EMPLOYMENT CONTRACTS
We have entered into employment agreements with certain of our executive
officers, including each of the Named Executive Officers. The employment
agreements provide for initial base salaries for Xxxxx Xxxxxxxx, Xxxxxxx
Xxxxxxxxxxx, Xxxxxx Xxxx and Xxxxx Xxxxxx of $200,000, $135,000, $135,000 and
$100,000, respectively. Base salaries are to be adjusted periodically by the
Board of Directors. The four agreements provide for a $12,500 bonus payment in
February and October 2002 for each of the officers. The agreements also provide
for an annual bonus at the end of the first year of employment as follows: each
shall share in an equal amount with all other executives the sum of the total of
all executive annual salaries times two and one half percent for each and every
percentage point for which the ratio of operating expenses to gross revenues
derived directly from collection activity (e.g. sales revenues collections) is
less than 55% for a specific calendar year as calculated on a cash flow basis.
The bonus may be amended or cancelled by the Board of Directors on the
anniversary of the effective date of the employment agreements. In addition, the
officers will receive in lieu of any outstanding equity or equivalent interest
in Performance Capital Management, LLC, a sum equal to the total of all
executive annual salaries divided by the total number of executive officers
employed by us at the time of (a) Performance Capital Management, LLC becoming a
"C" corporation or (b) Performance Capital Management, LLC selling substantially
all of its membership units or assets. For purposes of the compensation section
of the agreements, the executive officers shall be confined to the Chief
Operations Officer, Chief Officer of Information Technology, Chief Officer of
Legal Affairs and the Chief Human Resource Officer. The agreements provide that
the executive officers shall receive the following benefits: three weeks of
vacation, paid holidays, sick days and health care benefits.
The term of each employment agreement is five years commencing on July 31. On
July 31 of each successive year, the term of each employment agreement is
automatically extended for an additional year unless we or the officer gives 90
days advance termination notice. We reserve the right to terminate the agreement
"for cause" if the officer willfully breaches or habitually neglects the duties
that he or she is required to perform pursuant to the provisions of the
agreement, or commits acts of dishonesty, fraud, misrepresentation or other acts
of moral turpitude as would prevent the effective performance of his or her
duties. If we terminate the agreement "for cause", we shall pay to the officer
any compensation due under the agreement, including any unused vacation,
prorated through the date of termination, and we shall have the option to
purchase the entire ownership interest of the officer, if any, in accordance
with the agreement. The executive officer may terminate the agreement by giving
us at least 30 days notice in advance. Such a termination will be considered
"for cause".
The agreements will not be terminated by any voluntary or involuntary
dissolution of Performance Capital Management, LLC resulting from either a
merger or consolidation in which Performance Capital Management, LLC is not the
consolidated or surviving company, or a transfer of all or substantially all of
the assets of Performance Capital Management, LLC. Any rights, benefits and
obligations under the agreements are to be assigned to the surviving or
resulting company or the transferee of Performance Capital Management, LLC's
assets.
Each of the agreements provides that we will indemnify the executive officer, if
he or she is made a party to or threatened to be made a party to, or otherwise
involved in, any proceeding commenced during the employment term, or after the
employment term, because the officer is or was an employee or agent of
Performance Capital Management, LLC. The indemnification includes any and all
expenses, judgments, fines, penalties, settlements, and other amounts, actually
and reasonably incurred by the executive officer in connection with the defense
or settlement of any such proceeding. The executive officer must have acted in
good faith and in a manner that the officer reasonably believes to be in the
best interests of Performance Capital Management, LLC and, in a criminal
proceeding, the officer must have no reasonable cause to believe that his or her
conduct was unlawful. Any and all expenses, including filing fees, costs of
investigation, attorney's fees, messenger and delivery expenses, postage, court
reporters' fees and similar fees and expenses, incurred by the executive officer
in any proceeding are to be advanced by Performance Capital Management, LLC
prior to the final disposition of the proceeding and subject to considerations
of reasonableness at the written request of the officer, but only if the officer
undertakes to repay the advanced expenses to the extent he or she is entitled to
indemnification. The indemnification contemplated by the agreements is not to be
deemed exclusive of any other rights the officers may have to indemnification.
We have been advised that the SEC takes the position that these indemnification
provisions do not affect the liability of any officer or director under
applicable federal and state securities laws.
