTS AND PAYMENT DEFERRALS
Payment of Awards may be in the form of cash, Shares, other Awards or
combinations thereof as the Committee shall determine, and with such
restrictions as it may impose. The Committee also may require or permit
Participants to elect to defer the issuance of Shares from Stock Options or
Stock Awards or the settlement of Awards in cash under such rules and procedures
as it may establish under the Plan. It also may provide that deferred
settlements include the payment or crediting of interest on the deferred
amounts, or the payment or crediting of dividend equivalents where the deferred
amounts are denominated in Share equivalents. In addition, the Committee may
stipulate in an Award agreement, either at time of grant or by subsequent
amendment, that a payment or portion of a payment of an Award be delayed in the
event that Section 162(m) of the Code (or any successor or similar provision of
the Code affecting tax deductibility) would operate to disallow a tax deduction
by the Company for all or a portion of such payment. The period of any such
delay in payment shall be until the payment, or portion thereof, is tax
deductible, or such earlier date as the Committee may determine.
A-4
Shares shall not be issued pursuant to an Award unless the issuance and
delivery of such Shares pursuant thereto would comply with all applicable laws,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance. The Company shall have no obligation to cause
compliance with any applicable law. In particular, but without limitation, the
Company shall have no obligation to register under the Securities Act of 1933
the Shares issuable pursuant to any Award.
As a condition to the issuance of Shares to a Participant, the Company
may require the Participant to represent and warrant at the time of any such
issuance that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any applicable
law.
10. TRANSFERABILITY
Awards under the Plan shall not be transferable or assignable other
than by will or the laws of descent and distribution, except that the Committee
may provide for the transferability of particular Awards, other than ISOs:
a) by gift or other transfer to (i) any trust or estate in which the
original Award recipient or such person's spouse or other immediate relative has
a beneficial interest; or (ii) a spouse or other immediate relative, provided,
however, that the Participant continues to have substantial beneficial interest
in the Shares covered by the Award after such transfer; or
b) pursuant to a qualified domestic relations order.
In the event that a Participant terminates employment with the Company
or any Subsidiary to assume a position with a governmental, charitable,
educational or similar non-profit institution, the Committee may subsequently
authorize a third party, including but not limited to a "blind" trust, to act on
behalf of and for the benefit of such Participant regarding any outstanding
Award held by the Participant subsequent to such termination of employment. If
so permitted by the Committee, a Participant may designate a beneficiary or
beneficiaries to exercise the rights of the Participant and receive any
distribution under the Plan upon the death of the Participant.
11. CHANGE OF CONTROL
a) In order to maintain the Participants' rights in the event of a
Change of Control, the Committee in its sole discretion may, either at the time
an Award is made hereunder or at any time prior to, or coincident with or after
the time of a Change of Control:
i) provide for the acceleration of any time periods relating
to the exercise or realization of such Awards so that such Awards may
be exercised or realized in full on or before a date fixed by the
Committee;
ii) provide for the purchase of such Awards, upon the
Participant's request, for an amount of cash equal to the amount which
could have been obtained upon the exercise or realization of such
rights had such Awards been currently exercisable or payable;
iii) make such adjustment to the Awards then outstanding as
the Committee deems appropriate to reflect such transaction or change;
or
iv) cause the Awards then outstanding to be assumed, or new
rights substituted therefore, by the surviving corporation in such
change.
b) The Committee may, in its discretion, include such further
provisions and limitations in any agreement documenting such Awards as it may
deem equitable and in the best interests of the Company.
c) A "Change of Control" shall be deemed to occur if and when:
i) any person, including a "person" as such term is used in
Section 14(d)(2) of the 1934 Act (a "Person"), is or becomes a
beneficial owner (as such term is defined in Rule 13d-3 under the 1934
Act), directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Company's then
outstanding securities, but excluding any such person who holds such
voting power as of the date of adoption of the Plan;
A-5
ii) any plan or proposal for the liquidation or dissolution of
the Company is adopted by its shareholders;
iii) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then constituting the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act)
or other actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board;
iv) all or substantially all or the assets of the Company are
sold, liquidated or distributed; or
v) there occurs a reorganization, merger, consolidation or
other corporate transaction involving the Company (a "Transaction"), in
each case, with respect to which the shareholders of the Company
immediately prior to such Transaction do not, immediately after the
Transaction, own more than 50 percent of the combined voting power of
the Company or other corporation resulting from such Transaction.
d) Any good faith determination by the Incumbent Board of whether a
Change of Control within the meaning of this definition has occurred shall be
conclusive.
12. AWARD AGREEMENTS
Awards under the Plan shall be evidenced by agreements that set forth
the terms, conditions and limitations for each Award, which may include the term
of the Award (except that in no event shall the term of any ISO exceed a period
of ten years from the date of its grant), the provisions applicable in the event
the Participant's employment terminates, and the Company's authority
unilaterally or bilaterally to amend, modify, suspend, cancel or rescind any
Award. The Committee need not require the execution of any such Agreement by the
Participant, in which case acceptance of the Award by the Participant shall
constitute agreement by the Participant to the terms of the Award.
13. PLAN AMENDMENT
The Board may at any time amend, suspend or terminate the Plan as it
deems necessary or appropriate to better achieve the purposes of the Plan,
except that the Board may not, without the approval of the Company's
stockholders, materially increase the number of shares available for issuance in
accordance with Section 6 of the Plan.
14. TAX WITHHOLDING
The Company shall have the right to deduct from any settlement of an
Award made under the Plan, including the delivery or vesting of Shares, a
sufficient amount to cover withholding of any federal, state or local taxes
required by law or such greater amount of withholding as the Committee shall
determine from time to time, or to take such other action as may be necessary to
satisfy any such withholding obligations. If the Committee permits or requires
Shares to be used to satisfy required tax withholding, such Shares shall be
valued at the Fair Market Value as of the tax recognition date for such Award.
No Shares or other property shall be delivered under the Plan to any Participant
or other person until such Participant or other person has made arrangements
acceptable to the Committee for the satisfaction of any foreign, federal, state,
or local income and employment tax withholding obligations, including, without
limitation, obligations incident to the receipt of shares or the disqualifying
disposition of shares received on exercise of an ISO. Upon exercise of an
Option, the Company shall withhold or collect from the Participant an amount
sufficient to satisfy such tax obligations.
A-6
15. OTHER BENEFIT AND COMPENSATION PROGRAMS
Unless otherwise specifically determined by the Committee, settlements
of Awards received by participants under the Plan shall not be deemed a part of
a participant's regular, recurring compensation for purposes of calculating
payments or benefits from any Company benefit plan or severance program.
Further, the Company may adopt other compensation programs, plans or
arrangements as it deems appropriate or necessary.
16. UNFUNDED PLAN
Unless otherwise determined by the Board, the Plan shall be unfunded
and shall not create (or be construed to create) a trust or a separate fund or
funds. The Plan shall not establish any fiduciary relationship between the
Company and any participant or other person. To the extent any person holds any
rights by virtue of an Award granted under the Plan, such rights shall
constitute general unsecured liabilities of the Company and shall not confer
upon any Participant any right, title or interest in any assets of the Company.
17. USE OF PROCEEDS
The cash proceeds received by the Company from the issuance of Shares
pursuant to the exercise of stock options or the settlement of other Awards
under the Plan may be used for general corporate purposes.
18. REGULATORY APPROVALS
The implementation of the Plan, the grant of any Award under the Plan,
and the issuance of Shares upon the exercise or settlement of any Award shall be
subject to the Company's receiving all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, Awards or the Shares
issued pursuant to Awards.
19. FUTURE RIGHTS
No person shall have any claim or rights to be granted an Award under
the Plan, and no Participant shall have any rights under the Plan to be retained
in the employment of the Company. Likewise, participation in the Plan will not
in any way affect the Company's right to terminate the employment of the
Participant at any time with or without cause. Any discretionary authority held
by the Committee or the Board shall not give rise to any duty on the part of
such body to exercise such discretion for the benefit of any Participant; and
all such discretion may be exercised for the exclusive benefit of the Company.
20. GOVERNING LAW
The validity, construction and effect of the Plan and any actions taken
or relating to the Plan shall be determined in accordance with the internal laws
of the State of California and applicable federal law.
21. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of a
Participant, including, without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors. However,
no Award or other interest in the Plan may be assigned, pledged or otherwise
alienated, except to the extent permitted in accordance with Section 10 of the
Plan and the applicable Award agreement.
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CONSUMER PORTFOLIO SERVICES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 28, 2003
The undersigned shareholder of CONSUMER PORTFOLIO SERVICES, INC., a
California corporation, hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement with respect to the Annual Meeting
of Shareholders of Consumer Portfolio Services, Inc. to be held at the offices
of said corporation at 16355 Laguna Canyon Road, Irvine, California 92618 on
Wednesday, May 28, 2003, at 10:00 a.m., and hereby appoints Charles E. Bradley,
Jr. and William L. Brummund, Jr., and each of them, proxies and
attorneys-in-fact, Each with power of substitution and revocation, and each with
all powers that the undersigned would possess if personally present, to vote the
Consumer Portfolio Services, Inc. Common Stock of the undersigned at such
meeting and any postponements or adjournments of such meeting, as set forth
below, and in their discretion upon any other business that may properly come
before the meeting (and any such postponements or adjournments).
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, FOR
THE ELECTION OF THE NOMINEES, FOR PROPOSALS 2 AND 3, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY
POSTPONEMENTS OR ADJOURNMENTS THEREOF.
(IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE)
/x/ Please mark
votes as in
this example PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS CARD
FOR AGAINST ABSTAIN
1. Election of Directors Nominees: Charles E. Bradley, Jr., 2. To approve an amendment to the / / / / / /
Thomas L. Chrystie, E. Bruce Fredrikson, John E. Company's 1997 Long-Term Incentive
McConnaughy, Jr., John G. Poole, William B. Roberts, Stock Plan, which increases the number
John C. Warner and Daniel S. Wood. of shares issuable from 3,400,000 to
4,900,000, thereby ratifies grants of
FOR ALL WITHHELD 1,498,450 options, and otherwise amends
NOMINEES FROM ALL said Plan.
NOMINEES
/ / / / 3. To ratify the appointment of KPMG / / / / / /
LLP as independent auditors
of the Company for the year
For all nominees except as noted below ending December 31, 2003.
--------------------------------------- 4. To transact such other business as
may properly come before the meeting
or any adjournment(s) thereof.
MARK HERE FOR / /
ADDRESS CHANGE
AND NOTE AT LEFT
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS CARD
Signature:_____________________________ Date:_________________ Signature:_____________________________
of