Attached files
| file | filename |
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| EX-10.1 - EXHIBIT 10.1 - PERFORMANCE CAPITAL MANAGEMENT LLC | ex10_1.htm |
| EX-10.2 - EXHIBIT 10.2 - PERFORMANCE CAPITAL MANAGEMENT LLC | ex10_2.htm |
| EX-10.3 - EXHIBIT 10.3 - PERFORMANCE CAPITAL MANAGEMENT LLC | ex10_3.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
__________________
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): January 7,
2010
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Performance
Capital Management, LLC
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(Exact
name of registrant as specified in its charter)
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California
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0 – 50235
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03-0375751
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(State
or other Jurisdiction of incorporation)
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(Commission
File Number)
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(I.R.S.
Employer Identification No.)
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7001
Village Drive, Suite 255
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Buena Park, California
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90621
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area code: (714)
736-3790
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item 1.01. Entry Into a
Material Definitive Agreement.
Termination
of Credit Facility
On July
13, 2004, effective June 10, 2004, Performance Capital Management, LLC (the
“Company”) entered into a definitive Master Loan Agreement (“MLA”) with Varde
Investment Partners, L.P. (“Varde”), a well-known participant in the debt
collection industry, to augment its portfolio purchasing capacity using
capital provided by Varde. To implement the MLA, the Company created a
wholly-owned subsidiary, Matterhorn Financial Services, LLC (“Matterhorn”),
which is also a party to the MLA. The facility provided for up to $25 million of
capital (counting each dollar loaned on a cumulative basis) with a term ending
in June 2009. In June 2009, Varde agreed to extend the termination date of the
MLA to June 2010.
Matterhorn
served as the entity that purchased portfolios under the MLA. Varde had a first
priority security interest in all the assets of Matterhorn securing repayment of
its loans and payment of its interest in residual collections. The Company also
entered into a Servicing Agreement with Matterhorn as part of the MLA, whereby
the Company serviced the portfolios owned by Matterhorn for a fee, and Varde had
a security interest in Matterhorn's rights to proceeds under the Servicing
Agreement.
Varde had
the option of exercising its rights under its various security interests and the
guaranty if an event of default occurred. These rights included demanding the
immediate payment of all amounts due to Varde, as well as liquidating the
portfolios owned by Matterhorn. A failure to make payments when due, if not
cured within five days, was an event of default. Other events of default
included:
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Material
breaches of representations and
warranties;
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—
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Uncured
breaches of agreements having a material adverse
effect;
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Bankruptcy
or insolvency of Performance Capital Management, LLC or
Matterhorn;
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Fraudulent
conveyances;
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Defaults
in other debt or debt-related
agreements;
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—
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Failure
to pay judgments when due;
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—
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Material
loss or damage to, or unauthorized transfer of, the
collateral;
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—
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Change
in control of Performance Capital
Management;
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—
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Termination
of Performance Capital Management as the Servicer under the Servicing
Agreement; and
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Breach
of Varde's right of first refusal to finance portfolio
acquisitions.
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Matterhorn
had not kept up with its scheduled principal and interest payments to Varde over
the past couple of years, which had entitled Varde to declare Matterhorn in
default and commence with seizing the portfolios and selling them to pay amounts
owed by Matterhorn to Varde. In an effort to prevent such an outcome, Matterhorn
sought and received extensions for amounts owing to Varde. In lieu of commencing
with a default, Varde had taken amounts that would have otherwise been paid to
the Company to pay for amounts owing to it by Matterhorn.
In light
of these circumstances, and the Board’s decision to dissolve and liquidate the
Company, the Board determined that was in the best interests of the Company and
its Members to structure a settlement among the Company, Varde and Matterhorn
that included the sale of the portfolios owned by Matterhorn and the use of the
sale proceeds to settle amounts owing by Matterhorn to Varde and the
Company.
As a
result, on January 7, 2010, the Company entered into an Agreement Regarding Loan
(“Settlement Agreement”) with Varde and Matterhorn, the Company’s Board having
approved the same on January 6, 2010. The Settlement Agreement provided for the
payment of $1,075,425.36 to Varde in full settlement of all amounts owing to it
by Matterhorn, including principal, interest and Varde's residual equity value
in the portfolios. Varde also released all security interests it had in the
portfolios owned by Matterhorn. The Settlement Agreement also provided that
Matterhorn would retain $500,000 as a net settlement payment to the Company for
its equity interest in the portfolios. The closing of the Settlement Agreement
was January 11, 2010 and the effective date of the termination of the MLA was
January 7, 2010. A copy of the Settlement Agreement is attached hereto as
Exhibit 10.1 and incorporated herein by reference, and the foregoing disclosure
is qualified by reference to the Termination Agreement.
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Sale
of Loan Portfolios
In
connection with the Settlement Agreement, and conditioned upon its execution,
Matterhorn entered into a Purchase and Sale Agreement (“PSA”) with North Star
Capital Acquisition LLC, a Florida limited liability company (“North Star”) on
January 8, 2010, the Company’s Board having approved the same on January 6,
2010. The closing of the PSA was January 11, 2010. Matterhorn sold all of its
loan portfolios to North Star for $1,575,425.36. Under the PSA, North Star
purchased the debt accounts “as is”, thereby relieving Matterhorn of any
obligation to repurchase the accounts if North Star should determine that an
account is deficient. A copy of the PSA is attached hereto as Exhibit 10.2 and
incorporated herein by reference, and the foregoing disclosure is qualified in
its entirety by reference to the PSA.
Termination
of Servicing Agreement with Matterhorn
With the
termination of the MLA and sale of all of the Matterhorn portfolios, the
Servicing Agreement between the Company and Matterhorn also terminated on
January 7, 2010.
Outsourcing
of Collections of the Company’s Portfolios
The
Company’s cost to collect exceeded 100% of its collection revenues in December
2009. In an effort to reduce its operating expenses and preserve cash, the
Company terminated all but four of its full-time employees and three of its
part-time employees effective January 1, 2010, which was disclosed in a Report
on Form 8-K dated January 1, 2010 and filed with the SEC on January 7,
2010.
As
previously disclosed in a Report on Form 8-K dated December 15, 2009 and filed
with the SEC on December 21, 2009, Mr. Darren Bard will be resigning as Chief
Technology Officer effective January 15, 2010. The Board has agreed to retain
him on a part-time, consulting basis to assist from time-to-time with
transitional matters.
As a
result of dismantling its collections infrastructure, the Company entered into
an Agency Service Agreement (“Agency Agreement”) with Oliphant Financial Group,
LLC, a Florida limited liability company (“Oliphant”) on January 11, 2010. The
Agency Agreement provides for Oliphant to service all of the Company’s
portfolios in exchange for a servicing fee of between 45% and 52% of gross
receipts. Either party may terminate the Agency Agreement upon 30 days advance
written notice to the non-terminating party. A copy of the Agency Agreement is
attached hereto as Exhibit 10.3 and incorporated herein by reference, and the
foregoing disclosure is qualified in its entirety by reference to the Agency
Agreement.
Item
1.02. Termination of a Material Definitive Agreement.
The
Master Loan Agreement, as amended, by and among Varde Investment Partners, L.P.,
Performance Capital Management, LLC and Matterhorn Financial Services, LLC was
terminated effective January 7, 2010. For additional disclosure regarding the
termination of the Master Loan Agreement, see the section entitled Termination of Credit
Facility under Item 1.01 in this Report on Form 8-K above, which
disclosure is incorporated herein by reference.
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Item
2.01. Completion of Acquisition or Disposition of Assets
On
January 8, 2010, Matterhorn Financial Services, LLC, a wholly-owned subsidiary
of Performance Capital Management, LLC, entered into a Purchase and Sale
Agreement with North Star Capital Acquisition LLC, a Florida limited liability
company, to sell all of its portfolios for $1,575,425.36 in connection with the
termination of the credit facility with Varde Investment Partners, L.P. The
Purchase and Sale Agreement closed on January 11, 2010. For additional
disclosure regarding the sale of the Matterhorn Financial Services, LLC
portfolios, see the section entitled Sale of Loan Portfolios under
Item 1.01 in this Report on Form 8-K above, which disclosure is incorporated
herein by reference.
Item
8.01. Other Events.
Legal
Proceedings
In
addition to the two class action lawsuits disclosed in Performance Capital
Management’s (the “Company”) report on Form 10-Q for the period ended September
30, 2009, two other lawsuits have been filed against the Company as
follows.
In
November 2009, a lawsuit was filed against the Company in Orange County Superior
Court in the United States District Court for the Eastern District of New York
by Mark Palmer (“Plaintiff”). An amended complaint was filed with the Court on
November 30, 2009. Plaintiff makes broad, general assertions that the Company
violated the Fair Debt Collection Practices Act, 15 U.S.C. Section 1692 et seq.
with respect to its debt collection practices. Plaintiff seeks statutory and
punitive damages as well as attorney’s fees and court costs. This lawsuit has
been referred to legal counsel. The merits of the case have not yet been
determined. The Company expects to prevail in this lawsuit; however, as
litigation is inherently unpredictable, there can be no assurance in this
regard. If the plaintiff does prevail, the results could have a material effect
on the Company’s financial position.
On
November 10, 2009, a purported class action lawsuit was filed against the
Company in the United States District Court for the District of Massachusetts,
Boston Division, on behalf of Ronald A. Luippold and a broad proposed class of
debtors (“Plaintiffs”). Plaintiffs make broad, general assertions that the
Company violated the Fair Debt Collection Practices Act, 15 U.S.C. Section 1692
et seq. with respect to its debt collection practices. Plaintiffs seek statutory
and punitive damages as well as attorney’s fees and court costs. This lawsuit
has been referred to legal counsel. The merits of the case have not yet been
determined and no class has been certified. The Company expects to prevail in
this lawsuit; however, as litigation is inherently unpredictable, there can be
no assurance in this regard. If the Plaintiffs do prevail, the results could
have a material effect on the Company’s financial position.
Should
the Company proceed with dissolving and liquidating after a vote by its members
(“Members”), all pending lawsuits will need to be resolved before the Company
can distribute its remaining assets to its Members and
dissolve.
Solicitation of Member Votes
As
previously announced, and as described in the definitive proxy statement filed
with the SEC on January 12, 2010, the Company is soliciting votes from its
members to take action by written consent in lieu of a special meeting of the
members to seek approval of a voluntary dissolution and liquidation of the
Company. If such approval is received, the Company intends to proceed with an
orderly wind down and dissolution of the Company, and cease its reporting
obligations under the Securities Exchange Act of 1934, as amended.
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ADDITIONAL
INFORMATION AND WHERE TO FIND IT
The
disclosure in this Report on Form 8-K is incorporated by reference in the
definitive proxy statement filed by the Company with the SEC on January 12,
2010. Members are urged to read the proxy statement and other relevant materials
filed by the Company with the SEC carefully, including this Report on Form 8-K,
because they contain important information about the Company, the proposal and
related matters. Members may to obtain free copies of the solicitation documents
filed with the SEC on the Company’s web site at:
http://www.cfpproxy.com/9101SM. Members may also request a copy of any
document posted on the Company’s web site by writing to Performance Capital
Management, LLC, 7001 Village Drive, Suite 255, Buena Park, California 90621,
Attn: David J. Caldwell or by calling 1-714-736-3790 or toll-free 1-800-757-7700
extension 0.
FORWARD-LOOKING
STATEMENTS
Except
for the historical information presented in this document, the matters discussed
in this Form 8-K or otherwise incorporated by reference into this document
contain “forward-looking statements” (as such term is defined in the Private
Securities Litigation Reform Act of 1995). These statements can be identified by
the use of forward-looking terminology such as “believes,” “plans,” “expects,”
“may,” “will,” “intends,” “should,” “plan,” “assume” or “anticipates” or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. The safe harbor
provisions of Section 21E of the Securities Exchange Act of 1934, as amended,
and Section 27A of the Securities Act of 1933, as amended, apply to
forward-looking statements made by Performance Capital Management, LLC. You
should not place undue reliance on forward-looking statements. Forward-looking
statements involve risks and uncertainties. The actual results that we achieve
may differ materially from any forward-looking statements due to such risks and
uncertainties. These forward-looking statements are based on current
expectations, and we assume no obligation to update this information. Readers
are urged to carefully review and consider the various disclosures made by us in
this report on Form 8-K and in our other reports filed with the Securities and
Exchange Commission that attempt to advise interested parties of the risks and
factors that may affect our business.
Item
9.01. Financial Statements and Exhibits.
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Exhibit No.
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Description
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Agreement
Regarding Loan by and among Matterhorn Financial Services, LLC,
Performance Capital Management, LLC and Varde Investment Partners, L.P.
dated January 7, 2010
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Purchase
and Sale Agreement by and between Matterhorn Financial Services, LLC and
North Star Capital Acquisition LLC dated January 8,
2010
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Agency
Service Agreement by and between Performance Capital Management, LLC and
Oliphant Financial Group, LLC dated January 11,
2010
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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PERFORMANCE
CAPITAL MANAGEMENT, LLC
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January 13, 2010
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By:
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/s/ David J. Caldwell
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(Date)
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David
J. Caldwell
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Its:
Chief Operations Officer
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