UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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CONSUMER PORTFOLIO SERVICES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No
fee required.
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Fee computed
on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
CONSUMER PORTFOLIO SERVICES, INC.
3800 Howard Hughes Parkway, Las Vegas,
Nevada 89169
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, April
27, 2016 at the Company's Nevada office at 3800 Howard Hughes Parkway, Las Vegas, Nevada for the following purposes:
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To elect the Company's entire Board of Directors for a one-year term.
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To ratify the appointment of Crowe Horwath LLP as the Company's independent auditors
for the fiscal year ending December 31, 2016.
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To approve an advisory resolution on executive compensation.
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To approve an amendment to the 2006 Long-Term Equity Incentive Plan, which would extend
the term of the Plan by ten years without changing the number of shares issuable thereunder.
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To transact such other business as may properly come before the meeting.
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Only shareholders of record at the close
of business on Monday, March 21, 2016 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: March 30, 2016
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on April 27, 2016
.
The Proxy Statement and Annual Report to Shareholders for the fiscal year ended December 31, 2015 are available at www.consumerportfolio.com/AnnualMeeting2016.html.
YOUR VOTE IS IMPORTANT
REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO VOTE BY COMPLETING,
SIGNING, DATING AND RETURNING THE PROXY CARD IN THE PRE-ADDRESSED RETURN ENVELOPE PROVIDED. IF GIVEN, YOU MAY REVOKE YOUR PROXY
BY FOLLOWING THE INSTRUCTIONS IN THE PROXY STATEMENT AND ATTACHED PROXY CARD.
CONSUMER PORTFOLIO SERVICES, INC.
3800 Howard Hughes Parkway
Las Vegas, Nevada 89169
949-753-6800
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 2016
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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, April 27, 2016 at the Company's office at 3800 Howard Hughes Parkway, Las Vegas, NV 89169, 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 March 21, 2016, 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 25,031,111 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 March 30, 2016. 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.
QUESTIONS AND ANSWERS ABOUT THIS PROXY STATEMENT AND ANNUAL
MEETING
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WHAT IS THIS PROXY STATEMENT AND WHY AM I RECEIVING IT?
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You are receiving this proxy statement in connection with an annual meeting of shareholders
called by our Board of Directors in connection with soliciting shareholder votes for the purpose of (i) electing the Company's
entire Board of Directors for a one-year term; (ii) ratifying the appointment of Crowe Horwath LLP as the Company's independent
auditors for the fiscal year ending December 31, 2016; (iii) holding a non-binding vote on executive compensation; (iv) approving
an amendment to the 2006 Long-Term Equity Incentive Plan, which would extend the term of the Plan by ten years, without changing
the number of shares issuable thereunder, and (v) transacting such other business as may properly come before the annual meeting;
in each case, as more fully described in this proxy statement. You have been sent this proxy statement and the enclosed proxy
card because our Board of Directors is soliciting your proxy to vote at the annual meeting of shareholders called for the purpose
of voting on the foregoing matters
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WHAT INFORMATION IS CONTAINED IN THIS PROXY STATEMENT?
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The information included in this proxy statement relates to the proposals to be voted
on at the annual meeting, the voting process, compensation of our directors and most highly paid executive officers, and certain
other required information.
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WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING, AND WHAT VOTE IS REQUIRED TO APPROVE
THE PROPOSALS?
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The Board of Directors of the Company has fixed the close of business on March 21,
2016, as the record date (“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 25,031,111 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 in this proxy statement under the heading “Voting of Shares.” In order
to approve each proposal, a quorum (a majority of outstanding shares of CPS Common Stock) must be present and (other than with
respect to election of directors) a majority of all of the votes cast on the proposal at the Annual Meeting must be cast in favor
of the proposal, which favorable votes cast must exceed 25% of the outstanding shares. Directors are elected by plurality vote.
Abstentions and broker non-votes will not be counted as “votes cast” and will have no effect on the result of the
vote, although they will count toward the presence of a quorum.
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HOW DOES THE BOARD OF DIRECTORS RECOMMEND THAT I VOTE?
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Our Board of Directors recommends that you vote
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“
FOR
” each of the six nominees for election as directors (Proposal
One)
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“
FOR
” the ratification of the appointment of Crowe Horwath LLP
as the Company's independent auditors for the fiscal year ending December 31, 2016 (Proposal Two)
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“
FOR
” the approval, by non-binding vote, of executive compensation
(Proposal Three)
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“
FOR
” approval of an amendment to the 2006 Long-Term Equity Incentive
Plan, which would extend the term of the Plan by ten years, without changing the number of shares issuable thereunder (Proposal
Four)
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HOW MAY I VOTE ON THE PROPOSALS IF I OWN SHARES IN MY OWN NAME?
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If you own your shares in your own name, you may vote
on the proposals presented in this proxy statement, whether or not you plan to attend the annual meeting, by completing,
signing and dating the accompanying proxy card and returning it in the enclosed postage-prepaid envelope. It is important that
you vote your shares whether or not you attend the meeting in person. 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 the
ratification of the appointment of Crowe Horwath LLP as the Company's independent auditors for the year ending December 31, 2016;
FOR the approval, by non-binding vote, of executive compensation; FOR the approval
of an
amendment to the 2006 Long-Term Equity Incentive Plan, which would extend the term of the Plan by ten years, without changing
the number of shares issuable thereunder; and such proxy will also be deemed to grant discretionary authority to vote upon any
other matters properly coming before the meeting.
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HOW MAY I VOTE ON THE PROPOSALS IF MY SHARES ARE HELD IN “STREET NAME”
BY MY BROKER, BANK OR OTHER NOMINEE?
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If your shares are held in “street name”
through a broker, bank or other nominee, under certain circumstances the nominee may vote your shares. Brokerage firms have authority
to vote shares for which their customers do not provide voting instructions on certain “routine” matters. The ratification
of an accounting firm is an example of a routine matter. If you do not provide voting instructions to
your
brokerage
firm, the brokerage firm may either: (1) vote your shares on routine matters, or (2) leave your shares unvoted. We encourage
you to provide instructions to your brokerage firm by signing and returning your proxy. This ensures your shares will be voted
at the meeting. When a brokerage firm votes its customers’ unvoted shares on routine matters, these shares are counted for
purposes of establishing a quorum to conduct business at the meeting and determining the outcome of the vote on routine matters.
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CAN I CHANGE MY MIND AND REVOKE MY PROXY?
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Yes. 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
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CAN I VOTE MY SHARES IN PERSON?
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Yes. The annual meeting is open to all holders of CPS Common Stock as of the Record
Date. To vote in person, you will need to attend the meeting and bring with you evidence of your stock ownership. If your shares
are registered in your name, you will need to bring valid identification. If your shares are held in the name of your broker,
bank or another nominee or you received your proxy materials electronically, you will need to obtain and bring with you a “legal
proxy” from your broker, bank or nominee, and bring evidence of your stock ownership, together with valid identification.
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DO I HAVE DISSENTERS’ RIGHTS?
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No. There are no “dissenters’ rights” applicable to any of the proposals
presented in this proxy statement.
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WHO IS PAYING FOR THIS PROXY SOLICITATION?
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Our Board of Directors is making this solicitation, and we will pay the entire cost
of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the mailing of these proxy
materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communications by our directors,
officers and employees, who will not receive any additional compensation for such solicitation activities. We will also reimburse
brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy
and solicitation materials to shareholders.
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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 are set forth below. None of the nominees currently serves on the board
of directors of any other publicly-traded companies.
Charles E. Bradley, Jr
., 56, 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. Mr. Bradley has been the Company's Chief Executive Officer since January 1992. 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. Having
been with the Company since its inception, Mr. Bradley brings comprehensive knowledge of the Company’s business, structure,
history and culture to the Board and the Chairman position.
Chris A. Adams
, 67, has been a director
of the Company since August 2007. Since 1982 he has been the owner and chief executive of Latrobe Pattern Company and K Castings
Inc., which are firms engaged in the business of fabricating metal parts.
With his experience as chief executive of manufacturing companies, Mr. Adams contributes to the Company’s Board significant
organizational and operational management skills.
Brian J. Rayhill
, 53, has been a director
of the Company since August 2006. Mr. Rayhill has been a practicing attorney in New York State since 1988. As an experienced
advocate, counselor and litigator, Mr. Rayhill brings legal knowledge and perspective to the Company’s Board.
William B. Roberts
, 78, 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. Having spent decades in the business of finance, Mr. Roberts
brings to the Company’s Board his perspective and judgment regarding means of financing its business.
Gregory S. Washer
, 54, has been a director
of the Company since June 2007. He has been the president of Clean Fun Promotional Marketing, a promotional marketing company,
since its founding in 1986. With his experience in promotions and marketing, Mr. Washer contributes to the Board significant organizational
and operational management skills, combined with a wealth of experience in promotion and marketing of services.
Daniel S. Wood
, 57, has been a director
of the Company since July 2001. Mr. Wood was president of Carclo Technical Plastics, a manufacturer of custom injection
moldings, from September 2000 until his retirement in April 2007. Previously, from 1988 to September 2000, he was the
chief operating officer and co-owner of Carrera Corporation, the predecessor to the business of Carclo Technical Plastics. As president
of Carclo, Mr. Wood was responsible for the overall operation of that company and for the quality and integrity of its financial
statements. He brings to the Board the knowledge and perspective useful in evaluating the Company’s financial statements,
and broad organizational and management skills.
The Board of Directors has established an
Audit Committee, a Compensation Committee, and a Nominating Committee. Each of these three committees operates under
a written charter, adopted by the Board of Directors. The charters are available on the Company’s website,
www.consumerportfolio.com/charters.html
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The Board of Directors has concluded that each member of these three committees (every director other than Mr. Bradley, the Company's
chief executive officer), is independent in accordance with the director independence standards prescribed by Nasdaq, and has determined
that none of them have a material relationship with the Company that would impair their independence from management or otherwise
compromise the ability to act as an independent director.
The members of the Audit Committee are Mr.
Wood (chairman), Mr. Rayhill and Mr. Washer.
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 that may arise
with respect to accounting and auditing policy and procedure.
The Board of Directors has further determined
that Mr. Wood has the qualifications and experience necessary to serve as an "audit committee financial expert" as such
term is defined in Item 407 of Regulation S-K promulgated by the SEC. Mr. Wood, as president of Carclo Technical
Plastics, was responsible for the preparation and evaluation of the audited financial statements of that company.
The members of the Compensation Committee are Mr. Adams (chairman),
Mr. Roberts, and Mr. Wood. This Committee makes determinations as to general levels of compensation for all employees
of the Company and the annual salary of each of the executive officers of the Company, and administers the Company's compensation
plans. Those plans include the Company's 1997 Long-Term Stock Incentive Plan, the Executive Management Bonus Plan, and
the CPS 2006 Long-Term Equity Incentive Plan.
The members of the Nominating Committee are
Mr. Rayhill (chairman), Mr. Adams and Mr. Washer. Nominations for board positions are made on behalf of the Board of Directors
by the nominating committee. Because neither the Board of Directors nor its nominating committee has received recommendations
from shareholders as to nominees, the Board of Directors and the nominating committee believe that it is and remains appropriate
to operate without a formal policy with regard to any director candidates who may in the future be recommended by shareholders. The
nominating committee would consider such recommendations if received.
When considering a potential nominee, the nominating committee
considers the benefits to the Company of such nomination, based on the nominee's skills and experience related to managing a significant
business, the willingness and ability of the nominee to serve, and the nominee's character and reputation. The Company does not
have a policy regarding the consideration of diversity in identifying nominees for director.
Shareholders who wish to suggest individuals for possible future
consideration for board positions, or to otherwise communicate with the Board of Directors, should direct written correspondence
to the corporate secretary at the Company's principal executive offices, indicating whether the shareholder wishes to communicate
with the nominating committee or with the Board of Directors as a whole. The present policy of the Company is to forward
all such correspondence to the designated members of the Board of Directors. There have been no changes in the procedures
regarding shareholder recommendations in the past year.
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 2015 were timely filed, except that the May 19 grants of
options to three individuals (officers Richard Haskell and Chris Terry and director Rayhill) were reported one day late (three
transactions in total), and one sale of 2000 shares by officer Curtis Powell was reported three business days late.
Code of Ethics
The Company has adopted a Code of Ethics for Senior Financial
Officers, which applies to the Company's chief executive officer, chief financial officer, controller and others. A
copy of the Code of Ethics may be obtained at no charge by written request to the Corporate Secretary at the Company's principal
executive offices.
Meetings of the Board
The Board of Directors held four meetings and acted six times
by written consent during 2015. The Audit Committee met five times during 2015, including at least one meeting
per quarter to review the Company's financial statements, while the Compensation Committee met three times during 2015 and acted
four times by written consent. The Nominating Committee met twice during 2015. 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 2015. The
Company does not have a policy of encouraging directors to attend or discouraging directors from attending its annual meetings
of shareholders. Other than the chairman and chief executive officer, no directors attended last year’s annual
meeting of shareholders.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES ABOVE.
PROPOSAL NO. 2 – RATIFICATION
OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors
has appointed the accounting firm of Crowe Horwath LLP ("Crowe") to be the Company's independent auditors for the year
ending December 31, 2016. Crowe also performed the audit of the Company's financial statements for the years ended December 31,
2008 through 2015.
A proposal to ratify the Audit Committee’s
appointment of Crowe will be presented to shareholders at the Annual Meeting. If the shareholders do not ratify the
selection of Crowe at the Annual Meeting, the Audit Committee will consider selecting another firm of independent public accountants. Representatives
of Crowe are expected to 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.
Fees Paid to Auditors
The following table sets forth the fees accrued or paid to the
Company’s independent registered public accounting firms for the years ended December 31, 2015 and 2014. Crowe has served
as the Company’s independent registered public accounting firm since February 2009, and reported on the Company’s financial
statements for the years ended December 31, 2008 through 2015.
Audit and Non-Audit Fees
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2014
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2015
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Audit Fees (1)
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$810,000
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$770,000
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Audit-Related Fees (2)
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148,750
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184,300
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Tax Fees (3)
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314,075
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279,450
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All Other Fees
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TOTAL
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$1,272,825
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$1,233,750
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(1) Audit fees relate to professional services rendered in connection
with the audit of the Company’s annual financial statements and internal control over financial reporting, quarterly review
of financial statements included in the Company’s Quarterly Reports on Form 10-Q, and audit services provided in connection
with other statutory and regulatory filings.
(2) Audit-related fees comprise fees for professional services
that are reasonably related to the performance of the audit or review of the Company’s financial statements.
(3) The 2015 and 2014 tax fees represent services rendered in
connection with preparation of state and federal tax returns for the Company and its subsidiaries.
Audit Committee Supervision of Principal
Accountant
The Audit
Committee acts pursuant to a written charter adopted by the Board of Directors. Pursuant to the charter, the Audit Committee
pre-approves the audit and permitted non-audit fees to be paid to the independent auditor, and authorizes on behalf of the Company
the payment of such fees, or refuses such authorization. The Audit Committee has delegated to its chairman and its vice-chairman
the authority to approve performance of services on an interim basis. In the fiscal years ended December 31, 2015 and December
31, 2014, all services for which audit fees or audit related fees were paid were preapproved by the Audit Committee as a whole,
or pursuant to such delegated authority.
In the course
of its meetings, the Audit Committee has considered whether the provision of the non-audit fees outlined above is compatible with
maintaining the independence of the respective audit firms, and has concluded that such independence is not and was not impaired.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" RATIFICATION OF THE APPOINTMENT OF CROWE HORWATH LLP.
Audit Committee Report
The Audit Committee assists the Board of Directors in its oversight of our financial reporting process. The Audit Committee’s responsibilities are more fully described in its charter, which is available on our website at www.consumerportfolio.com/charters.html
Management has the primary
responsibility for the financial statements and the financial reporting process, including internal control over financial reporting.
Our independent registered public accounting firm is responsible for performing an audit of our consolidated financial statements
and expressing an opinion on the fair presentation of those financial statements in conformity with United States generally accepted
accounting principles. The independent registered public accounting firm also is responsible for performing an audit of and expressing
an opinion on the effectiveness of our internal control over financial reporting.
In
the course of performing its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited
consolidated financial statements for the year ended December 31, 2015. Those reviews included discussions of, among other things:
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the acceptability and quality of the accounting
principles;
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the reasonableness of significant accounting judgments
and critical accounting policies and estimates;
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the clarity of disclosures in the financial statements;
and
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the adequacy and effectiveness of our financial
reporting procedures, disclosure controls and procedures and internal control over financial reporting, including management’s
assessment and report on internal control over financial reporting.
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The
Audit Committee also discussed with the chief executive officer and chief financial officer of the Company their respective certifications
with respect to our annual report on Form 10-K for the year ended December 31, 2015.
The
Audit Committee reviewed and discussed with the independent registered public accounting firm the audited consolidated financial
statements for the year ended December 31, 2015, the firm’s judgments as to the acceptability and quality of our accounting
principles and such other matters as are required to be discussed with the Audit Committee under the standards of the Public Company
Accounting Oversight Board (United States) (the “PCAOB”), including those matters required to be discussed by Auditing
Standard No. 16, Communications with Audit Committees. The Audit Committee also reviewed and discussed with the independent registered
public accounting firm its audit of the effectiveness of our internal control over financial reporting.
In addition, the Audit
Committee received the written disclosures and the letter from the independent registered public accounting firm required by applicable
requirements of the PCAOB regarding the firm’s communications with the Audit Committee concerning independence, and discussed
with the independent registered public accounting firm the firm’s independence.
The Audit Committee discussed with our independent registered public accounting firm the overall
scope and plans for their respective audits. The Audit Committee and its members meet with the independent registered public accounting
firm, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls
and the overall quality of our financial reporting.
In reliance on the reviews
and discussions referred to above, and the receipt of unqualified opinions from Crowe Horwath LLP dated March 9, 2016, with respect
to the consolidated financial statements of the Company and its subsidiaries as of and for the year ended December 31, 2015, and
with respect to the effectiveness of our internal control over financial reporting, the Audit Committee on behalf of the Board
of Directors authorized the inclusion of the audited consolidated financial statements our annual report on Form 10-K for the
year ended December 31, 2015, for filing with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Daniel S. Wood – Chairman Brian
J. Rayhill Gregory S. Washer
PROPOSAL NO. 3 – NON-BINDING
VOTE ON EXECUTIVE COMPENSATION
General
The Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010 (the “Dodd-Frank Act”) and Section 14A of the Securities Exchange Act enable the shareholders to vote to approve,
on an advisory or non-binding basis, the compensation of the Company’s named executive officers as disclosed in accordance
with the SEC’s rules in the “
Executive Compensation
” section of this proxy statement beginning on page
13 below. This proposal, commonly known as a “say-on-pay” proposal, gives the shareholders the opportunity to express
their views on the Company’s named executive officers’ compensation as a whole. This vote is not intended to address
any specific item of compensation or any specific named executive officer, but rather the overall compensation of all of our named
executive officers and the philosophy, policies and practices described in this proxy statement. The Company’s current policy
is to seek such say-on-pay votes annually, at every regular meeting of shareholders.
The say-on-pay vote is advisory, and therefore not binding on
the Company, the Compensation Committee or the Board of Directors. The say-on-pay vote will, however, provide information to the
board and the Compensation Committee regarding investor sentiment about our executive compensation philosophy, policies and practices,
which the Compensation Committee will be able to consider when determining executive compensation for the remainder of the current
fiscal year and beyond. The Board of Directors and its Compensation Committee value the opinions of the shareholders; accordingly,
to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement,
the Compensation Committee will consider the shareholders’ concerns and evaluate whether any actions are necessary to address
those concerns.
Summary of 2015 Executive Compensation Program
Following is a summary of some of the key
points of our 2015 executive compensation program:
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It is simple, comprising base salary, an annual cash bonus pursuant
to an incentive plan, and long-term equity incentives in the form of stock options.
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The Compensation Committee of the Board of Directors controls all
portions of the compensation payable to executive officers.
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That committee has from time to time exercised its discretion to reduce
cash incentives otherwise payable under the bonus plan.
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See the “
Executive Compensation
”
section beginning on page 13 below for more information.
We believe that the information provided above and within the
Executive Compensation section of this proxy statement demonstrates that our executive compensation program was designed appropriately
and is working to ensure management’s interests are aligned with our shareholders’ interests to support long-term value
creation. We also believe the compensation paid to our executive officers during 2015 was appropriate in light of our financial
performance.
Accordingly, we ask that our shareholders vote “FOR”
the following resolution, which will be presented at the Annual Meeting:
“RESOLVED, that the Company’s shareholders approve,
on an advisory basis, the compensation of the named executive officers as disclosed in the Company’s Proxy Statement for
the 2016 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission,
including the compensation tables and the other related disclosure.”
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE ADVISORY (NON-BINDING) VOTE APPROVING EXECUTIVE COMPENSATION.
PROPOSAL NO. 4 – AMENDMENT OF
2006 LONG-TERM EQUITY INCENTIVE PLAN
The Board of Directors proposes that the
shareholders approve an amendment (the "Amendment") to the Company's 2006 Long-Term Equity Incentive Plan (the "Plan"). The
Amendment would extend the term of the Plan by somewhat less than ten years, to the tenth anniversary of the Annual Meeting. The
Amendment would not change the maximum number of shares issuable under the Plan, would not change who is eligible to receive awards
under the Plan, and would have no effect on awards previously granted under the Plan. The sole effect of the Amendment would be
to allow awards to be granted after the present termination date of the Plan, and through the tenth anniversary of the adoption
of the Amendment.
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 Plan as presently in
effect has a termination date of June 15, 2016. Unless the shareholders approve the Amendment, the Company will not be authorized
to grant further awards under the Plan after that date; however, any awards granted prior to that date would remain effective.
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.
It should be noted that the Company previously
maintained a 1991 Stock Option Plan (the "1991 Plan"), under which a total of 2,657,870 shares were sold to directors,
officers and other employees upon exercise of options, and a 1997 Long-Term Incentive Plan (the "1997 Plan"), under which
a total of approximately 4.6 million shares were sold to directors, officers and other employees upon exercise of options. The
1991 Plan and 1997 Plan (together, the “Prior Plans”) have expired, and therefore no new grants can be made under either
of the Prior Plans. No grants under the Prior Plans remain eligible for exercise.
The number of shares of Common Stock reserved
for issuance under the Plan, whether or not the proposed Amendment is adopted, is 17,200,000, plus 1,914,180 shares that were authorized
for issuance under the Prior Plans but became unavailable for issuance due to expiration or other termination of grants under the
Prior Plans, in all events without issuance of shares. Giving effect to such adjustments, the total number of shares issuable under
the Plan is 19,114,180 shares. Of those shares authorized for issuance under the Plan, approximately 11,213,874 are the subject
of outstanding valid options as of March 30, 2016, and 2,424,125 shares have been sold to Plan participants pursuant to exercise
of options granted under the Plan.
The number of shares remaining available
for future awards under the Plan, after giving effect to all outstanding grants and prior exercises, is 5,476,181. Such total number
would be unaffected by the adoption or failure to adopt the Amendment.
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. The Company has 916 employees and five non-employee directors, all
of whom are eligible to participate in the Plan; however, based on past practice and present policy, it would be reasonable to
expect that it will be the Company’s managerial and officer employees (49 individuals) and its five non-employee directors
who will receive awards under the Plan. From the inception of the Plan in 2006 to the present, no awards other than stock options
have been granted under the Plan. There are no current plans to issue any awards other than stock options; however, the Board and
the Compensation Committee have examined the possibility of granting awards of restricted stock, and may do so in the future.
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.
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, it can reasonably be anticipated that each person nominated for election
as a director at the Annual Meeting, and each executive officer of the Company, may at some time in the future receive grants under
the Plan.
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, and will not be less than the fair market value of such
shares at the time of grant. It is anticipated that awards will be granted in consideration of the recipients’ continued
service with the Company. 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 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 or with the consent of
the Committee. The Committee has consented in the past and may consent in the future to “net exercise” of options,
that is the payment of the exercise price by surrender to the Company of a portion of the shares acquired upon exercise, valued
at the current market price of such shares. Unless otherwise provided by the Board or the Committee administering the Plan,
awards 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.
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 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.
INFORMATION REGARDING THE COMPANY
Leadership Structure
The board of directors
is responsible for overseeing the management of the company. Its oversight is aimed at seeing to it that the company’s business
is managed to meet our goals, and that the interests of the shareholders are served.
Charles E. Bradley
currently serves as both the chairman of the board and our chief executive officer, and is the only member of our board who is
not independent of the Company. Largely because of the small number of directors (six members in total), our board has chosen not
to designate any individual formally as the lead independent director. Each director retains his full oversight responsibility.
Our board structure
supports the independence of our non-management directors. Our audit committee, compensation committee and nominating committee
are each composed solely of independent directors. Our bylaws provide that any two directors have the authority to call meetings
of the board of directors, as do specified officers, including the president and the secretary. To enhance the possible use of
that authority by independent directors, the corporate secretary is under standing instructions to call a meeting at the instance
of any one director.
The board believes
that combining the chairman and chief executive officer positions is currently the most effective leadership structure given Mr.
Bradley’s in-depth knowledge of our business and industry and his demonstrated ability to formulate and implement strategic
initiatives. Mr. Bradley is continuously involved in developing and implementing our strategies, working closely with the company’s
other senior executives to seek continued disciplined growth and excellence in operations. His close involvement in management
places Mr. Bradley in the best position to decide which business issues require consideration by the independent directors of the
board. In addition, having a combined chairman and chief executive officer enables us to speak with a unified voice to shareholders,
customers and others concerned with our company. The board believes that combining the chief executive and chairman roles, as part
of a governance structure that includes oversight of management responsibilities by independent directors, provides the preferred
system for meeting the requirement that the Company be managed in the best interest of our shareholders.
Risk Oversight
The board’s
overall responsibility for directing the management of the company includes risk oversight. The risk oversight function is performed
at the board level, and by the Audit and Compensation Committees.
The board of directors
as a whole in its regular meetings discusses and considers the risk inherent in the existing business of the Company and in proposed
initiatives. Because the Company’s business consists of extending consumer credit to individuals believed to be of higher
risk than others (sub-prime credit), the assessment of the risk assumed in such extensions of credit is a primary consideration
on the part of the board. Risk oversight is also a key function of the Audit and Compensation Committees.
The principal
risk management function performed by the Audit Committee is the ongoing assessment of the credit estimates and allowances periodically
recorded in the Company’s books. The committee reviews that assessment regularly. Other risk assessments performed by the
Audit Committee include assessments of contingent liabilities, and of other reserves and allowances.
The principal
risk management functions performed by the Compensation Committee are its setting and evaluation of objectives for the chief executive
officer, in connection with its administration of the executive management bonus plan. The committee recognizes that the company’s
business of extending subprime credit inherently includes a conflict between growing the business and managing the risk of credit
losses: one means to increase the company’s business is to offer credit on terms that are priced too low for the risk assumed.
The Compensation Committee manages that risk by insisting that objectives to grow the business are qualified by a mandate that
credit quality be maintained at appropriate levels. To some extent, such risk management is shared with the Audit Committee, which
performs the primary oversight of whether credit risk assumed is reflected with adequate allowances in the company’s financial
statements.
EXECUTIVE COMPENSATION
Compensation Committee Report
The Compensation Committee has reviewed and discussed with CPS
management the Compensation Discussion and Analysis contained in this report. Based on such review and discussions and
relying thereon, we have recommended to the Company's Board of Directors that the Compensation Discussion and Analysis set forth
below be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.
THE COMPENSATION COMMITTEE
Chris
A. Adams (chairman) William B. Roberts Daniel S. Wood
Compensation Discussion and Analysis
2015 Say-on-Pay Advisory
Vote Outcome
The Compensation
Committee annually considers the results of the most recent advisory vote by shareholders to approve executive officer compensation.
In the 2015 advisory vote, 85.4% of the voted shares approved the compensation of our named executive officers, and the Compensation
Committee interprets that vote as a reason to retain the existing design purposes and structure of our executive compensation
programs. The Compensation Committee will continue to consider the results from future shareholder advisory votes regarding executive
officer compensation in its future administration of executive compensation.
Compensation Objectives
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 compensation
committee ("Committee") of the Company's Board of Directors is charged with administering the Company’s compensation
plans to meet those objectives. To the extent that elements of compensation would not advance such objectives, or would
do so less effectively than would other elements, the Committee seeks to avoid paying compensation in those forms.
Role of the Compensation Committee
and the chief executive officer
Our Board of Directors
has authorized the Compensation Committee, which is composed solely of independent directors, to make all decisions regarding executive
compensation, including administration of our compensation plans. In that regard, the Compensation Committee:
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Reviews and discusses with management the factors underlying our compensation
policies and decisions, including overall compensation objectives;
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Reviews and approves all company goals and objectives (both financial
and non-financial) relevant to the compensation of the chief executive officer;
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Evaluates, together with the other independent directors, the performance
of the chief executive officer in light of these goals and objectives and that individual’s overall effectiveness;
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Fixes and approves directors each element of the compensation of the
chief executive officer;
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Reviews the performance evaluations of all other members of executive
management (the chief executive officer prepares and presents to the Compensation Committee the performance evaluations of the
other executive officers);
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Reviews and approves each element of compensation, as well as the
terms and conditions of employment, of those other executive officers;
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Grants awards under our equity compensation plans and oversees the
administration of those plans; and
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Reviews the costs and structure of our key employee benefit and fringe-benefit
plans and programs.
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The Compensation Committee is authorized to form subcommittee(s) and to retain experts and consultants to assist in the discharge
of its responsibilities. To date it has not done so.
The chief executive
officer, who attends the January meeting of the Compensation Committee by invitation of the Committee’s chairman, assists
the Committee in determining the compensation of our other executive officers by, among other things:
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Proposing annual merit increases to the base salaries of the other
executive officers;
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Establishing annual individual performance objectives for the other
executive officers and evaluating their performance against such objectives (the Committee reviews these performance evaluations);
and
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Making recommendations, from time to time, for special stock option
and restricted stock grants (e.g., for motivational or retention purposes) to other executive officers.
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The other executive
officers do not have a role in determining their own compensation, other than to discuss their annual individual performance objectives
and results achieved with the chief executive officer.
Our Overall Approach
The Committee
has put into place a compensation system consisting of three key components: base salary, an annual cash bonus pursuant to an incentive
plan, and long-term equity incentives in the form of stock options.
The table below
provides comparative information regarding the components of our year 2015 executive compensation program. We are applying the
same elements in our executive compensation program for the year 2016.
Element
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Form
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Objectives and Basis
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Base Salary
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Cash
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Attract and retain high quality personnel
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Targeted to be superior to compensation offered by our competitors
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Annual Incentive Bonus
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Cash
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Achieve objectives set annually
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Annual bonus amount is set and computed as a percentage of base salary
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Actual payout determined by Company and individual performance
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Target total cash (base salary + target bonus) designed to be superior to compensation offered by our competitors
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Long-Term Incentive Compensation
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Stock options
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Align interests of executives with those of shareholders;
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Target long-term incentive award size designed to retain executives through long-term vesting and the potential for wealth accumulation, contingent on benefit to the shareholders
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The Committee
has from time to time considered providing additional elements of executive compensation. It has considered elements
such as restricted stock awards, restricted stock units, compensation contingent on a change in control, defined benefit pension
plans, deferred cash compensation, and supplemental retirement plans (supplemental in the sense that they exceed the limits for
tax advantaged treatment). To date, the Committee has elected not to pay compensation in such forms, having determined
that the Company's objectives are better met by one or more of the elements of compensation that it does pay.
Regarding restricted
stock and restricted stock units, the Committee has noted that any form of equity equivalent to or closely tied to common stock
does serve to meet the objective of aligning officers' personal interest with that of the shareholders generally. The
Committee believes, however, that the objective is better met by grants of stock options than by grants of share equivalents, because
recipients of the grants will face the same degree of variance in results at a lesser cost to the Company, when option grants are
compared to grants of restricted stock units. Further, unlike restricted stock, option grants will not provide a reward to
the holder absent an improvement over time in the Company’s stock price. The committee has elected not to provide material
perquisites as compensation, having determined that cash is a better medium of exchange.
Regarding compensation
that would be payable contingent on a change in control of the Company, the Committee believes that there are certain legitimate
objectives to be met by such contingent compensation. As of the date of this proxy statement, however, no such contingent
compensation plans are in place. Regarding defined benefit pension plans, deferred cash compensation and supplemental
retirement plans, the Committee believes that the Company's retention objective is better met by straight cash payments, whether
in the form of base salary or in the form of bonus compensation. In particular with respect to plans for deferred compensation,
the Committee believes those make sense for the Company and for the recipient only on the basis of assumptions regarding future
tax rates payable by each. Having no assurance that such assumptions would be correct, the Committee has chosen not to put into
place any special deferred compensation programs for the company’s executive officers. Those officers do participate in a
company-sponsored tax-deferred savings plan, commonly known as a 401(k) plan, on the same terms available to company employees
generally.
The Committee
may in the future revisit its conclusions as to any of the components discussed above, or may consider other forms of compensation.
The Base Salary
Element
With respect
to the retention objective, the Committee considers an executive's base salary to be the most critical component. Acting primarily
on the basis of recommendations of the chief executive officer, the Committee adjusts other officers' base salaries annually,
with the adjustment generally consisting of a 3% to 10% increase from the prior year's rate. Where exceptional circumstances apply,
such as recruitment of a new executive officer, 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's
general approach in setting the annual compensation of its named executive officers is to set those officers’ base compensation
by reference to their base rates for the preceding year. During the year ended December 2015, the Company's chief executive
officer, Charles E. Bradley, Jr., received $985,000 in base salary. In setting that rate in January 2015, the Committee
considered the base salary rate that the Company had paid in the prior year ($965,000), the desirability of providing an annual
increase (which in this case was approximately 2%), 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.
Subsequent to year-end, the Committee considered whether to adjust officers’ base compensation for 2016, and determined to
increase the base rate for the chief executive officer nominally, approximately 1%, to $995,000. The Committee considered it desirable
to keep the individual’s base rate below the limit established by Section 162(m) of the Internal Revenue Code. The Committee
also approved increases in the base compensation payable to other officers of the Company.
The Annual
Incentive Bonus (EMB) element
To encourage executive
officers and key management personnel to exercise their best efforts and management skills toward causing the Company to meet its
overall objective, and toward achieving designated specific individual objectives, the Company has implemented an Executive Management
Bonus Plan, with annual payouts. Under the Company's bonus plan as applied to the year ended December 2015, the Company’s
two executive vice presidents (each of whom is among the named executive officers) were eligible to receive a cash bonus of up
to 160% of their base salaries, and the Company’s senior vice presidents (one of whom is among the named executive officers)
were eligible to receive a cash bonus of up to 120% of their base salaries. The chief executive officer was eligible
to receive a cash bonus of up to 480% of his base salary. The implementation of this element for the year 2015 is discussed below.
The Long-Term
Incentive Compensation Element
The Committee
also awards incentive and non-qualified stock options under the Company's stock option plans. 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. During the year ended December 31, 2015, the Committee granted stock options to the Company's executive officers. All
such grants were awarded in May 2015, and all carry exercise prices equal to the market price for the Company's common stock at
the date of grant. The terms of such options are described below, under the caption "Grants of Plan-Based Awards
in Last Fiscal Year." The numbers of shares made subject to each of the option grants were based on various factors
relating to the responsibilities of the individual officers and to the extent of previous grants to such individuals.
Because the exercise
price of all options granted is equal to or above the fair market value of the Company's common stock on the date of grant, the
option holders may realize value only if the stock price appreciates from the price on the date the options were granted. This
design is intended to focus executives on the enhancement of shareholder value over the long term.
Other Elements
The Company also
maintains certain broad-based employee benefit plans, such as medical and dental insurance, and a qualified defined contribution
retirement savings plan (401(k) plan), in which executive officers are permitted to participate. Such officers participate
on the same terms as non-executive personnel who meet applicable eligibility criteria, and are subject to any legal limitations
on the amounts that may be contributed or the benefits that may be payable under the plans. The Company does not maintain
any form of defined benefit pension or retirement plan in which executive officers may participate, nor does it maintain any form
of supplemental retirement savings or supplemental deferred compensation plan.
Exercise of
Discretion
In exercising
its discretion as to the level of executive compensation and its components, the Committee considers a number of factors. Members
of the Committee conduct informal surveys of compensation paid to comparable executives within and without the consumer finance
industry. The Committee finds these data useful primarily in evaluating the overall level of compensation paid or to
be paid to the Company's executive officers. Financial factors considered with respect to the year ended December 31,
2015 included the Company's increases in earnings, revenue and originations, and its having increased its servicing portfolio. Most
important, the Committee noted that the Company met and exceeded its budget objectives for the year. Operational factors
considered included individual and group management goals; indicators of the performance and credit quality of the Company's servicing
portfolio, including levels of delinquencies and charge-offs; and indicators of successful management of personnel, including employee
stability. All of such factors are assessed with reference to the judgment of the Committee as to the degree of difficulty
of achieving desired outcomes. With respect to payment of annual bonuses and grants of stock options, the Committee
also takes note of factors relating to the degree of the Company's success over the most recent year.
Specific
Objectives and Evaluation
In the first quarter
of 2015 the compensation committee designated specific objectives with respect to the chief executive officer to be accomplished
within the year 2015, and fixed weights to be associated with each such objective. The chief executive officer proposed to the
committee specific annual objectives with respect to each other executive officer of the company, which the committee, after making
certain modifications, approved. These objectives and the Committee’s administration of the annual incentive bonus
element of compensation are discussed in detail below, under the heading “ - Grants of Plan-Based Awards in Last Fiscal Year
- Executive Management Bonus Plan.”
Grants of Options
The Committee's
award of stock options to the Company's officers in May 2015 included option grants to the chief executive officer and the other
named executive officers. In determining the appropriate level of such grant, the Committee considered the long-term
performance of the chief executive officer and the desirability of providing significant incentive for future performance, as well
as the desirability of ensuring that officer's continued retention by the Company, and the various factors noted above with respect
to option grants generally. These grants and the Committee’s administration of the long-term incentive element of compensation
are discussed in detail below, under the heading “-Grants of Plan-Based Awards in Last Fiscal Year – Equity Incentives.”
Compensation Committee Interlocks
and Insider Participation
The Compensation
Committee comprises non-employee directors Chris Adams (chairman), William Roberts and Daniel Wood. As discussed below under the
heading “Certain Transactions – Subordinated Notes,” to which discussion the reader is directed, Mr. Roberts
holds $4,000,000 of subordinated notes issued by the Company. The board of directors has considered whether such holdings would
reasonably be expected to impair Mr. Roberts’ exercise of independent judgment, and has concluded that his independence is
not impaired. In coming to that conclusion, the board noted that the Company’s repayment obligation is subordinated to all
other debt of the Company, creating a near-alignment of interest with the holders of common stock, and also noted Mr. Roberts’
substantial beneficial ownership of Company common stock.
Summary of Compensation
The following table summarizes all compensation earned during
the three fiscal years ended December 31, 2015 by the Company's chief executive officer, its chief financial officer, and the other
three most highly compensated individuals (such five individuals, the "named executive officers") who were serving in
such position or as executive officers at any time in 2015. It lists their names, the principal positions in which they served
in those years, and each component of compensation paid with respect to those years.
Summary Compensation Table
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Non-Equity
Incentive Plan Compensation
|
|
Option
Awards (1)
|
|
All Other Compen-
sation (2)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles E. Bradley, Jr.
|
|
2015
|
|
$985,000
|
|
$ 2,700,000
|
|
$747,000
|
|
$600
|
|
$4,432,600
|
President & Chief
|
|
2014
|
|
965,000
|
|
2,600,000
|
|
843,000
|
|
600
|
|
4,408,600
|
Executive Officer
|
|
2013
|
|
940,000
|
|
2,303,000
|
|
2,627,900
|
|
600
|
|
5,871,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey P Fritz
|
|
2015
|
|
380,000
|
|
382,000
|
|
224,100
|
|
600
|
|
986,700
|
Executive Vice President
|
|
2014
|
|
352,000
|
|
362,400
|
|
505,800
|
|
600
|
|
1,220,800
|
& Chief Financial Officer
|
|
2013
|
|
335,000
|
|
317,000
|
|
630,696
|
|
600
|
|
1,283,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael T. Lavin
|
|
2015
|
|
398,000
|
|
476,000
|
|
224,100
|
|
600
|
|
1,098,700
|
Executive Vice President
|
|
2014
|
|
376,000
|
|
441,000
|
|
365,300
|
|
600
|
|
1,182,900
|
& Chief Legal Officer
|
|
2013
|
|
348,000
|
|
345,000
|
|
703,632
|
|
600
|
|
1,397,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtis K Powell
|
|
2015
|
|
348,000
|
|
311,000
|
|
149,400
|
|
600
|
|
809,000
|
Senior Vice President
|
|
2014
|
|
341,000
|
|
294,000
|
|
168,600
|
|
600
|
|
804,200
|
- Special Projects
|
|
2013
|
|
331,000
|
|
306,500
|
|
630,696
|
|
600
|
|
1,268,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Teri L. Robinson
|
|
2015
|
|
340,000
|
|
323,000
|
|
149,400
|
|
600
|
|
813,000
|
Senior Vice President
|
|
2014
|
|
324,000
|
|
304,100
|
|
168,600
|
|
600
|
|
797,300
|
- Originations
|
|
2013
|
|
300,000
|
|
285,000
|
|
630,696
|
|
600
|
|
1,226,296
|
(1)
|
|
Represents the dollar value of accrued for financial accounting purposes in connection
with the grant of such options, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification
Topic 718 and SFAS 123R. For the year 2015, value was estimated using a binomial option pricing model. The weighted average
fair value per option was $2.49, based on assumptions of 4.43 years expected life, expected volatility of 51%, and a risk-free
rate of 1.43%. For the prior years we estimated value using a Black-Scholes model, with assumptions of 4.22 years expected life,
volatility of 55 %, and a risk-free rate of 1.43% (2014), and 5.41 years expected life, volatility of 80%, and a risk-free rate
of 0.73% (2013). In all cases, we assumed a dividend yield of 0.0%.
|
(2)
|
|
Amounts in this column represent premiums paid by the Company for group life insurance,
in the amount of $600 for each of the named executive officers.
|
Grants of Plan-Based Awards in Last Fiscal Year
Equity Incentives
In the year ended December 31, 2015, we did not grant any stock
awards or stock appreciation rights to any of our named executive officers. We granted options to substantially all
of our management level employees on May 19, 2015. The option grants noted in the tables above and below were awarded to the named
executive officers as part of those grants. We also granted awards under our Executive Management Bonus Plan, which were evaluated
in January and March of 2015, and have been paid. The amounts paid are shown in the table above (Summary Compensation Table) as
“Non-Equity Incentive Plan Compensation.”
In the May 2015 grant, the chief executive officer received
an option to purchase 300,000 shares of the Company's common stock at the market closing price ($6.11 per share) on the date of
grant, with such right to purchase to become exercisable in increments of 25% on each of the first through fourth anniversaries
of the grant date, and to expire on the seventh anniversary. Each of the other executive officers of the Company received a grant
at that time on the same terms. Mr. Fritz and Mr. Lavin received such a grant with respect to 90,000 shares, and the other executive
officers of the Company each received such a grant with respect to 60,000 shares.
The table below provides information regarding the two awards
granted to each of the named executive officers in 2015.
Grants
of Plan-Based Awards
|
|
Estimated future payouts under non-
equity incentive plan awards
|
|
|
|
|
|
|
|
|
Name
|
|
Threshold
|
|
|
Target
|
|
Maximum
|
|
Grant
Date
|
|
Number of
Shares
Underlying
Options
|
|
Exercise
Price
|
|
Grant
Date Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Bradley
|
|
|
–
|
|
|
–
|
|
--
|
|
5/19/2015
|
|
300,000
|
|
$6.11
|
|
$747,000
|
|
|
$
|
–
|
|
|
$4,728,000
|
|
$4,728,000
|
|
–
|
|
–
|
|
–
|
|
–
|
Mr. Fritz
|
|
|
–
|
|
|
–
|
|
--
|
|
5/19/2015
|
|
90,000
|
|
$6.11
|
|
224,100
|
|
|
$
|
–
|
|
|
608,000
|
|
608,000
|
|
–
|
|
–
|
|
–
|
|
–
|
Mr. Lavin
|
|
|
–
|
|
|
–
|
|
–
|
|
5/19/2015
|
|
90,000
|
|
$6.11
|
|
224,100
|
|
|
$
|
–
|
|
|
636,800
|
|
636,800
|
|
–
|
|
–
|
|
–
|
|
–
|
Ms. Robinson
|
|
|
–
|
|
|
–
|
|
–
|
|
5/19/2015
|
|
60,000
|
|
$6.11
|
|
149,400
|
|
|
$
|
–
|
|
|
408,000
|
|
408,000
|
|
–
|
|
–
|
|
–
|
|
–
|
Mr. Powell
|
|
|
–
|
|
|
–
|
|
–
|
|
5/19/2015
|
|
60,000
|
|
$6.11
|
|
149,400
|
|
|
$
|
–
|
|
|
417,600
|
|
417,600
|
|
–
|
|
–
|
|
–
|
|
–
|
The “target” and “maximum” figures appearing
in the table above represent the
maximum
cash payout under the individual executives’ Executive Management Bonus Plan
awards as of the date the incentive was fixed. The actual payout to each individual named in the table above has been determined
and paid prior to the date of this proxy statement. That amount was in each case less than the maximum. The respective actual payments
are described below, and appear above in the Summary Compensation Table under the heading “Non-Equity Plan Compensation.”
Because each non-equity incentive plan award has been settled and paid, the future payout under such awards as of the date of this
proxy statement is in each case zero. The “grant date fair value” figures appearing in the table above are computed
as described in note 1 to the Summary Compensation Table.
Executive Management Bonus Plan
The Executive Management Bonus Plan award granted to the chief
executive officer, Mr. Bradley, called for him to meet as many as possible of thirteen separate operational and financial objectives
within the year 2015. The Compensation Committee assigned to each of those objectives a value as a percentage of base salary. The
objectives and their weightings were as follows: to meet the Company’s quarterly budgeted earnings (20% each quarter, total
of 80%), to increase the Company’s monthly originations of receivables to each of five targets (50% in the aggregate, creditable
in increments of 10% for reaching monthly levels of $95 million, $100 million, $105 million , $110 million and $115 million), to
provide for expansion space in Irvine, California (20%), to raise capital in a secondary offering priced above $7.00 or $8.00 per
share (10% or 20%, respectively), to cause the Company’s common stock to trade in excess of each of six targets (60% in the
aggregate, creditable in increments of 10% for reaching prices of $7.00, $7.50, $8.00, $8.50, $9.00 and $9.50 per share), to obtain
new coverage from two equity analysts (20% each, 40% total), to open a new warehouse financing facility (30%), to renew a designated
existing warehouse credit facility (30%), to pay off an existing residual financing facility (20%), to open a new residual financing
facility (20%), to promote the Company by attending four equity or asset-backed securities conferences (10% each, 40% total), to
execute four rated securitization transactions (10% each, 40% total), and to acquire a material new servicing portfolio (30%).
The total of the thirteen weightings is 480%; accordingly, the target and maximum possible value to that officer of the award was
480% of his base salary for 2015.
In January and March 2016, the committee evaluated the chief
executive’s performance in comparison to the goals. The Compensation Committee determined that the budget objective was met
in each quarter of 2015, and credited the chief executive with the full value of 80%. It determined that we increased our originations
volume to in excess of $100 million per month while maintaining credit quality, representing creditable performance in the amount
of 20%. The committee noted that we entered into a new five-year lease for expansion space in Irvine, California, with two successive
five year extension options, and assigned the full 20% value to that, but that we did not complete a secondary equity offering,
and therefore assigned zero value to the equity offering objective. The committee noted that our common stock had traded for a
portion of 2015 above the first of six share price targets, representing creditable performance of 10%, and that new equity analyst
coverage was obtained from two firms, representing creditable performance of 40%.
The Company opened a new warehouse credit facility and successfully
renewed the designated existing facility. The committee allocated 30% credit toward each of those objectives. The company neither
paid off its existing residual financing nor opened a new residual facility; accordingly, the committee awarded zero credit for
these objectives. The committee noted that the chief executive officer had promoted the Company by attending two equity and two
asset-backed securities conferences, representing creditable performance of 40%, and that the Company had executed three, but not
four, rated securitizations, representing creditable performance of 30%. The Company did not acquire a servicing portfolio, and
the committee accordingly assigned zero value with respect to that objective.
The aggregate valuation of all creditable performance for the
chief executive officer was thus 300%, which would imply a bonus payment under our Executive Management Bonus Plan of $2,955,000.
The committee elected to pay a bonus of less than the maximum creditable percentage, in the amount of $2,700,000, representing
274% of our chief executive’s base salary. In choosing to reduce the maximum award, the committee noted in part that the
creditable stock price objective had been met for only a portion of the year.
The Executive Management Bonus Plan
awards granted to the named executive officers other than the chief executive officer are evaluated on a more subjective basis,
and were set by the Compensation Committee in consultation with and on the recommendation of the chief executive officer. Factors
used in determining the amount of bonus for the two named executive officers who are executive vice presidents of the Company are
these: (I) an evaluation of the executive’s skills and performance (25%), (II) whether the executive has met three individual
objectives approved by the compensation committee (24% in aggregate), (III) whether the Company as a whole has met or exceeded
budget targets (12.5%), (IV) a subjective evaluation of the officer's performance (50%), and (V) a discretionary allocation recommended
by the chief executive officer and approved by the compensation committee (48.5%). Numerical scores are assigned to
each of these factors, up to the maximum percentages stated above, and can result in a maximum bonus of 160% of base compensation.
Similar factors are applied in determining the amount of annual bonus for executive officers who are senior vice presidents of
the Company (I) skills and performance, 20%, (II) three individual objectives, 24%, (III) Company budget, 10%, (IV) subjective
evaluation, 40%, and (V) discretionary allocation, 26%, resulting in a maximum bonus of 120% of base compensation.
Following the end of the year 2015, our compensation committee
evaluated each named executive officer’s performance in relation to these standards and goals. The Company met its overall
budget target, and each officer accordingly received full credit with respect to that target.
With respect to the individual factors, the compensation committee,
acting in part on the advice of our chief executive officer, determined that creditable performance for 2015 for each named executive
officer other than the chief executive officer was as set forth below:
|
|
|
|
|
|
Maximum
percentage
|
|
Creditable
percentage
|
|
Base
Salary
|
|
Result (rounded to
nearest $1000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Fritz
|
|
|
|
|
|
160%
|
|
100.5%
|
|
$398,000
|
|
$476,000
|
Mr. Lavin
|
|
|
|
|
|
160
|
|
119.6
|
|
380,000
|
|
382,000
|
Ms. Robinson
|
|
|
|
|
|
120
|
|
95.0
|
|
340,000
|
|
323,000
|
Mr. Powell
|
|
|
|
|
|
120
|
|
89.4
|
|
348,000
|
|
311,000
|
On that basis, the Compensation Committee approved payments
to these named executive officers in the amounts shown in the rightmost column.
Outstanding Equity Awards at Fiscal Year-end
The following table sets forth as of December 31, 2015 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 exercise price and expiration date of each such option. Each option referred to
in the table was granted at an option price per share no less than the fair market value per share on the date of grant. None of
such individuals holds a stock award; accordingly, only information concerning option awards is presented.
Name
|
|
Number of securities underlying unexercised options (exercisable)
|
|
|
|
Number
of securities underlying unexercised options (unexercisable)
|
|
|
Option
exercise price
|
|
Option expiration date
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles E. Bradley, Jr.
|
|
80,000
|
|
|
|
–
|
|
|
$1.50
|
|
10/25/2016
|
|
|
120,000
|
|
|
|
–
|
|
|
$1.50
|
|
2/27/2017
|
|
|
40,000
|
|
|
|
–
|
|
|
$1.50
|
|
7/30/2017
|
|
|
40,000
|
|
|
|
–
|
|
|
$1.50
|
|
1/30/2018
|
|
|
120,000
|
|
|
|
–
|
|
|
$0.77
|
|
5/13/2019
|
|
|
50,000
|
|
|
|
–
|
|
|
$1.81
|
|
4/27/2020
|
|
|
200,000
|
|
|
|
–
|
|
|
$1.19
|
|
12/31/2020
|
|
|
80,000
|
|
|
|
20,000
|
(1)
|
|
$1.03
|
|
6/23/2021
|
|
|
83,333
|
|
|
|
–
|
|
|
$1.75
|
|
11/23/2021
|
|
|
250,000
|
|
|
|
–
|
|
|
$1.75
|
|
11/23/2021
|
|
|
166,666
|
|
|
|
–
|
|
|
$1.50
|
|
11/23/2021
|
|
|
80,000
|
|
|
|
20,000
|
(2)
|
|
$0.95
|
|
11/23/2021
|
|
|
84,000
|
|
|
|
56,000
|
(3)
|
|
$1.20
|
|
4/3/2022
|
|
|
36,000
|
|
|
|
24,000
|
(4)
|
|
$1.94
|
|
7/16/2022
|
|
|
100,000
|
|
|
|
–
|
|
|
$3.72
|
|
11/8/2022
|
|
|
100,000
|
|
|
|
150,000
|
(5)
|
|
$6.86
|
|
2/1/2023
|
|
|
100,000
|
|
|
|
150,000
|
(6)
|
|
$7.97
|
|
5/7/2023
|
|
|
75,000
|
|
|
|
225,000
|
(7)
|
|
$6.59
|
|
7/28/2021
|
|
|
–
|
|
|
|
300,000
|
(8)
|
|
$6.11
|
|
5/19/2022
|
|
|
|
|
|
|
|
|
|
|
Jeffrey P. Fritz
|
|
40,000
|
|
|
|
–
|
|
|
$1.50
|
|
10/25/2016
|
|
|
10,000
|
|
|
|
–
|
|
|
$1.50
|
|
2/27/2017
|
|
|
20,000
|
|
|
|
–
|
|
|
$1.50
|
|
7/30/2017
|
|
|
20,000
|
|
|
|
–
|
|
|
$1.50
|
|
1/30/2018
|
|
|
60,000
|
|
|
|
–
|
|
|
$0.77
|
|
5/13/2019
|
|
|
25,000
|
|
|
|
5,000
|
|
|
$1.81
|
|
4/27/2020
|
|
|
40,000
|
|
|
|
20,000
|
(1)
|
|
$1.03
|
|
6/23/2021
|
|
|
21,600
|
|
|
|
21,600
|
(3)
|
|
$1.20
|
|
4/3/2022
|
|
|
8,400
|
|
|
|
8,400
|
(4)
|
|
$1.94
|
|
7/16/2022
|
|
|
24,000
|
|
|
|
48,000
|
(5)
|
|
$6.86
|
|
2/1/2023
|
|
|
24,000
|
|
|
|
48,000
|
(6)
|
|
$7.97
|
|
5/7/2023
|
|
|
45,000
|
|
|
|
135,000
|
(7)
|
|
$6.59
|
|
7/28/2021
|
|
|
–
|
|
|
|
90,000
|
(8)
|
|
$6.11
|
|
5/19/2022
|
|
|
|
|
|
|
|
|
|
|
Michael T. Lavin
|
|
5,000
|
|
|
|
–
|
|
|
$1.81
|
|
4/27/2020
|
|
|
10,000
|
|
|
|
10,000
|
(1)
|
|
$1.03
|
|
6/23/2021
|
|
|
20,000
|
|
|
|
10,000
|
(2)
|
|
$0.95
|
|
11/23/2021
|
|
|
7,200
|
|
|
|
14,400
|
(3)
|
|
$1.20
|
|
4/3/2022
|
|
|
2,800
|
|
|
|
5,600
|
(4)
|
|
$1.94
|
|
7/16/2022
|
|
|
30,000
|
|
|
|
45,000
|
(5)
|
|
$6.86
|
|
2/1/2023
|
|
|
24,000
|
|
|
|
36,000
|
(6)
|
|
$7.97
|
|
5/7/2023
|
|
|
32,500
|
|
|
|
130,000
|
(7)
|
|
$6.59
|
|
7/28/2021
|
|
|
–
|
|
|
|
90,000
|
(8)
|
|
$6.11
|
|
5/19/2022
|
|
|
|
|
|
|
|
|
|
|
Teri L. Robinson
|
|
20,000
|
|
|
|
–
|
|
|
$1.50
|
|
10/25/2016
|
|
|
5,000
|
|
|
|
–
|
|
|
$1.50
|
|
2/27/2017
|
|
|
30,000
|
|
|
|
–
|
|
|
$1.50
|
|
5/22/2017
|
|
|
20,000
|
|
|
|
–
|
|
|
$1.50
|
|
7/30/2017
|
|
|
20,000
|
|
|
|
–
|
|
|
$1.50
|
|
1/30/2018
|
|
|
60,000
|
|
|
|
–
|
|
|
$0.77
|
|
5/13/2019
|
|
|
25,000
|
|
|
|
|
|
|
$1.81
|
|
4/27/2020
|
|
|
40,000
|
|
|
|
10,000
|
(1)
|
|
$1.03
|
|
6/23/2021
|
|
|
5,000
|
|
|
|
–
|
|
|
$1.75
|
|
11/23/2021
|
|
|
5,000
|
|
|
|
–
|
|
|
$1.50
|
|
11/23/2021
|
|
|
5,000
|
|
|
|
–
|
|
|
$1.50
|
|
11/23/2021
|
|
|
21,600
|
|
|
|
14,400
|
(3)
|
|
$1.20
|
|
4/3/2022
|
|
|
8,400
|
|
|
|
5,600
|
(4)
|
|
$1.94
|
|
7/16/2022
|
|
|
24,000
|
|
|
|
36,000
|
(5)
|
|
$6.86
|
|
2/1/2023
|
|
|
24,000
|
|
|
|
36,000
|
(6)
|
|
$7.97
|
|
5/7/2023
|
|
|
15,000
|
|
|
|
45,000
|
(7)
|
|
$6.59
|
|
7/28/2021
|
|
|
–
|
|
|
|
60,000
|
(8)
|
|
$6.11
|
|
5/19/2022
|
Name
|
|
Number of securities underlying unexercised options (exercisable)
|
|
|
|
Number
of securities underlying unexercised options (unexercisable)
|
|
|
Option
exercise price
|
|
Option expiration date
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtis K. Powell
|
|
30,000
|
|
|
|
–
|
|
|
$1.50
|
|
10/25/2016
|
|
|
10,000
|
|
|
|
–
|
|
|
$1.50
|
|
2/27/2017
|
|
|
20,000
|
|
|
|
–
|
|
|
$1.50
|
|
7/30/2017
|
|
|
20,000
|
|
|
|
–
|
|
|
$1.50
|
|
1/30/2018
|
|
|
|
|
|
|
25,000
|
|
|
$1.81
|
|
4/27/2020
|
|
|
10,000
|
|
|
|
10,000
|
(1)
|
|
$1.03
|
|
6/3/2021
|
|
|
10,000
|
|
|
|
–
|
|
|
$1.75
|
|
11/23/2021
|
|
|
10,000
|
|
|
|
–
|
|
|
$1.50
|
|
11/23/2021
|
|
|
10,000
|
|
|
|
–
|
|
|
$1.50
|
|
11/23/2021
|
|
|
7,200
|
|
|
|
14,400
|
(3)
|
|
$1.20
|
|
4/3/2022
|
|
|
8,400
|
|
|
|
5,600
|
(4)
|
|
$1.94
|
|
7/16/2022
|
|
|
24,000
|
|
|
|
36,000
|
(5)
|
|
$6.86
|
|
2/1/2023
|
|
|
24,000
|
|
|
|
36,000
|
(6)
|
|
$7.97
|
|
5/7/2023
|
|
|
15,000
|
|
|
|
45,000
|
(7)
|
|
$6.59
|
|
7/28/2021
|
|
|
–
|
|
|
|
60,000
|
(8)
|
|
$6.11
|
|
5/19/2021
|
(1)
|
|
Becomes exercisable in full on
June 23, 2016.
|
(2)
|
|
Becomes exercisable in full on
November 23, 2016.
|
(3)
|
|
Exercisable as to additional increments
of 50% of the unexercisable portion on April 3, 2016 and 2017.
|
(4)
|
|
Exercisable as to additional increments
of 50% of the unexercisable portion on July 16, 2016 and 2017.
|
(5)
|
|
Exercisable as to additional increments
of one-third of the unexercisable portion on February 1, 2016, 2017 and 2018.
|
(6)
|
|
Exercisable as to additional increments
of one-third of the unexercisable portion on May 7, 2016, 2017 and 2018.
|
(7)
|
|
Exercisable as to cumulative increments
of one-third of the unexercisable portion on July 28, 2016, 2017 and 2018.
|
(8)
|
|
Exercisable as to cumulative increments
of one-third of the unexercisable portion on May 19, 2017, 2018 and 2019.
|
Option Exercises in Last Fiscal Year
Four of the five named executive officers exercised stock options
during 2015. The table below shows the realized value and the number of options exercised for those four individuals. None of our
officers hold stock awards; accordingly, no stock awards vested during 2015.
Option Exercises and Stock Vested
|
Value realized on
exercise (1)
|
Number of shares
acquired on exercise
|
Mr. Bradley
|
$769,600
|
160,000
|
Mr. Fritz
|
496,600
|
100,000
|
Ms. Robinson
|
85,400
|
20,000
|
Mr. Powell
|
594,672
|
98,400
|
(1)
|
|
The value realized is the difference between the fair market value of the Company’s
common stock on the date of exercise (the closing price reported by Nasdaq) and the exercise price of the option.
|
Executive Management Bonus Plan (Non-equity
Incentive Plan)
The salary and cash bonus of the named executive officers are
determined by the Compensation Committee. The compensation appearing in the Summary Compensation Table above under the caption
"Non-Equity Incentive Plan Compensation" is paid pursuant to an executive management bonus plan (the “EMB Plan”).
The EMB Plan is administered by the Compensation Committee. Among other things, the Compensation Committee selects participants
in the EMB Plan from among the Company’s executive officers and determines the performance goals, target amounts and other
terms and conditions of awards under the EMB Plan. With respect to officers other than the chief executive officer, determinations
of base salary and of criteria relating to the EMB Plan are based in part on evaluations of such officers prepared by the chief
executive officer, which are furnished to and discussed with the Compensation Committee.
Director Compensation
Throughout 2015, we paid our non-employee directors a retainer
of $5,167 per month, with an additional fee of $500 per month for service on a board committee ($1,000 for a committee chairman). Non-employee
directors also received
per diem
fees of $1,000 for attendance in person at meetings of the board of directors, or $500
for attendance by telephone. No
per diem
fees are paid for attendance at committee meetings. The Board in 2015
approved issuance to each non-employee director of options to purchase an aggregate of 30,000 shares. The exercise prices of all
such options are the closing price of the Company’s common stock on the date of grant, which was $6.11 per share. The
following table summarizes compensation received by our directors for the year 2015:
Name of Director
|
|
Fees Earned or Paid in Cash (1)
|
|
Option Awards (2)
|
|
Total
|
Chris A. Adams
|
|
83,500
|
|
$42,300
|
|
125,800
|
Charles E. Bradley, Jr. (3)
|
|
-
|
|
-
|
|
-
|
Brian J. Rayhill
|
|
90,000
|
|
42,300
|
|
132,300
|
William B. Roberts
|
|
71,000
|
|
42,300
|
|
113,300
|
Gregory S. Washer
|
|
77,500
|
|
42,300
|
|
119,800
|
Daniel S. Wood
|
|
89,500
|
|
42,300
|
|
131,800
|
(1) This column reports cash compensation earned in 2015
for Board and committee service.
(2) This column represents the dollar amount recognized
for financial statement reporting purposes with respect to the 2015 fiscal year for the fair value of stock options granted to
the directors in 2015. The fair value was estimated using the Black-Scholes option-pricing model in accordance with SFAS 123R.
The weighted average fair value per option was $1.41, based on assumptions of 1.53 years expected life, expected volatility of
47.03 %, expected dividend yield of 0.0%, and a risk-free rate of 0.44%. In addition to the stock option awards granted in 2015,
our directors held at December 31, 2015 option awards granted in previous years. The total options held at December 31, 2015 represent
the right to purchase shares as follows: Mr. Bradley, 2,749,999 shares; Mr. Adams, 190,000 shares; Mr. Rayhill, 337,000 shares;
Mr. Roberts, 60,000 shares; Mr. Washer, 180,000 shares; and Mr. Wood, 195,000 shares.
(3) Mr. Bradley's compensation as chief executive officer
of the Company is described elsewhere in this report. He received no additional compensation for service on the Company's Board
of Directors.
Pension Plans
The Company's
officers do not participate in any pension or retirement plan, other than a tax-qualified defined contribution plan (commonly known
as a 401(k) plan).
Each of
the named executive officers is employed "at will" by the Company, and none has an employment contract. The Compensation
Committee has considered entering into agreements with one or more of the Company's officers that might pay additional compensation
following a change in control, and may authorize such agreement(s) in the future, but no such agreements are in place as of the
date of this proxy statement.
Potential Payments Upon Termination or Change of Control
This section
provides information regarding payments and benefits to the named executive officers that would be triggered by termination of
the officer’s employment (including resignation, or voluntary termination; severance, or involuntary termination; and retirement)
or a change of control of the Company.
Each of
the named executive officers is an at-will employee and, as such, does not have an employment contract. In addition, if the officer’s
employment terminates for any reason other than a change of control of the Company, any unvested stock options are terminated,
and vested options become subject to accelerated expiration: ordinarily three months following separation from service, or twelve
months in the case of disability, retirement or death. Accordingly, there are no payments or benefits that are triggered by any
termination event (including resignation and severance) other than in connection with a change of control of the Company.
Benefits Triggered by Change of Control or Termination after
Change of Control
Our stock
option plans provide that each employee of ours who holds outstanding unexpired options under our stock option may have the right
to exercise such options following a change of control of the Company, without regard to the date such option would first be exercisable.
Each of the named executive officers holds such options. The “acceleration” of options is mandatory following certain
changes of control, and subject to the discretion of the Compensation Committee following certain others. Acceleration is mandatory
in the event of (i) the sale, or other disposition of substantially all of the Company’s assets, or (ii) a merger or
similar transaction in which shareholders of the Company hold less than 50% of the shares of the surviving entity; provided, however,
that acceleration following a merger or similar transaction is mandatory only if the holder suffers a Qualifying Termination (defined
below) within one year following the transaction, or if the surviving entity does not provide the holder with an equivalent award.
Acceleration is also mandatory if a holder suffers a Qualifying Termination within one year following (iii) a change within a three-year
period in the membership of a majority of the board of directors (excluding changes recommended by the board), or (iv) a person’s
acquisition of outstanding voting securities of the Company, other than directly from the Company and without approval of the board,
resulting in that person’s having beneficial ownership of greater than 25% of the Company.
Under our
stock option plans, the Compensation Committee may exercise its discretion to provide for acceleration under other circumstances
than those described above with respect to any particular stock option or class of stock options. The committee would expect to
exercise its discretion with the intention of preserving the value of the stock option award. To date, such discretion has not
been exercised. A “Qualifying Termination” is a termination of the holder’s employment by the Company other than
for cause, disability or death, or by the holder for “good reason” (principally relating to a material diminution in
the holder’s authority, compensation or responsibilities, or a relocation of greater than 50 miles). The preceding description
applies to options held by officers and employees. Options issued to non-employee directors accelerate without the exercise of
discretion upon any of the four categories of change of control described above.
The following
table quantifies for each named executive officer the value of his unvested stock options, the vesting of which could be accelerated
upon a change of control (assuming that the change of control occurred on December 31, 2015, and using as the value of the shares
underlying such options the closing market price on December 31, 2015, which was $5.19):
Name
|
|
Value of Unvested Stock Options (1)
|
|
Mr. Bradley
|
|
|
$ 469,440
|
|
Mr. Fritz
|
|
|
117,256
|
|
Mr. Lavin
|
|
|
159,656
|
|
Ms. Robinson
|
|
|
117,256
|
|
Mr. Powell
|
|
|
117,256
|
|
|
|
|
|
|
(1)
|
|
Represents the difference between the closing market
price per share of the Company’s common stock on December 31, 2015 (which was $5.19) and the exercise price of each unvested
option held by the officer as of December 31, 2015.
|
Policies
Stock Ownership, Hedging and Pledging
. Our
board of directors and compensation committee have considered whether to establish a minimum stock ownership goal for members of
our senior management. We have elected not to do so, considering that such a policy would either be strict and mandatory, in which
case it would undermine the compensatory objectives of our equity compensation plans, or would be merely hortatory, in which case
it could be expected to have little effect. We’ve also noted that the multiyear vesting terms of the equity incentives granted
under our plans have the effect of aligning our executives’ individual personal financial incentives with the future price
performance of the Company’s stock.
As part of our comprehensive compliance policy,
we remind all company executive officers of the mandatory legal prohibition on selling short company shares. We also prohibit company
executive officers from entering into transactions that would have the effect of causing those individuals to benefit from a decline
in the price of the company stock, such as the purchase of “put” options. We prohibit such “hedging” transactions
but we do not find it appropriate to prohibit our executive officers from pledging their shares of company stock as security for
a loan. We believe that the beneficial incentives of owning company stock remain substantially the same with or without such a
pledge.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth the number and
percentage of shares of the our Common Stock (our only class of voting securities) owned beneficially as of the March 21, 2016,
the record date, by (i) each person known to us to own beneficially more than 5% of the outstanding Common Stock, (ii) each nominee
for election as director and each named executive officer, and (iii) all of our director nominees and executive officers, 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. Except
as otherwise noted, each person named in the table has a mailing address at 3800 Howard Hughes Parkway, Suite 1400, Las Vegas,
Nevada 89169.
Name and Address of Beneficial Owner
|
|
|
Amount and Nature
of Beneficial Ownership (1)
|
|
|
|
Percent
of Class
|
|
|
|
|
|
|
|
|
|
|
Charles E. Bradley, Jr.
|
|
|
3,981,185
|
|
|
|
14.7%
|
|
Chris A. Adams
|
|
|
299,203
|
|
|
|
1.2%
|
|
Brian J. Rayhill
|
|
|
357,000
|
|
|
|
1.4%
|
|
William B. Roberts
|
|
|
810,000
|
|
|
|
3.2%
|
|
Gregory S. Washer
|
|
|
601,201
|
|
|
|
2.4%
|
|
Daniel S. Wood
|
|
|
360,154
|
|
(2)
|
|
1.4%
|
|
Jeffrey P. Fritz
|
|
|
521,700
|
|
|
|
2.1%
|
|
Michael T. Lavin
|
|
|
473,283
|
|
|
|
1.9%
|
|
Teri L. Robinson
|
|
|
496,000
|
|
|
|
2.0%
|
|
Curtis K. Powell
|
|
|
481,880
|
|
|
|
1.9%
|
|
All directors, nominees and executive officers combined (15 persons)
|
|
|
9,886,653
|
|
(3)
|
|
23.5%
|
|
Second Curve Capital, 350 Fifth Ave, Suite 4730, New York, New York 10118
|
|
|
2,520,963
|
|
(4)
|
|
10.1%
|
|
Dimensional Fund Advisors LP, Building One, 6300 Bee Cave Road, Austin, Texas, 78746
|
|
|
2,039,699
|
|
(5)
|
|
8.1%
|
|
Citigroup Financial Products Inc., 388 Greenwich Street, New York, New York 10013
|
|
|
2,000,000
|
|
(6)
|
|
7.4%
|
|
BlackRock Inc., 55 East 52nd Street, New York, New York 10055
|
|
|
1,706,232
|
|
(7)
|
|
6.8%
|
|
(1)
|
|
Includes certain shares that may be acquired within 60 days after March 21, 2016 from the
Company upon exercise of options, as follows: Mr. Bradley, 2,007,999 shares; Mr. Adams, 190,000 shares; Mr. Rayhill,
337,000 shares; Mr. Roberts, 60,000 shares; Mr. Washer, 180,000 shares; Mr. Wood, 195,000 shares; Mr. Fritz, 391,700 shares;
Mr. Lavin, 188,200 shares; Ms. Robinson, 374,200 shares; and Mr. Powell, 269,800 shares. Of Mr. Bradley’s shares,
1,419,906 are pledged to secure loan(s) to him. The calculation of beneficial ownership also includes, in the case of the
executive officers, an approximate number of shares each executive officer could be deemed to hold through contributions made
to the Company's Employee 401(k) Plan (the "401(k) Plan"). The 401(k) Plan provides an option for all participating
employees to purchase stock in the Company indirectly by buying units in a mutual fund. Each "unit" in the mutual
fund represents an interest in Company stock, cash and cash equivalents.
|
(2)
|
|
Excludes 8,202 shares owned by the person’s wife, as to which beneficial ownership
is disclaimed.
|
(3)
|
|
Includes 5,406,799 shares that may be acquired within 60 days after March 19, 2015,
upon exercise of options and conversion of convertible securities.
|
(4)
|
|
Based on a report on Schedule 13G/A filed by the named persons and others on January
27, 2016.
|
(5)
|
|
Based on a report on Schedule 13G filed by the named persons and others on February
9, 2016.
|
(6)
|
|
All of which are shares that may be acquired upon exercise of presently-exercisable
warrants. Based on a report on Schedule 13G/A filed by the named person and others on February 9, 2016.
|
(7)
|
|
Based on a report on Schedule 13G filed by the named person and others on January
28, 2016.
|
The table below presents inform
a
tion regarding securities
authorized for issuance under equity compensation plans, including the CPS 2006 Long-Term Equity Incentive Plan, as of December
31, 2015.
Plan Category
|
Outstanding Options
|
Weighted average exercise price of Outstanding Options
|
Number of securities
remaining available for
future issuance under equity
compensation plans
|
|
|
|
|
Plans approved by shareholders
|
|
11,223,624
|
|
|
$4.66
|
|
|
5,476,181
|
|
Plans not approved by shareholders
|
|
None
|
|
|
N/A
|
|
|
N/A
|
|
Total
|
|
11,223,624
|
|
|
$4.66
|
|
|
5,476,181
|
|
CERTAIN TRANSACTIONS
Citigroup.
On July 10, 2008, CPS and its wholly owned
subsidiary Folio Funding II, LLC, as borrower, agreed with Citigroup Financial Products Inc. (“CGFP”), an affiliate
of Citigroup Inc. (“Citigroup”), to amend and restate the agreements governing a pre-existing revolving residual credit
facility. CGFP was the note purchaser in and administrative agent of that credit facility. The amendments included the issuance
to an affiliate of CGFP of a warrant to purchase (for nominal consideration) 2,500,000 shares of Company common stock, which warrant
was subsequently transferred to CGFP. Upon issuance of such warrant, CGFP became a person with beneficial ownership of greater
than 5% of the Company’s common stock. On March 10, 2010, the Company repurchased a portion of the warrant, representing
500,000 of the 2,500,000 shares available for purchase upon exercise of such warrant.
On August 26, 2011, another affiliate of Citigroup (Citigroup
Global Markets, Inc. or “CGMI”) agreed to purchase certain below investment grade notes to be issued not later than
August 25, 2013 by securitization trusts sponsored by CPS. The last such purchase was in June 2012. In September 2011, and approximately
quarterly thereafter, CGMI acted as a placement agent of asset-backed notes issued by securitization trusts sponsored by CPS. The
issuances of investment-grade and below investment-grade notes, and the placement compensation to CGMI, are set forth in the following
table:
|
Investment-
grade notes
issued
|
Below investment-
grade notes issued
|
Fees paid to
CGMI
|
March 2013
|
$169,730,000
|
$15,270,000
|
$1,076,450
|
June 2013
|
189,110,000
|
15,890,000
|
1,189,081
|
September 2013
|
189,110,000
|
15,890,000
|
1,191,517
|
December 2013
|
168,800,000
|
14,200,000
|
1,063,635
|
March 2014
|
166,050,000
|
13,950,000
|
1,053,900
|
June 2014
|
186,800,000
|
15,700,000
|
1,060,263
|
September 2014
|
251,840,000
|
21,160,000
|
1,521,207
|
December 2014
|
246,760,000
|
20,740,000
|
1,494,783
|
March 2015
|
226,010,000
|
18,990,000
|
1,369,048
|
June 2015
|
199,370,000
|
18,130,000
|
1,398,677
|
September 2015
|
239,990,000
|
27,760,000
|
1,555,587
|
January 2016
|
272,000,000
|
20,910,000
|
914,379
|
On May 11, 2012, the Company entered into a one-year revolving
credit agreement (the "Citi Warehouse Agreement") and related agreements with affiliates of Citigroup and others, under
which the lenders have agreed to lend up to a maximum of $100 million, to be secured by automobile receivables. In connection with
the Citi Warehouse Agreement, the Company paid a closing fee of $1,000,000. The Company first incurred indebtedness under the Citi
Warehouse Agreement in the amount of $9.1 million on May 14, 2012. The Company used the proceeds of that draw for working capital.
Following an earlier extension in 2013, the Company and the
lenders agreed on August 18, 2014 to extend the revolving term of the Citi Warehouse Agreement to August 15, 2016. At the conclusion
of the revolving period, at the election of either the borrower or the lender, the loans are to amortize for an additional one
year, and then become due in full. Loans under the Citi Warehouse Agreement bear interest during the revolving period at a floating
rate equal to one-month LIBOR plus 5.50%, but in all events no less than 6.25% per year, and during the amortization period (if
any) at a floating rate equal to one-month LIBOR plus 6.50%, but in all events no less than 7.25% per year. The loans
are subject to acceleration upon the occurrence of certain defined events of default. In connection with the 2014 renewal of the
Citi Warehouse Agreement, we paid a closing fee of $603,022 (determined by pro-ration of a $1 million fee for a two-year renewal,
noting that the termination of the revolving period prior to the August 2014 agreement was June 30, 2015).
The maximum principal amount of indebtedness
under the Citi Warehouse Agreement during 2015 was $99.9 million. During 2015, the Company paid $373.8 million of principal
and $1.7 million of interest on such debt. As of March 21, 2016, the principal amount owed was $16.2 million. The Company
intends to incur additional indebtedness under the Citi Warehouse Agreement from time to time as it purchases motor vehicle receivables
from dealers
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 chief executive officer and chairman of the board of directors of the Company. CPSL engaged in the equipment leasing
business, and is currently in the process of liquidation as its leases come to term. The Company 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 amounts of the advances made by the Company and outstanding to CPSL as of December
31, 2013, 2014 and 2015, were approximately$305,000, $275,000 and $243,000, respectively.
Subordinated Notes
.
The Company has offered and
sold its subordinated notes in a continuous public offering. Director William Roberts on December 3, 2007 purchased $4,000,000
of three-year notes directly from the Company in that offering. The Company in the years 2013, 2014 and 2015 paid interest of $560,000,
$520,000 and $400,000 on such notes, in accordance with their terms. The interest rate on such notes was initially 14.91% per annum,
and the yield paid to the noteholder was computed by compounding that rate on a daily basis. The rate was determined by negotiation,
and Mr. Roberts and the Company have agreed to a series of successive extensions of such indebtedness, at the same interest rate
through April 2013, at 13% through December 2014, and at 10% thereafter.
Policy on Related Party Transactions and
Director Independence.
The agreements and transactions described above, other than those described under the caption “Citigroup,”
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. It is the Company's policy that any such transactions with persons having a control or
fiduciary relationship with the Company may take place only if approved by the Audit Committee or by the members of the Company's
Board of Directors who are disinterested with respect to the transaction, and independent in accordance with the standards for
director independence prescribed by Nasdaq. Such policy is maintained in writing in the charter of the Audit Committee. The
agreements and transactions above were reviewed and approved by the members of the Company's Board of Directors who were disinterested
with respect to the transaction, except that the subordinated notes transaction was reviewed and approved by the Audit Committee.
The six directors of the Company are Charles
E. Bradley, Jr., Chris A. Adams, Brian J. Rayhill, William B. Roberts, Gregory S. Washer, and Daniel S. Wood, of whom Messrs. Wood,
Rayhill and Washer compose the Audit Committee. The Board of Directors has concluded that other than Mr. Bradley (who is the Company's
chief executive officer), each of the other five directors is independent in accordance with the director independence standards
prescribed by Nasdaq, and has determined that none of them has a material relationship with the Company that would impair his independence
from management or otherwise compromise his ability to act as an independent director.
FURTHER INFORMATION RELATING TO THE ANNUAL
MEETING
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.
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. 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, that is, a minimum of 12,515,556
shares of the 25,031,111 shares outstanding at the record date.
You are entitled to one vote per share on
each matter other than election of directors. As to election of directors, you may cumulate votes and give any nominee
an aggregate number of votes equal to the number of directors to be elected (six) times the number of your shares, or distribute
that number of votes among as many nominees as you see fit. However, no one will be entitled to cumulate votes for any
nominee unless the nominee's name has been placed in nomination prior to the voting and the shareholder wishing to cumulate votes
has given notice at the Annual Meeting prior to the voting of his intention to cumulate votes. If anyone has given such
notice, all shareholders may cumulate their votes for nominees. We are seeking discretionary authority to cumulate votes
of shares represented by proxies. The six persons properly placed in nomination at the meeting and receiving the most affirmative
votes will be elected as directors.
Approval of each of the other proposals requires
the affirmative vote of a majority of those shares voting on the proposal, provided that such affirmative votes are at least a
majority of the required quorum, that is, the affirmative votes must be greater than the negative votes, and must be no less than
6,257,779. Provided that at least the minimum number of affirmative votes are cast in favor of such proposals, an abstention will
have no effect on the outcome; however, if less than 6,257,779 affirmative votes are cast in favor of such proposals, then each
abstention will have an effect equivalent to that of a negative vote.
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 that is not marked as to a particular item will be voted FOR the director nominees named in this
proxy statement, FOR ratification of Crowe Horwath LLP as the Company’s auditors for the year 2016, FOR the approval, by
non-binding vote, of executive compensation, FOR the approval of an amendment to the 2006 Long-Term Equity Incentive Plan, which
would extend the term of the Plan without changing the number of issuable thereunder, and will be deemed to grant discretionary
authority to vote upon any other matters properly coming before the Meeting, including procedural matters such as a recess or adjournment. We
believe that brokers holding shares for their customers in general will not be permitted to vote without instruction from their
customers on any proposal other than ratification of the selection of independent auditors. 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, and will have the effect of abstentions
as described above. 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
We plan to hold our year 2017 Annual Meeting of Shareholders
on May 11, 2017. In order to be considered for inclusion in our proxy statement and form of proxy for the 2016 Annual
Meeting, any proposals by shareholders intended to be presented at such meeting must be received by the Secretary of the Company
at 3800 Howard Hughes Parkway, Las Vegas, Nevada 89169 no later than December 1, 2016. In addition, any such proposals will need
to comply with Rule 14a-8 adopted under the Securities Exchange Act of 1934, which lists the requirements for the inclusion of
shareholder proposals in company-sponsored proxy materials. Notice of any director nomination or other proposal that you intend
to present at the 2017 annual meeting of shareholders, but do not intend to have included in the proxy statement and form of proxy
relating to the 2017 annual meeting of shareholders, must be delivered to the Company’s Secretary by mail at the address
given above, a reasonable time before we send our proxy materials for that meeting. The proxy we solicit for the 2017 annual meeting
of shareholders will confer discretionary authority on the Company’s proxies to vote on any proposal presented by a shareholder
at that meeting for which we have not been provided with such notice.
Availability of Annual Report on Form
10-K
We have provided a copy of our 2015 Annual
Report with this proxy statement.
Shareholders may obtain, without charge, a copy of the Company’s annual report
on Form 10-K, upon written request.
Any such request should be directed to "Corporate Secretary, Consumer Portfolio
Services, Inc., 3800 Howard Hughes Parkway, Suite 1400, Las Vegas, Nevada 89169." The annual report on Form 10-K
is also available on our website, at the following address:
http://www.consumerportfolio.com/2015Form10K.html
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 APRIL 27, 2016
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 3800 Howard Hughes Parkway, Las Vegas, NV 89169 on APRIL 27, 2016, at 10:00 a.m., and hereby appoints Charles E. Bradley, Jr.
and Jeffrey P. Fritz, 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).
(Continued and to be signed on the reverse
side.)
ANNUAL MEETING OF SHAREHOLDERS OF
CONSUMER PORTFOLIO SERVICES, INC.
Please date, sign and mail your proxy card in the
envelope provided as soon as possible. Meeting date is
APRIL
27, 2016
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL
:
The Notice of Meeting, proxy statement and proxy card
are available at www.consumerportfolio.com/AnnualMeeting2016.html
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Please detach along perforated line and
mail in the envelope provided.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS, AND “FOR” PROPOSALS 2, 3 AND 4.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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FOR
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AGAINST
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ABSTAIN
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1. Election of Directors:
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To ratify the appointment of Crowe Horwath LLP as independent auditors of the Company for the year ending December 31, 2016.
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FOR ALL
NOMINEES
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WITHHOLD AUTHORITY
FOR ALL NOMINEES
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FOR ALL EXCEPT
(See instructions below)
INSTRUCTION:
To withhold authority to vote for any individual
nominee(s), mark
“FOR ALL EXCEPT”
and fill in the circle next to each nominee you wish to withhold, as shown
here:
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NOMINEES:
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Charles E. Bradley, Jr.
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Chris A. Adams
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Brian J. Rayhill
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William B. Roberts
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Gregory S. Washer
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Daniel S. Wood
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3.
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To approve an advisory resolution on executive compensation.
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To approve an amendment to the 2006 Long-Term Equity Incentive Plan, which would extend the term of the Plan by ten years without changing the number of shares issuable thereunder
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To transact such other business as may properly come before the meeting or any adjournment(s) thereof.
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THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS
SPECIFIED, FOR THE ELECTION OF THE NOMINEES, FOR PROPOSALS 2, 3, AND 4, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING AND ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS CARD.
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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Signature of Shareholder ________________________
Date________ Signature of Shareholder _______________________ Date ________
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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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 APRIL 27, 2016
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 3800 Howard Hughes Parkway, Las Vegas, NV 89169 on APRIL 27, 2016, at 10:00 a.m., and hereby appoints Charles E. Bradley, Jr.
and Jeffrey P. Fritz, 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).
(Continued and to be signed on the reverse
side.)
ANNUAL MEETING OF SHAREHOLDERS OF
CONSUMER PORTFOLIO SERVICES, INC.
APRIL 27, 2016
PROXY VOTING INSTRUCTIONS
INTERNET -
Access “
www.voteproxy.com
”
and follow the on-screen
instructions. Have your proxy card available when you access
the web page.
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TELEPHONE -
Call toll-free
1-800-PROXIES
(1-800-776-9437) in the United States or
1-718-921-8500
from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call.
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Vote online/phone until 11:59 PM EST the day before the meeting.
MAIL – S
ign, date and mail your proxy card in the
envelope provided as soon as possible.
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IN PERSON -
You may vote your shares in person by attending
the Annual Meeting.
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NOTICE OF INTERNET AVAILABILITY OF
PROXY MATERIAL
: The Notice of Meeting, proxy statement and proxy card are available at www.consumerportfolio.com/AnnualMeeting2016.html
Please detach along perforated line and
mail in the envelope provided IF you are not voting via telephone.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS, “FOR” PROPOSALS 2, 3, AND 4.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
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FOR
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AGAINST
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ABSTAIN
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1. Election of Directors:
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2.
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To ratify the appointment of Crowe Horwath LLP as independent auditors of the Company for the year ending December 31, 2016.
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o
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o
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o
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o
FOR ALL
NOMINEES
o
WITHHOLD AUTHORITY
FOR ALL NOMINEES
o
FOR ALL EXCEPT
(See instructions below)
INSTRUCTION:
To withhold authority to vote for any individual
nominee(s), mark
“FOR ALL EXCEPT”
and fill in the circle next to each nominee you wish to withhold, as shown
here:
l
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NOMINEES:
m
Charles E. Bradley, Jr.
m
Chris A. Adams
m
Brian J. Rayhill
m
William B. Roberts
m
Gregory S. Washer
m
Daniel S. Wood
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3.
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To approve an advisory resolution on executive compensation.
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4.
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To approve an amendment to the 2006 Long-Term Equity Incentive Plan, which would extend the term of the Plan by ten years without changing the number of shares issuable thereunder
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5.
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To transact such other business as may properly come before the meeting or any adjournment(s) thereof.
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THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS
SPECIFIED, FOR THE ELECTION OF THE NOMINEES, FOR PROPOSALS 2, 3, AND 4, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING AND ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS CARD.
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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Signature of Shareholder ________________________
Date________ Signature of Shareholder _______________________ Date ________
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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