UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended March 31, 1997
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________to____________________.
Commission file number 0-15167
Trans Leasing International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-2747735
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3000 Dundee Road, Northbrook, Illinois 60062
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 272-1000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes
_X__ No_____
The number of shares of Common Stock, Par Value $.01 Per Share, of the
Registrant outstanding as of May 2, 1997 was 4,025,755.
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Independent Accountants' Review Report 4
Condensed Consolidated Statements Of Operations 5
Three-month and Nine-month periods ended
March 31, 1997 and 1996
(unaudited)
Condensed Consolidated Balance Sheets 6
March 31, 1997 and June 30, 1996
(unaudited)
Condensed Consolidated Statements of Cash Flows 7
Nine-month periods ended
March 31, 1997 and 1996
(unaudited)
Notes to Condensed Consolidated Financial Statements 8
(unaudited)
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Stockholders and Board of Directors
Trans Leasing International, Inc.
Northbrook, Illinois
We have reviewed the accompanying condensed consolidated balance sheet
of Trans Leasing International, Inc. and subsidiaries (the "Company") as
of March 31, 1997, and the related condensed consolidated statements of
operations for the three-month and nine-month periods ended March 31,
1997 and 1996, and the condensed consolidated statements of cash flows
for the nine-month periods ended March 31, 1997 and 1996. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and of making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression of
an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Trans Leasing
International, Inc. and subsidiaries as of June 30, 1996, and the
related consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended (not presented herein); and in our
report dated September 6, 1996, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance
sheet as of June 30, 1996 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
DELOITTE & TOUCHE LLP
Chicago, Illinois
May 2, 1997
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine Months ended
March 31, March 31,
1997 1996 1997 1996
REVENUES:
<S>
Finance and other lease related
<S> <C> <C> <C> <C>
income $ 9,764 $ 8,660 $28,920 $24,879
Operating lease income 717 389 1,910 988
Other 350 312 852 941
Total Revenues 10,831 9,361 31,682 26,808
EXPENSES:
Interest 4,607 4,013 13,178 11,556
General and administrative 4,136 3,630 11,735 9,489
Provision for uncollectible
accounts 1,365 1,297 4,045 3,854
Total Expenses 10,108 8,940 28,958 24,899
723 421 2,724 1,909
KEY-MAN LIFE INSURANCE INCOME - - 2,196 -
EARNINGS BEFORE INCOME TAXES 723 421 4,920 1,909
INCOME TAXES 277 161 1,043 731
NET EARNINGS $ 446 $ 260 $ 3,877 $ 1,178
WEIGHTED AVERAGE SHARES
OUTSTANDING:
PRIMARY 4,253 4,057 4,115 4,119
FULLY DILUTED 4,253 4,057 4,169 4,121
EARNING PER SHARE:
PRIMARY $.10 $.06 $.94 $.29
FULLY DILUTED $.10 $.06 $.93 $.29
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANS LEASING INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
March 31, June 30,
ASSETS 1997 1996
<S> <C> <C> <C> <C>
CASH $ 1,320 $ 4,528
RESTRICTED CASH 10,174 5,639
DIRECT FINANCE LEASES:
Future minimum lease payments 300,791 270,458
Estimated unguaranteed residual value 24,481 22,452
Total Direct Finance Lease Receivables 325,272 292,910
Less: Unearned lease income (49,109) (46,788)
Allowance for uncollectible accounts (10,689) ( 9,506)
Net investment in direct finance
leases 265,474 236,616
LEASE FINANCING RECEIVABLES, less allowance
for uncollectible accounts of $267 and
$238 respectively 7,259 6,534
EQUIPMENT UNDER OPERATING LEASES, net of
accumulated depreciation 10,462 7,709
FURNITURE, FIXTURES AND EQUIPMENT, net of
accumulated depreciation 1,829 1,811
INCOME TAXES RECOVERABLE 473 904
OTHER ASSETS 5,123 5,686
TOTAL ASSETS $ 302,114 $ 269,427
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 8,627 $ 9,183
NOTES PAYABLE TO FINANCIAL INSTITUTIONS 44,300 50,250
LEASE-BACKED OBLIGATIONS 197,538 159,567
SUBORDINATED OBLIGATIONS 18,510 20,730
DEFERRED INCOME TAXES 3,411 3,411
TOTAL LIABILITIES 272,386 243,141
STOCKHOLDERS' EQUITY
Preferred stock, par value $1.00;
authorized 2,500 shares; none issued
Common stock, par value $.01; authorized
10,000 shares; issued 4,809 shares,
outstanding 4,026 and 4,045 respectively 48 48
Additional paid-in capital 9,914 9,879
Retained earnings 22,160 18,646
Less 783 and 753 treasury shares
respectively, at cost (2,394) (2,287)
TOTAL STOCKHOLDERS' EQUITY 29,728 26,286
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 302,114 $ 269,427
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANS LEASING INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Earnings $ 3,877 $ 1,178
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Leasing costs, primarily provision for
uncollectible accounts and
amortization of initial direct costs 5,789 5,446
Depreciation and amortization 2,531 1,301
Initial direct costs incurred ( 2,367) ( 1,966)
Changes in:
Accounts payable and accrued expenses ( 557) 2,043
Income taxes recoverable 431 63
Other, net 569 ( 1,186)
Net cash provided by operating
activities 10,273 6,879
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collections on leases 73,905 64,989
Equipment purchased for leasing (108,151) ( 96,829)
Purchase of lease financing receivables ( 3,232) ( 2,631)
Purchase of property and equipment ( 5,731) ( 4,426)
Disposal of property and equipment 380 404
Net cash used in investing activities ( 42,829) ( 38,493)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of notes payable to financial
institutions 64,150 87,950
Repayment of notes payable to financial
institutions ( 70,100) ( 76,385)
Issuance of lease-backed obligations 210,517 152,864
Repayment of lease-backed obligations (172,564) (131,540)
Repayment of subordinated obligations ( 2,220) -
Payment of dividends on common stock ( 363) ( 371)
Issuance of common stock 35 -
Purchase of treasury stock ( 107) ( 558)
Net cash provided by financing
activities 29,348 31,960
NET INCREASE (DECREASE) IN CASH ( 3,208) 346
CASH, beginning of period 4,528 3,758
CASH, end of period $ 1,320 $ 4,104
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Financial Statements:
The condensed consolidated balance sheet of Trans Leasing
International, Inc. and subsidiaries (the "Company") as of March 31,
1997, and the condensed consolidated statements of operations for the
three-month and nine-month periods ended March 31, 1997 and 1996, and
the condensed consolidated statements of cash flows for the nine-month
periods ended March 31, 1997 and 1996, have been prepared by the Company
without audit. The condensed consolidated balance sheet as of June 30,
1996, has been derived from the audited financial statements of that
date. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position at March 31, 1997, and the results of operations and cash flows
for the periods presented have been made. The results of operations for
the period ended March 31, 1997, are not necessarily indicative of the
operating results for the full year.
The Company has sold certain of its leases and related assets to
two special purpose, bankruptcy remote subsidiaries, TL Lease Funding
Corp. III ("TLFC III") and TL Lease Funding Corp. IV ("TLFC IV"), which
have in turn transferred leases to various trusts established by such
subsidiaries. Each of TLFC III and TLFC IV is an entity distinct from
Trans Leasing International, Inc., with its own assets and liabilities,
and in the event of a bankruptcy, the creditors of each such subsidiary
would be entitled to satisfy their claims from the assets of the
respective subsidiary prior to any distribution to Trans Leasing
International, Inc.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. Accordingly these financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's June 30, 1996 annual report
to stockholders.
Certain reclassifications have been made to prior years to conform
with the presentation used in fiscal 1997.
Note B - Pending Accounting Standards:
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation", which encourages entities to adopt a fair
value based method of accounting for the compensation cost of employee
stock compensation plans. The statement allows an entity to continue
the application of the accounting method prescribed by APB No. 25,
"Accounting for Stock Issued to Employees", however pro forma
disclosures of net income and earnings per share, as if the fair value
based method of accounting defined by this statement had been applied,
are required. The disclosure requirements of this statement will be
adopted in the fourth quarter of fiscal 1997. Results of operations and
financial position will not be affected by the adoption of this
statement.
Statement of Financial Accounting Standards No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" (SFAS 125), provides new methods of accounting and
reporting for transfers and servicing of financial assets and
extinguishments of liabilities for transaction occurring after December
31, 1996. The effect of adopting SFAS 125 is not expected to have a
material effect on the Company's financial position or results of
operations.
In February of 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" which simplifies the current standards for computing earning
per share. The statement is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods.
Earlier adoption of this standard is not permitted. The statement will
be adopted in fiscal 1998 and will not impact the results of operations,
financial position or cash flows for the Company. The requirements of
this statement are not expected to materially impact the Company's
earnings per share calculation.
<PAGE>
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure" which clarifies the disclosure
requirements related to type and nature of securities contained in an
entity's capital structure. The standard will be adopted in fiscal 1998
and will not impact the results of operations, financial position or
cash flows of the Company.
Note C - Insurance Proceeds:
On October 7, 1996, Richard Grossman, the Company's principal
shareholder, passed away. Prior to that date, Mr. Grossman held the
positions of Chairman of the Board, Chief Executive Officer and
President.
The Company was beneficiary on two key-man life insurance policies,
which insured the life of Richard Grossman. The proceeds from these
policies amounted to approximately $2,500,000, resulting in recognition
of life insurance income of $2,196,000, in the second quarter of fiscal
1997.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company's operations comprise, almost exclusively, lease
financing. The Company's net earnings are significantly influenced by
the level of invested assets, the related financing spread (i.e., the
excess of interest rates earned over interest rates incurred on
borrowings) and the quality of those assets. General and administrative
expenses and a provision for uncollectible accounts further reduce the
Company's net earnings.
Substantially all of the Company's lease receivables are written at
a fixed rate of interest for a fixed term. The Company's borrowings are
at both fixed and floating rates of interest. The Company borrows under
revolving credit facilities at floating interest rates (see "Liquidity
and Capital Resources") and periodically refinances that debt either
through a fixed-rate loan option in the revolving credit agreements,
securitization of lease receivables or the sale of debt in the public or
private markets. To the extent the Company refinances with fixed-rate
debt, the Company locks in the spread in its portfolio. The Company will
from time to time, utilize interest rate swaps to the extent its
borrowings are at floating interest rates. Such swaps reduce the
Company's exposure to interest rate risk.
The primary long-term funding method currently employed by the
Company is to securitize portions of its lease portfolio. This method
of funding is believed to afford the lowest cost long-term financing
available. These transactions are not reflected as sales of lease
receivables in the financial statements as the Company has an ongoing
economic interest in the securitized assets. As such, the leases remain
on the consolidated balance sheet and the income associated with such
leases is recognized over the respective lease terms.
The Company has experienced growth in the total dollar amounts of
new lease receivables added to its portfolio during each of the last
five fiscal years, though there can be no assurances that this trend
will continue. In analyzing the Company's financial statements, it is
important to understand the impact of lease receivable growth during an
accounting period on lease income and net earnings.
For financial reporting purposes, the majority of the Company's
leases are classified as direct finance leases. The Company accounts for
its investment in direct finance leases by recording on the balance
sheet the total minimum lease payments receivable plus the estimated
residual value of leased equipment less the unearned lease income.
Unearned lease income represents the excess of the total minimum lease
payments plus the estimated residual value expected to be realized at
the end of the lease term over the cost of the related equipment.
Unearned lease income is recognized as revenue over the term of the
lease by the effective interest method, i.e., application of a constant
periodic rate of return to the declining net investment in each lease.
As a result, during a period in which the Company realizes growth in new
lease receivables, lease income should also increase, but at a lesser
rate.
The Company also originates leases classified as operating leases.
Operating lease income is recognized as revenue when the rental payments
become due. Equipment under operating leases is recorded at cost and
depreciated on a straight-line basis over the estimated useful life of
the equipment, generally three to five years.
Initial direct costs incurred in consummating a lease, principally
commissions and a portion of salaries for personnel directly involved in
generating new lease receivables, are capitalized as part of the net
investment in direct finance leases and amortized over the lease term as
a reduction in the yield. An allowance for uncollectible accounts is
provided over the terms of the underlying leases as the leases are
determined to be uncollectible. See "Results of Operations" below for
further discussion.
<PAGE>
Results of Operations
Finance lease income increased $4,041 (16.2%) in the first nine
months of fiscal 1997 compared to the first nine months of fiscal 1996,
and $1,104 (12.7%) in the third quarter of fiscal 1997 compared to the
same period of fiscal 1996. The increase was primarily due to a 18.9%
increase in the net investment in direct finance leases from March 31,
1996 to March 31, 1997.
Operating lease income increased $922 (93.3%) in the first nine
months of fiscal 1997 compared to the first nine months of fiscal 1996,
and $328 (84.3%) in the third quarter of fiscal 1997 compared to the
same period of fiscal 1996. The increase was primarily due to a 66.3%
increase in the net cost of equipment under operating leases from March
31, 1996 to March 31, 1997.
The Company's lease portfolio increased primarily as a result of
its increased marketing and selling activities, greater name recognition
of LeaseCard in the marketplace, and the introduction of new products by
equipment manufacturers. Growth in lease volume originated as measured
by future minimum lease payments, increased by $28,282 (21.0%), and
$2,047 (4.5%) for the first nine months and the third quarter of fiscal
1997 respectively, as compared to same periods in fiscal 1996. Lease-
related fees, late delinquency charges and lease continuance fees, have
increased as a result of the growth in the size of the Company's lease
portfolio.
Interest expense increased $1,622 (14.0%) in the first nine months
of fiscal 1997 and $594 (14.8%) in the third quarter of fiscal 1997
versus the comparable prior year periods due to an increase in the
amounts borrowed to finance the growth in the lease portfolio. Interest
expense as a percent of lease income decreased to 42.7% and 44.0% for
the nine-month and three-month periods ended March 31, 1997,
respectively, from 44.7% and 44.3% for the comparable periods in fiscal
1996. Interest expense is reported net of the impact of interest rate
swaps used to fix the rate on floating rate financings, the effect of
which was to decrease interest expense by $48 and $9 for the first nine
months and the third quarter of fiscal 1996, respectively. As of March
31, 1997, the Company was not party to any interest rate swap contracts.
General and administrative expense increased $2,246 (23.7%) in the
first nine months of fiscal 1997 compared to the first nine months of
fiscal 1996, and $506 (13.9%) in the third quarter of fiscal 1997
compared to same period of fiscal 1996. General and administrative
expense as a percent of lease income increased to 38.1% in the nine-
month period ended March 31, 1997, from 36.7% for the comparable period
in fiscal 1996. General and administrative expense as a percent of lease
income decreased to 39.5% in the three-month ended March 31, 1997, from
40.1% for the comparable period in fiscal 1996. The increase in general
and administrative expense is primarily attributable to the increase in
the number of employees to accommodate the Company's continued growth,
and the increase in depreciation of equipment under operating leases.
The provision for uncollectible accounts increased $191 (5.0%) in
the first nine months of fiscal 1997 compared to the first nine months
of fiscal 1996, and $68 (5.2%) in the third quarter compared to the same
period of fiscal 1996. The provision for uncollectible accounts as a
percent of lease income decreased to 13.0% and 13.1% for the three-month
and nine-month periods ended March 31, 1997, respectively, from 14.3%
and 14.9% for the comparable fiscal 1996 periods.
Earnings, before income taxes and key-man life insurance income,
for the first nine months of fiscal 1997 increased 42.7% to $2,724
compared with $1,909 for the first nine months of fiscal 1996, and 71.7%
to $723 in the third quarter, compared with $421 for the same quarter of
fiscal 1996. The primary earnings per share amounts exclusive of the key-
man life insurance income were $.10 and $.41 for the quarter and the
nine months ended March 31, 1997 respectively, compared to $.06 and $.29
for the same periods of fiscal 1996. The increases in earnings are
primarily due to the increase in lease income and the decrease in
interest expense as a percent of lease income, as discussed above. The
effect of key-man life insurance income of $2,196 was to increase
earnings per share for the nine months ended March 31, 1997, by $.53.
<PAGE>
Liquidity and Capital Resources
The Company historically has financed its operations, including the
growth of its lease portfolio, principally through borrowings under its
revolving credit agreements, issuance of debt and lease-backed
obligations in both the institutional private placement and public
markets, principal collections on leases and cash provided from
operations.
Net cash used in investing activities, which was $42.8 million in
the first nine months of fiscal 1997 and $38.5 million in the first nine
months of fiscal 1996, generally represents the excess of equipment
purchased for leasing over principal collections on leases. Net cash
provided by financing activities (the excess of borrowings under the
revolving credit agreement and issuances of debt and lease-backed
obligations over repayments of these debt instruments) was $29.3 million
in the first nine months of fiscal 1997 and $32.0 million in the first
nine months of fiscal 1996. The remaining funds used in investing
activities were provided by operating cash flows and cash on hand at the
beginning of the period. As of March 31, 1997, the Company had
outstanding commitments to purchase equipment, which it intended to
lease, with an aggregate purchase price of $5.6 million.
The Company borrows under its unsecured revolving credit agreement
(the "TLI Revolving Credit Facility") to fund its operations. The
maximum borrowing under the TLI Revolving Credit Facility is $30
million. At May 2, 1997, the outstanding loans under this facility were
$13.5 million and unused borrowing capacity was $16.5 million.
On November 26, 1996, the Company issued approximately $128 million
5.98% senior notes and approximately $13.5 million 6.64% subordinated
notes through a newly-formed limited-purpose business trust. The assets
of the trust securing such indebtedness include equipment leases and the
interest in the underlying equipment acquired from TL Lease Funding
Corp. IV (a special purpose subsidiary of the Company, "TLFC IV") which
in turn acquired such assets from the Company at various times prior to
the issuance of the notes. This securitization transaction was afforded
financing accounting treatment with no gain or loss recognized on
consolidated earnings. The Company continues to service the leases and
the trust makes monthly principal and interest payments to the note
holders from lease collections. Proceeds from the transaction were used
to repay borrowings under the TLFC IV securitized revolving credit
facility in the amount of approximately $108 million, to repay
borrowings under the Company's revolving credit agreement in the amount
of $29.5 million and the remainder for general corporate purposes. Upon
completion of this transaction, the then existing TLFC IV securitized
revolving credit facility was terminated.
Effective as of December 20, 1996, TLFC IV entered into a new $75
million securitized revolving credit facility. On January 21, 1997, the
Company sold leases with a net book value of approximately $28.5 million
to TLFC IV for approximately $28 million in cash borrowed under the new
TLFC IV revolving credit facility. On April 4, 1997, the Company sold
leases with a net book value of approximately $23.3 million to TLFC IV
for approximately $23 million in cash borrowed under this facility. The
Company continues to service the leases sold to TLFC IV and used the
proceeds from the sales of leases to reduce revolving credit borrowings
under its unsecured revolving facility. As of May 2, 1997, outstanding
loans under the TLFC IV revolving credit facility were $47 million and
unused borrowing capacity was $28 million.
The Company believes that the unused portions of the credit
facilities, increasing principal payments on leases and continued
placements of debt and lease-backed obligations in the public and/or
private markets will provide adequate capital resources and liquidity
for the Company to fund its operations and debt maturities. The Company
was in compliance with all of the provisions of its loan agreements and
its revolving credit facilities as of March 31, 1997.
As the Company has approached full utilization under its revolving
credit facilities, it has sold long-term debt and lease-backed
obligations in both the institutional private placement and public
markets and used the proceeds to reduce its revolving credit borrowings.
These long-term debt and lease-backed obligations are issued either with
fixed interest rates or with floating interest rates combined with an
interest rate hedge to lock in a fixed rate. The Company intends to
continue to pursue this strategy of ensuring adequate liquidity through
both the institutional private placement and public markets, and to
reduce its exposure to floating interest rates associated with revolving
credit borrowings through interest rate hedge transactions.
<PAGE>
On November 16, 1994, the Board of Directors authorized the
repurchase by the Company of up to one million shares of its common
stock. As of March 31, 1997, 356 thousand shares have been repurchased
at a total cost of $1,216 under this program. On November 7, 1996, the
Board terminated this stock repurchase program.
The Company has entered into a five-year lease commitment in order
to consolidate the location of its headquarters with certain of its
operating subsidiaries. The lease commencing on October 1, 1997, is
expected to improve the streamlining and coordination of certain of the
Company's operations.
On May 5, 1997 the Board of Directors approved the payment of a
quarterly cash dividend in the amount of $.03 per share. The dividend
will be paid on May 26, 1997 to holders of record as of May 12, 1997.
On May 1, 1997, at a special meeting of the shareholders of the
Company, the shareholders approved the Company's 1996 Stock Option Plan.
The 1996 Stock Option Plan provides for the granting of stock options
with respect to one million shares of the Company's common stock to
directors and key employees of the Company.
In February of 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" which simplifies the current standards for computing earning
per share. The statement is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods.
Earlier adoption of this standard is not permitted. The statement will
be adopted in fiscal 1998 and will not impact the results of operations,
financial position or cash flows for the Company. Further, the
requirements of this statement are not expected to materially impact the
Company's earnings per share calculation.
Further, in February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 129, "Disclosure
of Information about Capital Structure" which clarifies the disclosure
requirements related to type and nature of securities contained in an
entity's capital structure. The standard will be adopted in fiscal 1998
and will not impact the results of operations, financial position or
cash flows of the Company.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE LITIGATION REFORM ACT OF 1995
Except for historical matters, the matters discussed in this Form 10-Q
are forward-looking statements that involve risks and uncertainties.
Forward-looking statements include, but are not limited to, statements
made under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The Company wishes to caution readers that in addition to the
important factors described elsewhere in this Form 10-Q, the following
important factors, among others, sometimes have affected and in the
future could affect, the Company's actual results and could cause the
Company's actual results during the remainder of fiscal 1997 and beyond,
to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company:
Portfolio Risk
The principal assets of the Company are its portfolio of lease
receivables and the unguaranteed residual value of its equipment.
Investment risks inherent in a leasing company include the possibility
that lease receivables might not be fully collectible and that equipment
might be sold at lease expiration or termination for less than the
residual value recorded on the Company's balance sheet.
Receivables Risk: Although the allowance for uncollectible accounts
carried on the Company's books historically has been adequate to provide
for losses associated with its lease receivables, changes in the
reimbursement policies of government or third-party payors, obsolescence
of equipment under lease, changes in the local, regional or national
economies, changes in federal tax laws or other factors could
significantly impact the Company's future delinquency and loss
experience, which could in turn have a material adverse effect on the
Company's earnings.
<PAGE>
Residual Risk: When the Company enters into a lease from which it
expects to derive value through the resale of equipment at lease
expiration, it records an estimate of the expected resale value on the
Company's balance sheet as a residual interest. The growth in the
Company's equipment lease portfolio in recent years has resulted in
increases in the aggregate amount of recorded residual values.
Realization of residual values depends on certain factors not within the
Company's control, such as equipment obsolescence, whether the lease
expires or is terminated for default, whether the equipment is in fact
returned to the Company at the end of the lease and the condition of the
equipment when it is returned. Although the Company historically has
received a very high percentage of recorded residual values for expired
leases, there can be no assurance this will continue in the future.
Failure to realize residual values could have a material adverse effect
on the Company's earnings.
Interest Rate Risk
The Company's leases are at fixed rates but its warehouse lines, which
represent a significant portion of its borrowings, bear interest at
floating rates. Consequently, if interest rates were to increase,
earnings would be adversely affected. In addition, the Company's
ability to increase its yield on new receivables would be limited by
competitive and economic factors.
Financing
The Company's profitability depends, among other factors, on the size
of its lease portfolio, which in turn depends on the Company's ability
to obtain external financing to supplement cash flows available from
operations. The Company's principal sources of external financing have
been borrowings under its revolving credit agreements and public
offerings and private placements of debt and lease-backed obligations.
Although the Company has been successful in arranging these types of
fundings in the past, there can be no assurance that it will be able to
obtain funding in the future in amounts or on terms it deems necessary
or acceptable. The Company's inability to obtain financing would have a
material adverse effect on its operations. Covenants in certain of the
Company's debt agreements limit its ability to incur additional debt
above certain levels.
Under substantially all of the Company's debt agreements, a reduction
in the principal shareholder's ownership of the Common Stock below
certain levels ranging from 30% to 35% would constitute an event of
default or require prepayment. A default or required prepayment under
any of these debt agreements may also result in defaults and required
prepayments under other debt agreements.
Third Party Reimbursement
The Company believes that, due to the growing national concern with
rising health care costs, the amount the government and other third
party payors reimburse for individual health care procedures could be
reduced. Changes in third party reimbursement policies, especially if
such changes limit reimbursement for outpatient services (the type of
services generally provided by the Company's medical lessees), could
adversely affect the Company.
Competition
The Company competes with finance affiliates of equipment
manufacturers which sell products leased by the Company, banks and other
leasing and finance companies. Many of these organizations have greater
financial and other resources than the Company and as a consequence may
be able to obtain funds on terms more favorable than those available to
the Company. Some of these competitors may provide financing which is
less expensive than leasing from the Company.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) List of Exhibits Filed with Form 10-Q:
10.44 Consent to Extension, dated as of January 30, 1997, to
Credit Agreement, dated as of January 31, 1996, among
Registrant, the Banks (as defined therein) and the First
National Bank of Chicago, as agent.
10.45 Trans leasing International Inc., 1996 Stock Option Plan.
10.46 Severance Agreement dated October 31, 1996 between
Registrant and Larry s. Grossman.
10.47 Severance Agreement dated October 31, 1996 between Registrant
and Joseph Rabito.
11 Statement re Computation of Per Share Earnings.
27 Financial Data Schedule.
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the fiscal
quarter ended March 31, 1996.
<PAGE>
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 thereunto duly authorized.
TRANS LEASING INTERNATIONAL, INC.
(Registrant)
DATE: May 2, 1997 /s/LARRY S. GROSSMAN
Larry S. Grossman
Chairman of the Board of Directors &
Chief Executive Officer
DATE: May 2, 1997 /s/MICHAEL J. HEYMAN
Michael J. Heyman
President & Chief Operating Officer
DATE: May 2, 1997 /s/STEPHEN J. HUPP
Stephen J. Hupp
Vice President, Finance
<PAGE>
Exhibit Index
Exhibit No. Description of Exhibit Page No.
10.44 Consent to Extension, dated as of 18
January 30, 1997, to Credit Agreement,
dated as of January 31, 1996, among
Registrant, the Banks (as defined
therein) and the First National Bank
of Chicago, as agent.
10.45 Trans Leasing International Inc. 1996 19
Stock Option Plan.
10.46 Severance Agreement dated October 31, 23
1996 between Registrant and Larry s.
Grossman.
10.47 Severance Agreement dated October 31, 28
1996 between Registrant and Joseph
Rabito.
11 Statement re Computation of Per Share
Earnings. 34
27 Financial Data Schedule. 35
CONSENT TO EXTENSION
January 30, 1997
Reference is made to that certain Credit Agreement
dated as of January 31, 1996, as amended (as so amended, the
"Agreement"), among Trans Leasing International, Inc. (the
"Company"), the undersigned banks (collectively, the
"Banks") and The First National Bank of Chicago, as Agent.
Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to such terms in
the Agreement.
Pursuant to Section 6.8 of the Agreement, the Company
has requested that the Conversion Date be extended from
January 30, 1997 to January 29, 1998, a copy of which
request is attached hereto. By its execution hereof, each of
the undersigned Banks hereby consents to the extension of
the Conversion Date from January 30, 1997 to January 29,
1998.
The Agreement, as modified hereby, shall remain in full
force and effect and is hereby ratified, approved, and
confirmed in all respects.
THE FIRST NATIONAL BANK OF CHICAGO
By:______________________
_____
Title:___________________
_____
CORESTATES BANK, N.A.
By:___________________________
Title:___________________
_____
UNION BANK OF CALIFORNIA,
N.A.
By:______________________
_____
Title:___________________
_____
TRANS LEASING INTERNATIONAL, INC.
1996 STOCK OPTION PLAN
1. Plan. Options to purchase shares of the Company's
Common Stock may be granted to such directors and key employees
of the Company (and its Subsidiaries, if any) as may be selected
by the Compensation Committee of the Board of Directors or
another committee appointed by the Board to administer the Plan
(the "Committee").
2. Limitation on Aggregate Shares. The number of shares
of Common Stock with respect to which options may be granted
under this Plan and which may be issued upon the exercise thereof
shall not exceed, in the aggregate, 1,000,000 shares; provided,
however, that if any options expire unexercised or are cancelled,
terminated or forfeited in any manner without the issuance of
Common Stock or benefit therefrom, the shares with respect to
which such options were granted shall again be available for
grant under this Plan. Such 1,000,000 shares of Common Stock may
be either authorized and unissued shares, treasury shares, or a
combination thereof, as the Committee shall determine.
Notwithstanding anything herein to the contrary no participant
may be granted in the aggregate in any year options relating to
in excess of 200,000 shares of Common Stock. In the event of any
stock split or similar change in the Common Stock, the number of
shares of Common Stock referenced in this paragraph shall
automatically be adjusted proportionately.
3. Options. Options to be granted under this Plan may be
incentive stock options (within the meaning of Section 422 of the
Code), if granted to employees, or in such other form, consistent
with this Plan, as the Committee may determine. Subject to the
terms of this Plan, the Committee shall determine and designate
the recipients of options, the dates options are granted, the
number of shares of Common Stock subject to option, the option
prices, and the duration of options. No option granted under
this Plan which states that it is an incentive stock option
shall, together with all other incentive stock options granted to
the same person, cover shares of Common Stock having a fair
market value greater than permitted under Section 422(d) of the
Code (or any successor provision). Options granted under this
Plan shall be subject to such terms and conditions and evidenced
by agreements in such form as shall be determined from time to
time by the Committee and shall in any event be subject to the
terms and conditions set forth below and in paragraph 4:
(a) Option Price. The option price per share of
Common Stock shall be fixed by the Committee at not less than
100% of the Fair Market Value of a share of Common Stock on the
date of grant. However, in the case of an option granted to any
person owning 10 percent or more of the Common Stock of the
Company, the option price fixed by the Committee shall not be
less than 110 percent of the Fair Market Value of a share of
Common Stock on the date of grant.
(b) Term of Options. Except as otherwise provided in
paragraph 5, no option shall be exercisable more than five years
after the date of grant.
<PAGE>
(c) Exercise of Options. Options shall be exercised
by written notice to the Company (to the attention of the
Corporate Secretary) accompanied by payment in full of the option
price. Unless otherwise specified in the applicable option
agreement, payment of the option price may be made (i) in cash
(including check, bank draft, or money order), (ii) by delivery
of Common Stock, including the withholding from issuance of
Common Stock issuable upon the exercise of such option, in each
case valued at the Exchange Value thereof on the date of
exercise, (iii) with the approval of the Committee, by delivery
of the optionee's promissory note (provided that at least the par
value of the Shares as to which exercise is made shall be paid in
cash), or (iv) by delivery of a combination of the items set
forth in clauses (i) through (iii).
4. Additional Provisions.
(a) Conditions and Limitations on Exercise. Options
may be made exercisable in one or more installments, upon the
happening of certain events, upon the passage of a specified
period of time, or upon the fulfillment of a condition, as the
Committee shall decide in each case when the option is granted.
Unless specifically provided in an option agreement, the
exercisability of options shall not accelerate upon a change in
control of the Company.
(b) Termination of Employment. Any option shall be
exercisable only during the period of the holder's service as a
director of or employment by the Company or a Subsidiary, except
that in the Committee's discretion an option may be exercisable
for a period of up to two years after retirement or death while a
director or employee of the Company or a Subsidiary, and up to
three months after the termination of such directorship or
employment for any other reason. An option may be exercised
after the termination of a holders' directorship or employment
with the Company or a Subsidiary (i) only to the extent the
holder was entitled to do so on the date of termination (except
that the Committee may in its discretion include in any option an
acceleration of such option in the event of the holder's death or
retirement), and (ii) only to the extent that the option would
not have expired had the holder continued to serve as a director
of or be employed by the Company or a Subsidiary (except that the
Committee may, in its discretion, permit an option to be
exercisable within three months after a holder's death where the
holder died prior to its expiration). The Committee may, in its
discretion, determine that an authorized leave of absence shall
be deemed to satisfy this Plan's employment/service requirements.
(c) Listing, Registration and Compliance With Laws and
Regulations
(i) Each option shall be subject to the requirement
that if at any time the Committee shall determine, in its
discretion, that the listing, registration, or qualification
of the shares subject to the option upon any securities
exchange or under any state or federal securities or other
law or regulation, or the consent or approval of any
governmental regulatory body, is necessary as a condition to
or in connection with the exercising of such option, no such
option may be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval
shall have been effected or obtained, and the holder of the
option will supply the Company with such certificates,
representations, and information as the Company shall
reasonably request and shall otherwise cooperate with the
Company in obtaining such listing, registration,
qualification, consent or approval. In the case of officers
and other persons subject to Section 16(b) of the Exchange
Act, the Committee may at any time impose any limitations
upon the exercise of an option or the transfer of any Common
Stock received upon the exercise of an option which, in the
Committee's discretion, are necessary in order to comply
with Section 16(b) of the Exchange Act and the rules and
regulations thereunder.
<PAGE>
(ii) Notwithstanding the terms of this paragraph 4(c),
no holder of any option shall have the right to require the
Company to register, list or qualify said option or any of
the stock underlying such option.
(d) Cash Payments. Options which are not incentive
stock options (as defined in Section 422 of the Code) may, in the
Committee's discretion, provide that the holder thereof, promptly
after computation thereof, will receive a cash payment equal to
the excess of the Fair Market Value of a share of Common Stock
(on the date the holder recognizes taxable income) over the
option price multiplied by the number of shares as to which the
option is exercised.
(e) Nontransferability. Options may not be
transferred other than by will or the laws of descent and
distribution and, during the lifetime of the person to whom they
are granted, may be exercised only by such person (or his
guardian or legal representative).
(f) Adjustment for Change in Common Stock. In order
to prevent the dilution or enlargement of rights under options in
the event of a reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation or
other change in the Common Stock, the Committee shall make
appropriate changes in the number and type of shares authorized
by this Plan and the number and type of shares covered by,
outstanding options and the prices specified therein.
(g) Taxes. The Company shall be entitled, if
necessary to withhold (or secure payment from the Plan
participant in lieu of withholding) the amount of any withholding
or other tax due with respect to the participant in connection
with shares issuable under this Plan, and the Company may defer
such issuance unless indemnified to its satisfaction.
5. Administration. The Committee shall have full power to
construe and interpret this Plan and options granted under this
Plan, to establish and amend rules for its administration, to
grant options under this Plan and to correct any defect or
omission or reconcile any inconsistency in this Plan or in any
option to the extent the Committee deems necessary to carry this
Plan or any option into effect. The Committee may, with the
consent of the person entitled to exercise any outstanding
option, amend such option, including reducing the exercise price
of any option to not less than the Fair Market Value of the
Common Stock at the time of the amendment and extending the
duration thereof so long as it is not more than five years from
the time of the amendment.
The Committee may act by a majority of a quorum present at a
meeting or by an instrument executed by all of its members. All
actions taken and decisions made by the Board of Directors or the
Committee pursuant to this Plan shall be binding and conclusive
on all persons interested in this Plan. The Committee may from
time to time authorize the Chairman of the Board, the Chief
Executive Officer or the President of the Company to determine
the dates on which options shall be granted to persons designated
by the Committee for such number of shares as the Committee shall
have designated, at prices determined by or in a manner specified
by the Committee.
<PAGE>
6. Definitions. "Common Stock" means shares of the Common
Stock, par value $.0l per share, of the Company, or such other
shares as are substituted pursuant to paragraph 4(f). The
"Company" means Trans Leasing International, Inc. "Subsidiary"
means any corporation in which the Company owns, directly or
indirectly, stock possessing 50% or more of the total combined
voting power. The "Fair Market Value" of the Common Stock on any
given date means (a) the last sale price reported on such date on
the New York Stock Exchange-Composite Transactions Tape (or, if
not so reported, on any domestic stock exchanges on which the
Common Stock is then listed); or (b) if the Common Stock is not
listed on any domestic stock exchange, the last sale price
reported on such date on the National Association of Securities
Dealers Automated Quotation System (or, if not so reported, by
the system then regarded as the most reliable source of such
prices); or (c) if the Common Stock is listed on a domestic
exchange or quoted in the domestic over-the-counter market, but
there are no reported sales on the given date, the value
determined pursuant to (a) or (b) above using the reported sale
prices on the last previous date on which so reported; or (d) if
none of the foregoing clauses apply, the fair value as determined
in good faith by the Board of Directors or the Committee.
"Exchange Value" of the Common Stock on any date means the
highest Fair Market Value as of any date in the period beginning
30 days prior to such date and ending on such date. The "Code"
means the Internal Revenue Code of 1986, as amended from time to
time or any successor statute thereto. The "Exchange Act" means
the Securities Exchange Act of 1934, as amended from time to time
or any successor statute thereto. The "Plan" shall mean this
1996 Stock Option Plan of Trans Leasing International, Inc., as
amended from time to time.
7. Termination and Amendment. The Board of Directors or
the Committee at any time may suspend or terminate this Plan and
make such additions or amendments as it deems advisable under
this Plan, except that they may not, without further approval by
the Company's stockholders, (a) increase the maximum number of
shares as to which options may be granted under this Plan, except
pursuant to paragraph 4(f) above, (b) extend the term of this
Plan, (c) change the method of determining the minimum price
specified in an option pursuant to paragraphs 3(a), except
pursuant to paragraphs 4(f) and 5, or (d) change the class of
participants to whom options may be granted under this Plan. No
options shall be granted hereunder after November 6, 2006.
23
SEVERANCE AGREEMENT
THIS AGREEMENT is made as of October 31, 1996 between
Trans Leasing International, Inc., a Delaware corporation (the
"Company"), and Larry S. Grossman ("Executive").
The Company considers the establishment and maintenance
of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its stockholders.
Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Company's management, including Executive, to
their assigned duties without distraction. In order to induce
Executive to remain in the employ of the Company, this Agreement
sets forth the severance benefits Executive shall receive in the
event Executive's employment with the Company is terminated under
the circumstances described herein.
In consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. For purposes of this Agreement, the
following words and phrases shall have the following meanings:
"Cause" shall mean (i) the commission of a felony or a
crime involving moral turpitude or the commission of any other
act or omission involving dishonesty, disloyalty or fraud with
respect to the Company or any of its Subsidiaries or any of their
customers or suppliers, (ii) conduct tending to bring the Company
or any of its Subsidiaries into substantial public disgrace or
disrepute, (iii) substantial and repeated failure to perform
duties as reasonably directed by the Board (other than the
failure to take any action that would constitute Good Reason),
(iv) gross negligence or willful misconduct with respect to the
Company or any of its Subsidiaries or (v) any other material
breach of this Agreement which is not cured within 15 days after
written notice thereof to Executive.
"Good Reason" shall mean, without the approval of
Executive, (a) the assignment to Executive of duties inconsistent
with Executive's positions, duties, responsibilities and status
with the Company, a change in Executive's titles or offices, or
any removal of Executive from or any failure to re-appoint
Executive to any of such positions, except in connection with the
termination of Executive's employment for Cause or as a result of
Executive's resignation, death or permanent disability or
incapacity (permanent disability or incapacity to be determined
by the Board in its good faith judgment) or by Executive other
than for Good Reason; (b) a reduction in Executive's base salary;
or (c) the Company's requiring Executive to be based anywhere
other than within 50 miles of Executive's present office
location, except for required travel on the Company's business to
an extent substantially consistent with Executive's present
business travel obligations.
"Subsidiaries" shall mean any corporation of which the
securities having a majority of the voting power in electing
directors are, at the time of determination, owned by the
Company, directly or through one of more Subsidiaries.
2. Term of Agreement. This Agreement shall commence
on the date hereof and shall continue in effect through the third
anniversary of the date hereof; provided that commencing on the
third anniversary of the date hereof and on each subsequent
anniversary during the term of this Agreement, the term of this
Agreement shall automatically be extended for one additional year
unless not later than three months prior to the next scheduled
termination date, the Company shall have notified Executive in
writing that it does not intend to extend this Agreement (the
"Agreement Period").
<PAGE>
3. Termination. If during the Agreement Period, the
Company shall terminate Executive's employment with the Company
without Cause, other than as a result of Executive's resignation,
death or permanent disability or incapacity (permanent disability
or incapacity to be determined by the Board in its good faith
judgment), or Executive shall terminate his employment with the
Company for Good Reason, Executive shall be entitled to receive
(a) a severance payment, payable in cash in one lump sum within
30 days after the date of such termination, subject to customary
withholding, in an amount equal to three times his annual base
salary in effect prior to such termination and (b) outplacement
services provided by an outplacement firm of Executive's choice
(the cost of such services to be paid by the Company not to
exceed 20% of Executive's base salary); provided, however, that
if Section 280G of the Internal Revenue Code is applicable, in no
event shall the amount of such severance benefits when taken
together with all other amounts included in the calculation of
"parachute payment" (as such term is used in Section 280G of the
Internal Revenue Code) exceed 299.9% of Executive's "base amount"
(as such term is used in Section 280G of the Internal Revenue
Code); and provided further that Executive will only be entitled
to such severance benefits if he has not breached and does not
breach the provisions of paragraphs 4, 5 and 6 hereof. The
Company may offset any amounts Executive owes it or its
Subsidiaries against any amounts it owes Executive hereunder.
Notwithstanding anything in this Agreement to the contrary, the
Company may terminate Executive's employment at any time, subject
to providing the benefits specified herein.
4. Confidential Information. Executive acknowledges
that the information, observations and data obtained by him while
employed by the Company and its Subsidiaries concerning the
business or affairs of the Company or any Subsidiary
("Confidential Information") are the property of the Company or
such Subsidiary. Therefore, Executive agrees that he shall not
disclose to any unauthorized person or use for his own purposes
any Confidential Information without the prior written consent of
the Board, unless and to the extent that the aforementioned
matters become generally known to and available for use by the
public other than as a result of Executive's acts or omissions.
Nothing herein shall prevent Executive from making (i) any
disclosure that is required by applicable law or the order of a
court of competent jurisdiction, or (ii) any disclosure, in good
faith, to properly fulfill Executive's duties. Executive shall
deliver to the Company at the termination of his employment with
the Company, or at any other time the Company may request, all
memoranda, notes, plans, records, reports, computer tapes,
printouts and software and other documents and data (and copies
thereof) relating to the Confidential Information, Work Product
(as defined below) or the business of the Company or any
Subsidiary which he may then possess or have under his control.
5. Work Product. Executive acknowledges that all
innovations, improvements, developments, methods, analyses,
reports and all similar or related information which relate to
the Company's or any of its Subsidiaries' actual or anticipated
business, research and development or existing or future products
or services and which are conceived, developed or made by
Executive while employed by the Company and its Subsidiaries
("Work Product") belong to the Company or such Subsidiary.
Executive shall promptly disclose such Work Product to the Board
and perform all actions reasonably requested by the Board
(whether before or after the termination of Executive's
employment with the Company) to establish and confirm such
ownership (including, without limitation, assignments, consents,
powers of attorney and other instruments).
<PAGE>
6. Non-Compete, Non-Solicitation.
(a) In further consideration of the compensation to be
paid to Executive hereunder, Executive acknowledges that in the
course of his employment with the Company he shall become
familiar with the Company's and its Subsidiaries' trade secrets
and with other Confidential Information concerning the Company
and its Subsidiaries and that his services shall be of special,
unique and extraordinary value to the Company and its
Subsidiaries. Therefore, Executive agrees that, during the
period of Executive's employment with the Company and for three
years thereafter (the "Noncompete Period"), he shall not directly
or indirectly own any interest in, manage, control, participate
in, consult with, render services for, or in any manner engage in
any business competing with the businesses of the Company or its
Subsidiaries, as such businesses exist or are in process on the
date of the termination of Executive's employment, within any
geographical area in which the Company or its Subsidiaries engage
or plan to engage in such businesses. Nothing herein shall
prohibit Executive from being a passive owner of not more than 2%
of the outstanding stock of any class of a corporation which is
publicly traded, so long as Executive has no active participation
in the business of such corporation.
(b) During the Noncompete Period, Executive shall not
directly or indirectly through another entity (i) induce or
attempt to induce any employee of the Company or any Subsidiary
to leave the employ of the Company or such Subsidiary, or in any
way interfere with the relationship between the Company or any
Subsidiary and any employee thereof, (ii) hire any person who was
an employee of the Company or any Subsidiary at any time during
the period Executive was employed with the Company except for a
noncompetitive situation or (iii) induce or attempt to induce any
customer, supplier, licensee, licensor, franchisee or other
business relation of the Company or any Subsidiary to cease doing
business with the Company or such Subsidiary, or in any way
interfere with the relationship between any such customer,
supplier, licensee or business relation and the Company or any
Subsidiary (including, without limitation, making any negative
statements or communications about the Company or its Subsidiar
ies).
7. Enforcement. If, at the time of enforcement of
paragraphs 4, 5 or 6 of this Agreement, a court holds that the
restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area.
Because Executive's services are unique and because Executive has
access to Confidential Information and Work Product, the parties
hereto agree that money damages would not be an adequate remedy
for any breach of this Agreement. Therefore, in the event a
breach or threatened breach of this Agreement, the Company or its
successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other
relief in order to enforce, or prevent any violations of, the
provisions hereof (without posting a bond or other security). In
addition, in the event of an alleged breach or violation by
Executive of paragraph 6, the Noncompete Period shall be tolled
until such breach or violation has been duly cured. Executive
agrees that the restrictions contained in paragraph 6 are reason
able.
8. Survival. Paragraphs 4 through 16 shall survive
and continue in full force in accordance with their terms
notwithstanding any termination of the Agreement Period.
9. Notices. Any notice provided for in this
Agreement shall be in writing and shall be either personally
delivered, or mailed by first class mail, return receipt
requested, to the recipient at the address below indicated:
<PAGE>
Notices to Executive:
Larry S. Grossman
1625 Tall Tree Lane
Deerfield, IL 60015
Notices to the Company:
Trans Leasing International, Inc.
3000 Dundee Road
Northbrook, IL 60062
Attention: President
or such other address or to the attention of such other person as
the recipient party shall have specified by prior written notice
to the sending party. Any notice under this Agreement shall be
deemed to have been given when so delivered or mailed.
10. Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable provision had never
been contained herein.
11. Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement
between the parties and supersedes any prior understandings,
agreements or representations by or between the parties, written
or oral, that may have related in any way to the subject matter
hereof.
12. No Strict Construction. The language used in this
Agreement shall be deemed to be the language chosen by the
parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any party.
13. Counterparts. This Agreement may be executed in
separate counterparts, each of which is deemed to be an original
and all of which taken together constitute one and the same
agreement.
14. Successors and Assigns. This Agreement is
intended to bind and inure to the benefit of and be enforceable
by Executive, the Company and their respective heirs, successors
and assigns, except that Executive may not assign his rights or
delegate his obligations hereunder without the prior written
consent of the Company.
15. Choice of Law. All issues and questions
concerning the construction, validity, enforcement and
interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by, and construed in accordance with,
the laws of the State of Illinois, without giving effect to any
choice of law or conflict of law rules or provisions (whether of
the State of Illinois or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the
State of Illinois.
16. Amendment and Waiver. The provisions of this
Agreement may be amended or waived only with the prior written
consent of the Company and Executive, and no course of conduct or
failure or delay in enforcing the provisions of this Agreement
shall affect the validity, binding effect or enforceability of
this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date first written above.
TRANS LEASING INTERNATIONAL, INC.
By /s/ Michael J. Heyman
Its President
/s/ Larry S. Grossman
LARRY S. GROSSMAN
SEVERANCE AGREEMENT
THIS AGREEMENT is made as of October 31, 1996 between
Trans Leasing International, Inc., a Delaware corporation (the
"Company"), and Joseph Rabito ("Executive").
The Company considers the establishment and maintenance
of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its stockholders.
Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Company's management, including Executive, to
their assigned duties without distraction. In order to induce
Executive to remain in the employ of the Company, this Agreement
sets forth the severance benefits Executive shall receive in the
event Executive's employment with the Company is terminated under
the circumstances described herein.
In consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. For purposes of this Agreement, the
following words and phrases shall have the following meanings:
"Cause" shall mean (i) the commission of a felony or a
crime involving moral turpitude or the commission of any other
act or omission involving dishonesty, disloyalty or fraud with
respect to the Company or any of its Subsidiaries or any of their
customers or suppliers, (ii) conduct tending to bring the Company
or any of its Subsidiaries into substantial public disgrace or
disrepute, (iii) substantial and repeated failure to perform
duties as reasonably directed by the Board or the Company's Chief
Executive Officer or President (other than the failure to take
any action that would constitute Good Reason), (iv) gross
negligence or willful misconduct with respect to the Company or
any of its Subsidiaries or (v) any other material breach of this
Agreement which is not cured within 15 days after written notice
thereof to Executive.
"Change of Conrol" shall mean (a) any person or group
(other than the estate of Richard Grossman, the beneficiaries of
such estate, Larry S. Grossman, individually and as administrator
of such estate, his spouse and lineal descendants, and trusts and
trustees of trusts established for the benefit of such persons
and estates and administrators and executors of estates of such
persons) is or becomes the benefical owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended),
directly or indirectly, of securities of the Company representing
more than 50% of the Company's then outstanding common stock; (b)
the consummation of a consolidation or merger of the Company in
which the Company is not the surviving corporation or pursuant to
which the Company's common stock is converted into cash,
securities or other property, other than a merger of the Company
in which the holders of the Company's common stock immediately
prior to the merger have, directly or indirectly, at least a 75%
ownership interest in the common stock of the surviving
corporation after the merger on a fully diluted basis; or (c) the
sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) or all or substantially all of
the assets of the Company (other than through transactions in the
ordinary course of business).
<PAGE>
"Good Reason" shall mean, without the approval of
Executive, (a) the assignment to Executive of duties inconsistent
with Executive's positions, duties, responsibilities and status
with the Company, a change in Executive's titles or offices, or
any removal of Executive from or any failure to re-appoint
Executive to any of such positions, except in connection with the
termination of Executive's employment for Cause or as a result of
Executive's resignation, death or permanent disability or
incapacity (permanent disability or incapacity to be determined
by the Board in its good faith judgment) or by Executive other
than for Good Reason; (b) a reduction in Executive's base salary;
or (c) the Company's requiring Executive to be based anywhere
other than within 50 miles of Executive's present office
location, except for required travel on the Company's business to
an extent substantially consistent with Executive's present
business travel obligations.
"Subsidiaries" shall mean any corporation of which the
securities having a majority of the voting power in electing
directors are, at the time of determination, owned by the
Company, directly or through one of more Subsidiaries.
2. Term of Agreement. This Agreement shall commence
on the date hereof and shall continue in effect through the third
anniversary of the date hereof; provided that commencing on the
third anniversary of the date hereof and on each subsequent
anniversary during the term of this Agreement, the term of this
Agreement shall automatically be extended for one additional year
unless not later than three months prior to the next scheduled
termination date, the Company shall have notified Executive in
writing that it does not intend to extend this Agreement (the
"Agreement Period").
3. Termination. If during the Agreement Period a
Change of Control shall have occurred and within one year
thereafter either the Company shall terminate Executive's
employment with the Company without Cause, other than as a result
of Executive's resignation, death or permanent disability or
incapacity (permanent disability or incapacity to be determined
by the Board in its good faith judgment), or Executive shall
terminate his employment with the Company for Good Reason,
Executive shall be entitled to receive (a) a severance payments,
payable in cash in equal installments payable over a twenty four
month period after the date of such termination, subject to
customary withholding, in an amount equal to two times his annual
base salary in effect prior to such termination and (b)
outplacement services provided by an outplacement firm of
Executive's choice (the cost of such services to be paid by the
Company not to exceed 20% of Executive's base salary); provided,
however, that if Section 280G of the Internal Revenue Code is
applicable, in no event shall the amount of such severance
benefits when taken together with all other amounts included in
the calculation of "parachute payment" (as such term is used in
Section 280G of the Internal Revenue Code) exceed 299.9% of
Executive's "base amount" (as such term is used in Section 280G
of the Internal Revenue Code); and provided further that
Executive will only be entitled to such severance benefits if he
has not breached and does not breach the provisions of paragraphs
4, 5 and 6 hereof. The Company may offset any amounts Executive
owes it or its Subsidiaries against any amounts it owes Executive
hereunder. Notwithstanding anything in this Agreement to the
contrary, the Company may terminate Executive's employment at any
time, subject to providing the benefits specified herein.
<PAGE>
4. Confidential Information. Executive acknowledges
that the information, observations and data obtained by him while
employed by the Company and its Subsidiaries concerning the
business or affairs of the Company or any Subsidiary
("Confidential Information") are the property of the Company or
such Subsidiary. Therefore, Executive agrees that he shall not
disclose to any unauthorized person or use for his own purposes
any Confidential Information without the prior written consent of
the Board, unless and to the extent that the aforementioned
matters become generally known to and available for use by the
public other than as a result of Executive's acts or omissions.
Nothing herein shall prevent Executive from making (i) any
disclosure that is required by applicable law or the order of a
court of competent jurisdiction, or (ii) any disclosure, in good
faith, to properly fulfill Executive's duties. Executive shall
deliver to the Company at the termination of his employment with
the Company, or at any other time the Company may request, all
memoranda, notes, plans, records, reports, computer tapes,
printouts and software and other documents and data (and copies
thereof) relating to the Confidential Information, Work Product
(as defined below) or the business of the Company or any
Subsidiary which he may then possess or have under his control.
5. Work Product. Executive acknowledges that all
innovations, improvements, developments, methods, analyses,
reports and all similar or related information which relate to
the Company's or any of its Subsidiaries' actual or anticipated
business, research and development or existing or future products
or services and which are conceived, developed or made by
Executive while employed by the Company and its Subsidiaries
("Work Product") belong to the Company or such Subsidiary.
Executive shall promptly disclose such Work Product to the Board
and perform all actions reasonably requested by the Board
(whether before or after the termination of Executive's
employment with the Company) to establish and confirm such
ownership (including, without limitation, assignments, consents,
powers of attorney and other instruments).
6. Non-Compete, Non-Solicitation.
(a) In further consideration of the compensation to be
paid to Executive hereunder, Executive acknowledges that in the
course of his employment with the Company he shall become
familiar with the Company's and its Subsidiaries' trade secrets
and with other Confidential Information concerning the Company
and its Subsidiaries and that his services shall be of special,
unique and extraordinary value to the Company and its
Subsidiaries. Therefore, Executive agrees that, during the
period of Executive's employment with the Company and for two
years thereafter (the "Noncompete Period"), he shall not directly
or indirectly own any interest in, manage, control, participate
in, consult with, render services for, or in any manner engage in
any business competing with the businesses of the Company or its
Subsidiaries, as such businesses exist or are in process on the
date of the termination of Executive's employment, within any
geographical area in which the Company or its Subsidiaries engage
or plan to engage in such businesses. Nothing herein shall
prohibit Executive from being a passive owner of not more than 2%
of the outstanding stock of any class of a corporation which is
publicly traded, so long as Executive has no active participation
in the business of such corporation.
(b) During the Noncompete Period, Executive shall not
directly or indirectly through another entity (i) induce or
attempt to induce any employee of the Company or any Subsidiary
to leave the employ of the Company or such Subsidiary, or in any
way interfere with the relationship between the Company or any
Subsidiary and any employee thereof, (ii) hire any person who was
an employee of the Company or any Subsidiary at any time during
the period Executive was employed with the Company or (iii)
induce or attempt to induce any customer, supplier, licensee,
licensor, franchisee or other business relation of the Company or
any Subsidiary to cease doing business with the Company or such
Subsidiary, or in any way interfere with the relationship between
any such customer, supplier, licensee or business relation and
the Company or any Subsidiary (including, without limitation,
making any negative statements or communications about the
Company or its Subsidiaries).
<PAGE>
7. Enforcement. If, at the time of enforcement of
paragraphs 4, 5 or 6 of this Agreement, a court holds that the
restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area.
Because Executive's services are unique and because Executive has
access to Confidential Information and Work Product, the parties
hereto agree that money damages would not be an adequate remedy
for any breach of this Agreement. Therefore, in the event a
breach or threatened breach of this Agreement, the Company or its
successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other
relief in order to enforce, or prevent any violations of, the
provisions hereof (without posting a bond or other security). In
addition, in the event of an alleged breach or violation by
Executive of paragraph 6, the Noncompete Period shall be tolled
until such breach or violation has been duly cured. Executive
agrees that the restrictions contained in paragraph 6 are reason
able.
8. Survival. Paragraphs 4 through 16 shall survive
and continue in full force in accordance with their terms
notwithstanding any termination of the Agreement Period.
9. Notices. Any notice provided for in this
Agreement shall be in writing and shall be either personally
delivered, or mailed by first class mail, return receipt
requested, to the recipient at the address below indicated:
Notices to Executive:
Joseph Rabito
21817 Inglenook Lane
Barrington, IL 60010
Notices to the Company:
Trans Leasing International, Inc.
3000 Dundee Road
Northbrook, IL 60062
Attention: Chief Executive Officer
or such other address or to the attention of such other person as
the recipient party shall have specified by prior written notice
to the sending party. Any notice under this Agreement shall be
deemed to have been given when so delivered or mailed.
10. Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable provision had never
been contained herein.
11. Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement
between the parties and supersedes any prior understandings,
agreements or representations by or between the parties, written
or oral, that may have related in any way to the subject matter
hereof.
12. No Strict Construction. The language used in this
Agreement shall be deemed to be the language chosen by the
parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any party.
13. Counterparts. This Agreement may be executed in
separate counterparts, each of which is deemed to be an original
and all of which taken together constitute one and the same
agreement.
<PAGE>
14. Successors and Assigns. This Agreement is
intended to bind and inure to the benefit of and be enforceable
by Executive, the Company and their respective heirs, successors
and assigns, except that Executive may not assign his rights or
delegate his obligations hereunder without the prior written
consent of the Company.
15. Choice of Law. All issues and questions
concerning the construction, validity, enforcement and
interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by, and construed in accordance with,
the laws of the State of Illinois, without giving effect to any
choice of law or conflict of law rules or provisions (whether of
the State of Illinois or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the
State of Illinois.
16. Amendment and Waiver. The provisions of this
Agreement may be amended or waived only with the prior written
consent of the Company and Executive, and no course of conduct or
failure or delay in enforcing the provisions of this Agreement
shall affect the validity, binding effect or enforceability of
this Agreement.
<PAGE>
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first written above.
TRANS LEASING INTERNATIONAL, INC.
By /s/ Michael J. Heyman
Its President
/s/ Joseph Rabito
JOSEPH RABITO
Trans Leasing International, Inc.
Earning Per Share Computation
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months Nine Months
ended ended
March 31, March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Income 446 260 3,877 1,178
Shares:
Weighted average shares outstanding 4,021 4,049 4,027 4,115
Additional shares from assumed
warrants and options exercised (1) 232 8 88 4
Total shares outstanding for
calculation 4,253 4,057 4,115 4,119
Additional shares from assumed
warrants and options exercised -
assuming full dilution (1) - - 54 2
Total shares outstanding - assuming
full dilution 4,253 4,057 4,169 4,121
Earnings per share based on:
Weighted average shares outstanding 0.11 0.06 0.96 0.29
Weighted average common and common
equivalent shares outstanding (1) 0.10 0.06 0.94 0.29
Weighted average common and common
equivalent shares outstanding -
assuming full dilution (1) 0.10 0.06 0.93 0.29
</TABLE>
(1) The dilutive impact of common stock equivalents was less than 3% for
1996.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,320
<SECURITIES> 0
<RECEIVABLES> 261,775
<ALLOWANCES> 10,956
<INVENTORY> 0
<CURRENT-ASSETS> 284,700
<PP&E> 17,121
<DEPRECIATION> 4,830
<TOTAL-ASSETS> 302,114
<CURRENT-LIABILITIES> 8,627
<BONDS> 260,348
0
0
<COMMON> 48
<OTHER-SE> 29,680
<TOTAL-LIABILITY-AND-EQUITY> 302,114
<SALES> 31,682
<TOTAL-REVENUES> 33,878
<CGS> 0
<TOTAL-COSTS> 11,735
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,045
<INTEREST-EXPENSE> 13,178
<INCOME-PRETAX> 4,920
<INCOME-TAX> 1,043
<INCOME-CONTINUING> 1,681
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,877
<EPS-PRIMARY> .94
<EPS-DILUTED> .93
</TABLE>
