UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 1-9670
PLM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3041257
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
One Market, Steuart Street Tower,
Suite 800, San Francisco, CA 94105-1301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 974-1399
--------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock, $0.01 Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 ______
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of February 21, 1997 was $29,660,546.
The number of shares outstanding of the issuer's classes of common
stock as of February 21, 1997: Common Stock, $0.01 Par Value -- 9,209,431 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant's 1997 Annual Meeting of
Stockholders are incorporated by reference in Part III.
<PAGE>
PLM INTERNATIONAL, INC.
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
Part I
Item 1 Business 2
Item 2 Properties 9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of Security Holders 10
Part II
Item 5 Market for the Company's Common Equity and Related
Stockholder Matters 11
Item 6 Selected Financial Data 12
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 8 Financial Statements and Supplemental Data 24
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 24
Part III
Item 10 Directors and Executive Officers of the Company 25
Item 11 Executive Compensation 25
Item 12 Security Ownership of Certain Beneficial Owners
and Management 25
Item 13 Certain Relationships and Related Transactions 25
Part IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 25
<PAGE>
PART I
ITEM 1. BUSINESS
A. Introduction
(i) Background
PLM International, Inc. (PLM International or the Company or PLMI), a Delaware
corporation, is a diversified equipment leasing company providing services to
transportation, industrial and commercial companies both domestically and
internationally. Through May 13, 1996, the Company also syndicated investment
programs organized to invest primarily in transportation equipment. The Company
operates and manages transportation, industrial and commercial equipment and
related assets with an approximate cost of $1.3 billion for its own account and
various investment partnerships and third party investors. An organization chart
for PLM International indicating the relationships of significant active legal
entities is shown in Table 1:
PLM International, Inc., a Delaware corporation.
Direct subsidiaries of PLM International, Inc.: PLM Financial Services, Inc., a
Delaware corporation; PLM Railcar Management Services, Inc., a Delaware
corporation; PLM Rental, Inc., a Delaware corporation; Aeromil Holdings, Inc., a
California corporation; PLM Worldwide Management Services Limited, a Bermuda
corporation; and American Finance Group, Inc., a Delaware corporation.
Direct subsidiaries of PLM Financial Services, Inc.: PLM Investment Management,
Inc., a California corporation; PLM Securities Corp., a California corporation;
and PLM Transportation Equipment Corporation, a California corporation.
Direct subsidiaries of PLM Worldwide Management Services Limited: Transportation
Equipment Indemnity Company, Ltd., a Bermuda corporation; and PLM Railcar
Management Services Canada, Ltd., an Alberta corporation.
Direct subsidiary of American Finance Group, Inc.: AFG Credit Corp. a Delaware
corporation.
Note: all entities are 100%-owned except Aeromil Holdings, Inc., which is
80%-owned.
<PAGE>
(ii) Description of Business
PLM International, a Delaware corporation formed on February 1, 1988, owns or
manages a portfolio of transportation equipment, industrial and commercial
equipment, and related assets consisting of approximately 80,000 individual
items with a combined original cost of approximately $1.3 billion (refer to
Table 2). The Company manages equipment and related assets for approximately
76,000 investors in various limited partnerships or investment programs.
TABLE 2
EQUIPMENT AND RELATED ASSETS
December 31, 1996
(original cost in millions)
<TABLE>
<CAPTION>
Professional
Lease Management Equipment Other
Income Fund 1 Growth Funds Investor
PLMI Programs Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aircraft and aircraft engines $ 17 $ 45 $ 377 $ 2 $ 441
Marine vessels -- 16 213 -- 229
Railcars/locomotives -- 19 128 48 195
Trailers/tractors 47 14 87 16 164
Marine containers 3 -- 88 6 97
Mobile offshore drilling units (MODUs) -- 7 18 -- 25
Commercial and industrial equipment 91 -- -- -- 91
Other 22 2 28 6 58
------------------------------------------------------------------------
Total $ 180 $ 103 $ 939 $ 78 $ 1,300
========================================================================
</TABLE>
(iii) Owned Equipment
(a) Transportation Equipment
The Company leases its owned transportation equipment to a wide variety of
lessees. Certain equipment is leased and operated internationally. In general,
the equipment leasing industry is an alternative to direct equipment ownership.
It is a highly competitive industry offering lease terms ranging from day-to-day
to a term equal to the economic life of the equipment (full payout leases).
Generally, leases for a term less than the economic life of the equipment are
known as operating leases because the aggregate lease rentals accruing over the
initial lease period are less than the cost of the leased equipment. PLM
International generally provides operating leases for its transportation
equipment. This type of lease generally commands a higher lease rate than full
payout leases because of the flexibility it affords the lessee. This emphasis on
operating leases requires highly experienced management and support staff, as
the equipment must be periodically re-leased to continue generating rental
income, and thus, to maximize the long-term return on investment in the
equipment. In appropriate circumstances, certain equipment, mainly marine
containers, is leased to utilization-type pools which include equipment owned by
unaffiliated parties. In such instances, revenues received by the Company
consist of a specified percentage of the pro-rata share of lease revenues
generated by the pool operator from leasing the pooled equipment to its
customers, after deducting certain direct operating expenses of the pooled
equipment.
With respect to trailer leasing activities, the Company markets
over-the-road trailers through its subsidiary PLM Rental, Inc. (PLM Rental) on
short-term leases through rental yards located in 10 major U.S. cities. These
rental facilities provide the Company with a base of operations in selected
markets to facilitate its operating lease strategy. The Company also markets
intermodal trailers to railroads and shippers on short-term arrangements through
a licensing agreement with a short-line railroad. In addition, the Company owns
on-site storage units protected by a patented security system. In January 1997,
the Company entered into an agreement to lease all of its storage equipment
assets to a lessee for a five year period with a purchase option at the end of
the lease.
Over the past five years, on average, approximately 94.3% of all
transportation equipment (owned and managed) was operating under a lease
agreement or in PLM trailer rental yards.
(b) Commercial and Industrial Equipment
The Company, through its American Finance Group, Inc. (AFG) subsidiary, serves
the capital equipment financing needs of predominately investment-grade, Fortune
2000 companies. AFG originates and manages leases for new commercial and
industrial equipment with lessees utilizing AFG's transaction-structuring
capabilities to tailor financing solutions to meet the needs of its customers.
The leases are generally mid-to longer term in nature, ranging from two to seven
years, with AFG holding the residual position.
(iv) Subsidiary Business Activities
(a) PLM Financial Services, Inc.
PLM Financial Services, Inc. (FSI) along with its primary subsidiaries: PLM
Transportation Equipment Corporation (TEC); PLM Securities Corp. (PLM
Securities); and PLM Investment Management, Inc. (IMI), focus on the management
of investment programs, including limited liability companies, limited
partnerships, and private placement programs, which acquire and lease primarily
used transportation and related equipment. Depending on the objectives of the
particular program, the programs feature various combinations of current cash
flow and income tax benefits through investments in long-lived, low-obsolescence
transportation and related equipment.
FSI completed the offering of 17 public programs which have invested in
diversified portfolios of transportation and related equipment. From 1986
through April of 1995, FSI offered the PLM Equipment Growth Fund (EGF)
investment series. From 1995 through May 13, 1996, FSI offered the Professional
Lease Management Income Fund I, L.L.C., a Limited Liability Company (Fund I),
with a no front-end fee structure. Each of the EGF and Fund I programs is
designed to invest primarily in used transportation equipment for lease in order
to generate current operating cash flow for (i) distribution to investors and
(ii) reinvestment into additional used transportation equipment. An objective of
the programs is to maximize the value of the equipment portfolio and provide
cash distributions to investors by acquiring and managing equipment for the
benefit of the investors. Cumulative equity raised by PLM International for its
affiliated investment programs is $1.7 billion.
Due to the changes in the federal tax laws causing Publicly Traded
Partnerships traded on a national exchange to be taxed as corporations after
December 31, 1997, rather than treated as flow-through entities, the management
of PLM International structured EGFs IV, V, VI, PLM Equipment Growth and Income
Fund VII (EGF VII) and Fund I so that they will not be publicly traded, and EGFs
I, II and III were delisted from the American Stock Exchange on April 8, 1996.
Investment in and Management of the EGFs, Other Limited Partnerships, and
Private Placements
FSI earns revenues in connection with its management of the limited partnerships
and private placement programs. During the syndication of each of the EGFs,
placement fees and commissions representing approximately 9% of equity raised
were generally earned upon the purchase by investors of partnership units. A
significant portion of these placement fees was reallowed to the originating
broker-dealer. Equipment acquisition, lease negotiation, and debt placement fees
are generally earned through the purchase, initial lease, and financing of
equipment, and are generally recognized as revenue when FSI has completed
substantially all of the services required to earn the fees, generally when
binding commitment agreements are signed.
Management fees are earned for managing the equipment portfolios and
administering investor programs as provided for in the various agreements and
are recognized as revenue as they are earned.
As compensation for organizing a partnership investment program, FSI,
as general partner, is generally granted an interest (between 1% and 5%) in the
earnings and cash distributions of the program. FSI recognizes as partnership
interests its equity interest in the earnings of the partnerships after
adjusting such earnings to reflect the use of straight-line depreciation and the
effect of special allocations of the program's gross income allowed under the
respective partnership agreements.
FSI also recognizes as income its interest in the estimated net
residual value of the assets of the partnerships as they are purchased. The
amounts recorded are based on management's estimate of the net proceeds to be
distributed upon disposition of the partnership's equipment at the end of the
respective partnerships. As assets are purchased by the partnerships, these
residual value interests are recorded in partnership interests and other fees at
the present value of FSI's share of estimated disposition proceeds. As required
by FASB Technical Bulletin 1986-2, the discount on FSI's residual value
interests is not accreted over the holding period. FSI reviews the carrying
value of its residual interests at least annually in relation to expected future
market values for the underlying equipment in which it holds residual interests,
for the purpose of assessing recoverability of recorded amounts. When a limited
partnership is in the liquidation phase, distributions received by FSI will be
treated as recoveries of its equity interest in the partnership until the
recorded residual is eliminated. Any additional distributions received will be
treated as residual interest income.
In accordance with certain investment program and partnership
agreements, FSI received reimbursement for organization and offering costs
incurred during the offering period. The reimbursement was generally between
1.5% and 3.0% of equity raised. The investment programs reimbursed FSI ratably
over the offering period of the investment programs based on equity raised. In
the event organizational and offering costs incurred by FSI as defined by the
partnership agreement exceeded amounts allowed, the excess costs were
capitalized as an additional investment in the related partnership and are being
amortized until the projected start of the liquidation phase of the partnership.
These additional investments are reflected as equity interest in affiliates in
the accompanying consolidated balance sheets.
Investment in and Management of Limited Liability Company
From 1995 through May 13, 1996, Fund I, a limited liability company with a no
front-end fee structure, was offered as an investor program. FSI serves as the
Manager for the program. There was no compensation paid to FSI or any of its
subsidiaries for the organization and syndication of interests in Fund I, the
acquisition of equipment, nor the negotiation of the leases by Fund I. FSI
funded the cost of organization, syndication, and offering through the use of
operating cash and has capitalized these costs as its investment in Fund I. FSI
is amortizing its investment in Fund I until the projected start of the
liquidation phase of the program. In return for its investment, FSI is generally
entitled to a 15% interest in the cash distributions and earnings of Fund I
subject to certain allocation provisions. FSI's interest in the cash
distributions and earnings of Fund I will increase to 25% after the investors
have received distributions equal to their invested capital. FSI is also
entitled to monthly fees for equipment management services and reimbursement for
certain accounting and administrative services it provides.
FSI also recognizes as income its interest in the estimated net
residual value of the assets of Fund I as they are purchased. The amounts
recorded are based on management's estimate of the net proceeds to be
distributed upon disposition of the program's equipment at the end of the
program. As assets are purchased by Fund I, these residual value interests are
recorded in partnership interests and other fees at the present value of FSI's
share of estimated disposition proceeds. When Fund I is in the liquidation
phase, distributions received by FSI will be treated as recoveries of its equity
interest in the program until the recorded residual is eliminated. Any
additional distributions received will be treated as residual interest income.
Fund I, which raised $100.0 million in equity through its May 13, 1996
closing date, is now in the equipment investment phase.
(b) PLM Transportation Equipment Corporation
PLM Transportation Equipment Corporation (TEC) is responsible for the selection,
negotiation and purchase, initial lease and re-lease, and sale of equipment.
This process includes identification of prospective lessees, analyses of
lessees' credit worthiness, negotiation of lease terms, negotiations with
equipment owners, manufacturers, or dealers for the purchase, delivery, and
inspection of equipment, preparation of debt offering materials, and negotiation
of loans. TEC or its wholly-owned subsidiary, TEC AcquiSub, Inc., also purchase
transportation equipment for PLM International's own portfolio and on an interim
basis, for resale to various affiliated limited partnerships at cost or to third
parties.
(c) PLM Securities Corp.
PLM Securities Corp. (PLM Securities) formerly marketed investment programs
through unaffiliated broker-dealers and financial planning firms throughout the
United States. Sales of investment programs were not made directly to the public
by PLM Securities. During 1996 and 1995, approximately 200 selected
broker-dealer firms with over 20,000 agents sold investment units in Fund I and
EGF VII. Royal Alliance Associates and Limsco/Private Ledger accounted for the
sale of 12% and 11% of the units in Fund I, respectively, during 1996. In 1995,
Wheat First Butcher Singer accounted for 15% of equity sales for units in EGF
VII and Fund I. No other selected agent has accounted for the sale of more than
10% of the units in these investment programs during these periods. The
marketing of the investment programs was supported by PLM Securities
representatives who dealt directly with account executives of participating
broker-dealers.
During the marketing of the EGFs, PLM Securities earned a placement fee
for the sale of investment units of which a significant portion was reallowed to
the originating broker-dealer. Placement fees vary from program to program, but
for EGF VII, PLM Securities received a fee of up to 9% of the capital
contributions to the partnership, of which commissions of up to 8% were
reallowed to the unaffiliated selling broker-dealer, with the difference being
retained by PLM Securities. Fund I has a no front-end fee structure. FSI funded
all organization costs and placement fees associated with the Fund I program
which were capitalized as its investment. Thus, as of December 31, 1996, 100% of
syndicated equity for Fund I was invested in equipment.
PLM Securities raised investor equity totaling approximately $107.4
million for its EGF VII program through April 1995 when the program closed. PLM
Securities raised investor equity totaling $100.0 million for its Fund I program
through May 13, 1996 when the program closed. PLM Securities suspended
syndication activities on May 14, 1996.
(d) PLM Investment Management, Inc.
PLM Investment Management, Inc. (IMI) manages equipment owned by the Company and
by investors in the various investment programs. The equipment consists of the
following: aircraft (commercial, commuter, and corporate); aircraft engines;
aircraft rotables; railcars; trailers (highway and intermodal, refrigerated, and
non- refrigerated); modular buildings; marine containers (refrigerated and
non-refrigerated); marine vessels (dry bulk carriers and product tankers); and
mobile offshore drilling units (rigs). IMI is obligated to invoice and collect
rents, arrange for maintenance and repair of the equipment, pay operating
expenses, debt service, and certain taxes, determine that the equipment is used
in accordance with all operative contractual arrangements, arrange insurance as
appropriate, provide or arrange for clerical and administrative services
necessary to the operation of the equipment, correspond with program investors,
prepare quarterly and annual financial statements and tax information materials,
and make distributions to investors. IMI also monitors equipment regulatory
requirements, and compliance with investor program debt covenants and terms of
the limited partnership agreements.
(e) American Finance Group, Inc.
In 1995, the Company established a wholly-owned equipment leasing and management
subsidiary, American Finance Group, Inc. (AFG), and entered into an agreement to
manage certain operations of Boston-based, privately-held Equis Financial Group
(Equis). During 1995, the Company provided management services for investor
programs of Equis for which the Company earned management fees and other
revenues. In January 1996, the agreement was modified to exclude management of
Equis' investor programs. Under the modified agreement the Company obtained the
lease origination and servicing operations of Equis, and the rights to manage an
institutional leasing investment program. Additionally, the agreement provided
for AFG to receive software, computers and furniture that support the marketing
and operations activities. The total cost to acquire the lease origination and
servicing operation was $3.2 million. AFG is originating and managing lease
transactions on new commercial and industrial equipment such as data processing,
communications, materials handling and construction equipment, which are
financed by a securitization facility, for the Company's own account, or sold to
the institutional investment program or other investors. The majority of these
leases are accounted for as direct finance leases. Periodically, AFG will use
its short-term loan facility to finance the acquisition of the assets subject to
these leases prior to sale or permanent financing by the securitization
facility.
(f) PLM Railcar Management Services, Inc.
PLM Railcar Management Services, Inc. (RMSI) markets and manages railcar fleets.
RMSI is also involved in negotiating the purchase and sale of railcars on behalf
of IMI.
(g) PLM Worldwide Management Services Limited
PLM Worldwide Management Services Limited (WMS), a wholly-owned subsidiary of
PLM, is a Bermuda-based holding company that serves as the parent of several PLM
foreign operating entities and generates revenue from certain equipment leasing
and brokering activities.
<PAGE>
(h) Transportation Equipment Indemnity Company, Ltd.
Transportation Equipment Indemnity Company, Ltd. (TEI), a wholly-owned
subsidiary of WMS, is a Bermuda-based insurance company licensed to underwrite a
full range of insurance products including property and casualty risk. TEI's
primary objective is to minimize both the long-term and short-term cost of
insurance coverages for all owned and managed equipment. A substantial portion
of the risks underwritten by TEI are reinsured with unaffiliated underwriters.
(i) PLM Railcar Management Services Canada, Limited.
PLM Railcar Management Services Canada, Limited, a wholly-owned subsidiary of
WMS headquartered in Calgary, Alberta, Canada, provides fleet management
services to the owned and managed railcars operating in Canada on behalf of IMI.
(j) PLM Rental, Inc.
PLM Rental markets trailers and storage units owned by the Company and its
affiliated investor programs on short-term and mid-term operating leases through
a network of rental facilities. Presently, facilities are located in Atlanta,
Chicago, Dallas, Detroit, Indianapolis, Kansas City, Miami, Newark, Orlando, and
Tampa.
All of the above subsidiaries are 100% owned directly or indirectly by
PLM International.
(k) Aeromil Holdings, Inc.
Aeromil Holdings, Inc. (Aeromil) is 80% owned by the Company (see Note 2 to the
Consolidated Financial Statements). Aeromil owns several operating companies
engaged in brokerage of corporate, commuter, and commercial aircraft and spare
parts in international markets.
(v) Equipment Leasing Markets
Within the equipment leasing industry, there are essentially three leasing
markets: the full payout lease, short-term rental, and the mid-term operating
lease. The full payout lease, in which the combined rental payments are
sufficient to cover the lessor's investment and to provide a return on the
investment, is a common form of leasing. This type of lease is sometimes
referred to, and qualifies as, a direct finance lease under United States
generally accepted accounting principles and is accounted for by the lessee as a
purchase of the underlying asset. From the lessee's perspective, the election to
enter into a full payout lease is usually made on the basis of a lease versus
purchase analysis which will take into account the lessee's ability to utilize
the depreciation tax benefits of ownership, its liquidity and cost of capital,
and financial reporting considerations.
Short-term rental lessors direct their services to a user's short-term
equipment needs. This business requires a more extensive overhead commitment in
the form of marketing and operating personnel by the lessor/owner. There is
normally less than full utilization in the lessor's equipment fleet as lessee
turnover is frequent. Lessors usually charge a premium for the additional
flexibility provided through short-term rentals. To satisfy lessee short-term
needs, certain equipment is leased through pooling arrangements or utilization
leases. For lessees, these arrangements can work effectively with respect to
interchangeable equipment such as marine containers, trailers, and marine
vessels. From the lessor's perspective, these arrangements diversify risk.
Operating leases for transportation equipment generally run for a period
of one to six years. Operating lease rates are usually higher than full payout
lease rates, but lower than short-term rental rates. From a lessee's
perspective, the advantages of a mid-term operating lease compared to a full
payout lease are flexibility in its equipment commitment and the fact that the
rental obligation under the lease need not be capitalized on its balance sheet.
The advantage from the lessee's perspective of a mid-term operating lease
compared to a short-term rental, apart from the lower monthly cost, is greater
control over future costs and the ability to balance equipment requirements over
a specific period of time. Disadvantages of the mid-term operating lease from
the lessee's perspective are that the equipment may be subject to significant
changes in lease rates for future periods or will generally be required to be
returned to the lessor at the expiration of the initial lease. Disadvantages
from the lessor's perspective of the mid-term operating lease (as well as the
short-term rental) compared to the full payout lease is that the equipment
generally must be re-leased at the expiration of the initial lease term in order
for the lessor to recover its investment and that re-lease rates are subject to
changes in current market conditions.
PLM International, its subsidiaries, and affiliated investment programs
lease their transportation equipment primarily on mid-term operating leases and
short-term rentals. Many of its leases are net operating leases. In a net
operating lease, expenses such as insurance and maintenance are the
responsibility of the lessee. The effect of entering into net operating leases
is to reduce lease rates as compared to full-service lease rates for comparable
lease terms. However, the overall profitability of net operating leases is more
predictable and less risk is assumed over time as the lessees absorb maintenance
costs which generally increase as equipment ages. Per diem rental agreements are
used mainly on equipment in the Company's trailer and marine container rental
operations. Per diem rentals for the most part require the Company to absorb
maintenance costs which tend to increase as the equipment ages.
AFG leases commercial and industrial equipment primarily on full payout
and mid-term triple net leases to investment-grade companies. AFG also
originates loans where it takes a security interest in the assets. Expenses such
as insurance, taxes and maintenance are the responsibility of the lessee. The
full payout leases AFG originates are classified as finance leases and the
mid-term triple net leases are classified as operating leases. The term of these
leases and loans is generally two to seven years depending on the equipment
type. The lessee enters into full payout leases or mid-term triple net leases
after a lease versus buy analysis where the utilization of the depreciation tax
benefits of ownership, liquidity and cost of capital, financial reporting
considerations, and capital budgeting constraints are evaluated. AFG leases have
an average term of 42 months. Because the assets are subject to leases and loans
to investment-grade companies, in the aggregate the payments represent a
predictable cash stream with lower risk. Although AFG leases a wide range of
commercial and industrial equipment, the lease portfolio was concentrated
primarily in computers, materials handling, and retail store fixtures (including
point-of-sale equipment) at December 31, 1996.
(vi) Management Programs
FSI also has sponsored programs in which the equipment is individually owned by
the program investors. Management agreements, with initial terms ranging from
three to ten years, are typically employed to provide for the management of this
equipment. These agreements require that the Company or one of its subsidiaries
use its best efforts to lease the equipment and to otherwise perform all
managerial functions necessary for the operation of the equipment, including
arranging for maintenance and repair, collection of lease revenues, and
disbursement of operating expenses. Management agreements also require that the
Company correspond with program investors, prepare financial statements and tax
information, and make distributions to investors from available cash. Operating
revenues and expenses for equipment under management agreements are generally
pooled in each program and shared pro rata by the participants. Management fees
are generally received by IMI for these services based on a flat fee per month
per unit of equipment.
(vii) Lessees
Lessees of equipment range from Fortune 2000 companies to small, privately-held
corporations and entities. All (i) equipment acquisitions, (ii) equipment sales,
and (iii) lease renewals relating to equipment having an original cost basis in
excess of $1.0 million must be approved by a Credit Committee. PLM Rental, which
leases equipment primarily on short-term rentals, follows guidelines set by the
Credit Committee in determining the credit worthiness of its respective lessees.
Deposits, prepaid rents, corporate and personal guarantees, and letters of
credit are utilized, when necessary, to provide credit support for lessees who
alone do not have a financial condition satisfactory to the Credit Committee. No
single lessee of the Company's equipment accounted for more than 10% of revenues
for the year ended December 31, 1996 or December 31, 1995.
(viii) Competition
In connection with operating leases for transportation assets, the Company
encounters considerable competition from lessors offering full payout leases on
new equipment. In comparing lease terms for the same equipment, full payout
leases provide longer lease periods and lower monthly rent than the Company
offers. However, lower lease rates can generally be offered for used equipment
under operating leases than can be offered on similar new equipment under a full
payout lease. The shorter length of operating leases also provides lessees with
flexibility in their equipment and capital commitments.
The Company also competes with transportation equipment manufacturers
who offer operating leases and full payout leases. Manufacturers may provide
ancillary services which the Company cannot offer such as specialized
maintenance services (including possible substitution of equipment), warranty
services, spare parts, training, and trade-in privileges.
The Company competes with many transportation equipment lessors,
including ACF Industries, Inc. (Shippers Car Line Division), General Electric
Capital Corporation, Greenbrier Leasing Company, GATX Corporation, XTRA
Corporation, and certain limited partnerships, some of which lease the same type
of equipment.
AFG, which leases new commercial and industrial equipment, competes
with industrial finance companies, regional banks, and money center banks, in
addition to captive and independent leasing companies. This includes, but is not
limited to companies such as General Electric Capital, Caterpillar Financial,
IBM Credit, AT&T Capital, Pitney Bowes, Comdisco, Charter One Bank, First Union
National Bank, Bank of Boston, Signet Bank, ATEL, and Capital Associates. These
companies all offer a wide array of financial products to the lessee which range
from off balance sheet loans and synthetic leases to operating leases and vendor
financing.
(ix) Government Regulations
PLM Securities is registered with the Securities and Exchange Commission (SEC)
as a broker-dealer. As such, it is subject to supervision by the SEC and
securities authorities in each state. In addition, it is a member of the
National Association of Securities Dealers, Inc. and is subject to that entity's
rules and regulations. These rules and regulations govern such matters as
program structure, sales methods, net capital requirements, record-keeping
requirements, trade practices among broker-dealers, and dealings with investors.
Sales of investment programs had to be made in compliance with various
complex federal and state securities laws. Failure to comply with provisions of
these laws, even though inadvertent, could result in investors having rights of
rescission or claims for damages.
The transportation industry, in which the majority of the equipment
owned and managed by the Company operates, has been subject to substantial
regulation by various federal, state, local, and foreign governmental
authorities. For example the Airport Noise and Capacity Act of 1990 generally
prohibits the operation of commercial jets which do not comply with stage III
noise level restrictions at United States airports after December 1999.
Enactments like this could affect the performance of aircraft owned and managed
by the Company. It is not possible to predict the positive or negative effect of
future regulatory changes in the transportation industry.
(x) Employees
As of February 21, 1997, the Company and its subsidiaries had 157 employees.
None of the Company's employees are subject to collective bargaining
arrangements. The Company believes employee relations are good.
ITEM 2. PROPERTIES
At December 31, 1996, the Company owned transportation equipment and related
assets and commercial and industrial equipment originally costing approximately
$180 million. The Company's principal offices are located in leased office space
at One Market, Steuart Street Tower, San Francisco, California. The Company or
its subsidiaries also lease business offices in Boston, Massachusetts; Chicago,
Illinois; and Calgary, Alberta, Canada. In addition, the Company or its
subsidiaries lease trailer and/or storage equipment rental yard facilities in
Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; Houston, Texas; Detroit,
Michigan; Indianapolis, Indiana; Kansas City, Kansas; Miami, Florida; Newark,
New Jersey; Orlando, Florida; and Tampa, Florida. The Company's Aeromil
subsidiary owns office space in Mudjimba, Queensland, Australia.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved as plaintiff or defendant in various legal actions
incident to its business. Management does not believe that any of these existing
actions will be material to the financial condition or, based on historical
trends, to the results of operations of the Company.
In November 1995, a former employee of PLM International (Plaintiff),
filed and served a first amended complaint (the Complaint) in the United States
District Court for the Northern District of California (Case No. C-95-2957 MMC)
against the Company, the PLM International, Inc. Employee Stock Ownership Plan
(the ESOP), the ESOP's trustee, and certain individual employees, officers,
and/or directors of PLM International. The Complaint contains claims for relief
alleging breaches of fiduciary duties and various violations of the Employee
Retirement Income Security Act of 1974 (ERISA) arising principally from
purported defects in the structure, financing, and termination of the ESOP and
for interference with Plaintiff's rights under ERISA. Plaintiff seeks monetary
damages, rescission of the preferred stock transactions with the ESOP and/or
restitution of ESOP assets, and attorneys' fees and costs under ERISA. In
January 1996, PLMI and other defendants filed a motion to dismiss the Complaint
for lack of subject matter jurisdiction, arguing the plaintiff lacked standing.
The motion was granted and on May 30, 1996, the court entered a judgment
dismissing the Complaint for lack of subject matter jurisdiction. Plaintiff has
appealed to the U.S. Court of Appeals for the Ninth Circuit, seeking a reversal
of District Court's judgment. The briefing on this appeal was completed on
February 18, 1997.
The Company along with PLM Financial Services, Inc. (FSI), PLM
Investment Management, Inc. (IMI), PLM Transportation Equipment Corporation
(TEC), and PLM Securities Corp. (PLM Securities), and collectively with PLMI,
FSI, IMI, TEC, and PLM Securities (the "PLM Entities"), were named as defendants
in a class action lawsuit filed in the Circuit Court of Mobile County, Mobile,
Alabama, Case No. CV-97-251. The PLM Entities received service of the complaint
on February 10, 1997, and pursuant to an extension of time granted by
plaintiffs' attorneys, have sixty days to respond to the complaint. The Company
is currently reviewing the substance of the allegations with its counsel, and
believes the allegations to be completely without merit and intends to defend
this matter vigorously.
The plaintiffs, who filed the complaint on their own and on behalf of
all class members similarly situated, are six individuals who allegedly invested
in certain California limited partnerships (the Partnerships) sponsored by PLM
Securities, for which FSI acts as the general partner, including PLM Equipment
Growth Fund IV, PLM Equipment Growth Fund V, PLM Equipment Growth Fund VI, and
PLM Equipment Growth and Income Fund VII. The complaint purports eight causes of
action against all defendants as follows: fraud and deceit, suppression,
negligent misrepresentation and suppression, intentional breach of fiduciary
duty, negligent breach of fiduciary duty, unjust enrichment, conversion, and
conspiracy. Additionally, plaintiffs allege a cause of action for breach of
third party beneficiary contracts against and in violation of the NASD rules of
fair practice by PLM Securities alone.
Plaintiffs allege that each defendant owed plaintiffs and the class
certain duties due to their status as fiduciaries, financial advisors, agents,
general partner, and control persons. Based on these duties, plaintiffs assert
liability against the PLM Entities for improper sales and marketing practices,
mismanagement of the Partnerships, and concealing such mismanagement from
investors in the Partnerships. Plaintiffs seek unspecified compensatory and
recissory damages, as well as punitive damages, and have offered to tender their
limited partnership units back to the defendants.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades (under the ticker symbol "PLM") on the
American Stock Exchange (AMEX). As of the date of this annual report, there are
9,209,431 common shares outstanding and approximately 8,525 shareholders of
record.
Table 3, below, sets forth the high and low prices of the Company's
common stock for 1996 and 1995 as reported by the AMEX: TABLE 3
<TABLE>
<CAPTION>
Calendar Period High Low
------------------- --------- ---------
1996
<S> <C> <C>
1st Quarter $ 3.875 $ 3.250
2nd Quarter $ 3.813 $ 3.250
3rd Quarter $ 3.563 $ 3.188
4th Quarter $ 3.500 $ 2.875
1995
1st Quarter $ 3.687 $ 2.563
2nd Quarter $ 3.563 $ 2.750
3rd Quarter $ 4.125 $ 2.875
4th Quarter $ 4.000 $ 2.875
</TABLE>
In February 1995, the Company announced that its Board of Directors
authorized the repurchase of up to $0.5 million of the Company's common stock.
The shares could be purchased either in the open market or through private
transactions with working capital and existing cash reserves. Shares repurchased
could be used for corporate purposes, including option plans, or they could be
retired. The Company purchased 146,977 shares under this program for $0.5
million in 1995.
In November 1995, the Company authorized the repurchase of up to $5.0
million of the Company's common stock and, pursuant to such authorization, in
1995 the Company repurchased 735,196 shares in private transactions for $2.6
million.
During 1996, the Company repurchased 1.7 million shares of its common
stock for $6.5 million. These repurchases completed the $5.0 million common
stock repurchase program announced in November 1995, as well as an additional
repurchase of $3.7 million authorized by the Company's Board of Directors in
July 1996.
Additional future repurchases may be made in the open market or
through private transactions.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SUMMARY OF SELECTED FINANCIAL DATA
Years Ended December 31,
(in thousands except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------------------------------------------------------------------------------
Results of Operations:
<S> <C> <C> <C> <C> <C>
Revenue $ 51,545 $ 60,073 $ 53,715 $ 67,431 $ 38,797
Income (loss) before income taxes $ 3,893 $ 7,868 $ (5,579 ) $ 7,737 $ (33,918 )
Net income (loss) before cumulative
effect of accounting change $ 4,095 $ 6,048 $ (1,511 ) $ 6,282 $ (18,231 )
Cumulative effect of accounting change $ -- $ -- $ (5,130 ) $ -- $ --
Net income (loss) to common shares $ 4,095 $ 6,048 $ (9,071 ) $ 1,432 $ (25,271 )
Per common share:
Net income (loss) $ 0.40 $ 0.51 $ (0.73 ) $ 0.14 $ (2.41 )
Financial position:
Total assets $ 198,749 $ 126,213 $ 140,372 $ 217,720 $ 255,404
Long-term recourse debt 43,618 $ 47,853 $ 60,119 $ 129,119 $ 171,470
Long-term nonrecourse debt $ 45,392 $ -- $ -- $ -- --
Shareholders' equity $ 46,320 $ 48,620 $ 45,695 $ 51,133 $ 44,719
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Comparison of the Company's Operating Results for the Years Ended December 31,
1996 and 1995
The Company owns a diversified portfolio of transportation equipment from which
it earns operating lease revenue and incurs operating expenses. The Company's
transportation equipment held for operating leases, which consists of aircraft,
marine containers, trailers, and storage equipment at December 31, 1996, is
mainly equipment built prior to 1988. As equipment ages, the Company continues
to monitor the performance of its assets on lease and current market conditions
for leasing equipment in order to seek the best opportunities for investment.
Failure to replace equipment may result in shorter lease terms and higher costs
of maintaining and operating aged equipment, and, in certain instances, limited
remarketability.
The Company has syndicated investment programs from which it earns
various fees and equity interests. The Professional Lease Management Income Fund
I (Fund I) was structured as a limited liability company with a no front-end fee
structure. The previously syndicated limited partnership programs allowed the
Company to receive fees for the acquisition and initial lease of the equipment.
The Fund I program does not provide for acquisition and lease negotiation fees.
The Company invests the equity raised through syndication in transportation
equipment which is then managed on behalf of the investors. The equipment
management activities for these types of programs generate equipment management
fees for the Company over the life of the program, typically 10 to 12 years. The
limited partnership agreements generally entitle the Company to receive a 1% or
5% interest in the cash distributions and earnings of the partnership subject to
certain allocation provisions. The Fund I agreement entitles the Company to a
15% interest in the cash distributions and earnings of the program subject to
certain allocation provisions which will increase to 25% after the investors
have received distributions equal to their original invested capital.
On May 14, 1996, the Company announced the suspension of
public syndication of equipment leasing programs with the May 13, 1996 close of
Fund I. As a result of this decision, revenues earned from managed programs
which include management fees, partnership interests and other fees, and
acquisition and lease negotiation fees will be reduced in the future as the
older programs begin liquidation and the managed equipment portfolio becomes
permanently reduced.
The Company is engaged in the funding and management of longer-term
direct finance leases, operating leases, and loans through its AFG subsidiary.
Master lease agreements are entered into with predominately investment-grade
lessees and serve as the basis for marketing efforts. The underlying assets
represent a broad range of commercial and industrial equipment, such as data
processing, communications, materials handling, and construction equipment. This
is an important new growth area for the Company. The investment in AFG permits
the Company to apply much of the same accounting, finance, and management
experience gained from its many years in the transportation sector. Through AFG,
the Company is also engaged in the management of an institutional leasing
investment program for which it originates leases and receives acquisition and
management fees.
The following analysis summarizes the operating results of the Company:
Revenue:
<TABLE>
<CAPTION>
1996 1995
----------------------------
(in thousands)
<S> <C> <C>
Operating leases $ 18,180 $ 23,919
Management fees 10,971 11,197
Partnership interests and other fees 3,811 4,978
Acquisition and lease negotiation fees 6,610 6,659
Finance lease income 4,186 --
Commissions -- 1,322
Aircraft brokerage and services 2,903 5,022
Gain on the sale or disposition of assets, net 2,282 4,912
Other 2,602 2,064
------------------------------
Total revenues $ 51,545 $ 60,073
</TABLE>
<PAGE>
The fluctuations in revenues for 1996 from 1995 are summarized and
explained below.
Operating lease revenue:
<TABLE>
<CAPTION>
1996 1995
----------------------------
(in thousands)
<S> <C> <C>
By equipment type:
Trailers $ 8,004 $ 10,582
Aircraft 4,444 6,465
Marine vessels -- 1,304
Mobile offshore drilling unit 123 --
Marine containers 392 635
Storage equipment 1,076 1,056
Railcars 99 1,584
Commercial and industrial equipment 4,042 2,293
-------------------------------
$ 18,180 $ 23,919
</TABLE>
As of December 31, 1996, the Company owned transportation equipment held for
operating leases or held for sale with an original cost of $74.6 million, which
was $39.1 million less than the original cost of equipment owned and held for
operating leases or held for sale at December 31, 1995. The reduction in
equipment, on an original cost basis, is a consequence of the Company's
strategic decision to dispose of certain underperforming transportation assets
resulting in a 100% reduction in its marine vessel fleet and railcar portfolio,
a 34% net reduction in its marine container portfolio, a 67% net reduction in
its aircraft portfolio, and a 12% net reduction in its trailer portfolio,
compared to 1995. The reduction in equipment available for lease is the primary
reason marine vessel, railcar, trailer, marine container, and aircraft revenues
were all reduced as compared to the prior year. In addition, trailer lease
revenue decreased due to lower utilization. Mobile offshore drilling unit (rig)
revenue increased $0.1 million in 1996 due to the purchase of the rig held for
sale to an affiliated program during the fourth quarter of 1996.
The decrease in operating lease revenues as a result of the reduction in
transportation equipment available for lease was partially offset by a $1.7
million increase in operating lease revenues generated by commercial and
industrial equipment leases on $15.9 million of purchased equipment retained and
revenues generated on leased equipment purchased for $30.7 million prior to
being sold to third parties.
Management fees:
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. Management fees were $11.0 million for
1996, compared to $11.2 million in 1995. Although management fees related to
Fund I and management fees related to the institutional leasing investment
program managed by the Company's AFG subsidiary increased, management fees from
the remaining older programs decreased due to a net decrease in managed
equipment, a decrease in lease rates for certain types of equipment in those
programs and the elimination of management of the Equis programs. With the
termination of syndication activities, management fees are expected to decrease
in the future as older programs begin liquidation and the managed equipment
portfolio becomes permanently reduced. This future decrease will be offset, in
part, by increased management fees earned from the institutional leasing
investment program managed by the Company's AFG subsidiary.
Partnership interests and other fees:
The Company records as revenues its equity interest in the earnings of
the Company's affiliated programs. The net earnings and distribution levels from
the affiliated programs were $2.7 million and $3.3 million for the years ended
December 31, 1996 and 1995, respectively. In addition, net increases of $0.8
million and $1.7 million in the Company's recorded residual values were recorded
during the years ended December 31, 1996 and 1995, respectively. In 1996, the
equity interest recorded was impacted by $1.8 million in residual income
recorded for Fund I equipment purchases, offset partially by decreases in
residual values related to dispositions of equipment in certain of the Equipment
Growth Funds. In 1995, the equity interest recorded was impacted by $2.2 million
in residual income recorded for Fund I equipment purchases, and $0.9 million in
residual income from the Equis programs, offset partially by a decrease in
residual income related to other existing programs. Residual income is
recognized on residual interests based upon the general partners' share of the
present value of the estimated disposition proceeds of the equipment portfolios
of the affiliated partnerships. Net decreases in the recorded residual values
result when partnership assets are sold and the reinvestment proceeds are less
than the original investment in the sold equipment. In 1996, the Company also
earned $0.3 million in liquidation sales fees for the sales of managed
equipment.
Acquisition and lease negotiation fees:
During the year ended December 31, 1996, a total of $105.7 million of equipment
was purchased on behalf of the Equipment Growth Funds compared to $100.0 million
during 1995, resulting in a $0.3 million increase in acquisition and lease
negotiation fees. This increase was offset by a $0.3 million decrease in
acquisition and lease negotiation fees related to AFG purchases for managed
programs. As a result of the Company's decision to suspend syndication of
equipment leasing programs with the close of Fund I on May 13, 1996, and because
Fund I had a no front-end fee structure, acquisition and lease negotiation fees
will be substantially reduced in the future.
Finance lease income:
The Company earns finance lease income for certain leases originated by
its AFG subsidiary which are either retained for long-term investment or sold to
third parties or to an institutional leasing investment program. During 1996,
the Company earned direct finance lease income on average equipment purchases of
$37.6 million, financed by both short-term secured debt and a nonrecourse
securitization facility. These direct finance leases resulted in $4.2 million in
earned income for 1996, which represented income earned on the lease payment
stream. There were no similar transactions in 1995.
Commissions:
Commission revenue represents syndication placement fees, generally 9%
of equity raised for the Equipment Growth Funds, earned upon the sale of
partnership units to investors. During 1996, there was no program equity raised
for the Equipment Growth Funds compared to $14.6 million of equity raised during
1995, resulting in a $1.3 million decrease in placement commissions. The Company
closed EGF VII syndication activities on April 30, 1995. As a result of the
Company's decision to suspend syndication of equipment leasing programs on May
14, 1996, and because Fund I had a no front-end fee structure, commission
revenue has been eliminated since the close of EGF VII.
Aircraft brokerage and services:
Aircraft brokerage and services revenue, which represents revenue
earned by Aeromil Holdings, Inc. (Aeromil), the Company's aircraft leasing and
spare parts brokerage subsidiary, decreased $2.1 million in 1996, from 1995. The
decrease was attributable to the sale of the subsidiary's ownership interest in
Aeromech Pty. Ltd. and Austin Aero FBO Ltd. to third parties in December 1995
and January 1996, respectively.
Gain on the sale or disposition of assets, net:
The $3.0 million in net gains recorded during 1996 resulted mainly from
the sale or disposition of 8 commuter aircraft, 2 commercial aircraft, 267
marine containers, 85 railcars, 157 storage units, and 525 trailers and from
$0.9 million in gains related to AFG equipment sales. Gains for 1996 were
partially offset by adjustments totaling $0.7 million to write down the net book
value of certain commuter aircraft ($0.4 million) and certain trailers ($0.3
million) to their estimated market value. A $5.6 million net gain was recorded
during the year ended December 31, 1995 which included gains from the sale of 3
option contracts for railcar equipment and the disposition of 1 marine vessel,
645 marine containers, 2 commercial aircraft, 2 commuter aircraft, 4
helicopters, 318 railcars, 37 storage equipment units, and 525 trailers.
Additionally during 1995, the Company purchased and sold 3 off-lease commuter
aircraft for an aggregate gain of $0.5 million, net of selling costs, and
adjustments totaling $1.2 million were recorded to write down the net book value
of certain aircraft to their estimated market value.
Other:
Other revenues increased $0.5 million in the year ended December 31,
1996, from 1995, due to increased underwriting income, brokerage fees, and
financing income.
<PAGE>
Costs, Expenses, and Other:
<TABLE>
<CAPTION>
1996 1995
----------------------------
(in thousands)
<S> <C> <C>
Operations support $ 21,795 $ 26,001
Depreciation and amortization 11,318 8,616
Commissions -- 1,416
General and administrative 7,756 10,539
Interest expense 7,341 7,110
Interest income 1,228 1,973
Other expense, net 670 496
</TABLE>
Operations support:
Operations support expense (including salary and office-related
expenses for operational activities, provision for doubtful accounts, equipment
insurance, repair and maintenance costs, costs of goods sold, and equipment
remarketing costs) decreased $4.2 million (16%) for the year ended 1996, from
1995. The decrease resulted from a $1.7 million decrease in operating, cost of
sales, and repair and maintenance costs due to the sale of the Company's
transportation equipment and due to the sale of the Company's ownership
interests in Aeromech Pty. Ltd. and Austin Aero FBO Ltd. to third parties in
December 1995 and January 1996, respectively, a $5.0 million decrease in
compensation and bonus expense due to headcount reductions, and higher
compensation expense in 1995 (primarily to compensate employees for lost
benefits resulting from the termination of the 401(k) plan during 1995), offset
partially by a one-time $1.4 million charge related to the termination of
syndication activities, a $0.3 million increase in bad debt expense, and a $0.8
million decrease in allocated expenses to the Equis programs (as the Company is
no longer managing these programs) in 1996.
Depreciation and amortization:
Depreciation and amortization expense increased $2.7 million (31%) for
the year ended 1996, as compared to 1995. The increase resulted from
amortization of costs associated with AFG and depreciation of AFG assets held
for operating leases and administrative assets, offset partially by the
reduction in depreciable equipment discussed in the operating lease revenue
section.
Commissions:
Commission expenses are incurred by the Company primarily in connection
with the syndication of investment partnerships and represented payments to
brokers and financial planners for sales of investment program units. Commission
expenses for 1996 decreased $1.4 million (100%) from 1995. The reduction is the
result of no syndicated equity raised for the Equipment Growth Funds during
1996, versus $14.6 million in syndicated equity raised for the Equipment Growth
Funds during 1995. Commission costs related to Fund I were capitalized as part
of the Company's investment in the program. With the termination of syndication
activities, there will be no more commission costs incurred in the future.
General and administrative:
General and administrative expenses decreased $2.8 million (26%) during
the year ended 1996, compared to 1995. The decrease resulted from a $1.0 million
decrease in compensation expenses primarily related to terminated employees and
lower 1996 bonus expense (primarily related to the compensation of employees
during 1995 for lost benefits resulting from the termination of the 401(k)
plan), a $0.3 million decrease in estimated accruals, a $0.7 million decrease in
professional services expenses, and a $0.8 million decrease in administrative
expenses.
Interest expense:
Interest expense increased $0.2 million (3%) during the year ended
1996, compared to 1995, mainly due to an increase in borrowings on the
nonrecourse securitization facility, the new senior secured notes facility, and
the short-term equipment acquisition loan facility, offset partially by the
retirement of the subordinated debt and the $10.0 million reduction of the
senior secured loan.
<PAGE>
Interest income:
Interest income decreased $0.7 million (38%) in the year ended December
31, 1996, compared to 1995 from a reduction in interest income earned on the
Employee Stock Ownership Plan (ESOP) cash collateral account due to the
termination of the Company's ESOP and due to a decrease in interest income as a
result of lower average cash balances in 1996 compared to 1995.
Other expense, net:
Other expense, net was $0.7 million during the year ended December 31, 1996,
compared to $0.5 million in 1995. During 1996, the Company prepaid the remaining
$8.6 million balance of its subordinated debt and $10.0 million of its senior
secured loan and wrote off the associated loan fees and incurred prepayment
penalties totaling $1.0 million, which were partially offset by other income of
$0.4 million due to the sale of 32 wind turbines in 1996 which had previously
been written off. Other expense, net was $0.5 million in the year ended December
31, 1995 due mainly to loan fees of $1.1 million related to the early retirement
of $11.5 million of the Company's subordinated debt, offset partially by
collection of an account receivable that had previously been written off.
Income taxes:
The Company recognized a benefit for income taxes in 1996 of $0.2 million that
was the result of several items of a non-recurring nature. These items included
adjustments that reduced income tax expense relating to 1) differences between
the amount recognized in the 1995 financial statements and the 1995 tax return
as filed, and 2) changes in state tax apportionment factors used to record
deferred taxes. In both 1996 and 1995, the Company's income tax rate included
the benefit of certain income earned from foreign activities which has been
permanently invested (see Note 13 to the consolidated financial statements.) For
1995, the provision for income taxes was $1.8 million, which represented an
effective rate of 23%.
Net income:
As a result of the foregoing, year ended 1996 net income was $4.1
million resulting in net income per common share of $0.40. For the year ended
1995, net income was $6.0 million resulting in net income per common share of
$0.51.
Comparison of the Company's Operating Results for the Years Ended December 31,
1995 and 1994
The following analysis reviews the operating results of the Company:
Revenue:
<TABLE>
<CAPTION>
1995 1994
----------------------------
(in thousands)
<S> <C> <C>
Operating leases $ 23,919 $ 28,748
Management fees 11,197 11,189
Partnership interests and other fees 4,978 3,101
Acquisition and lease negotiation fees 6,659 4,223
Commissions 1,322 4,939
Aircraft brokerage and services 5,022 4,624
Gain (loss) on the sale or disposition of assets, net 4,912 (4,411 )
Other 2,064 1,302
------------------------------
Total revenues $ 60,073 $ 53,715
</TABLE>
<PAGE>
Each component is explained below.
Operating lease revenue:
<TABLE>
<CAPTION>
1995 1994
----------------------------
(in thousands)
By equipment type:
<S> <C> <C>
Trailers $ 10,582 $ 14,268
Aircraft 6,465 9,319
Marine vessels 1,304 3,211
Marine containers 635 941
Storage equipment 1,056 749
Railcars 1,584 260
Commercial and industrial equipment 2,293 --
-------------------------------
$ 23,919 $ 28,748
</TABLE>
As of December 31, 1995, the Company owned transportation equipment
held for operating leases or held for sale with an original cost of $113.6
million, which was $57.9 million less than the original cost of equipment owned
and held for operating leases or held for sale at December 31, 1994. The
reduction in equipment, on an original cost basis, is a consequence of the
Company's strategic decision to dispose of certain underperforming and
nonperforming assets resulting in a 100% reduction in its marine vessel fleet, a
54% net reduction in its marine container portfolio, a 29% net reduction in its
aircraft portfolio, a 13% net reduction in its trailer portfolio, a 6% net
reduction in its storage equipment portfolio, and a 93% reduction in its railcar
portfolio compared to 1994. Operating lease revenue was also impacted by the
level of assets held for sale and AFG lease originations which earned lease
revenue for short-term periods before sale in 1995.
The reduction in equipment available for lease is the primary reason
marine vessel, trailer, marine container, and aircraft revenues were all reduced
as compared to the prior year. The decrease in operating lease revenues as a
result of the reduction in equipment available for lease was partially offset by
a $2.3 million increase in operating lease revenues generated by AFG-related
leases, a $1.3 million increase in railcar lease revenues, and a $0.3 million
increase in storage equipment revenues. The increase in railcar revenue of $1.3
million for the year ended 1995 is comprised primarily of revenues on railcars
acquired by the Company of which the majority had been sold to both affiliated
programs and third parties as of December 31, 1995. Storage equipment revenue
increased $0.3 million for the year ended December 31, 1995, compared to 1994,
due to additions of $0.6 million in new storage equipment during the fourth
quarter of 1994.
Management fees:
<TABLE>
<CAPTION>
Year
Liquidation
1995 1994 Phase Begins
---------------------------------------------
(in thousands)
Management fees by program were:
<S> <C> <C> <C>
EGF I $ 1,318 $ 1,482 1998
EGF II 818 1,153 1999
EGF III 1,137 1,788 2000
EGF IV 1,064 1,183 1999
EGF V 1,767 2,097 2001
EGF VI 1,775 1,760 2002
EGF VII 971 500 2004
Fund I 343 -- 2005
AFG programs 1,483 -- --
Other programs 521 1,226 --
---------------------------
$ 11,197 $ 11,189
</TABLE>
The original cost of the equipment under management, excluding
equipment managed under the Equis programs, amounted to $1.11 billion and $1.07
billion at December 31, 1995 and 1994, respectively. Management fees were $11.2
million in both 1995 and 1994. Although management fees generated by gross
revenues from the Equipment Growth Funds and other programs decreased $1.8
million in 1995 from 1994 due to net decreases in managed equipment and a
decrease in lease rates for certain types of equipment, these decreases were
offset by a $1.5 million increase from the January 1995 agreement with Equis to
provide management services to their existing investor programs and from a $0.3
million increase in management fees generated by the Fund I program.
Partnership interests and other fees:
The Company records as revenues its equity interest in the earnings of
the Company's affiliated partnerships. The net earnings and distribution levels
from the affiliated partnerships were $3.3 million and $3.6 million for the
years ended December 31, 1995 and 1994, respectively. In addition, a net
increase in the Company's recorded residual values of $1.7 million and a net
decrease of $0.7 million were recorded during the years ended December 31, 1995
and 1994, respectively. In 1995, the equity interest recorded was impacted by
net increases of $1.7 million in the Company's recorded residual values which
included $2.2 million in residual income recorded for Fund I equipment
purchases, and $0.9 million in residual income from the Equis programs, offset
partially by a decrease in residual income related to other existing programs. A
$0.7 million net decrease in residual values was recorded for the same period in
1994. Residual income is recognized on residual interests based upon the general
partners' share of the present value of the estimated disposition proceeds of
the equipment portfolios of the affiliated partnerships. Net decreases in the
recorded residual values result when partnership assets are sold and the
reinvestment proceeds are less than the original investment in the sold
equipment. During the year ended December 31, 1994, the Company also recorded
$0.2 million in debt financing fees earned for debt placed in affiliated
partnerships.
Acquisition and lease negotiation fees:
During the year ended December 31, 1995, a total of $100.0 million of equipment
was purchased on behalf of the Equipment Growth Funds compared to $78.2 million
during 1994, resulting in a $1.2 million increase in acquisition and lease
negotiation fees. In addition, $1.2 million in acquisition and lease negotiation
fees were generated by AFG-related purchases during the year ended December 31,
1995. There were no AFG-related transactions during 1994.
Commissions:
Commission revenue represents syndication placement fees, generally 9%
of equity raised for the Equipment Growth Funds, earned upon the sale of
partnership units to investors. During 1995, program equity raised for the
Equipment Growth Funds totaled $14.6 million compared to $55.2 million during
1994, resulting in a $3.6 million decrease in placement commissions. The Company
closed EGF VII syndication activities on April 30, 1995.
Aircraft brokerage and services revenue:
Aircraft brokerage and services revenue increased $0.4 million during
1995, compared to 1994. The increase represents revenue earned by Aeromil, the
Company's aircraft leasing and spare parts brokerage subsidiary.
Gain (loss) on the sale or disposition of assets, net:
A $5.6 million net gain recorded during the year ended December 31,
1995 included gains from the sale of 3 option contracts for railcar equipment
and the disposition of 1 marine vessel, 645 marine containers, 2 commercial
aircraft, 2 commuter aircraft, 4 helicopters, 318 railcars, 37 storage equipment
units, and 525 trailers. Additionally during 1995, the Company purchased and
sold 3 off-lease commuter aircraft for an aggregate gain of $0.5 million, net of
selling costs, and recorded adjustments totaling $1.2 million to reduce the
estimated net realizable value of certain aircraft. A $0.2 million net loss for
the same period in 1994 resulted from the sale or disposition of trailers and
marine containers, partially offset by net gains on the sale of 11 aircraft and
1 marine vessel. Additionally during 1994, the Company recorded adjustments to
the estimated net realizable values of certain equipment totaling $4.2 million
consisting of certain aircraft ($2.1 million), trailers ($1.1 million), storage
vaults ($0.2 million), containers ($0.1 million), and 1 marine vessel ($0.7
million).
<PAGE>
Other:
Other revenues increased $0.8 million in the year ended December 31,
1995, from 1994, due to an increase in revenue earned for data processing
services provided to the Company's affiliated programs.
Costs, Expenses, and Other:
<TABLE>
<CAPTION>
1995 1994
----------------------------
(in thousands)
<S> <C> <C>
Operations support $ 26,001 $ 23,510
Depreciation and amortization 8,616 12,135
Commissions 1,416 5,192
General and administrative 10,539 10,366
Interest expense 7,110 9,777
Interest income 1,973 3,744
Other expense, net 496 2,058
</TABLE>
Operations support:
Operations support expense (including salary and office-related
expenses for operational activities, provision for doubtful accounts, equipment
insurance, repair and maintenance costs, and equipment remarketing costs)
increased $2.5 million (11%) for the year ended 1995, from 1994. The increase
resulted from $5.5 million in costs associated with the operation of AFG, a $1.1
million increase in Aeromil expenses due to higher operational expenses in the
current year, a $0.4 million increase in accrued compensation expense primarily
to compensate employees for lost benefits resulting from the termination of the
Company's 401(k) plan, and a $0.2 million increase in accrued severances due to
employee terminations, offset partially by a $2.5 million decrease in operating
costs and repair and maintenance expenses due to the sale of the entire owned
marine vessel portfolio and other equipment, a $0.6 million decrease in expenses
absorbed by the Company for rental yard operations due to the sale of trailers
in 1994 and 1995, a $0.7 million decrease in the provision for bad debts, and a
$0.9 million decrease in compensation expenses booked in 1994 related to the
adoption of Statement of Position 93-6 "Employers' Accounting for Employee Stock
Ownership Plans" (SOP 93-6).
Depreciation and amortization:
Depreciation and amortization expense decreased $3.5 million (29%) for
the year ended 1995, as compared to 1994. The decrease resulted from the
reduction in depreciable equipment discussed in the operating lease revenue
section.
Commissions:
Commission expenses are incurred by the Company primarily in connection
with the syndication of investment partnerships and represent payments to
brokers and financial planners for sales of investment program units.
Commissions were also paid to certain of the Company's employees directly
involved in syndication and leasing activities. Historically, commission costs
related to the Equipment Growth Funds were expensed as incurred. Since
syndication efforts related to EGF VII ended, commission expense for the year
ended December 31, 1995 decreased $3.8 million (73%) from 1994. Commission costs
related to Fund I were capitalized as part of the Company's investment in the
Fund I program as equity was raised for Fund I and commissions were paid.
General and administrative:
General and administrative expenses increased $0.2 million (2%) during
the year ended 1995, compared to 1994. The increase resulted from a $0.4 million
increase in accrued compensation expense primarily to compensate employees for
lost benefits resulting from the termination of the Company's 401(k) plan and
for severance pay to terminated employees of the Company, offset partially by a
decrease in amortized fees booked in the prior year related to the Employee
Stock Ownership Plan (ESOP).
<PAGE>
Interest expense:
Interest expense decreased $2.7 million (27%) during the year ended
1995, compared to 1994, due to the reduction in senior and subordinated debt
levels in 1995 from 1994, partially offset by increased interest rates.
Interest income:
Interest income decreased $1.8 million (47%) in the year ended December
31, 1995, compared to 1994 from a reduction in interest income earned on the
ESOP cash collateral account which existed prior to the ESOP's termination at
the end of 1994.
During 1994, the Company elected to adopt SOP 93-6 which had a
significant impact on the Company's presentation of interest income, income
taxes, and preferred dividends. SOP 93-6 required the change in accounting
principle to be reflected as of January 1, 1994 (refer to Note 15 to the
Consolidated Financial Statements).
Other expense, net:
Other expense, net was $0.5 million in the year ended December 31, 1995
due mainly to loan fees of $1.1 million related to the early retirement of $11.5
million of the Company's subordinated debt, offset partially by collection of an
account receivable from a previously bankrupt debtor. For 1994, other expense,
net of $2.1 million, was due to the write-off of unamortized loan fees related
to the termination of the Company's ESOP and a reduction in the carrying value
of certain marketable securities.
Income taxes:
For the year ended December 31, 1995, the provision for income taxes was $1.8
million, which represented an effective rate of 23%. For 1994, the $4.1 million
tax benefit reflected the benefit for the Company's losses and the tax benefit
on the ESOP dividend.
Cumulative effect of accounting change:
The adoption of SOP 93-6 in 1994 resulted in a noncash charge to
earnings of $5.1 million for the impact of the change in accounting principle
and is reflected as the "Cumulative effect of accounting change" in the
Consolidated Statements of Operations.
Net income (loss):
As a result of the foregoing, year ended 1995 net income was $6.0
million resulting in net income per common share of $0.51. For the year ended
1994, net loss was $6.6 million. In addition, $2.4 million was required in 1994
for the imputed preferred dividend allocated to ESOP shares, resulting in a $9.1
million net loss to common shareholders, or a $0.73 loss per common share
outstanding.
<PAGE>
Liquidity and Capital Resources
Cash requirements historically have been satisfied through cash flow from
operations, borrowings, or sales of transportation equipment.
Liquidity beyond 1996 will depend, in part, on continued remarketing of
the equipment portfolio at similar lease rates, management of existing sponsored
programs, effectiveness of cost control programs, possible additional equipment
sales, and the volume of commercial and industrial equipment leasing
transactions for which the Company earns fees and a spread. Management believes
the Company can accomplish the preceding and will have sufficient liquidity and
capital resources for the future. Specifically, future liquidity is influenced
by the following:
(a) Debt Financing:
Senior Debt: The Company's $25.0 million senior loan with a syndicate of
insurance companies provides that equipment sale proceeds from pledged equipment
or cash deposits be placed into collateral accounts or used to purchase
additional equipment to the extent required to meet certain debt covenants. As
of December 31, 1996, the cash collateral balance was $13.2 million. The
facility requires quarterly interest only payments through March 31, 1997, with
quarterly principal payments of $1.5 million plus interest charges beginning
June 30, 1997, through termination of the loan in June 2001.
Senior Notes: On June 28, 1996, the Company closed a floating rate senior
secured note agreement which allows the Company to borrow up to $27.0 million
within a one year period. The facility bears interest at LIBOR plus 240 basis
points. As of February 21, 1997, the Company had borrowed $18.0 million under
this agreement. The Company has pledged substantially all of its management,
acquisition and lease negotiation fees, data processing fees, and certain
partnership distributions as collateral to the facility. The facility requires
quarterly interest only payments through August 15, 1997, with principal plus
interest payments beginning November 15, 1997. Principal payments are payable
quarterly in 20 equal amounts through termination of the loan on August 15,
2002.
Bridge Financing: Assets acquired and held on an interim basis for
placement with affiliated partnerships or purchased for placement in the
Company's securitization facility have, from time to time, been partially funded
by a $50.0 million short-term equipment acquisition loan facility. During 1996,
the availability of this facility was extended until October 31, 1997.
This bridge facility, which is shared with Equipment Growth Funds
(EGFs) IV, V, VI, VII, and Fund I, allows the Company to purchase equipment
prior to the designated program or partnership being identified. This facility
provides 80% financing for transportation assets and the lesser of 100% of the
present value of the lease stream or 85% of the original equipment cost on
assets purchased for placement in a securitization facility, if the Company is
the borrower and working capital is used for the nonfinanced costs of these
acquisitions. The Company can hold transportation assets under this bridge
facility for up to 150 days. Assets to be transferred to the securitization
facility have no preset time limit. Interest accrues at prime or LIBOR plus 2.0%
at the option of the borrower at the time of the advance under the facility. The
Company retains the difference between the net lease revenue earned and the
interest expense during the interim holding period since its capital is at risk.
As of February 21, 1997, the Company had $41.9 million in borrowings, and EGF V
had $1.5 million in outstanding borrowings under this facility.
Securitized Debt: The Company has available a securitization facility for up to
$80.0 million on a nonrecourse basis secured by direct finance leases, operating
leases and loans which generally have terms of two to seven years. The facility
is available for a one year period expiring July 1997. Repayment of the facility
matches the terms of the underlying leases. The securitized debt bears interest
equivalent to average U.S. treasury rates plus 1%. As of February 21, 1997,
there were $47.7 million in borrowings outstanding under this facility.
Interest Rate Swap Contracts: The Company has entered interest rate swap
agreements in order to manage the interest rate exposure associated with its
securitized debt. The swap agreements have remaining terms averaging 4.7 years,
corresponding to the terms of the related debt. Under the agreements, the
Company makes payments to counterparties at fixed rates and in return receives
payments based on variable rates indexed to LIBOR. At December 31, 1996, a
notional amount of $47.8 million of interest rate swap agreements effectively
fixed interest rates between 7.42% and 8.67% on such obligations. Interest
expense was increased by $76,000 due to these arrangement in 1996. The notional
amounts of the swaps do not represent amounts exchanged between the parties and,
therefore, are not a measure of the Company's exposure resulting from its use of
the swaps. Rather, the amounts exchanged are based on interest rates applied to
the notional amounts.
(b) Portfolio Activities:
During 1996, the Company generated proceeds of $19.5 million from the sale of
owned transportation equipment. These net proceeds were placed in a collateral
account as required by the senior loan facility agreement. During 1996, $17.3
million in funds were released to the Company from the cash collateral account
relating to asset sales in 1996 and 1995. On October 1, 1996, $10.0 million of
the released collateral was used to pay down all of the floating rate portion of
its senior loan. The remaining released collateral was used for general
corporate purposes. The funds were released based on the appraised fair market
value of the equipment portfolio and the related collateral coverage ratio. As
of December 31, 1996, $13.2 million was on deposit in the cash collateral
account.
Over the last four years, the Company has downsized its
transportation equipment portfolio through the sale or disposal of
underperforming and nonperforming assets. The Company will continue to identify
underperforming and nonperforming assets for sale or disposal as necessary.
(c) Syndication Activities:
On May 14, 1996, the Company's Board of Directors approved the
suspension of syndication of transportation equipment leasing programs effective
with the May 13, 1996 close of its then current offering, Professional Lease
Management Income Fund I. The Company will no longer be required to fund the
front-end investment requirement of this no front-end fee structured program.
From May 1995 through May 13, 1996, Fund I raised $100 million in equity
investment from the public. The Company recognized a one-time $1.4 million
charge in the second quarter of 1996 mainly related to employee severance pay
associated with this decision to suspend syndication activities.
The Company earned fees from syndication activities related to
EGF VII during the first four months of 1995. Total equity raised for this
partnership was $107.4 million through April 30, 1995, when the program closed.
There will be no more equity raised for this partnership.
(d) Commercial and Industrial Equipment Leasing Activities:
The Company earns finance lease or operating lease income for leases originated
and retained by its AFG subsidiary. The funding of leases requires the Company
to retain an equity interest in all leases financed through the securitization
facility. AFG also originates loans where it takes a security interest in the
assets. Lease and loan originations funded through February 21, 1997, equal
$155.2 million, on an original equipment cost basis. A portion of these
transactions has been financed, on an interim basis, through the Company's
bridge financing facility. Some equipment subject to leases is sold to an
institutional leasing investment program for which the Company serves as the
manager ($31.2 million) or to third parties ($25.1 million). Acquisition fees
and management fees are received for the sale and subsequent management of these
leases. The Company believes this lease origination operation is a growth area
for the future.
Management believes that through debt and equity financing,
possible sales of transportation equipment, and cash flows from operations, the
Company will have sufficient liquidity and capital resources to meet its
projected future operating needs.
Inflation
There was no significant impact on the Company's operations as a result of
inflation during 1996, 1995, or 1994.
Geographic Information
For a discussion of the geographic information, refer to Note 19 to the
Consolidated Financial Statements.
New Accounting Pronouncements
For a discussion of the impact of new accounting pronouncements, refer to Note 1
to the Consolidated Financial Statements.
<PAGE>
Forward Looking Information
Except for historical information contained herein, the discussion in this Form
10-K contains forward-looking statements that involve risks and uncertainties,
such as statements of the Company's plans, objectives, expectations and
intentions. The cautionary statements made in this Form 10-K should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-K. The Company's actual results could differ materially from
those discussed here.
Trends
The Company continues to seek opportunities for new businesses, markets, and
acquisitions. During 1995, the Company established its AFG subsidiary, and in
1996 entered into an agreement with Equis Financial Group (Equis) to obtain its
lease origination and servicing operations, and the rights to manage a
significant offshore investment program. Additionally, the agreement provided
for AFG to acquire software, computers and furniture that support the marketing
and operations activities. AFG is engaged in the funding and management of
longer-term direct finance-type leases, operating leases and loans. Master lease
agreements are entered into with predominately investment-grade lessees and
serve as the basis for marketing efforts. The underlying assets represent a
broad range of commercial and industrial equipment, such as data processing,
communications, materials handling, and construction equipment. AFG also is
engaged in the management of an institutional leasing investment program for
which it originates leases and receives acquisition and management fees. During
1996, AFG originated $150.0 million in leasing and loan transactions of which
$96.9 million was for the Company's account. This is an important new growth
area for the Company. In the future, the Company intends to continue to develop
the portfolio of its AFG subsidiary.
Going forward, the Company will also concentrate on expanding its
current trailer leasing and management operations through its PLM Rental, Inc.
subsidiary. PLM Rental is currently the largest short-term, on-demand
refrigerated trailer rental operation in North America, and the Company believes
there are new opportunities in the refrigerated and other trailer leasing
markets.
During 1996, the Company announced the suspension of public syndication
of equipment leasing programs with the May 13, 1996 close of Fund I. As a result
of this decision, revenues earned from managed programs which include management
fees, partnership interests and other fees, and acquisition and lease
negotiation fees will be reduced in the future as the older programs begin
liquidation and the managed equipment portfolio becomes permanently reduced.
The Company has continued to selectively reduce the size of its owned
transportation equipment portfolio over the past year. In 1996, the Company sold
$39.1 million (of which $0.9 million was included in assets held for sale as of
December 31, 1995), based on original cost, of its owned transportation
equipment, and the Company expects to continue to sell equipment in 1997 and
beyond, as market conditions dictate it is appropriate. As a result of the
reduction in owned equipment, the Company's operating lease revenues are
expected to continue to decrease as well as the associated depreciation,
operating, and repair and maintenance costs. However, the Company has used the
proceeds from equipment sales and cash from operations to reduce senior and
subordinated outstanding indebtedness by $25.0 million over the last three
years, resulting in reduced interest costs. These reductions will help offset
the increased borrowing activity associated with the expansion of the AFG lease
portfolio. In addition, the reduction in transportation equipment lease revenue
will be offset by increases in commercial and industrial equipment lease revenue
generated by AFG.
The Company continues to benefit from cost reduction measures,
principally reflecting reductions in total Company staffing implemented during
1995 and 1996, which are resulting in lower operations support and general and
administrative expenses.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The response to this item is submitted as a separate section of this report. See
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
NONE.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A definitive Company proxy statement will be filed not later than 120 days after
the end of the fiscal year with the Securities and Exchange Commission. The
information set forth under "Identification of Directors and Officers,"
"Compensation of Executive Officers," and "Security Ownership of Certain
Beneficial Owners and Management" in such proxy statement is incorporated herein
by reference for Items 10, 11 and 12, above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NONE
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements
(1) The consolidated financial statements listed in the accompanying
index to financial statements are filed as part of this Annual
Report on Form 10-K.
(2) Exhibits are listed at item (c), below.
(b) Reports on Form 8-K Filed in Last Quarter of 1996
None
(c) Exhibits
3.1 Certificate of Incorporation, incorporated by reference to
the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on April 2, 1990.
3.2 Bylaws, incorporated by reference to the Company's Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on April 2, 1990.
10.1 $45,000,000 Senior Secured Note Agreement, dated as of June
30, 1994, as amended, incorporated by reference to the
Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 15, 1995.
10.2 $27,000,000 Floating Rate Senior Secured Notes Agreement,
dated as of June 28, 1996, incorporated by reference to the
Company's Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on August 5, 1996.
10.3 Warehousing Credit Agreement among American Finance Group,
Inc. and First Union National Bank of North Carolina, dated
as of May 31, 1996, incorporated by reference to the
Company's Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on August 5, 1996.
10.4 Amended and Restated Warehousing Credit Agreement among TEC
AcquiSub Inc. and First Union National Bank of North
Carolina, dated as of September 27, 1995, incorporated by
reference to the Company's Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission on November
1, 1995.
10.5 Form of Employment contracts for executive officers,
incorporated by reference to the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission
on March 31, 1993.
10.6 Rights Agreement, as amended, filed with Forms 8-K, on March
12, 1989, August 12, 1991, and January 23, 1993, and
incorporated herein by reference.
10.7 Directors' 1992 Non-qualified Stock Option Plan, incorporated
by reference to the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March
31, 1993.
10.8 Form of Company Non-qualified Stock Option Agreement,
incorporated by reference to the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission
on March 31, 1993.
10.9 Directors' 1995 Non-qualified Stock Option Plan, incorporated
by reference to the Company's Annual Report on Form 10-K
filed with the Securities Exchange Commission on March 15,
1995.
10.10 PLM International, Inc. Mandatory Management Stock Bonus
Plan.
10.11 Form of Executive Deferred Compensation Agreement,
incorporated by reference to the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission
on March 31, 1993.
10.12 Asset Purchase Agreement, dated as of July 1, 1995,
incorporated by reference to the Company's Quarterly Report
on Form 10-Q filed with the Securities and Exchange
Commission on November 1, 1995.
10.13 Pooling and Servicing Agreement and Indenture of Trust, dated
as of July 1, 1995, incorporated by reference to the
Company's Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on November 1, 1995.
10.14 Office Lease for premises at One Market, San Francisco,
California, incorporated by reference to the Company's Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on April 1, 1991.
10.15 First Amendment to Amended and Restated Warehousing Credit
Agreement among TEC AcquiSub Inc. and First Union National
Bank of North Carolina, dated as of May 31, 1996.
10.16 Second Amendment to Amended and Restated Warehousing Credit
Agreement among TEC AcquiSub Inc. and First Union National
Bank of North Carolina, dated as of November 5, 1996.
10.17 First Amendment to Amended and Restated Warehousing Credit
Agreement among American Finance Group Inc. and First Union
National Bank of North Carolina, dated as of November 5,
1996.
10.18 First Amendment to $27,000,000 Floating Rate Senior Secured
Notes Agreement, dated as of July 12, 1996.
10.19 Fourth Amendment to Senior Secured Note Agreement, dated as
of February 10, 1996, incorporated by reference to the
Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 25, 1996.
10.20 Fifth Amendment to Senior Secured Note Agreement, dated as of
June 28, 1996.
10.21 Sixth Amendment to Senior Secured Note Agreement, dated as of
September 15, 1996.
10.22 Seventh Amendment to Senior Secured Note Agreement, dated as
of November 15, 1996.
10.23 Sublease Agreement for premises at One Market, San Francisco,
California, dated as of August 1, 1996.
11.1 Statement regarding computation of per share earnings.
21.1 Subsidiaries of the Company.
23.1 Consents of Independent Auditors.
24.1 Powers of Attorney.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: February 24, 1997 PLM International, Inc.
By: /s/ J. Michael Allgood
------------------------
J. Michael Allgood
Vice President and
Chief Financial Officer
By: /s/ Robert N. Tidball
------------------------
Robert N. Tidball
Director, President and
Chief Executive Officer
By: /s/ David J. Davis
---------------------
David J. Davis
Vice President and
Corporate Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Company, in the
capacities and on the dates indicated.
* Director, Senior February 24, 1997
------------------------------------- Vice President
Douglas P. Goodrich
* Director February 24, 1997
-------------------------------------
Walter E. Hoadley
* Director February 24, 1997
-------------------------------------
J. Alec Merriam
* Director February 24, 1997
-------------------------------------
Robert L. Pagel
* Director February 24, 1997
------------------------------------
Harold R. Somerset
* Stephen Peary, by signing his name hereto, does sign this document on
behalf of the persons indicated above pursuant to powers of attorney
duly executed by such persons and filed with the Securities and
Exchange Commission.
/s/ Stephen Peary
--------------------
Stephen Peary
Attorney-in-Fact
<PAGE>
INDEX TO FINANCIAL STATEMENTS
(Item 14(a)(1)(2))
Description Page
Independent Auditors' Report 30
Consolidated Statements of Operations for Years Ended
December 31, 1996, 1995, and 1994 31
Consolidated Balance Sheets as of December 31, 1996 and 1995 32
Consolidated Statements of Changes in Shareholders' Equity
for Years Ended December 31, 1996, 1995, and 1994 33
Consolidated Statements of Cash Flows for Years
Ended December 31, 1996, 1995, and 1994 34-35
Notes to Consolidated Financial Statements 36-53
All schedules are omitted since the required information is not pertinent or is
not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements and notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
PLM International, Inc.
We have audited the consolidated financial statements of PLM International, Inc.
and subsidiaries as listed in the accompanying index. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PLM
International, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
As discussed in Note 15 to the financial statements, the Company changed
its method of accounting for its Employee Stock Ownership Plan in 1994.
/S/ KPMG PEAT MARWICK LLP
- ---------------------------
SAN FRANCISCO, CALIFORNIA
FEBRUARY 24, 1997
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------------------
<S> <C> <C> <C>
Revenues:
Operating leases (Note 7) $ 18,180 $ 23,919 $ 28,748
Management fees (Note 6) 10,971 11,197 11,189
Partnership interests and other fees (Note 6) 3,811 4,978 3,101
Acquisition and lease negotiation fees (Note 6) 6,610 6,659 4,223
Finance lease income (Note 3) 4,186 -- --
Commissions (Note 6) -- 1,322 4,939
Aircraft brokerage and services (Note 2) 2,903 5,022 4,624
Gain (loss) on the sale or disposition of assets, net 2,282 4,912 (4,411 )
Other 2,602 2,064 1,302
----------------------------------------------
Total revenues 51,545 60,073 53,715
Costs and expenses:
Operations support (Note 17) 21,795 26,001 23,510
Depreciation and amortization 11,318 8,616 12,135
Commissions -- 1,416 5,192
General and administrative (Note 17) 7,756 10,539 10,366
----------------------------------------------
Total costs and expenses 40,869 46,572 51,203
----------------------------------------------
Operating income 10,676 13,501 2,512
Interest expense 7,341 7,110 9,777
Interest income 1,228 1,973 3,744
Other expense, net 670 496 2,058
----------------------------------------------
Income (loss) before income taxes 3,893 7,868 (5,579 )
(Benefit from) provision for income taxes (Note 13) (202 ) 1,820 (4,068 )
----------------------------------------------
Net income (loss) before cumulative effect of
accounting change 4,095 6,048 (1,511 )
Cumulative effect of accounting change (Note 15) -- -- (5,130 )
----------------------------------------------
Net income (loss) 4,095 6,048 (6,641 )
Preferred dividend imputed on allocated shares -- -- 2,430
----------------------------------------------
Net income (loss) to common shares $ 4,095 $ 6,048 $ (9,071 )
==============================================
Earnings (loss) per common share outstanding $ 0.40 $ 0.51 $ (0.73 )
==============================================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31,
(in thousands, except share amounts)
ASSETS
<TABLE>
<CAPTION>
1996 1995
-----------------------------
<S> <C> <C>
Cash and cash equivalents $ 7,638 $ 13,764
Receivables 5,286 4,931
Receivables from affiliates (Note 6) 6,019 8,690
Investment in direct finance leases, net (Note 3) 69,994 --
Loans receivable 5,718 --
Assets held for sale (Note 5) 6,222 719
Equity interest in affiliates (Note 6) 30,407 27,566
Equipment held for operating leases (Note 7) 82,476 112,732
Less accumulated depreciation (44,052 ) (64,892 )
-----------------------------
38,424 47,840
Restricted cash and cash equivalents (Note 8) 17,828 10,621
Other, net 11,213 12,082
=============================
Total assets $ 198,749 $ 126,213
=============================
LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
Liabilities:
Short-term secured debt (Note 9) $ 30,966 $ --
Senior secured loan (Note 10) 25,000 35,000
Senior secured notes (Note 10) 18,000 --
Other secured debt (Note 10) 618 1,353
Subordinated debt (Note 11) -- 11,500
Nonrecourse securitization facility (Note 12) 45,392 --
Payables and other liabilities 16,757 13,884
Deferred income taxes (Note 15,334 15,493
13)
-----------------------------
Total liabilities 152,067 77,230
Commitments and contingencies (Note 14)
Minority interest (Note 2) 362 363
Shareholders' Equity:
Common stock, $0.01 par value, 50,000,000 shares authorized, 9,142,761 and
10,833,161 shares issued and outstanding at December 31, 1996
and 1995, respectively (Note 15) 117 117
Paid-in capital, in excess of par (Note 15) 77,778 77,743
Treasury stock (3,453,630 and 1,753,230 shares at
respective dates) (Note 15) (12,382 ) (5,931 )
-----------------------------
65,513 71,929
Accumulated deficit (19,193 ) (23,309 )
-----------------------------
Total shareholders' equity 46,320 48,620
=============================
Total liabilities, minority interest, and shareholders' equity $ 198,749 $ 126,213
=============================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years Ended December 31, 1996, 1995, and 1994
(in thousands)
<TABLE>
<CAPTION>
Loan to
Employee Common Stock
-------------------------------------------
Preferred Stock Paid-in
Stock at Ownership Capital in
Paid-in Plan At Excess Treasury
Amount (ESOP) Par of Par Stock
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1993 $ 63,569 $ (50,280 ) $ 109 $ 55,557 $ (131 )
Net loss
Cumulative effect of change in
accounting on unearned
compensation 7,130
Common stock repurchase (2,997 )
Conversion of preferred stock (192 ) 161 31
Allocation of shares (4,091 ) 6,044
Current year imputed dividend on
allocated ESOP shares
Prior year preferred dividend not
charged to equity until paid
Cancellation of preferred stock and
issuance of common stock upon
termination of ESOP (59,286 ) 37,106 8 21,906 266
Exercise of stock options 75
Translation gain
------------------------------------------------------------------------------------
Balances, December 31, 1994 -- -- 117 77,699 (2,831 )
Net income
Common stock repurchases (3,100 )
Exercise of stock options 44
Translation loss
------------------------------------------------------------------------------------
Balances, December 31, 1995 -- -- 117 77,743 (5,931 )
Net income
Common stock repurchases (6,451 )
Exercise of stock options 35
Translation gain
------------------------------------------------------------------------------------
Balances, December 31, 1996 $ -- $ -- $ 117 $ 77,778 $ (12,382 )
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Accumulated Shareholders'
Deficit Equity
---------------------------------------
<S> <C> <C>
Balances, December 31, 1993 $ (17,691 ) $ 51,133
Net loss (6,641 ) (6,641 )
Cumulative effect of change in
accounting on unearned
compensation 7,130
Common stock repurchase (2,997 )
Conversion of preferred stock --
Allocation of shares 1,953
Current year imputed dividend on
allocated ESOP shares (2,430 ) (2,430 )
Prior year preferred dividend not
charged to equity until paid (2,565 ) (2,565 )
Cancellation of preferred stock and
issuance of common stock upon
termination of ESOP --
Exercise of stock options 75
Translation gain 37 37
--------------------------------------
Balances, December 31, 1994 (29,290 ) 45,695
Net income 6,048 6,048
Common stock repurchases (3,100 )
Exercise of stock options 44
Translation loss (67 ) (67 )
--------------------------------------
Balances, December 31, 1995 (23,309 ) 48,620
Net income 4,095 4,095
Common stock repurchases (6,451 )
Exercise of stock options 35
Translation gain 21 21
--------------------------------------
Balances, December 31, 1996 $ (19,193 ) $ 46,320
======================================
</TABLE>
See accompanying notes to these consolidated financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income (loss) $ 4,095 $ 6,048 $ (6,641 )
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 11,318 8,616 12,135
Cumulative effect of accounting change -- -- 5,130
Foreign currency translations 21 (67 ) 37
Decrease in deferred income taxes (141 ) (672 ) (3,342 )
Compensation expense for ESOP, net -- -- (477 )
(Gain) loss on the sale or disposition of assets, net (2,282 ) (4,912 ) 4,411
Undistributed residual value interests (846 ) (445 ) 728
Minority interest in net (loss) income of subsidiaries (1 ) (37 ) 64
Increase (decrease) in payables and other liabilities 2,881 2,839 (6,760 )
(Increase) decrease in receivables and receivables
from affiliates 4,001 (1,825 ) 4,132
Increase in loans receivable (5,718 ) -- --
Cash distributions from affiliates in excess of
income accrued 2,977 1,087 675
(Increase) decrease in other assets 151 (1,807 ) 1,844
---------------------------------------------
Net cash provided by operating activities 16,456 8,825 11,936
Investing activities:
Additional investments in affiliates (4,972 ) (10,477 ) (311 )
Purchase of residual option -- (200 ) --
Principal payments received on finance leases 5,746 -- --
Investment in direct finance leases (99,113 ) -- --
Purchase of equipment (54,697 ) (45,930 ) (31,344 )
Proceeds from the sale of transportation equipment for lease 17,409 11,998 14,609
Proceeds from the sale of assets held for sale 2,052 55,362 19,886
Proceeds from the sale of commercial and industrial
equipment to institutional investment program 28,614 -- --
Proceeds from the sale of commercial and industrial
equipment to third parties 23,277 -- --
Proceeds from the sale of leveraged leased assets -- 4,530 --
Proceeds from the disposition of residual options and
other investments -- 2,059 90
Sale of investment in subsidiary 372 -- --
Increase in restricted cash and cash equivalents (7,207 ) (9,212 ) (17,106 )
Purchase of restricted marketable securities -- -- (19,552 )
Proceeds from the maturity and sale of restricted
marketable securities -- -- 43,485
Acquisition of subsidiary net of cash acquired -- -- (1,013 )
---------------------------------------------
Net cash (used in) provided by investing activities (88,519 ) 8,130 8,744
</TABLE>
(continued)
See accompanying notes to
these consolidated financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------
<S> <C> <C> <C>
Financing activities:
Borrowings of short-term secured debt 109,254 18,620 9,357
Repayment of short-term secured debt (78,288 ) (25,024 ) (2,953 )
Borrowings of other secured debt 90 779 138
Repayment of other secured debt (595 ) (69 ) (1,523 )
Borrowings under senior loan facility -- -- 45,000
Repayment of senior loan facility (10,000 ) -- (55,000 )
Repayment of ESOP note payable -- -- (6,992 )
Borrowings under senior notes facility 18,000 -- --
Borrowings under securitization facility 56,024 -- --
Repayment of securitization facility (10,632 ) -- --
Repayment of subordinated debt (11,500 ) (11,500 ) (8,000 )
Cash dividends paid on preferred stock -- -- (9,436 )
Payments received from ESOP trustee -- 928 8,097
Repurchase of treasury stock (6,451 ) (3,100 ) (2,997 )
Proceeds from exercise of stock options 35 44 75
---------------------------------------------
Net cash provided by (used in) financing activities 65,937 (19,322 ) (24,234 )
---------------------------------------------
Net decrease in cash and cash equivalents (6,126 ) (2,367 ) (3,554 )
Cash and cash equivalents at beginning of year 13,764 16,131 19,685
=============================================
Cash and cash equivalents at end of year $ 7,638 $ 13,764 $ 16,131
=============================================
Supplementary schedule - net cash paid for:
Interest $ 6,516 $ 6,371 $ 10,231
=============================================
Income taxes $ 1,292 $ 603 $ 4,009
=============================================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements present the results of
operations, financial position, changes in shareholders' equity, and cash flows
of PLM International, Inc. and its wholly and majority-owned subsidiaries (PLM
International or the Company). PLM International and its consolidated group
began operations on February 1, 1988. All intercompany transactions among the
consolidated group have been eliminated.
PLM International is a diversified equipment leasing and management
company providing services to transportation, industrial, and commercial
companies. The Company specializes in creating equipment leasing solutions for
domestic and international customers. PLM Financial Services, Inc., a
wholly-owned subsidiary, is the general partner or manager of the Company's
diversified equipment leasing programs for its investors.
These financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles. This
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Lease Operations
PLM International's leasing operations generally consist of operating and direct
finance leases on a variety of equipment types, primarily aircraft, trailers,
computers, and materials handling equipment. Under the operating lease method of
accounting, the leased asset is recorded at cost and depreciated over its
estimated useful life. Rental payments are recorded as revenue over the lease
term. Lease origination costs for transportation assets are capitalized and
amortized over the term of the lease. Initial direct costs of originating leases
for commercial and industrial equipment are expensed as incurred.
Under the direct finance lease method of accounting, the leased asset is
recorded as an investment in direct finance leases and represents the net
minimum lease payments receivable plus the unguaranteed residual value of the
equipment, less unearned income. Rental payments, including principal and
interest on the lease, reduce the investment each month and the interest is
recorded as revenue over the lease term.
Equipment
Equipment held for operating leases is stated at the lower of depreciated cost
or estimated fair value less cost to sell. Depreciation is computed on the
straight-line method down to its estimated salvage value utilizing the following
estimated useful lives (in years): aircraft 8-20; trailers 8-18; marine
containers 10-15; railcars 15-18; and storage equipment 15. Commercial and
industrial equipment is depreciated over the lease term, generally ranging from
2-7 years. Salvage values for transportation equipment are generally 15% of
original equipment cost. Salvage values for commercial and industrial equipment
vary according to the type of equipment.
In accordance with Financial Accounting Standards Board (FASB) Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (SFAS 121), the Company reviews the carrying value of
its equipment at least annually in relation to expected future market conditions
for the purpose of assessing recoverability of the recorded amounts. If
projected undiscounted future lease revenues plus residual values are lower than
the carrying value of the equipment, a loss on revaluation is recorded in gain
(loss) on the sale or disposition of assets ($0.7 million in 1996, $1.2 million
in 1995, and $4.2 million in 1994). The Company classifies assets as held for
sale if the particular asset is subject to a pending contract for sale or is
held for sale to an affiliated program. Equipment held for sale is valued at the
lower of depreciated cost or estimated fair value less cost to sell.
Except for trailers and storage equipment at the Company's short-term
rental yards, maintenance costs are usually the obligation of the lessee. If not
covered by the lessee, they are charged against operations as incurred. To meet
the maintenance obligations of certain aircraft engines and frames, escrow
accounts are generally prefunded by the lessees. The escrow accounts are
included in the consolidated balance sheet as restricted cash and other
liabilities. Repairs and maintenance expense was $3.0 million, $3.5 million, and
$4.2 million for 1996, 1995, and 1994, respectively.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment in and Management of Equipment Growth Funds, Other Limited
Partnerships, and Private Placements
The Company earns revenues in connection with the management of the limited
partnerships and private placement programs. During the syndication of each of
the PLM Equipment Growth Funds (EGFs), placement fees and commissions,
representing approximately 9% of equity raised, were generally earned upon the
purchase by investors of the partnership units. A significant portion of these
placement fees was reallowed to the originating broker-dealer.
Equipment acquisition, lease negotiation, and debt placement fees are
generally earned through the purchase, initial lease, and financing of
equipment, and are generally recognized as revenue when the Company completes
substantially all of the services required to earn the fees, generally when
binding commitment agreements are signed.
Management fees are earned for managing the equipment portfolios and
administering investor programs as provided for in various agreements and are
recognized as revenue over time as they are earned.
As compensation for organizing a partnership investment program, the
Company was generally granted an interest (between 1% and 5%) in the earnings
and cash distributions of the program for which PLM Financial Services, Inc.
(FSI) is the general partner. The Company recognizes as partnership interests
its equity interest in the earnings of the partnerships after adjusting such
earnings to reflect the use of straight-line depreciation and the effect of
special allocations of the program's gross income allowed under the respective
partnership agreements.
The Company also recognizes as income its interest in the estimated net
residual value of the assets of the partnerships as they are purchased. The
amounts recorded are based on management's estimate of the net proceeds to be
distributed upon disposition of the partnership's equipment at the end of the
respective partnerships. As assets are purchased by the partnerships, these
residual value interests are recorded in other fees at the present value of the
Company's share of estimated disposition proceeds. When a limited partnership is
in the liquidation phase, distributions received by the Company will be treated
as recoveries of its equity interest in the partnership until the recorded
residual is eliminated. Any additional distributions received will be treated as
residual interest income.
In accordance with certain investment program and partnership
agreements, the Company received reimbursement for organization and offering
costs incurred during the offering period. The reimbursement was generally
between 1.5% and 3.0% of equity raised. The investment program reimbursed the
Company ratably over the offering period of the investment program based on
equity raised. In the event organizational and offering costs incurred by the
Company, as defined by the partnership agreement, exceeded amounts allowed, the
excess costs were capitalized as an additional investment in the related
partnership and are being amortized until the projected start of the liquidation
phase of the partnership. These additional investments are reflected as equity
interest in affiliates in the accompanying consolidated balance sheets.
Investment in and Management of Limited Liability Company
From May 1995 through May 13, 1996, Professional Lease Management Income Fund I,
L.L.C. (Fund I), a limited liability company with a no front-end fee structure,
was offered as an investor program. FSI serves as the Manager for the program.
There was no compensation paid to the Company for the organization and
syndication of interests in Fund I, the acquisition of equipment, placement of
debt, nor the negotiation of leases by Fund I. The Company funded the costs of
organization, syndication, and offering through the use of operating cash and
has capitalized these costs as its investment in Fund I.
The Company is amortizing its investment in Fund I over eight years. In
return for its investment, the Company is generally entitled to a 15% interest
in the cash distributions and earnings of Fund I subject to certain allocation
provisions. The Company's interest in the cash distributions and earnings of
Fund I will increase to 25% after the investors have received distributions
equal to their invested capital. The Company is entitled to monthly fees for
equipment management services and reimbursement for certain accounting and
administrative services it provides.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment in and Management of Limited Liability Company (continued)
FSI also recognizes as income its interest in the estimated net residual
value of the assets of Fund I as they are purchased. The amounts recorded are
based on management's estimate of the net proceeds to be distributed upon
disposition of the program's equipment at the end of the program. As assets are
purchased by Fund I, these residual value interests are recorded in partnership
interests and other fees at the present value of FSI's share of estimated
disposition proceeds. When Fund I is in the liquidation phase, distributions
received by FSI will be treated as recoveries of its equity interest in the
program until the recorded residual is eliminated. Any additional distributions
received will be treated as residual interest income.
Residual Interests
The Company has residual interests in equipment owned by the managed programs
which are recorded in Equity Interest in Affiliates. Residual interests in
equipment on finance leases are recorded in Investment in Direct Finance Leases,
Net. As required by FASB Technical Bulletin 1986-2, the discount on the
Company's residual value interests in the equipment owned by the managed
programs is not accreted over the holding period. The Company reviews the
carrying value of its residual interests at least annually in relation to
expected future market values for the underlying equipment in which it holds
residual interests for the purpose of assessing recoverability of recorded
amounts.
Earnings (Loss) Per Common Share
The total common shares outstanding at December 31, 1996, were 9,142,761, a
decrease from 10,833,161 outstanding at December 31, 1995. Primary earnings
(loss) per common share is computed by dividing net income (loss) to common
shares by the weighted average number of shares and stock options deemed
outstanding during the period. The weighted average number of shares and stock
options deemed outstanding during the years ended 1996, 1995, and 1994, were
10,188,739, 11,795,116, and 12,373,616, respectively.
Fully diluted earnings (loss) per common share is anti-dilutive or
substantially the same as primary earnings (loss) per common share for each year
reported and, therefore, is not reported separately.
Income Taxes
The Company recognizes income tax expense using the liability method. Deferred
income taxes are recognized for the tax consequences of "temporary differences"
by applying enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities.
Deferred income taxes arise primarily because of differences in the
timing of reporting transportation equipment depreciation, partnership income,
and certain reserves for financial statement and income tax reporting purposes.
Intangibles
Intangibles are included in other assets on the balance sheet and consist
primarily of goodwill related to acquisitions. Goodwill is being amortized over
8 to 15 years from the acquisition date. The Company annually reviews the
valuation of goodwill based on projected future cash flows.
Cash and Cash Equivalents
The Company considers highly liquid investments readily convertible into known
amounts of cash with original maturities of 90 days or less to be cash
equivalents.
Reclassifications
Certain prior year amounts have been reclassified in order to conform to the
current year's presentation.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounting Pronouncements
In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). This standard defines a fair-value-based method of
accounting for stock-based compensation plans. However, the standard also allows
measurement of compensation cost using the intrinsic-value-based method of
accounting prescribed in Accounting Principles Board Opinion No. 25 (APB 25).
Companies that choose to retain APB 25 for measurement are required to provide
pro forma footnote disclosures effective for 1996 financial statements. The
Company continues to record stock-based compensation costs based on APB 25 but
has provided the pro forma disclosures required under SFAS 123 for 1996 (refer
to Note 15).
The Financial Accounting Standards Board has issued Statement No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities," which provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings and which revises the accounting rules for liabilities extinguished
by an in-substance defeasance. This statement is effective for transfers of
financial assets and extinguishments of liabilities occurring after December 31,
1996 and is not expected to have any impact on the Company's operating results
or financial condition.
Interest Rate Swap Agreements
The Company has entered into interest rate swap agreements to hedge its interest
rate exposure on its securitized debt obligation. The terms of the swap
agreements correspond to the hedged debt. The differential to be paid or
received under the swap agreement is charged or credited to interest expense.
2. ACQUISITIONS AND DISPOSITIONS
In February 1994, the Company created a subsidiary, Aeromil Holdings, Inc., to
complete the purchase of Aeromil Australia Pty. Ltd., Yoder Holdings Pty. Ltd.,
Austin Aero FBO Ltd., TNPL, Inc., and a 50% interest in Aeromech Pty. Ltd.
(Aeromil). Aeromil Holdings, Inc. purchased an 80% interest in Aeromil for
$1,237,000 in cash. Aeromil is one of Australia's largest aircraft dealers
specializing in local and international marketing and brokerage of corporate,
commuter, and commercial aircraft and aircraft spare parts. The acquisition was
accounted for by the purchase method of accounting and accordingly, the purchase
price was allocated to assets and liabilities based on the estimated fair value
at the date of acquisition. The excess of the consideration paid over the
estimated fair value of the net assets acquired in the Aeromil transaction, in
the amount of $0.6 million, has been recorded as goodwill to be amortized on a
straight-line basis over ten years. The portion of Aeromil not owned by PLM
International is shown as minority interest on the balance sheet.
In October 1995, the Company entered into an agreement with the 50%
partners in Aeromech, Pty. Ltd. to sell the Company's 50% interest to the
partners for $124,000. A nominal gain on sale was recorded in relation to this
transaction. In January 1996, the Company sold its 100% ownership interest in
Austin Aero FBO Ltd. to a third party for $923,000 and the assumption of certain
debt. A nominal loss was recorded on the sale, net of the tax benefit.
In 1995, the Company established a new wholly-owned equipment leasing
and management subsidiary, American Finance Group, Inc. (AFG), and entered into
an agreement to manage certain operations of Boston-based, privately-held Equis
Financial Group (Equis). During 1995, the Company provided management services
for investor programs of Equis for which the Company earned management fees and
other revenues. In January 1996, the agreement was modified to exclude
management of Equis' investor programs. Under the modified agreement the Company
obtained the lease origination and servicing operations and the rights to manage
an institutional leasing investment program. Additionally, the agreement
provided for AFG to acquire software, computers, and furniture that support the
marketing and operations activities. The total cost incurred by PLM
International relating to the lease origination and servicing operation was $3.2
million. The $0.5 million paid for furniture and fixtures is being depreciated
over three to five years. All other intangible assets are amortized over eight
years.
<PAGE>
3. FINANCING TRANSACTION ACTIVITIES
AFG is originating and managing lease and loan transactions on new commercial
and industrial equipment that is financed by a securitization facility, for the
Company's own account, or sold to the institutional leasing investment program
or other investors. The majority of these leases are accounted for as direct
finance leases while some transactions qualify as operating leases and loans.
Periodically, the Company will use its short-term loan facility to finance the
acquisition of the assets subject to these leases prior to sale or permanent
financing by the securitization facility.
The following lists the components of the investment in direct finance
leases, net as of December 31, 1996 (in thousands):
Total minimum lease payments receivable $ 73,434
Add: Estimated unguaranteed residual values of leased
properties 11,541
-------------
84,975
Less: Unearned income (14,981 )
=============
Investment in direct finance leases, net $ 69,994
=============
Schedule of Minimum Lease Payments
(in thousands):
1997 - $ 22,533
1998 - 21,087
1999 - 17,400
2000 - 7,175
2001 - 4,743
thereafter - 496
============
Total minimum lease payments - $ 73,434
receivable
============
4. LOANS RECEIVABLE
At December 31, 1996, the Company had loans receivable outstanding with two
customers totaling $5.7 million with interest rates ranging from 10.21%-10.24%,
secured by commercial and industrial equipment. Future payments receivable on
the notes at December 31, 1996 are as follows (in thousands):
1997 - $ 1,818
1998 - 1,990
1999 - 1,910
============
Total loans - $ 5,718
receivable
============
5. ASSETS HELD FOR SALE
At December 31, 1996, assets held for sale included a 25.5% interest in a mobile
offshore drilling unit to be sold to an affiliated partnership or program, with
a net book value of $5.1 million, and 2 commuter aircraft, subject to pending
contracts for sale, with net book values of $0.7 million and $0.4 million,
respectively. At December 31, 1995, assets held for sale included 1 marine
container and 69 railcars, subject to pending contracts for sale, with an
aggregate net book value of $0.7 million.
6. EQUITY INTEREST IN AFFILIATES
FSI, a wholly-owned subsidiary of the Company, is the general partner in 23
limited partnerships and generally holds an equity interest in each ranging from
1% to 5%. Net earnings and distributions of the partnerships are generally
allocated 99% to the limited partners and 1% to the general partner, except for
EGFs II, III, IV, V, VI, and PLM Equipment Growth and Income Fund VII (EGF VII),
which are allocated 95% to the limited partners and 5% to the general partner.
<PAGE>
6. EQUITY INTEREST IN AFFILIATES (continued)
FSI is the manager of Fund I and is entitled to a 15% interest in the
cash distributions and earnings of Fund I, subject to certain allocation
provisions. The Company's interest in the cash distributions and earnings of
Fund I will increase to 25% after the investors have received distributions
equal to their invested capital.
Summarized combined financial data for these affiliates, reflecting
straight-line depreciation, is as follows (in thousands and unaudited):
<TABLE>
<CAPTION>
Financial position at December 31,: 1996 1995
-----------------------------
<S> <C> <C>
Cash and other assets $ 55,681 $ 88,619
Transportation equipment and other assets,
net of accumulated depreciation of $248,668
in 1996 and $250,715 in 1995 700,304 843,297
-----------------------------
Total assets 755,985 931,916
Less liabilities, primarily long-term financings 215,974 265,356
=============================
Partners' equity $ 540,011 $ 666,560
=============================
PLM International's share thereof, which amounts are recorded as equity
interest in affiliates:
Equity interest $ 17,426 $ 15,245
Estimated residual value interests in equipment 12,981 12,321
=============================
Equity interest in affiliates $ 30,407 $ 27,566
=============================
</TABLE>
<TABLE>
<CAPTION>
Operating results for the years ended December 31,: 1996 1995 1994
---------------------------------------------
<S> <C> <C> <C>
Revenue from equipment leases and other $ 198,226 $ 201,401 $ 200,415
Equipment depreciation (52,653 ) (100,652 ) (87,959 )
Other costs and expenses (60,768 ) (88,944 ) (83,460 )
Reduction in carrying value of certain assets -- (1,084 ) (3,213 )
================================================
Net income before provision for income taxes $ 84,805 $ 10,721 $ 25,783
================================================
PLM International's share of partnership interests
and other fees $ 3,811 $ 4,978 $ 3,101
================================================
Distributions received $ 5,565 $ 4,590 $ 4,110
================================================
</TABLE>
Most of the limited partnership agreements contain provisions for
special allocations of the partnerships' gross income. These special allocation
provisions, in effect, allow the Company to record partnership income which
reflects the cash distributions received from the partnerships.
While none of the partners, including the general partner, are liable
for partnership borrowings and while the general partner maintains insurance
against liability for bodily injury, death, and property damage for which a
partnership may be liable, the general partner may be contingently liable for
non-debt claims against the partnership which exceed asset values.
<PAGE>
7. EQUIPMENT HELD FOR OPERATING LEASES
Equipment, at cost, held for operating lease at December 31, 1996, is
represented by the following types (in thousands):
Aircraft $ 14,379 17 %
Trailers 46,913 57 %
Marine containers 2,980 4 %
Storage equipment 2,273 3 %
Commercial and industrial equipment 15,931 19 %
Periodically, the Company will purchase groups of assets whose ownership
may be allocated among affiliated partnerships and the Company. Generally in
these cases, only assets that are on lease will be purchased by the affiliated
partnerships. The Company will generally assume the ownership and remarketing
risks associated with off-lease equipment. Allocation of the purchase price will
be determined by a combination of the relevant equipment market, third party
industry sources, and recent transactions or published fair market value
references. During 1996, the Company realized $0.7 million of gains on the sale
of 69 railcars purchased by the Company as part of a group of assets in 1994
which had been allocated to EGFs IV, VI, VII, Fund I, and the Company. These
assets were included in assets held for sale at December 31, 1995. During 1995,
the Company realized $1.3 million in gains on sales of railcars and aircraft
purchased by the Company in 1994 and 1995 as part of a group of assets which had
been allocated to EGFs IV, V, VI, VII, Fund I, and the Company.
Future minimum rentals receivable under noncancelable leases at December
31, 1996 are approximately $4,844,000 in 1997; $3,996,000 in 1998; $2,469,000 in
1999; $1,094,000 in 2000; $257,000 in 2001; and $22,000 thereafter. In addition,
per diem and contingent rentals consisting of utilization rate lease payments
included in revenue amounted to approximately $9.3 million in 1996, $13.0
million in 1995, and $17.0 million in 1994. At December 31, 1996, the Company
had committed all of its trailer equipment to rental yard and per diem
operations. Certain equipment owned by the Company is leased and operated
internationally.
8. RESTRICTED CASH
Restricted cash consists of bank accounts and short-term investments that are
subject to withdrawal restrictions as per lease or loan agreements. Certain
lease agreements, primarily for aircraft, require prepayments to the Company for
periodic engine and air frame maintenance. The Company's senior loan agreement
requires proceeds from the sale of pledged assets to be deposited into a
collateral bank account and the funds used to purchase additional equipment to
the extent required to meet certain debt requirements or to reduce the
outstanding loan balance (refer to Note 10). The Company's senior note agreement
requires all management, acquisition and lease negotiation fees, data processing
fees, and certain partnership distributions to be deposited into a collateral
bank account to the extent required to meet certain debt requirements or to
reduce the outstanding note balance (refer to Note 10). Management fees can be
withdrawn from the account monthly if the collateral account amount is at
certain defined levels.
All of the cash is released quarterly when the interest payment is made.
9. SHORT-TERM SECURED DEBT
The Company maintains a warehousing line of credit to be used to acquire assets
on an interim basis for placement with affiliated partnerships or purchased for
placement in the Company's securitization facility.
The Company amended this facility on May 31, 1996 to add the Company's AFG
subsidiary as a borrower. A second amendment on November 5, 1996, increased the
facility from $35.0 million to $50.0 million and extended the availability of
the facility until October 31, 1997. This facility, which is shared by EGFs IV,
V, VI, VII, and Fund I, allows the Company, through a special purpose entity, to
purchase equipment prior to a designated program or partnership being
identified, or prior to having raised sufficient capital to purchase the
equipment. This facility provides 80% financing for transportation assets and
the lesser of 100% of the present value of the lease stream or 85% of the
original equipment cost on assets purchased for placement in a securitization
facility, if the Company is the borrower and working capital is used for the
nonfinanced costs of these acquisitions. The Company can hold transportation
assets under this bridge facility for up to 150 days. Assets to be transferred
to the securitization facility have no preset time limit. Interest accrues at
prime or LIBOR plus 2.0%, at the option of the borrower at the time of the
advance under the facility.
<PAGE>
9. SHORT-TERM SECURED DEBT (continued)
The Company retains the difference between the net lease revenue earned and the
interest expense during the interim holding period since its capital is at risk.
As of December 31, 1996, there were $31.0 million in borrowings on this facility
by the Company, and EGFs V, VI, and VII had $2.5 million, $1.3 million, and $2.0
million in borrowings, respectively. At December 31, 1995, there were no
borrowings on this facility by the Company, the EGFs, or Fund I.
10. LONG-TERM SECURED DEBT
Long-term secured debt consisted of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------------------------
<S> <C> <C>
Senior Secured Loan:
Institutional debt, $25.0 million bearing interest at 9.78% and $10.0 million
bearing interest at LIBOR plus 2.75% per annum (8.69% at December 31,
1995), interest due quarterly, principal payments due quarterly beginning
June 30, 1997 through June 2001, secured by substantially all of the
Company's transportation-related equipment assets and associated leases,
except those assets used as collateral for other secured debt,
and cash in the cash collateral account $ 25,000 $ 35,000
Senior Secured Notes:
Institutional notes, bearing interest at LIBOR plus 2.40% per annum (7.90% at
December 31, 1996), interest due quarterly, principal payments due
quarterly beginning November 15, 1997 through August 15, 2002, secured by
management, acquisition and lease negotiation, data processing fees, and
certain partnership distributions,
and cash in the cash collateral account 18,000 --
Other Secured Debt:
Notes payable, bearing interest from 10.75% to 12.37% due in varying monthly
principal and interest installments through 2001, secured by equipment with
a net book value
of approximately $646,000 at December 31, 1996 618 1,353
-------------------------------
Total Secured Debt $ 43,618 $ 36,353
===============================
</TABLE>
The senior loan facility provides that equipment sales proceeds or cash
deposits be placed into cash collateral accounts or used to purchase additional
equipment to the extent required to meet certain debt covenants. In October
1996, the Company utilized the balance in the cash collateral account to prepay
$10.0 million of the entire floating rate portion of the loan and incurred
prepayment penalties of $0.1 million.
The current institutional debt agreements contain financial covenants
related to net worth, ratios for leverage, interest coverage ratios, and
collateral coverage, all of which were met at December 31, 1996. In addition,
there are restrictions on payment of dividends, purchase of stock, and certain
investments based on computations of tangible net worth, financial ratios, and
cash flows, as defined.
<PAGE>
10. LONG-TERM SECURED DEBT (continued)
Scheduled principal payments on long-term secured debt are approximately
(in thousands):
1997 - $ 5,550
1998 - 9,727
1999 - 9,935
2000 - 9,605
2001 - 6,101
thereafter - 2,700
===========
Total - $ 43,618
===========
The Company estimates, based on recent transactions, that the fair value
of the $25.0 million fixed-rate 9.78% long-term senior debt is $25.6 million.
The Company believes the fair value of the $18.0 million senior secured notes
approximates the outstanding balance due to the floating rate of interest.
11. SUBORDINATED DEBT
During 1996, the Company repaid the $11.5 million balance of its 11.55%
subordinated debt and wrote off associated loan fees and incurred prepayment
penalties totaling $0.9 million.
12. NONRECOURSE SECURITIZATION FACILITY
The Company has available a securitization facility for up to $80.0 million on a
nonrecourse basis secured by direct finance leases, operating leases and loans
which generally have terms of two to seven years. This facility is available for
a one year period expiring July 1997. Repayment of the facility matches the
terms of the underlying leases. The securitized debt bears interest equivalent
to average U.S. treasuries plus 1.0% (7.23% at December 31, 1996). As of
December 31, 1996, there were $45.4 million in borrowings under this facility.
Scheduled principal payments on long-term securitized debt are
approximately (in thousands):
1997 - $ 14,033
1998 - 14,644
1999 - 10,850
2000 - 4,190
2001 - 1,560
thereafter - 115
===========
Total - $ 45,392
===========
The Company believes the fair value of the $45.4 million securitized
debt approximates the outstanding balance due to the floating rate of interest.
13. INCOME TAXES
The provision for (benefit from) income taxes attributable to income from
operations consists of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------------------------------------------------ ----------------------------------------------------
Federal State Foreign Total Federal State Foreign Total
------------------------------------------------------ ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current $ (262 ) $ 64 $ 155 $ (43 ) $ 2,406 $ 60 $ 26 $ 2,492
Deferred 470 (629 ) -- (159 ) (941 ) 269 -- (672 )
====================================================== ====================================================
$ 208 $ (565 ) $ 155 $ (202 ) $ 1,465 $ 329 $ 26 $ 1,820
====================================================== ====================================================
</TABLE>
<PAGE>
13. INCOME TAXES (continued)
<TABLE>
<CAPTION>
1994
-----------------------------------------------------
Federal State Foreign Total
-----------------------------------------------------
<S> <C> <C> <C> <C>
Current $ (740 ) $ 42 $ 6 $ (692 )
Deferred (2,664 ) (712 ) -- (3,376 )
=======================================================
$ (3,404 ) $ (670 ) $ 6 $ (4,068 )
=======================================================
</TABLE>
Amounts for the current year are based upon estimates and assumptions as
of the date of this report and could vary significantly from amounts shown on
the tax returns ultimately filed. Accordingly, the variances, if any, in
classification from the amounts previously reported for prior years are
primarily the result of adjustments to conform to the tax returns as filed.
The difference between the effective rate and the expected Federal
statutory rate is reconciled below:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------
<S> <C> <C> <C>
Federal statutory tax expense (benefit) rate 34 % 34 % (34 )%
State income tax (benefit) 1 3 (8 )
Effect of foreign operations at lower rate (20 ) (4 ) --
Reversal of excess accrual (19 ) -- --
Tax adjustment related to ESOP termination (6 ) (10 ) --
Benefit from preferred dividend to ESOP -- -- (32 )
Other 5 -- 1
------------------------------------------
Effective tax expense (benefit) rate (5 )% 23 % (73 )%
==========================================
</TABLE>
Net operating loss carryforwards for federal income tax purposes
amounted to $0 and $8,904,000 at December 31, 1996 and 1995, respectively.
Alternative minimum tax credit carryforwards at December 31, 1996 are $7,000.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities at December 31, are presented below (in
thousands):
<TABLE>
<CAPTION>
1996 1995
------------------------------
<S> <C> <C>
Deferred Tax Assets
Tax credit carryforwards $ 6,946 $ 9,018
Net operating loss carryforwards 236 3,451
Federal benefit of state taxes 620 975
Other -- 75
---------------------------------
Total deferred tax assets 7,802 13,519
---------------------------------
Deferred Tax Liabilities
Transportation equipment, principally differences in depreciation 12,420 19,581
Partnership interests 7,495 6,327
Other 3,221 3,104
---------------------------------
Total deferred tax liabilities 23,136 29,012
---------------------------------
Net deferred tax liabilities $ 15,334 $ 15,493
=================================
</TABLE>
Management has reviewed all established tax interpretations of items
reflected in its consolidated tax returns and believes these interpretations do
not require valuation allowances as described in SFAS No. 109. At December 31,
1996, deferred taxes not provided on cumulative earnings of consolidated foreign
subsidiaries designated as permanently invested were approximately $1.8 million.
<PAGE>
14. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is involved as plaintiff or defendant in various legal actions
incident to its business. Management does not believe that any of these existing
actions will be material to the financial condition or, based on historical
trends, to the results of operations of the Company.
In November 1995, a former employee of PLM International (Plaintiff),
filed and served a first amended complaint (the Complaint) in the United States
District Court for the Northern District of California (Case No. C-95-2957 MMC)
against the Company, the PLM International, Inc. Employee Stock Ownership Plan
(the ESOP), the ESOP's trustee, and certain individual employees, officers,
and/or directors of PLM International. The Complaint contains claims for relief
alleging breaches of fiduciary duties and various violations of the Employee
Retirement Income Security Act of 1974 (ERISA) arising principally from
purported defects in the structure, financing, and termination of the ESOP and
for interference with Plaintiff's rights under ERISA. Plaintiff seeks monetary
damages, rescission of the preferred stock transactions with the ESOP and/or
restitution of ESOP assets, and attorneys' fees and costs under ERISA. In
January 1996, PLMI and other defendants filed a motion to dismiss the Complaint
for lack of subject matter jurisdiction, arguing the plaintiff lacked standing.
The motion was granted and on May 30, 1996, the court entered a judgment
dismissing the Complaint for lack of subject matter jurisdiction. Plaintiff has
appealed to the U.S. Court of Appeals for the Ninth Circuit, seeking a reversal
of District Court's judgment. The briefing on this appeal was completed on
February 18, 1997.
The Company along with PLM Financial Services, Inc. (FSI), PLM
Investment Management, Inc. (IMI), PLM Transportation Equipment Corporation
(TEC), and PLM Securities Corp. (PLM Securities), and collectively with PLMI,
FSI, IMI, TEC, and PLM Securities (the "PLM Entities"), were named as defendants
in a class action lawsuit filed in the Circuit Court of Mobile County, Mobile,
Alabama, Case No. CV-97-251. The PLM Entities received service of the complaint
on February 10, 1997, and pursuant to an extension of time granted by
plaintiffs' attorneys, have sixty days to respond to the complaint. The Company
is currently reviewing the substance of the allegations with its counsel, and
believes the allegations to be completely without merit and intends to defend
this matter vigorously.
The plaintiffs, who filed the complaint on their own and on behalf of
all class members similarly situated, are six individuals who allegedly invested
in certain California limited partnerships (the Partnerships) sponsored by PLM
Securities, for which FSI acts as the general partner, including PLM Equipment
Growth Fund IV, PLM Equipment Growth Fund V, PLM Equipment Growth Fund VI, and
PLM Equipment Growth and Income Fund VII. The complaint purports eight causes of
action against all defendants as follows: fraud and deceit, suppression,
negligent misrepresentation and suppression, intentional breach of fiduciary
duty, negligent breach of fiduciary duty, unjust enrichment, conversion, and
conspiracy. Additionally, plaintiffs allege a cause of action for breach of
third party beneficiary contracts against and in violation of the NASD rules of
fair practice by PLM Securities alone.
Plaintiffs allege that each defendant owed plaintiffs and the class
certain duties due to their status as fiduciaries, financial advisors, agents,
general partner, and control persons. Based on these duties, plaintiffs assert
liability against the PLM Entities for improper sales and marketing practices,
mismanagement of the Partnerships, and concealing such mismanagement from
investors in the Partnerships. Plaintiffs seek unspecified compensatory and
recissory damages, as well as punitive damages, and have offered to tender their
limited partnership units back to the defendants.
Lease Agreements
The Company and its subsidiaries have entered into operating leases for office
space and rental yard operations. The Company's total net rent expense was $2.4
million, $2.5 million, and $2.1 million in 1996, 1995, and 1994, respectively.
The portion of rent expense related to its principal office, net of sublease
income of $38,000 in 1996, was $1.3 million in 1996, 1995, and 1994. The
remaining rent expense was related to other office space and rental yard
operations.
Annual lease rental commitments for all of the Company's locations
total $2,427,000, $2,290,000, $2,136,000, $2,011,000, $827,000, and $56,000 for
years 1997 through 2001, and thereafter, respectively.
<PAGE>
14. COMMITMENTS AND CONTINGENCIES (continued)
Purchase Commitments
As of December 31, 1996, the Company through its AFG subsidiary, had committed
to purchase $37.0 million of equipment for its commercial and industrial
equipment lease portfolio.
From January 1, 1997 through February 21, 1997, the Company, through its
AFG subsidiary, funded $5.2 million of commitments outstanding for its
commercial and industrial lease portfolio at December 31, 1996, and entered into
new commitments for $9.9 million.
Letter of Credit
At December 31, 1996, the Company had a $327,000 open letter of credit to cover
its guarantee of the payment of the outstanding debt of a Canadian railcar
repair facility, in which the Company has a 10% equity interest. This letter of
credit must be extended or replaced under the terms of the guarantee.
Other
The Company provides employment contracts to certain officers which provide for
certain payments in the event of a change of control and termination of
employment.
The Company has agreed to provide supplemental retirement benefits to 10
current or former members of management. The benefits accrue over a maximum of
15 years and will result in payments over 5 years based on the average base rate
of pay during the 60-month period prior to retirement as adjusted for length of
participation in the plan. Expenses for the plan were $218,000 for 1996,
$316,000 for 1995, and $249,000 for 1994. As of December 1996, the total
estimated future obligation relating to the current participants is $7,672,000
including vested benefits of $2,836,000. In connection with this plan, whole
life insurance contracts were purchased on the participants. Insurance premiums
of $250,000 and $247,000 were paid during 1996 and 1995, respectively.
Additionally, the Company has recorded $790,000 in cash surrender values
relating to these contracts as of December 31, 1996.
15. SHAREHOLDERS' EQUITY
Common Stock
In February 1995, the Company announced that its Board of Directors had
authorized the repurchase of up to $0.5 million of the Company's common stock.
The shares could be purchased in the open market or through private
transactions, with working capital and existing cash reserves. Shares
repurchased could be used for corporate purposes, including option plans, or
they could be retired. The Company purchased 146,977 shares under this program
for $0.5 million in 1995 completing the repurchase.
In November 1995, the Company authorized the repurchase of up to $5.0
million of the Company's common stock and, pursuant to such authorization, in
1995 the Company repurchased 735,196 shares in private transactions for $2.6
million.
During 1996, the Company repurchased 1.7 million shares of its common
stock for $6.5 million. The repurchases completed the $5.0 million common stock
repurchase program announced in November 1995, as well as an additional
repurchase of $3.7 million authorized by the Company's Board of Directors in
July 1996.
<PAGE>
15. SHAREHOLDERS' EQUITY (continued)
Common Stock
The following table summarizes changes in common stock during 1995 and
1996:
<TABLE>
<CAPTION>
Issued Outstanding
Common Treasury Common
Shares Shares Shares
--------------------------------------------------------
<S> <C> <C> <C>
Shares at December 31, 1994 12,570,730 871,057 11,699,673
Stock options exercised 15,661 -- 15,661
Stock repurchase -- 882,173 (882,173 )
------------------------------------------------------
Shares at December 31, 1995 12,586,391 1,753,230 10,833,161
Stock options exercised 10,000 -- 10,000
Stock repurchase -- 1,700,400 (1,700,400 )
======================================================
Shares at December 31, 1996 12,596,391 3,453,630 9,142,761
======================================================
</TABLE>
Preferred Stock
PLM International has authorized 10,000,000 shares of preferred stock at $0.01
par value, none of which are outstanding at December 31, 1996 or December 31,
1995.
Stock Option Plans
At December 31, 1996, the Company has stock option plans, which are described
below.
The granting of non-qualified stock options to key employees and
directors is provided for in plans that reserve up to 780,000 shares of the
Company's common stock. The price of the shares issued under an option must be
at least 85% of the fair market value of the common stock at the date of grant.
All options currently outstanding are exercisable at prices equal to the market
value of the shares at the date of grant. Vesting of options granted generally
occurs in three equal installments of 33 1/3% per year, initiating from the date
of grant.
Stock option transactions during 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
Number of Average
Options/ Option Price
Shares Per Share
------------------------------------
<S> <C> <C>
Balance, December 31, 1993 605,195 $ 2.00
Granted 102,500 3.06
Canceled (77,069 ) 2.00
Exercised (23,331 ) 2.00
------------------------------------
Balance, December 31, 1994 607,295 $ 2.18
Granted 50,000 2.78
Canceled (37,834 ) 2.00
Exercised (15,661 ) 2.00
------------------------------------
Balance, December 31, 1995 603,800 $ 2.24
Granted 246,000 3.16
Canceled (153,000 ) 2.07
Exercised (10,000 ) 2.00
====================================
Balance, December 31, 1996 686,800 $ 2.61
====================================
</TABLE>
<PAGE>
15. SHAREHOLDERS' EQUITY (continued)
Stock Option Plans (continued)
At December 31, 1996, 1995, and 1994, respectively, 381,633, 484,547, and
297,170 of these options were exercisable.
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
Options Outstanding
Range of exercise prices $2.00-3.50
Number outstanding at 12/31/96 686,800
Weighted-average remaining contractual life 4 years
Weighted-average exercise price $2.61
Options Exercisable
Number exercisable at 12/31/96 381,633
Weighted-average exercise price $2.18
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its fixed stock option plans. Had compensation cost for the Company's
stock-based compensation plans been determined consistent with FASB Statement
No. 123, the Company's net income and earnings per share would have been reduced
by less than 3% for 1996 and 1995. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for grants in 1996 and 1995: no
dividend yield; expected volatility of 30%; risk-free interest rate of 5.53%;
and expected lives of 3 years for the management plan and 8 years for the
director plan options. The weighted-average fair value per share of options
granted during 1996 and 1995 were $1.10 and $0.93, respectively.
Shareholder Rights
On March 12, 1989, the Company adopted a Shareholder Right Plan (Plan) under
which one common stock purchase right (a Right) was distributed as a dividend on
each outstanding share of common stock. The Plan, which was amended on August
12, 1991 and on January 18, 1993, is designed to protect against unsolicited and
coercive attempts to acquire control of PLM International and other abusive
tactics. The Plan is not intended to preclude an acquisition of PLM
International which is determined to be fair to, and in the best interests of,
its shareholders.
Upon the occurrence of certain events which may be characterized as
unsolicited or abusive attempts to acquire control of the Company, each Right
will entitle its holder (other than holders and their affiliates participating
in such attempts), to purchase, for the exercise price, shares of the Company's
common stock (or in certain circumstances, other securities, cash, or
properties) having a fair market value equal to twice the exercise price. In
addition, in certain other events involving the sale of the Company or a
significant portion of its assets, each Right not owned by the acquiring entity
and its affiliates will entitle the holder to purchase, at the Right's exercise
price, equity securities of such acquiring entity having a market value equal to
twice the exercise price.
Previously, the Plan did not provide for the issuance of rights to the
holder of preferred stock except upon conversion of the preferred stock into
common stock. On January 18, 1993, the Plan was amended to distribute additional
rights as a dividend on each outstanding share of the Company's Series A
Cumulative Preferred Stock held at the close of business on February 1, 1993.
PLM International generally will be entitled to redeem the Rights in
whole at a price of one cent per Right at any time prior to the Rights becoming
exercisable. As of December 31, 1996, there were 9,142,761 Rights outstanding
which will expire on March 31, 1999, and carry no voting privileges.
<PAGE>
15. SHAREHOLDERS' EQUITY (continued)
Employee Stock Ownership Plan (ESOP)
Termination
On August 17, 1989, the Company established a leveraged ESOP, effective August
21, 1989. PLM International issued 4,923,077 shares of Series A Cumulative
Convertible Preferred Stock to the ESOP for $13.00 per share, for an aggregate
purchase price of $64,000,001. The sale was financed, in part, with the proceeds
of a loan (the Bank Loan) from a commercial bank (the Bank) which proceeds were
lent to the ESOP (ESOP Debt) on terms substantially the same as those in the
Bank Loan agreement. The ESOP Debt was secured, in part, by the shares of
preferred stock, while the Bank Loan was secured with cash equivalents and
marketable securities. Preferred dividends were payable semiannually on February
21 and August 21, which corresponded to the ESOP Debt payment dates. Bank loan
debt service was covered through release of the restricted cash and marketable
securities. While the annual ESOP dividend was fixed at $1.43 per share, the
interest rate on the ESOP debt varied, resulting in uneven debt service
requirements.
Termination of the ESOP resulted in the distribution to each ESOP
participant of shares of preferred stock allocated to such participant's account
which shares immediately converted into common stock. During the life of the
ESOP, 2,118,594 common shares were distributed to approximately 315 ESOP
participants, including 1,650,075 shares distributed to then ESOP participants
upon termination of the ESOP. Shares in the amount of 468,519 were distributed
on or about November 18, 1994, to participants who, at that time, were no longer
employees of the Company. All such distributed shares are freely tradable common
shares listed on the American Stock Exchange.
Shares of preferred stock held by the ESOP which were not allocated to
participants' accounts at the date of termination (2,804,483 shares) were
returned to the Company. In addition, the bank indebtedness of the Company
($43.3 million) related to the ESOP was repaid using restricted cash and
marketable securities collateral. In 1994, the Company charged approximately
$0.5 million to earnings to reflect an adjustment to current market value of
this collateral.
Termination of the ESOP and the related ESOP loan has eliminated payment
by the Company of the annual dividend on the preferred stock held by the ESOP.
For the year ended December 31, 1994, the aggregate pretax amount of this
dividend was $7.3 million. The Company also charged to earnings approximately
$2.7 million of previously paid, unamortized ESOP loan fees and other costs in
1994.
Change in Accounting
On November 22, 1993, the American Institute of Certified Public Accountants
issued SOP 93-6 which changes the way companies report transactions with
leveraged employee stock ownership plans for financial statement purposes,
including the following: (i) compensation expense is to be recognized based on
the fair value of shares committed to be released to employees net of the
imputed dividend on allocated shares; (ii) interest received on the loan to the
ESOP is not recorded as income; (iii) only dividends on allocated shares are
reflected as a reduction to income to common shareholders; and (iv) the
previously reported ESOP loan is not recognized under SOP 93-6, instead an
amount representing the unearned compensation related to the unallocated shares
is reported as a reduction of preferred stock. The Company elected to adopt SOP
93-6 in the third quarter of 1994, which required the previously issued
financial statements to be restated for the change in accounting as of January
1, 1994. The adoption of SOP 93-6 resulted in a noncash charge to earnings of
$5.1 million for the impact of the change in accounting principle which was
primarily the result of an increase in unearned compensation of $7.1 million and
the recording of a previously unaccrued dividend of $2.5 million. Additionally,
SOP 93-6 eliminates the recognition of interest income on the Company's loan to
the ESOP and records the entire tax benefit of the ESOP as a reduction in income
tax expense.
<PAGE>
16. PROFIT SHARING AND 401(K) PLAN
The Company adopted the PLM International, Inc. Profit Sharing and 401(k) Plan
(the Plan) effective as of February 1996. The Plan provides for deferred
compensation as described in Section 401(k) of the Internal Revenue Code. The
401(k) Plan is a contributory plan available to essentially all full-time
employees of the Company. In 1996, employees who participated in the 401(k) Plan
could elect to defer and contribute to the trust established under the 401(k)
Plan up to 9% of pre-tax salary or wages. The Company matched up to a maximum of
$4,000 of employee's contributions in 1996 to vest in four equal installments
over a four-year period. The Company's total 401(k) contribution for 1996 was
$348,000.
17. TRANSACTIONS WITH AFFILIATES
In addition to various fees payable to the Company or its subsidiaries (refer to
Notes 1 and 6), the affiliated partnerships reimburse the Company for certain
expenses as allowed in the partnership agreements. Reimbursed expenses totaling
approximately $6.2 million, $6.9 million, and $7.0 million in 1996, 1995, and
1994, respectively, have been recorded as reductions of operations support or
general and administrative expenses. Outstanding amounts are paid within normal
business terms or treated as a capital contribution if excess organization and
offering costs exceed the partnership agreement reimbursement limitations. The
Company amortizes such capital contributions over the estimated life of the
program.
18. RISK MANAGEMENT
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, lease
receivables, loans receivable, and receivables from affiliated entities.
The Company places its temporary cash investments with financial
institutions and other creditworthy issuers and limits the amount of credit
exposure to any one party. Concentrations of credit risk with respect to lease
receivables are limited due to the large number of customers comprising the
Company's customer base, and their dispersion across different businesses and
geographic areas. The Company's involvement with management of the receivables
from affiliated entities limits the amount of credit exposure from affiliated
entities.
As of December 31, 1996 and 1995, management believes the Company had no
significant concentrations of credit risk.
Interest Rate Risk Management
The Company has entered interest rate swap agreements in order to manage the
interest rate exposure associated with its securitized debt. The swap agreements
have remaining terms averaging 4.7 years, corresponding to the terms of the
related debt. Under the agreements, the Company makes payments to counterparties
at fixed rates and in return receives payments based on variable rates indexed
to LIBOR. At December 31, 1996, a notional amount of $47.8 million of interest
rate swap agreements effectively fixed interest rates between 7.42% and 8.67% on
such obligations. Interest expense was increased by $76,000 due to these
arrangement in 1996. The notional amounts of the swaps do not represent amounts
exchanged between the parties and, therefore, are not a measure of the Company's
exposure resulting from its use of the swaps. Rather, the amounts exchanged are
based on interest rates applied to the notional amounts. The fair values to the
Company of interest rate swap agreements at December 31, 1996 were approximately
$0.3 million, taking into account interest rates in effect at the time.
<PAGE>
19. GEOGRAPHIC INFORMATION
Financial information about the Company's foreign and domestic operations are as
follows:
Revenues
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------
<S> <C> <C> <C>
Domestic (including corporate) $ 42,493 $ 54,482 $ 49,770
International 9,052 5,591 3,945
==============================================
Total Revenues $ 51,545 $ 60,073 $ 53,715
==============================================
</TABLE>
The following table sets forth identifiable income (loss) information for the
years ended December 31, 1996, 1995 and 1994 (in thousands):
Net Income (loss):
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------
<S> <C> <C> <C>
Domestic (including corporate) $ 556 $ 4,376 $ (9,362 )
International 3,539 1,672 291
==============================================
Total net income (loss) $ 4,095 $ 6,048 $ (9,071 )
==============================================
</TABLE>
Identifiable assets at December 31, 1996, 1995, and 1994 are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------
<S> <C> <C> <C>
Domestic (including corporate) $ 185,656 $ 118,579 $ 134,750
International 13,093 7,634 5,622
==============================================
Indentifiable assets $ 198,749 $ 126,213 $ 140,372
==============================================
</TABLE>
International operations are comprised primarily of international
leasing, brokerage and other activities conducted primarily through the
Company's subsidiaries in Bermuda, Canada, and Australia.
20. QUARTERLY RESULTS OF OPERATIONS (unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1996 and 1995 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Net Earnings
Income Income to Per Common
(Loss) Common Shares
Revenue Before Taxes Shares Outstanding
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 Quarters
First $ 12,401 $ 1,253 $ 792 $ 0.07
Second 11,556 38 261 0.02
Third 14,060 1,498 1,365 0.14
Fourth 13,528 1,104 1,677 0.18
========================================================================
Total $ 51,545 $ 3,893 $ 4,095 $ 0.40
========================================================================
1995 Quarters
First $ 17,118 $ 2,602 $ 1,487 $ 0.13
Second 14,836 2,818 1,608 0.13
Third 14,750 3,616 2,057 0.18
Fourth 13,369 (1,168 ) 896 0.07
========================================================================
Total $ 60,073 $ 7,868 $ 6,048 $ 0.51
========================================================================
</TABLE>
<PAGE>
20. QUARTERLY RESULTS OF OPERATIONS (unaudited) (continued)
In the second quarter of 1996, the Company recorded a $1.4 million
charge mainly related to severance pay associated with the suspension of
syndication of equipment leasing programs.
In the third quarter of 1996, the Company's provision for income taxes
was $0.1 million, which represented an effective rate of 9%. Tax planning
strategies, an adjustment for state tax apportionment factors, and an adjustment
related to the ESOP resulted in the reduction in the Company's effective tax
rate during the third quarter of 1996.
In the fourth quarter of 1996, the Company's benefit for income taxes
was $0.6 million which reflected differences between the amount recognized in
the 1995 financial statements and the 1995 tax return as filed, changes in state
tax apportionment factors used to record deferred taxes, and the benefit of
certain income being earned from foreign activities which has been permanently
invested.
In the fourth quarter of 1995, the Company recorded a $1.2 million
reduction in the carrying value of certain aircraft equipment, $1.1 million in
loan fees related to early retirement of the Company's senior subordinated debt,
and higher operations support expense of $1.3 million which resulted mainly from
AFG-related expenses and severance accruals for terminated employees.
In the fourth quarter of 1995, the Company recorded a $2.1 million tax
benefit resulting in a 23% effective rate on its annual income.
21. SUBSEQUENT EVENTS
.
In January 1997, the Company entered into an agreement to lease all of its
storage equipment assets to a third party for a five year period with a purchase
option at the end of the lease.
In January 1997, the Company purchased a mobile offshore drilling unit
for $10.5 million to be sold to an affiliated partnership or program.
<PAGE>
EXHIBIT XI
PLM INTERNATIONAL, INC.
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE(a)
Years Ended December 31,
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Primary
Earnings:
Net income (loss) $ 4,095 $ 6,048 $ (6,641 )
Preferred dividend required -- -- (2,430 )
===================================================
Net income (loss) to common shares: $ 4,095 $ 6,048 $ (9,071 )
===================================================
Shares:
Weighted average number of common shares outstanding 10,189 11,795 12,374
===================================================
Primary earnings (loss) per common share $ 0.40 $ 0.51 $ (0.73 )
===================================================
Assuming Full Dilution(b)
Earnings:
Net income (loss) $ 4,095 $ 6,048 $ (6,641 )
===================================================
Shares:
Weighted average number of common shares
outstanding and common stock equivalents 10,189 11,795 12,374
Assumed conversion of preferred shares(c) -- -- 3,082
---------------------------------------------------
Weighted average number of common shares
outstanding as adjusted 10,189 11,795 15,456
===================================================
Earnings (loss) per common share assuming full dilution $ 0.40 $ 0.51 $ (0.43 )
===================================================
</TABLE>
(a) See accompanying notes to December 31, 1996, 1995, and 1994 Financial
Statements.
(b) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because the results are antidilutive.
(c) Refer to accompanying Note 15 to the December 31, 1994, Financial Statements
for the explanation related to the ESOP termination.
AMENDMENT NO. 1 TO
AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT
(TEC AcquiSub, Inc.)
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED WAREHOUSING CREDIT
AGREEMENT dated as of May 31, 1996 (the "Amendment"), is entered into by and
among TEC ACQUISUB, INC., a California special purpose corporation ("Borrower"),
and FIRST UNION NATIONAL BANK OF NORTH CAROLINA ("FUNB") and each other
financial institution which may hereafter execute and deliver an instrument of
assignment pursuant to Section 11.10 of the Credit Agreement (as defined below)
(any one financial institution individually, a "Lender," and collectively,
"Lenders"), and FUNB, as agent on behalf of Lenders (not in its individual
capacity, but solely as agent, "Agent"). Capitalized terms used herein without
definition shall have the same meanings herein as given to them in the Credit
Agreement.
RECITAL
<PAGE>
Agreement, the NotA. Borrower, Lenders and Agent have entered into that certain
Amended and Restated Credit Agreement dated as of September 27, 1995 (the
"Credit Agreement") by and among Borrower, FUNB (as the sole Lender party
thereto), and Agent pursuant to which Lenders have agreed to extend and make
available to Borrower certain advances of money.
B. Borrower desires that Lenders and Agent amend the Credit
Agreement as more fully set forth herein.
C. Subject to the representations and warranties of Borrower
and upon the terms and conditions set forth in this Amendment, the Lenders and
Agent are willing to so amend the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
2. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that, immediately before and immediately after giving effect to this
Amendment, no event shall have occurred and be continuing which constitutes an
Event of Default or a Potential Event of Default.
3. AMENDMENTS. The Credit Agreement is hereby amended as follows:
Section 1.1 of the Credit Agreement is amended to include the
following additional defined terms:
"AFG" means American Finance Group, Inc., a Delaware corporation and a
wholly-owned Subsidiary of PLMI.
"AFG Agreement" means the Warehousing Credit Agreement dated as of May
31, 1996, by and among AFG, Lenders and Agent, as the same from time to time may
be amended, modified, supplemented, renewed, extended or restated.
"Assignment and Acceptance" has the meaning set forth in Section
11.10.2.
. The definition of the term "Applicable Margin" set forth in Section
1.1 of the Credit Agreement is deleted and replaced with the following:
"Applicable Margin" means:
(a) with respect to Prime Rate Loans, zero percent (0.00%);
and
(b) with respect to LIBOR Loans, two percent (2.00%).
. The definition of "Commitment" set forth in Section 1.1 of the Credit
Agreement is amended by deleting Schedule A to the Credit Agreement entitled
"Commitments" referred to in such definition in its entirety and replacing such
Schedule A with the Schedule A attached to this Amendment, and the respective
Commitment of each Lender in effect from and after the effective date of this
Amendment shall be equal to the amount set forth opposite such Lender's name in
Schedule A.
. The definition of the term "Commitment Termination Date" set forth in
Section 1.1 of the Credit Agreement is deleted and replaced with the following:
"Commitment Termination Date" means May 23, 1997.
. The definition of the term "Growth Funds" set forth in Section 1.1 of
the Credit Agreement is deleted and replaced with the following:
"Growth Funds" means any and all of EGF III, EGF IV, EGF V, EGF VI, EGF
VII and Income Fund I.
. The definition of the term "Growth Fund Agreement" set forth in
Section 1.1 of the Credit Agreement is deleted and replaced with the following:
"Growth Fund Agreement" means the Second Amended and Restated
Warehousing Credit Agreement dated as of May 31, 1996, by and among each of the
Growth Funds, and Lenders, and Agent, as the same may from time to time be
amended, modified, supplemented, renewed, extended or restated.
. The portion of Section 2.1.1 of the Credit Agreement preceding
subsection (a) is deleted and replaced with the following:
2.1.1 Revolving Facility. Subject to the terms and conditions
of this Agreement and in reliance upon the representations and warranties of
Borrower set forth herein, Lenders hereby agree to make Advances (as defined
below) of immediately available funds to Borrower, on a revolving basis, from
the Closing Date until the Business Day immediately preceding the Commitment
Termination Date, in the aggregate principal amount outstanding at any time not
to exceed the lesser of (a) the total Commitments for the Facility less the
aggregate principal amount then outstanding under the Growth Fund Agreement and
the AFG Agreement or (b) the Borrowing Base (such lesser amount being the
"Maximum Availability"), as more fully set forth in this Section 2.1.1.
. Subparagraph (ii) of Section 2.1.1(a) of the Credit Agreement is
deleted and replaced with the following:
(ii) The obligation of Lenders to make any Loan
from time to time hereunder shall be limited to the then applicable Maximum
Availability. For the purpose of determining the amount of the Borrowing Base
available at any one time, the amount available shall be the total amount of the
Borrowing Base as set forth in the Borrowing Base Certificate delivered to Agent
pursuant to Section 3.2.1 with respect to each requested Loan. Nothing contained
in this Agreement shall under any circumstance be deemed to require any Lender
to make any Advance under the Facility which, in the aggregate principal amount,
either (1) taking into account such Lender's portion of the principal amounts
outstanding under this Agreement and the making of such Advance exceeds the
lesser of (A) such Lender's Commitment for the Facility and (B) such Lender's
Pro Rata Share of the Borrowing Base, or (2) taking into account such Lender's
portion of the principal amounts outstanding under this Agreement, under the
Growth Fund Agreement, under the AFG Agreement and the making of such Advance
exceeds such Lender's Commitment for the Facility.
. Subparagraph (d) of Section 2.2.3 of the Credit Agreement is deleted
and replaced with the following:
In the event that the Growth Fund Agreement or the AFG
Agreement shall be terminated for any reason as to any one or more of the Growth
Funds or as to AFG, as the case may be, then Borrower shall immediately prepay
any and all amounts outstanding under this Agreement and the Lenders'
Commitments shall, without notice, immediately and automatically terminate.
. Section 8.1 of the Credit Agreement is amended to include the
following subsection 8.1.16:
8.1.16 AFG Agreement. Without limiting the generality of, and
in addition to the events described in Section 8.1.1, the occurrence of any
"Event of Default" as defined under the AFG Agreement or any other loan or
security document related to the AFG Agreement.
. Sections 11.10.1 and 11.10.2 of the Credit Agreement are deleted and
replaced with the following:
(i) Agreement, the Not( have the right in accordance with this Section 11.10 to
sell and assign to any Eligible Assignee all or any portion of its interest
(provided that any such partial assignment shall not be for a principal amount
of less than Five Million Dollars ($5,000,000)) under this Agreement, the Notes
and the other Loan Documents, together with a ratable interest in the AFG
Agreement and the Growth Funds Agreement and the related Notes and other Loan
Documents (as separately described and defined in those agreements), subject to
the prior written consent of the affected Borrower, which consent shall not be
unreasonably withheld, and (ii) to grant any participation or other interest
herein or therein, except that each potential participant to which a Lender
intends to grant any rights under Sections 2.9, 2.10, 5.1 or 10.2 shall be
subject to the prior written consent of the affected Borrower, which consent
shall not be unreasonably withheld; provided, however, that no such sale,
assignment or participation grant shall result in requiring registration under
the Securities Act of 1933, as amended, or qualification under any state
securities law.
11.10.2 Subject to the limitations of this Section 11.10.2,
each Lender may sell and assign, from time to time, all or any portion of its
Pro Rata Share of the Commitments to any of its Affiliates or, with the approval
of the affected Borrower and FSI (which approval shall not be unreasonably
withheld), to any other financial institution acceptable to Agent, subject to
the assumption by such assignee of the share of the Commitments so assigned. The
assignment to such Affiliate or other financial institution shall be evidenced
by an Assignment and Assumption in the form of Exhibit I ("Assignment and
Acceptance") executed by the assignor Lender (hereinafter from time to time
referred to as the "Assignor Lender") and such Affiliate or other financial
institution (which, upon such assignment shall become a Lender hereunder
(hereinafter from time to time referred to as the "Assignee Lender")). The
Assignment and Assumption need not include any of the economic or financial
terms upon which such Assignee Lender receives the assignment from the Assignor
Lender, and such terms need not be disclosed to or approved by such Borrower or
FSI; provided only that such terms do not diminish the obligations undertaken by
such Assignee Lender in the Assignment and Assumption or increase the
obligations of Borrowers or FSI under this Agreement. Upon execution of such
Assignment and Assumption, (i) the definition of "Commitments" in Section 1
hereof and the Pro Rata Shares set forth therein shall be deemed to be amended
to reflect each Lender's share of the Commitments, giving effect to the
assignment and (ii) the Assignee Lender shall, from the effective date of the
instrument of assignment and assumption, be subject to all of the obligations,
and entitled to all of the rights, of a Lender hereunder, except as may be
expressly provided to the contrary in the Assignment and Assumption. To the
extent the obligations hereunder of the Assignor Lender are assumed by the
Assignee Lender, the Assignor Lender shall be relieved of such obligations. Upon
the assignment of any interest by any Assignor Lender pursuant to this Section
11.10.2, such Assignor Lender agrees to supplement Schedule 1.1 to show the date
of such assignment, the Assignor Lender, the Assignee Lender, the Assignee
Lender's address for notice purposes and the amount of the Commitments so
assigned.
. The Borrowing Base Certificate set forth as Exhibit B of the Credit
Agreement is deleted and replaced with Exhibit B attached hereto.
. Paragraph 3 of the Lockbox Agreement set forth in Exhibit F of the
Credit Agreement is amended to delete the name of "Allen V. Hirsch" and replace
it with "Stephen Peary" as an authorized Person.
. 4. LIMITATIONS ON AMENDMENTS
(a) The amendments set forth in Section 1, above, are
effective for the purposes set forth herein and shall be limited precisely as
written and shall not be deemed to (i) be a consent to any amendment, waiver or
modification of any other term or condition of any Loan Document or (ii)
otherwise prejudice any right or remedy which Lenders or Agent may now have or
may have in the future under or in connection with any Loan Document.
(b) This Amendment shall be construed in connection
with and as part of the Loan Documents and all terms, conditions,
representations, warranties, covenants and agreements set forth in the Loan
Documents, except as herein waived or amended, are hereby ratified and confirmed
and shall remain in full force and effect.
. In order to induce Lenders and Agent to enter into this Amendment, Borrower
represents and warrants to each Lender and Agent as follows:
(a) After giving effect to this Amendment (i) the
representations and warranties contained in the Loan Documents (other than those
which expressly speak as of a different date) are true, accurate and complete in
all material respects as of the date hereof and (ii) no Default or Event of
Default has occurred and is continuing;
(b) Borrower has the corporate power and authority to
execute and deliver this Amendment and to perform its obligations under the
Credit Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party;
(c) The articles of incorporation, bylaws and other
organizational documents of Borrower delivered to each Lender as a condition
precedent to the effectiveness of the Credit Agreement are true, accurate and
complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;
(d) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party have been duly authorized by all necessary corporate action
on the part of Borrower;
(e) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of respective obligations under the
Credit Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party do not and will not contravene (i) any law or
regulation binding on or affecting the Borrower, (ii) the articles of
incorporation, bylaws, or other organizational documents of Borrower, (iii) any
order, judgment or decree of any court or other governmental or public body or
authority, or subdivision thereof, binding on Borrower or (iv) any contractual
restriction binding on or affecting Borrower;
(f) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by any governmental or public body or authority, or subdivision
thereof, binding on Borrower, except as already has been obtained or made; and
(g) This Amendment has been duly executed and
delivered by the Borrower and is the binding obligation of Borrower, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws of general application and equitable principles relating to
or affecting creditors' rights.
. Borrower hereby reaffirms its obligations under each Loan Document to which it
is a party.
This Amendment shall become effective upon the last to occur of:
(a) The execution and delivery of this Amendment,
whether the same or different copies, by Borrower, FUNB (in its capacity as the
sole Lender) and Agent.
(b) The execution and delivery of the Acknowledgement
of Amendment and Reaffirmation of Guaranty attached to this Amendment, whether
the same or different copies, by each of FSI and TEC.
(c) Receipt by Agent, in form and substance
satisfactory to FUNB (in its capacity as the sole Lender), of a certified copy
of the records of all actions taken by Borrower, TEC and FSI, including all
corporate resolutions of Borrower, TEC and FSI authorizing or relating to the
execution, delivery and performance of this Amendment.
(d) Receipt by Agent, in form and substance
satisfactory to FUNB (in its capacity as the sole Lender), of a new Note
executed by Borrower in favor of Agent on behalf of Lenders in the stated
principal amount equal to the aggregate Commitments, which Note will replace and
supersede the existing Note dated September 27, 1995 issued by Borrower to
Agent.
(e) Receipt by Agent, in form and substance
satisfactory to FUNB (in its capacity as the sole Lender), of a side letter
agreement (the "Fee Letter") dated as of the date hereof by and among Borrower,
each Growth Fund and AFG relating to the terms of an arrangement fee.
(f) Receipt by Agent, in form and substance
satisfactory to Agent, of a side letter agreement (the "Agent's Side Letter")
dated as of the date hereof by and among Borrower, each Growth Fund and AFG
relating to the terms of an Agent's fee.
(g) Receipt by Agent of the arrangement fee described
in the Fee Letter and the Agent's fee described in the Agent's Side Letter.
(h) Receipt by Agent, in form and substance
satisfactory to FUNB (in its capacity as the sole Lender), of a favorable
written legal opinion of Stephen Peary, general counsel of FSI and TEC, on
behalf of itself and as the parent company to Borrower, together with copies of
any officer's certificate or legal opinion of another counsel or law firm
specifically identified and expressly relied upon by such counsel in its
opinion.
(i) Satisfaction, to the approval of FUNB (in its
capacity as the sole Lender) and Agent, of all conditions precedent to the
effectiveness of the Growth Fund Agreement.
(j) Satisfaction, to the approval of FUNB (in its
capacity as the sole Lender) and Agent, of all conditions precedent to the
effectiveness of the AFG Agreement.
. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
. BORROWER HEREBY REPRESENTS AND WARRANTS TO AGENT AND EACH LENDER THAT IT HAS
NO KNOWLEDGE OF ANY FACTS THAT WOULD SUPPORT A CLAIM, COUNTERCLAIM, DEFENSE OR
RIGHT OF SET-OFF.
. This Amendment may be signed in any number of counterparts, and by different
parties hereto in separate counterparts, with the same effect as if the
signatures to each such counterpart were upon a single instrument.
All counterparts shall be deemed an original of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWER TEC ACQUISUB, INC.
By: /s/ J. Michael Allgood
---------------------------
J. Michael Allgood
Chief Financial Officer
LENDERS FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By: /s/ Bill A. Shirley
--------------------------
Bill A. Shirley
Vice President
AGENT FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Agent
By: /s/ Bill A. Shirley
-------------------------
Bill A. Shirley
Vice President
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
<PAGE>
11. PLM Financial Services, Inc. ("FSI") and PLM
Transportation Equipment Corporation ("TEC") each hereby acknowledge and confirm
that it has reviewed and approved the terms and conditions of this Amendment.
12. FSI and TEC each hereby consent to this Amendment
and agree that its respective joint and several Guaranty of the Obligations of
Borrower under the Credit Agreement shall continue in full force and effect,
shall be valid and enforceable and shall not be impaired or otherwise affected
by the execution of this Amendment or any other document or instrument delivered
in connection herewith.
13. FSI and TEC each severally represent and warrant
that, after giving effect to this Amendment, all representations and warranties
contained in its respective Guaranty are true, accurate and complete as if made
the date hereof.
GUARANTOR PLM FINANCIAL SERVICES, INC.
By: /s/ J. Michael Allgood
-------------------------
J. Michael Allgood
Chief Financial Officer
GUARANTOR PLM TRANSPORTATION EQUIPMENT CORPORATION
By: /s/ J. Michael Allgood
-------------------------
J. Michael Allgood
Chief Financial Officer
<PAGE>
SCHEDULE A
COMMITMENTS
Pro
Rata
Lender Commitment Share
First Union National Bank $35,000,000 35/35 x 100%
of North Carolina
AMENDMENT NO. 2
TO AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
(TEC AcquiSub, Inc.)
THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED WAREHOUSING CREDIT
AGREEMENT dated as of November 5, 1996 (the "Amendment"), is entered into by and
among TEC ACQUISUB, INC., a California special purpose corporation ("Borrower"),
FIRST UNION NATIONAL BANK OF NORTH CAROLINA ("FUNB"), FLEET BANK, N.A. ("Fleet")
and each other financial institution which may hereafter execute and deliver an
instrument of assignment pursuant to Section 11.10 of the Credit Agreement (as
defined below) (any one financial institution individually, a "Lender," and
collectively, "Lenders"), and FUNB, as agent on behalf of Lenders (not in its
individual capacity, but solely as agent, "Agent"). Capitalized terms used
herein without definition shall have the same meanings herein as given to them
in the Credit Agreement.
RECITAL
<PAGE>
A. Borrower, Lenders and Agent have entered into that certain
Amended and Restated Warehousing Credit Agreement dated as of September 27,
1995, as amended by that certain Amendment No. 1 to Amended and Restated Credit
Agreement dated as of May 31, 1996 (as amended, the "Credit Agreement"), by and
among Borrower, FUNB (as the sole Lender party thereto) and Agent pursuant to
which Lenders have agreed to extend and make available to Borrower certain
advances of money.
B. Borrower desires that Lenders and Agent amend the Credit
Agreement to increase the aggregate amount of the Commitments by $15,000,000, to
extend the Commitment Termination Date, to release each of PLM Financial
Services, Inc., a Delaware corporation ("FSI"), and PLM Transportation Equipment
Corporation ("TEC") from its respective Guaranty and to replace FSI and TEC with
PLM International, Inc., a Delaware corporation ("PLMI"), as a Guarantor, as
more fully set forth herein.
C. FUNB is currently the sole Lender under the Credit
Agreement. On the terms and conditions set forth below, Fleet desires to become
a Lender under the Credit Agreement and to make Loans to Borrower with an
aggregate Commitment of $15,000,000.
D. Subject to the representations and warranties of Borrower
and upon the terms and conditions set forth in this Amendment, Lenders and Agent
are willing to so amend the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
The Credit Agreement is hereby amended as follows:
. The definition of "Commitment" set forth in Section 1.1 of the Credit
Agreement is amended by deleting Schedule A to the Credit Agreement entitled
"Commitments" referred to in such definition in its entirety and replacing such
Schedule A with the Schedule A attached to this Amendment, and the respective
Commitment of each Lender in effect from and after the effective date of this
Amendment shall be equal to the amount set forth opposite such Lender's name in
Schedule A.
. The definition of "Commitment Termination Date" set forth in Section
1.1 of the Credit Agreement is deleted and replaced with the following:
"Commitment Termination Date" means October 3, 1997.
. The definition of "Guaranties" set forth in Section 1.1 of the Credit
Agreement is deleted and replaced with the following:
"Guaranty" means that certain Guaranty dated as of November 5,
1996, executed by PLMI in favor of Lenders and Agent.
. The definition of "Requisite Lenders" set forth in Section 1.1 of the
Credit Agreement is deleted and replaced with the following:
"Requisite Lenders" means any combination of Lenders whose
combined Pro Rata Share (and voting interest with respect thereto) of
all amounts outstanding under this Agreement, or, in the event there
are no amounts outstanding, the Commitments, is greater than sixty-six
and two-thirds percent (66_%) of all such amounts outstanding or the
total Commitments, as the case may be; provided, however, that in the
event there are only two (2) Lenders, Requisite Lenders means both
Lenders.
. The portion of Section 2.1.1 of the Credit Agreement preceding
subsection (a) is deleted and replaced with the following:
2.1.1 Revolving Facility. Subject to the terms and
conditions of this Agreement and in reliance upon the representations
and warranties of Borrower set forth herein, Lenders hereby agree to
make Advances (as defined below) of immediately available funds to
Borrower, on a revolving basis, from the Closing Date until the
Business Day immediately preceding the Commitment Termination Date, in
the aggregate principal amount outstanding at any time not to exceed
the lesser of (a) the total Commitments for the Facility less the
aggregate principal amount then outstanding under the Growth Fund
Agreement and under the AFG Agreement or (b) the Borrowing Base or (c)
$35,000,000 (such lesser amount being the "Maximum Availability"), as
more fully set forth in this Section 2.1.1.
6 Section 2.1.1(a)(i) Facility Commitments. Section
2.1.1(a)(i) of the Credit Agreement is deleted and replaced with the following:
(i) On the Funding Date requested by
Borrower, after Borrower shall have satisfied all applicable conditions
precedent set forth in Section 3, each Lender shall advance immediately
available funds to Agent (each such advance being an "Advance")
evidencing such Lender's Pro Rata Share of a loan ("Loan"). Agent shall
immediately advance such immediately available funds to Borrower at the
Designated Deposit Account (or such other deposit account at FUNB or
such other financial institution as to which Borrower and Agent shall
agree at least three (3) Business Days prior to the requested Funding
Date) on the Funding Date with respect to such Loan. Borrower shall pay
interest accrued on the Loan at the rates and in the manner set forth
in Section 2.1.1(b). Subject to the terms and conditions of this
Agreement, the unpaid principal amount of each Loan and all unpaid
interest accrued thereon, together with all other fees, expenses, costs
and other sums chargeable to Borrower incurred in connection therewith
shall be due and payable no later than the Commitment Termination Date.
Each Loan advanced hereunder by each Lender shall be evidenced by
Borrower's revolving promissory note, substantially in the form of
Exhibit A (each, a "Note").
. Subsection 2.1.1(a)(iii) of the Credit Agreement is deleted and
replaced with the following:
(iii) If at any time and for any reason the
aggregate principal amount of the Loan(s) then outstanding shall exceed
the Maximum Availability (the amount of such excess, if any, being an
"Overadvance"), Borrower shall immediately repay the full amount of
such Overadvance, together with all interest accrued thereon; provided,
however, that if such Overadvance occurs solely as a result of a
decrease in the amount of the Borrowing Base due solely to a decrease
in the computation of the Borrowing Base under clause (b) of the
definition of Borrowing Base, as set forth on a Borrowing Base
Certificate delivered to Agent pursuant to Section 5.1.3, then, to the
extent of such decrease, Borrower shall not be required under this
Section 2.1.1(a)(iii) to prepay such Overadvance but Lenders shall have
no obligation to make or fund any Loans or extend any credit hereunder
so long as such Overadvance condition shall remain in effect.
. Section 2.1.3 of the Credit Agreement is deleted and replaced with
the following:
2.1.3 Utilization of the Loans. The Loans made under
the Facility may be used solely for the purpose of acquiring the
specific items of Eligible Inventory approved by Agent, in its sole
discretion, and against which Lenders have made Advances; provided,
however, in no event shall the proceeds of any Loan be used to finance
more than eighty percent (80.0%) of the Invoice Price of any item of
Eligible Inventory to be purchased with the proceeds of such Loan. The
parties hereto understand and contemplate that the Loans are being
requested to finance the acquisition of items of Eligible Inventory and
that only upon the funding of such Loans and the acquisition of record
title by Borrower or a Marine Subsidiary or by an Owner Trustee for the
beneficial interest of Borrower or a Marine Subsidiary in a single or
back-to-back transaction will the ownership requirements of Eligible
Inventory be satisfied.
. Section 4.1 of the Credit Agreement is deleted and replaced with the
following:
4.1 Existence and Power. Borrower is a corporation,
duly organized, validly existing and in good standing under the laws of
the State of California and is duly qualified and licensed as a foreign
corporation and authorized to do business in each jurisdiction within
the United States where its ownership of Property and assets or conduct
of business requires such qualification. Borrower has the corporate
power and authority, rights and franchises to own its Property and
assets and to carry on its business as now conducted. Borrower has the
corporate power and authority to execute, deliver and perform the terms
of the Loan Documents (to the extent it is a party thereto) and all
other instruments and documents contemplated hereby or thereby.
10 Note. The form of Note set forth as Exhibit A of the Credit
Agreement is deleted and replaced with Exhibit A attached hereto.
. The Borrowing Base Certificate set forth as Exhibit B of the Credit
Agreement is deleted and replaced with Exhibit B attached hereto.
Lenders hereby release each of FSI and TEC from all of its respective
obligations under those certain Guaranties dated as of June 30, 1993, in favor
of Lenders and Agent.
. 4. LIMITATIONS ON AMENDMENTS
(a) The amendments set forth in Section 1, above, are
effective for the purposes set forth herein and shall be limited precisely as
written and shall not be deemed to (i) be a consent to any amendment, waiver or
modification of any other term or condition of any Loan Document or (ii)
otherwise prejudice any right or remedy which Lenders or Agent may now have or
may have in the future under or in connection with any Loan Document.
(b) This Amendment shall be construed in connection
with and as part of the Loan Documents and all terms, conditions,
representations, warranties, covenants and agreements set forth in the Loan
Documents, except as herein waived or amended, are hereby ratified and confirmed
and shall remain in full force and effect.
. In order to induce Lenders and Agent to enter into this Amendment, Borrower
represents and warrants to each Lender and Agent as follows:
(a) Immediately after giving effect to this Amendment
(i) the representations and warranties contained in the Loan Documents (other
than those which expressly speak as of a different date) are true, accurate and
complete in all material respects as of the date hereof and (ii) no Default or
Event of Default, or event which constitutes a Potential Event of Default, has
occurred and is continuing;
(b) Borrower has the corporate power and authority to execute
and deliver this Amendment and to perform its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party;
(c) The articles of incorporation, bylaws and other
organizational documents of Borrower delivered to each Lender as a condition
precedent to the effectiveness of the Credit Agreement are true, accurate and
complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;
(d) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party have been duly authorized by all necessary corporate action
on the part of Borrower;
(e) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its respective Obligations under
the Credit Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party do not and will not contravene (i) any law or
regulation binding on or affecting Borrower, (ii) the articles of incorporation,
bylaws, or other organizational documents of Borrower, (iii) any order, judgment
or decree of any court or other governmental or public body or authority, or
subdivision thereof, binding on Borrower or (iv) any contractual restriction
binding on or affecting Borrower;
(f) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by any governmental or public body or authority, or subdivision
thereof, binding on Borrower, except as already has been obtained or made; and
(g) This Amendment has been duly executed and
delivered by Borrower and is the binding Obligation of Borrower, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws of general application and equitable principles relating to
or affecting creditors' rights.
Borrower hereby reaffirms its Obligations under each Loan Document to which it
is a party.
This Amendment shall become effective upon the last to occur of:
(a) The execution and delivery of this Amendment,
whether the same or different copies, by Borrower, Lenders and Agent.
(b) Receipt by Agent, in form and substance
satisfactory to Lenders, of a Guaranty (the "PLMI Guaranty") dated as of the
date hereof executed by PLMI in favor of Lenders and Agent.
(c) Receipt by Agent, in form and substance
satisfactory to Lenders, of a certified copy of the records of all actions taken
by Borrower and PLMI, including all corporate resolutions of Borrower and PLMI
authorizing or relating to the execution, delivery and performance of this
Amendment and the PLMI Guaranty, as the case may be.
(d) Receipt by Agent, in form and substance
satisfactory to Lenders, of Notes executed by Borrower in favor of each Lender
in the stated principal amount equal to each Lender's Pro Rata Share of the
Commitments, which Notes will replace and supersede the existing Note dated May
31, 1996, issued by Borrower to Agent.
(e) Receipt by Agent, in form and substance
satisfactory to Lenders, of a supplemental fee letter (the "Supplemental Fee
Letter") and a supplemental agent's side letter (the "Supplemental Agent's Side
Letter"), each duly executed by Borrower, each of the Growth Funds and AFG, and
the Supplemental Arrangement Fee and the Supplemental Agent's Fee described in
the Supplemental Fee Letter and the Supplemental Agent's Side Letter,
respectively.
(f) Receipt by Agent of an originally executed legal
opinion of Stephen Peary, general counsel of Borrower and Guarantor, on behalf
of Borrower and Guarantor, in form and substance satisfactory to Lenders, dated
as of the effective date of this Amendment and addressed to Lenders, together
with copies of any officer's certificate or legal opinion of other counsel or
law firm specifically identified and expressly relied upon by such counsel.
(g) Satisfaction, to the approval of Lenders and
Agent, of all conditions precedent to the effectiveness of Amendment No. 1 to
Second Amended and Restated Warehousing Credit Agreement dated as of the date
hereof by and among the Growth Funds, Lenders and Agent.
(h) Satisfaction, to the approval of Lenders and
Agent, of all conditions precedent to the effectiveness of Amendment No. 1 to
Warehousing Credit Agreement dated as of the date hereof by and among AFG,
Lenders and Agent.
THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
BORROWER HEREBY REPRESENTS AND WARRANTS TO AGENT AND EACH LENDER THAT IT HAS
NO KNOWLEDGE OF ANY FACTS THAT WOULD SUPPORT A CLAIM, COUNTERCLAIM, DEFENSE OR
RIGHT OF SET-OFF.
Upon the execution and delivery of this Amendment, Fleet shall be a Lender and
a party to the Credit Agreement, and shall be entitled to the rights and
benefits of the Loan Documents and, to the extent of the percentage equivalent
of Fleet's Commitment under the Facility divided by the aggregate Commitment of
all Lenders under the Facility, have the rights and obligations of a Lender
thereunder.
This Amendment may be signed in any number of counterparts, and by different
parties hereto in separate counterparts, with the same effect as if the
signatures to each such counterpart were upon a single instrument.
All counterparts shall be deemed an original of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWER TEC ACQUISUB, INC.
By:
J. Michael Allgood
Chief Financial Officer
LENDERS FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By:
Bill A. Shirley
Vice President
FLEET BANK, N.A.
By:
Printed Name:
Title:
AGENT FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Agent
By:
Bill A. Shirley
Vice President
<PAGE>
SCHEDULE A
COMMITMENTS
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $35,000,000 35/50 x 100%
of North Carolina
Fleet Bank, N.A. $15,000,000 15/50 x 100%
<PAGE>
EXHIBIT A
REVOLVING PROMISSORY NOTE
[LENDER]
$____________________ San Francisco, California
Date: November 5, 1996
TEC ACQUISUB, Inc., a California corporation (the "Borrower"), FOR
VALUE RECEIVED, hereby unconditionally promises to pay to the order of [LENDER]
("[__________________]"), in lawful money of the United States of America, the
aggregate principal amount of [__________________]'s Pro Rata Share of all Loans
outstanding under the Credit Agreement referred to below, payable in the
amounts, on the dates and in the manner set forth below.
This revolving promissory note (the "Note") is one of the Notes
referred to in that certain Amended and Restated Warehousing Credit Agreement
dated as of September 27, 1995, as amended by that certain Amendment No. 1 to
Amended and Restated Warehousing Credit Agreement dated as of May 31, 1996, and
that certain Amendment No. 2 to Amended and Restated Warehousing Credit
Agreement dated as of even date herewith (as the same may from time to time
hereafter be further amended, modified, supplemented, renewed, extended or
restated, the "Credit Agreement"), by and among the Borrower, First Union
National Bank of North Carolina, solely in its capacity as agent (solely in such
capacity, the "Agent") for [__________________], and such other financial
institutions as shall from time to time become "Lenders" pursuant to Section
11.10 of the Credit Agreement (such entities, together with their respective
successors and assigns being collectively referred to herein as the "Lenders"),
and the Lenders, and amends, restates and replaces that certain Revolving
Promissory Note dated May 31, 1996, executed and delivered by the Borrower in
favor and to the Agent, on behalf of the Lenders. All capitalized terms used but
not defined herein shall have the same meaning as given to them in the Credit
Agreement.
<PAGE>
12. Principal Payments. Subject to the terms and conditions of
the Credit Agreement, including, without limitation, terms relating to mandatory
prepayments of principal (Section 2.2.3), the entire principal amount
outstanding under each Loan shall be due and payable on the Maturity Date with
respect to such Loan, with any and all unpaid and not previously due and payable
principal amounts under the Loans being due and payable on the Commitment
Termination Date.
13. Interest Rate. The Borrower further promises to pay
interest on the sum of the daily unpaid principal balance of all Loans
outstanding on each day in lawful money of the United States of America, from
the Closing Date until all such principal amounts shall have been repaid in
full, which interest shall be payable at the rates per annum and on the dates
determined pursuant to the Credit Agreement.
14. Place of Payment. All amounts payable hereunder shall be
payable to the Agent, on behalf of [__________________], at the office of First
Union National Bank of North Carolina, One First Union Center, 301 South College
Street, Charlotte, North Carolina 28288, Attention: Elisha Sabido, or such other
place of payment as may be specified by the Agent in writing.
15. Application of Payments; Acceleration. Payments on this
Note shall be applied in the manner set forth in the Credit Agreement. The
Credit Agreement contains provisions for acceleration of the maturity of the
Loans upon the occurrence of certain stated events and also provides for
mandatory and optional prepayments of principal prior to the stated maturity on
the terms and conditions therein specified.
Each Advance made by [__________________] to the Borrower constituting
[__________________]'s Pro Rata Share of a Loan pursuant to the Credit Agreement
shall be recorded by [__________________] on its books and records. The failure
of [__________________] to record any Advance or any repayment or prepayment
made on account of the principal balance thereof shall not limit or otherwise
affect the obligations of the Borrower under this Note and under the Credit
Agreement to pay the principal, interest and other amounts due and payable
hereunder and thereunder.
16. Default. The Borrower's failure to pay timely any of the
principal amount due under this Note or any accrued interest or other amounts
due under this Note on or within five (5) calendar days after the date the same
becomes due and payable shall constitute a default under this Note. Upon the
occurrence of a default hereunder or an Event of Default under the Credit
Agreement, all unpaid principal, accrued interest and other amounts owing
hereunder shall, at the option of Required Lenders, be immediately collectible
by the Lenders and the Agent pursuant to the Credit Agreement and applicable
law.
17. Waivers. The Borrower waives presentment and demand for
payment, notice of dishonor, protest and notice of protest of this Note, and
shall pay all costs of collection when incurred by or on behalf of the Lenders,
including, without limitation, reasonable attorneys' fees, costs and other
expenses as provided in the Credit Agreement.
18. Governing Law. This Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of North
Carolina, excluding conflict of laws principles that would cause the application
of laws of any other jurisdiction.
19. Successors and Assigns. The provisions of this Note shall
inure to the benefit of and be binding on any successor to the Borrower and
shall extend to any holder hereof.
BORROWER TEC ACQUISUB, INC.,
a California corporation
By
J. Michael Allgood
Chief Financial Officer
<PAGE>
EXHIBIT B
BORROWING BASE CERTIFICATE
(TEC AcquiSub, Inc.)
____________, 199_
<PAGE>
Page 3
First Union National Bank of North Carolina, as Agent
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson
Re: Amended and Restated Warehousing Credit Agreement dated as of
September 27, 1995, as amended by that certain Amendment No. 1 to
Amended and Restated Warehousing Credit Agreement dated as of May 31,
1996, and that certain Amendment No. 2 to Amended and Restated
Warehousing Credit Agreement dated as of November 5, 1996 (as the same
may from time to time be amended, modified, supplemented or restated,
the "Credit Agreement"), by and among TEC AcquiSub, Inc., a California
corporation ("Borrower"), First Union National Bank of North Carolina
("FUNB"), Fleet Bank, N.A. and each other lender whose name is set
forth on the signature pages to the Credit Agreement or which may
hereafter execute and deliver an instrument of assignment pursuant to
Section 11.10 of the Credit Agreement (any one individually, a
"Lender," and collectively, "Lenders") and FUNB as Agent, on behalf of
Lenders.
Ladies and Gentlemen:
Reference is made to the Credit Agreement. The capitalized terms used in this
Borrowing Base Certificate and not defined herein have the same meaning as given
to them in the Credit Agreement.
Pursuant to Section 5.1(c) of the Credit Agreement, Borrower hereby certifies as
follows:
<PAGE>
20. The information furnished in Schedule 1 attached hereto
was true, accurate and complete as of the last day of the calendar month
immediately preceding the date of this Borrowing Base Certificate; provided,
however, that if such certificate is being delivered with respect to a requested
borrowing of a Loan under the Credit Agreement, then if expressly provided, so
stated in Schedule 1, such information shall be true, accurate and complete
through the requested Funding Date. The calculation of each item is subject to
the more detailed description thereof set forth in the Credit Agreement.
21. Except as disclosed in Schedule 2 attached hereto, the
representations and warranties set forth in Section 4 of the Credit Agreement
are true, accurate and complete as of the date hereof; provided, however, that
those representations and warranties expressly referring to another date shall
be deemed to be made as of such date;
22. Borrower does not have knowledge of the existence as of
the date hereof, of any Event of Default or Potential Event of Default, except
for such conditions or events listed on Schedule 2 attached hereto and
incorporated herein by this reference, specifying the nature and period of
existence thereof and what action Borrower has taken, is taking and proposes to
take with respect thereto; and
[Include the following if Borrowing Base Certificate is being
delivered in connection with a requested Loan.]
23. Borrower has [choose one] [available cash in an amount
sufficient to fund at least twenty percent (20.0%) of the Invoice Price of the
equipment to be financed with the requested Loan.] [has received a capital
contribution from PLM Transportation Equipment Corporation ("TEC"), the record
and beneficial owner one hundred percent (100.0%) of Borrower's Stock, in an
amount sufficient to fund at least twenty percent (20.0%) of the Invoice Price
of the equipment to be financed with the requested Loan. Attached hereto as
Attachment 1 is an originally executed certificate of the Chief Financial
Officer of TEC to the effect that the making of such capital contribution has
not caused TEC to cease to be Solvent.]
IN WITNESS WHEREOF, this Borrowing Base Certificate is executed by the
undersigned this ____ day of , 199 .
TEC ACQUISUB, INC.,
a California corporation
By:
Printed Name:
Title:
<PAGE>
Received by:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
in its capacity as Agent under the Credit Agreement
By:
Printed Name:
Title:
Date:
<PAGE>
SCHEDULE 1 TO BORROWING BASE CERTIFICATE
DATED , 199
<PAGE>
24. The aggregate Invoice Price of all Eligible Inventory then
owned of $__________ record by Borrower or any Marine Subsidiary
or of record by an Owner Trustee for the beneficial interest of
Borrower or any Marine Subsidiary, computed (a) with respect to
any requested Loan, as of the requested Funding Date (but
excluding the item(s) of equipment being financed with such
Loan), and (b) with respect to the delivery of any monthly
Borrowing Base Certificate to be furnished pursuant to Section
5.1(c), as of the last day of the calendar month for which such
Borrowing Base Certificate is furnished (provided that if any
portion of Borrower's, such Marine Subsidiary's or such Owner
Trustee's ownership interest in any such item of Eligible
Inventory is sold or assigned to one or more of the Equipment
Growth Funds such that Borrower, such Marine Subsidiary or such
Owner Trustee continues to retain less than the entire record or
beneficial ownership interest therein, then for the purpose of
computing the Borrowing Base under this Line 1, the Invoice Price
of such item of Eligible Inventory shall be deemed to be equal to
Borrower's or such Marine Subsidiary's ratable portion of the
Invoice Price of such item of Eligible Inventory; provided
further, that with respect to any Borrowing Base Certificate as
to be furnished with the requested funding of a Loan, this Line 1
shall include items of Eligible Inventory to be acquired with the
proceeds of such Loan)
25. The aggregate invoice price of Eligible Inventory included in
Line 1 $__________ which is subject to a Lease under which any
applicable lease or rental payment is more than ninety (90) days
past due
26. Line 1 minus Line 2 $__________
4. Eighty percent (80.0%) of Line 3 $__________
27. Sum of amount of unrestricted cash balances available for
purchase of transportation equipment by the Equipment Growth
Funds
EGF I $__________
EGF II $__________
EGF III $__________
EGF IV $__________
EGF V $__________
EGF VI $__________
EGF VII $__________
Income Fund I $__________
Total $__________
28. Lesser of Line 4 and Line 5 $__________
29. Lesser of (a) the total Commitments for the Facility
($50,000,000) $__________ minus the aggregate principal amount
outstanding under the Growth Fund Agreement and the AFG Agreement
and (b) Line 6
30. Current principal amount outstanding under the Credit
Agreement $__________
31. Amount available to be borrowed: Line 7 minus Line 8
$__________
32. Lesser of Line 9 and $35,000,000 $__________
33. Amount requested to be advanced (must not be greater than
Line 10) $__________
Footnote
Invoices or purchase agreements evidencing the cost of Eligible Inventory
purchased with this advance are attached.
<PAGE>
SCHEDULE 2 TO
BORROWING BASE CERTIFICATE
DATED ________________, 199_
LIST OF EXCEPTIONS
Condition(s) or event(s) constituting an Event of Default or Potential Event of
Default:
Period of existence:
Remedial action with respect to such condition or event:
<PAGE>
ATTACHMENT 1 TO
BORROWING BASE CERTIFICATE
DATED ________________, 199_
AMENDMENT NO. 1
TO WAREHOUSING CREDIT AGREEMENT
(American Finance Group, Inc.)
THIS AMENDMENT NO. 1 TO WAREHOUSING CREDIT AGREEMENT dated as of
November 5, 1996 (the "Amendment"), is entered into by and among AMERICAN
FINANCE GROUP, a Delaware corporation ("Borrower"), FIRST UNION NATIONAL BANK OF
NORTH CAROLINA ("FUNB"), FLEET BANK, N.A. ("Fleet") and each other financial
institution which may hereafter execute and deliver an instrument of assignment
pursuant to Section 11.10 of the Credit Agreement (as defined below) (any one
financial institution individually, a "Lender," and collectively, "Lenders"),
and FUNB, as agent on behalf of Lenders (not in its individual capacity, but
solely as agent, "Agent"). Capitalized terms used herein without definition
shall have the same meanings herein as given to them in the Credit Agreement.
RECITAL
<PAGE>
A. Borrower, Lenders and Agent have entered into that certain
Warehousing Credit Agreement dated as of May 31, 1996 (the "Credit Agreement"),
by and among Borrower, FUNB (as the sole Lender party thereto), and Agent
pursuant to which Lenders have agreed to extend and make available to Borrower
certain advances of money.
B. Borrower desires that Lenders and Agent amend the Credit
Agreement to increase the aggregate amount of the Commitments by $15,000,000, to
extend the Commitment Termination Date, to release PLM Financial Services, Inc.,
a Delaware corporation ("FSI"), from its Guaranty and to replace FSI with PLM
International, Inc., a Delaware corporation ("PLMI"), as a Guarantor, as more
fully set forth herein.
C. FUNB is currently the sole Lender under the Credit
Agreement. On the terms and conditions set forth below, Fleet desires to become
a Lender under the Credit Agreement and to make Loans to Borrower with an
aggregate Commitment of $15,000,000.
D. Subject to the representations and warranties of Borrower
and upon the terms and conditions set forth in this Amendment, Lenders and Agent
are willing to so amend the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
2. AMENDMENTS. The Credit Agreement is hereby amended as
follows:
1 Section 1.1 Defined Terms (Commitment). The definition of
"Commitment" set forth in Section 1.1 of the Credit Agreement is amended by
deleting Schedule A to the Credit Agreement entitled "Commitments" referred to
in such definition in its entirety and replacing such Schedule A with the
Schedule A attached to this Amendment, and the respective Commitment of each
Lender in effect from and after the effective date of this Amendment shall be
equal to the amount set forth opposite such Lender's name in Schedule A.
. The definition of "Commitment Termination Date" set forth in Section
1.1 of the Credit Agreement is deleted and replaced with the following:
"Commitment Termination Date" means October 3, 1997.
3 Section 1.1 Defined Terms (Eligible Lease). The definition
of "Eligible Lease" set forth in Section 1.1 of the Credit Agreement is deleted
and replaced with the following:
"Eligible Lease" means any Lease in respect of which the
lessee and Lease terms (including, without limitation, as to credit
quality, rental rate, maturity and insurance coverage) are acceptable
to Agent, in its sole discretion, and otherwise comply with the
following requirements:
(a) the original term shall be less than or
equal to eighty-four (84) months;
(b) the lessee shall not be a Governmental
Authority;
(c) Lease payments shall be due in United
States Dollars;
(d) the lessee shall not be in default under
the Lease (except as permitted by clause (f), below) or subject to
bankruptcy, insolvency, reorganization or liquidation proceedings or
other proceedings for relief under any bankruptcy or similar insolvency
law;
(e) neither the Lease nor the Equipment
leased thereunder shall be subject to any Lien of any nature other than
the Lien granted in favor of Agent on behalf of Lenders under the
Security Agreement and the other Security Documents;
(f) amounts due under the Lease shall be
less than thirty (30) days delinquent at the time of the Funding Date
related to the Lease and remain at all times less than ninety (90) days
delinquent, unless such Lease is an Administrative Lease;
(g) the Lease shall contain a "hell or
highwater" provision which unconditionally obligates the lessee to
maintain the Equipment in good working order, bear all costs of
operating such Equipment and make periodic Lease payments, including,
without limitation, taxes, notwithstanding damage to or destruction of
the Equipment leased thereunder or any other event;
(h) the Lease shall not be subject to
cancellation by the lessee and shall not permit early termination
unless the lessee pays an amount not less than the Discounted Present
Value of the Lease;
(i) payments under the Lease shall be
absolute, unconditional obligations of the lessee without the right to
offset for any reason;
(j) the Lease shall require the lessee to
maintain the Equipment in good working order and to bear the costs of
operating and maintaining the Equipment, including, without limitation,
taxes and insurance;
(k) the Lease shall permit the lessor to
accelerate all Lease payments in the event of the lessee's default;
(l) payments under the Lease shall be made
no less frequently than quarterly;
<PAGE>
(m) the Lease shall provide that in the
event of a Casualty Loss, the lessor shall have the option, at the
lessee's sole cost and expense, to
(i) repair the Equipment to good
condition and working order,
(ii) replace the Equipment with like
Equipment of the same or later model in good repair, condition and
working order, or
(iii) require the lessee to pay to
the lessor the Stipulated Loss Value of the Equipment;
<PAGE>
(n) the Equipment subject to the Lease shall
be Eligible Equipment; and
(o) the lessee shall have a minimum rating
by Moody's Investors Service, Inc. of B3, Standard & Poor's Corporation
of B- or the equivalent under the Alcar Debt Rater System.
Any Lease which is an Eligible Lease will cease to be an Eligible Lease
at any time it no longer meets all of the foregoing requirements.
4 Section 1.1 Defined Terms (Guarantor). The definition of
"Guarantor" set forth in Section 1.1 of the Credit Agreement is deleted and
replaced with the following:
"Guarantor" means any person who executes a written guaranty
of the Obligations, including, without limitation, PLMI under the
Guaranty.
5 Section 1.1 Defined Terms (Guaranty). The definition of
"Guaranty" set forth in Section 1.1 of the Credit Agreement is deleted and
replaced with the following:
"Guaranty" means that certain Guaranty dated as of November 5,
1996, executed by PLMI in favor of Lenders and Agent.
6 Section 1.1 Defined Terms (Investment Grade Lease). The
definition of "Investment Grade Lease" set forth in Section 1.1 of the Credit
Agreement is deleted and replaced with the following:
"Investment Grade Lease" means an Eligible Lease under which
the lessee has a minimum investment grade rating by Moody's Investors
Service, Inc. of Baa3, Standard & Poor's Corporation of BBB- or the
equivalent under the Alcar Debt Rater System.
7 Section 1.1 Defined Terms (Requisite Lenders). The
definition of "Requisite Lenders" set forth in Section 1.1 of the Credit
Agreement is deleted and replaced with the following:
"Requisite Lenders" means any combination of Lenders whose
combined Pro Rata Share (and voting interest with respect thereto) of
all amounts outstanding under this Agreement, or, in the event there
are no amounts outstanding, the Commitments, is greater than sixty-six
and two-thirds percent (66_%) of all such amounts outstanding or the
total Commitments, as the case may be; provided, however, that in the
event there are only two (2) Lenders, Requisite Lenders means both
Lenders.
8 Section 2.1.1(a)(i) Facility Commitments. Section
2.1.1(a)(i) of the Credit Agreement is deleted and replace with the following:
(i) On the Funding Date requested by Borrower, after
Borrower shall have satisfied all applicable conditions precedent set
forth in Section 3, each Lender shall advance immediately available
funds to Agent (each such advance being an "Advance") evidencing such
Lender's Pro Rata Share of a loan ("Loan"). Agent shall immediately
advance such immediately available funds to Borrower at the Designated
Deposit Account (or such other deposit account at FUNB or such other
financial institution as to which Borrower and Agent shall agree at
least three (3) Business Days prior to the requested Funding Date) on
the Funding Date with respect to such Loan. Borrower shall pay interest
accrued on the Loan at the rates and in the manner set forth in Section
2.1.1(b). Subject to the terms and conditions of this Agreement, the
unpaid principal amount of each Loan and all unpaid interest accrued
thereon, together with all other fees, expenses, costs and other sums
chargeable to Borrower incurred in connection therewith shall be due
and payable no later than the Commitment Termination Date. Each Loan
advanced hereunder by each Lender shall be evidenced by Borrower's
revolving promissory note, substantially in the form of Exhibit A
(each, a "Note").
9 Section 5.1 Lease Receivables Aging Reports. Section 5.1 of
the Credit Agreement is amended to include Section 5.1.14 to read as follows:
5.1.14 Lease Receivables Aging Reports. As soon as
practicable and in any event within sixty (60) days after the end of
each quarterly accounting period of Borrower, a Lease receivables aging
report as at the end of such period, all in reasonable detail and
certified by the Chief Financial Officer or Corporate Controller of
Borrower that they are complete and fairly present the Lease
receivables aging of Borrower as at the dates indicated.
10 Note. The form of Note set forth as Exhibit A of the Credit
Agreement is deleted and replaced with Exhibit A attached hereto.
11 Borrowing Base Certificate. The Borrowing Base Certificate
set forth as Exhibit B of the Credit Agreement is deleted and replaced with
Exhibit B attached hereto.
3. RELEASE OF FSI GUARANTY. Lenders hereby release FSI from
all of its obligations under that certain Guaranty dated as of May 31, 1996, in
favor of Lenders and Agent.
. 4. LIMITATIONS ON AMENDMENTS
(a) The amendments set forth in Section 1, above, are
effective for the purposes set forth herein and shall be limited precisely as
written and shall not be deemed to (i) be a consent to any amendment, waiver or
modification of any other term or condition of any Loan Document or (ii)
otherwise prejudice any right or remedy which Lenders or Agent may now have or
may have in the future under or in connection with any Loan Document.
(b) This Amendment shall be construed in connection
with and as part of the Loan Documents and all terms, conditions,
representations, warranties, covenants and agreements set forth in the Loan
Documents, except as herein waived or amended, are hereby ratified and confirmed
and shall remain in full force and effect.
. In order to induce Lenders and Agent to enter into this Amendment, Borrower
represents and warrants to each Lender and Agent as follows:
(a) Immediately after giving effect to this Amendment
(i) the representations and warranties contained in the Loan Documents (other
than those which expressly speak as of a different date) are true, accurate and
complete in all material respects as of the date hereof and (ii) no Default or
Event of Default, or event which constitutes a Potential Event of Default, has
occurred and is continuing;
(b) Borrower has the corporate power and authority to
execute and deliver this Amendment and to perform its Obligations under the
Credit Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party;
(c) The articles of incorporation, bylaws and other
organizational documents of Borrower delivered to each Lender as a condition
precedent to the effectiveness of the Credit Agreement are true, accurate and
complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;
(d) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party have been duly authorized by all necessary corporate action
on the part of Borrower;
(e) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its respective Obligations under
the Credit Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party do not and will not contravene (i) any law or
regulation binding on or affecting Borrower, (ii) the articles of incorporation,
bylaws, or other organizational documents of Borrower, (iii) any order, judgment
or decree of any court or other governmental or public body or authority, or
subdivision thereof, binding on Borrower or (iv) any contractual restriction
binding on or affecting Borrower;
(f) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by any governmental or public body or authority, or subdivision
thereof, binding on Borrower, except as already has been obtained or made; and
(g) This Amendment has been duly executed and
delivered by Borrower and is the binding Obligation of Borrower, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws of general application and equitable principles relating to
or affecting creditors' rights.
. Borrower hereby reaffirms its Obligations under each Loan Document to which it
is a party.
This Amendment shall become effective upon the last to occur of:
(a) The execution and delivery of this Amendment,
whether the same or different copies, by Borrower, Lenders and Agent.
(b) Receipt by Agent, in form and substance
satisfactory to Lenders, of a Guaranty, dated as of the date hereof executed by
PLMI in favor of Lenders and Agent.
(c) Receipt by Agent, in form and substance
satisfactory to Lenders, of a certified copy of the records of all actions taken
by Borrower and PLMI, if any, including all corporate resolutions of Borrower
and PLMI authorizing or relating to the execution, delivery and performance of
this Amendment and the Guaranty, as the case may be.
(d) Receipt by Agent, in form and substance
satisfactory to Lenders, of Notes executed by Borrower in favor of each Lender
in the stated principal amount equal to each Lender's Pro Rata Share of the
Commitments, which Notes will replace and supersede the existing Note dated May
31, 1996, issued by Borrower to Agent.
(e) Receipt by Agent, in form and substance
satisfactory to Lenders, of a supplemental fee letter (the "Supplemental Fee
Letter") and a supplemental agent's side letter (the "Supplemental Agent's Side
Letter"), each duly executed by Borrower, each of the Growth Funds and TEC
AcquiSub, and the Supplemental Arrangement Fee and the Supplemental Agent's Fee
described in the Supplemental Fee Letter and the Supplemental Agent's Side
Letter, respectively.
(f) Receipt by Agent of an originally executed legal
opinion of Stephen Peary, general counsel of Borrower and Guarantor, on behalf
of Borrower and Guarantor, in form and substance satisfactory to Lenders, dated
as of the effective date of this Amendment and addressed to Lenders, together
with copies of any officer's certificate or legal opinion of other counsel or
law firm specifically identified and expressly relied upon by such counsel.
(g) Satisfaction, to the approval of Lenders and
Agent, of all conditions precedent to the effectiveness of Amendment No. 1 to
Second Amended and Restated Warehousing Credit Agreement dated as of the date
hereof by and among the Growth Funds, Lenders and Agent.
(h) Satisfaction, to the approval of Lenders and
Agent, of all conditions precedent to the effectiveness of Amendment No. 2 to
Amended and Restated Warehousing Credit Agreement dated as of the date hereof by
and among TEC AcquiSub, Lenders and Agent.
. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
9. CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF.
BORROWER HEREBY REPRESENTS AND WARRANTS TO AGENT AND EACH LENDER THAT IT HAS NO
KNOWLEDGE OF ANY FACTS THAT WOULD SUPPORT A CLAIM, COUNTERCLAIM, DEFENSE OR
RIGHT OF SET-OFF.
10. FLEET AS LENDER. Upon the execution and delivery of this
Amendment, Fleet shall be a Lender and a party to the Credit Agreement, and
shall be entitled to the rights and benefits of the Loan Documents and, to the
extent of the percentage equivalent of Fleet's Commitment under the Facility
divided by the aggregate Commitment of all Lenders under the Facility, have the
rights and obligations of a Lender thereunder.
. This Amendment may be signed in any number of counterparts, and by different
parties hereto in separate counterparts, with the same effect as if the
signatures to each such counterpart were upon a single instrument.
All counterparts shall be deemed an original of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWER AMERICAN FINANCE GROUP, INC.
By
J. Michael Allgood
Chief Financial Officer
LENDERS FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By
Bill A. Shirley
Vice President
FLEET BANK, N.A.
By
Printed Name:
Title:
AGENT FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent
By
Bill A. Shirley
Vice President
<PAGE>
SCHEDULE A
COMMITMENTS
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $35,000,000 35/50 x 100%
of North Carolina
Fleet Bank, N.A. $15,000,000 15/50 x 100%
<PAGE>
EXHIBIT A
REVOLVING PROMISSORY NOTE
[LENDER]
$______________ San Francisco, California
Date: November 5, 1996
AMERICAN FINANCE GROUP, INC., a Delaware corporation (the "Borrower"),
FOR VALUE RECEIVED, hereby unconditionally promises to pay to the order of
[LENDER] ("[_________________]"), in lawful money of the United States of
America, the aggregate principal amount of [_________________]'s Pro Rata Share
of all Loans outstanding under the Credit Agreement referred to below, payable
in the amounts, on the dates and in the manner set forth below.
This revolving promissory note (the "Note") is one of the Notes
referred to in that certain Warehousing Credit Agreement dated as of May 31,
1996, as amended by that certain Amendment No. 1 to Warehousing Credit Agreement
dated as of even date herewith (as the same from time to time hereafter may be
further amended, modified, supplemented, renewed, extended or restated, the
"Credit Agreement") by and among the Borrower, First National Bank Of North
Carolina, solely in its capacity as agent (solely in such capacity, the "Agent")
for [_________________] and such other financial institutions as shall from time
to time become "Lenders" pursuant to Section 11.10 of the Credit Agreement (such
entities, together with their respective successors and assigns being
collectively referred to herein as the "Lenders"), and the Lenders, and amends,
restates and replaces that certain Revolving Promissory Note dated May 31, 1996,
executed and delivered by the Borrower in favor of and to the Agent, on behalf
of the Lenders. All capitalized terms used but not defined herein shall have the
same meaning as given to them in the Credit Agreement.
<PAGE>
12. Principal Payments. Subject to the terms and conditions of
the Credit Agreement, including, without limitation, terms relating to mandatory
prepayments of principal (Section 2.2.3), the entire principal amount
outstanding under each Loan shall be due and payable on the Maturity Date with
respect to such Loan, with any and all unpaid and not previously due and payable
principal amounts under the Loans being due and payable on the Commitment
Termination Date.
13. Interest Rate. The Borrower further promises to pay
interest on the sum of the daily unpaid principal balance of all Loans
outstanding on each day in lawful money of the United States of America, from
the Closing Date until all such principal amounts shall have been repaid in
full, which interest shall be payable at the rates per annum and on the dates
determined pursuant to the Credit Agreement.
14. Place of Payment. All amounts payable hereunder shall be
payable to the Agent, on behalf of [_________________], at the office of First
Union National Bank of North Carolina, One First Union Center, 301 South College
Street, Charlotte, North Carolina 28288, Attention: Elisha Sabido, or such other
place of payment as may be specified by the Agent in writing.
15. Application of Payments; Acceleration. Payments on this
Note shall be applied in the manner set forth in the Credit Agreement. The
Credit Agreement contains provisions for acceleration of the maturity of the
Loans upon the occurrence of certain stated events and also provides for
mandatory and optional prepayments of principal prior to the stated maturity on
the terms and conditions therein specified.
Each Advance made by [_________________] to the Borrower constituting
[_________________]'s Pro Rata Share of a Loan pursuant to the Credit Agreement
shall be recorded by [_________________] on its books and records. The failure
of [_________________] to record any Advance or any repayment or prepayment made
on account of the principal balance thereof shall not limit or otherwise affect
the obligations of the Borrower under this Note and under the Credit Agreement
to pay the principal, interest and other amounts due and payable hereunder and
thereunder.
16. Default. The Borrower's failure to pay timely any of the
principal amount due under this Note or any accrued interest or other amounts
due under this Note on or within five (5) calendar days after the date the same
becomes due and payable shall constitute a default under this Note. Upon the
occurrence of a default hereunder or an Event of Default under the Credit
Agreement, all unpaid principal, accrued interest and other amounts owing
hereunder shall, at the option of Required Lenders, be immediately collectible
by the Lenders and the Agent pursuant to the Credit Agreement and applicable
law.
17. Waivers. The Borrower waives presentment and demand for
payment, notice of dishonor, protest and notice of protest of this Note, and
shall pay all costs of collection when incurred by or on behalf of the Lenders,
including, without limitation, reasonable attorneys' fees, costs and other
expenses as provided in the Credit Agreement.
18. Governing Law. This Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of North
Carolina, excluding conflict of laws principles that would cause the application
of laws of any other jurisdiction.
19. Successors and Assigns. The provisions of this Note shall
inure to the benefit of and be binding on any successor to the Borrower and
shall extend to any holder hereof.
BORROWER AMERICAN FINANCE GROUP, INC.,
a Delaware corporation
By
J. Michael Allgood
Chief Financial Officer
<PAGE>
21168861
102896
EXHIBIT B
BORROWING BASE CERTIFICATE
(American Finance Group, Inc.)
____________, 199_
<PAGE>
Page 2
21168861
102896
First Union National Bank of North Carolina, as Agent
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson
Re: Warehousing Credit Agreement dated as of May 31, 1996, as amended
by that certain Amendment No. 1 to Warehousing Credit Agreement dated
as of November 5, 1996 (as the same may from time to time be further
amended, modified, supplemented or restated, the "Credit Agreement"))
by and among American Finance Group, Inc., a Delaware corporation (the
"Borrower"), First Union National Bank of North Carolina ("FUNB"),
Fleet Bank, N.A. and each other lender whose name is set forth on the
signature pages to the Credit Agreement or which may hereafter execute
and deliver an instrument of assignment pursuant to Section 11.10 of
the Credit Agreement (any one individually, a "Lender," and
collectively, "Lenders") and FUNB as Agent, on behalf of Lenders.
Ladies and Gentlemen:
Reference is made to the Credit Agreement. The capitalized terms used in this
Borrowing Base Certificate and not defined herein have the same meaning as given
to them in the Credit Agreement.
Pursuant to Section 5.1.3 of the Credit Agreement, the Borrower hereby certifies
as follows:
<PAGE>
20. The information furnished in Schedule 1 attached hereto
was true, accurate and complete as of the last day of the calendar month
immediately preceding the date of this Borrowing Base Certificate; provided,
however, that if such certificate is being delivered with respect to a requested
borrowing of a Loan under the Credit Agreement, then if expressly provided, so
stated in Schedule 1, such information shall be true, accurate and complete
through the requested Funding Date. The calculation of each item is subject to
the more detailed description thereof set forth in the Credit Agreement;
21. Except as disclosed in Schedule 2 attached hereto, the
representations and warranties set forth in Section 4 of the Credit Agreement
are true, accurate and complete as of the date hereof; provided, however, that
those representations and warranties expressly referring to another date shall
be deemed to be made as of such date; and
22. The Borrower does not have knowledge of the existence as
of the date hereof, of any Event of Default or Potential Event of Default,
except for such conditions or events listed on Schedule 2 attached hereto and
incorporated herein by this reference, specifying the nature and period of
existence thereof and what action the Borrower has taken, is taking and proposes
to take with respect thereto.
IN WITNESS WHEREOF, this Borrowing Base Certificate is executed by the
undersigned this ____ day of , 199 .
AMERICAN FINANCE GROUP, INC.,
a Delaware corporation
By:
Printed Name:
Title:
Received by:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
in its capacity as Agent under the Credit Agreement
By:_____________________________________
Printed Name:___________________________
Title:__________________________________
Date:___________________________________
<PAGE>
SCHEDULE 1 TO BORROWING BASE CERTIFICATE
DATED , 199
<PAGE>
23. The aggregate Discounted Present Value of all Eligible Leases
then $__________ owned of record by Borrower, computed (a) with
respect to any requested Loan, as of the requested Funding Date
(and shall include the aggregate Discounted Present Value of all
Eligible Leases to be acquired with the proceeds of the requested
Loan), and (b) with respect to the delivery of any monthly
Borrowing Base Certificate to be furnished pursuant to Section
5.1.3, as of the last day of the calendar month for which such
Borrowing Base Certificate is furnished; provided, however, that
there shall be excluded from the calculation under this paragraph
1, (x) the aggregate Discounted Present Value in excess of
$2,000,000 of otherwise Eligible Leases that are not Investment
Grade Leases, and (y) the aggregate Discounted Present Value in
excess of $1,000,000 of Administrative Leases
24. The aggregate Invoice Price of all Eligible Equipment subject
to an $__________ Eligible Lease then owned of record by Borrower
computed (a) with respect to any requested Loan, as of the
requested Funding Date (and shall include the item(s) of Eligible
Equipment leased pursuant to all Eligible Leases to be acquired
with the proceeds of the requested Loan), and (b) with respect to
the delivery of any monthly Borrowing Base Certificate to be
furnished pursuant to Section 5.1.3, as of the last day of the
calendar month for which such Borrowing Base Certificate is
furnished
25. Eighty-five percent (85.0%) of Line 2 $__________
26. Lesser of Line 1 and Line 3 $__________
27. Lesser of (a) the total Commitments for the Facility
($50,000,000) minus the aggregate principal amount outstanding
under the Growth Fund Agreement and the TEC AcquiSub Agreement,
and (b) Line 4 $__________
28. Current principal amount outstanding under the Credit
Agreement $__________
29. Amount available to be borrowed: Line 5 minus Line 6
$__________
30. Amount requested to be advanced (must not be greater than
Line 7) $__________
<PAGE>
SCHEDULE 2 TO
BORROWING BASE CERTIFICATE
DATED ________________, 199_
LIST OF EXCEPTIONS
Condition(s) or event(s) constituting an Event of Default or Potential Event of
Default:
Period of existence:
Remedial action with respect to such condition or event:
<PAGE>
ATTACHMENT 1 TO
BORROWING BASE CERTIFICATE
DATED ________________, 199_
AMENDMENT NO. 1 TO NOTE AGREEMENT
This Amendment No. 1 to Note Agreement (Amendment), dated July 12,
1996, is by and among PLM International, Inc., a Delaware corporation (Company),
PLM Financial Services, Inc. (FSI), PLM Investment Management, Inc. (IMI) and
SunAmerica Life Insurance company and its affiliates (Purchasers).
The Company, FSI, IMI and the Purchasers have entered into the Note
Agreement dated as of June 28, 1996 (Note Agreement), and the Company, FSI, IMI
and the Purchasers have entered into the Note Purchase Agreement among the
Company, FSI, IMI and the Purchasers dated June 28, 1996, relating to the
issuance and sale of up to $27,000,000 Floating Rate Senior Secured Notes. The
Company, FSI, IMI and the Purchasers now wish to enter into this Agreement to
amend certain provisions of the Note Agreement, as more fully set forth herein.
The Company, FSI, IMI and the Purchasers agree as follows:
1. The capitalized terms used but not defined herein shall have the
meanings given such terms in the Note Agreement.
2. Section 6.9 of the Note Agreement is hereby amended to read in its
entirety as follows:
6.9 Minimum Consolidated Total Net Worth. The company and its
Subsidiaries shall maintain a Consolidated Total Net Worth (i) through
March 31, 1997, of not less than $40,000,000 and (ii) from April 1,
1997, of not less than $45,000,000 plus the sum of 50% of Consolidated
Net Income for all periods commencing on and after July 1, 1996.
3. This Amendment shall become effective when it is executed by the
Company, FSI, IMI and the Required Noteholders.
4. Except as amended by this Amendment, the Note Agreement remains in
full force and effect as originally written.
5. This Amendment may be executed and delivered in any number of
counterparts, each of such counterparts constituting an original but all
together only one document.
<PAGE>
Amendment No. 1 to Note Agreement, dated June 28, 1996
Page 2
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officer to execute and deliver the Amendment as of the date first
written above
PLM INTERNATIONAL, INC.
By: /s/ Stephen Peary
-------------------------
Authorized Agent
PLM FINANCIAL SERVICES, INC.
By: /s/ Stephen Peary
-------------------------
Authorized Agent
PLM INVESTMENT MANAGEMENT, INC.
By: /s/ Stephen Peary
-------------------------
Authorized Agent
SUNAMERICA LIFE INSURANCE COMPANY
By: /s/ Sam Tillinghast
-------------------------
Authorized Agent
AMENDMENT No. 5 TO NOTE AGREEMENT
(June 28, 1996)
This Amendment No. 5 to Note Agreement ("Amendment") is entered into
effective as of June 28, 1996 by PLM International, Inc. (the "Company") and
each of the other parties signing this Amendment on the signature page hereof
(the "Purchasers").
Recitals
The Company and SunAmerica Life Insurance Company (formerly named Sun
Life Insurance of America), American Life and Casualty Insurance Company,
Alexander Hamilton Life Insurance Company of America and Republic Western
Insurance Company have previously entered into that Note Agreement dated June
30, 1994 (the "Note Agreement"). Any capitalized term used but not defined
herein shall have the meaning ascribed to such term in the Note Agreement.
The Company desires to amend the Note Agreement in accordance with the
terms of this Amendment. The Purchasers executing this Amendment constitute the
Required Noteholders necessary to approve this Amendment.
NOW, THEREFORE, in and for the mutual convenants and agreements set
forth herein and other good and valuable consideration, the Note Agreement is
amended as follows:
1. The definition of "Funded Debt" in Section 1.3 is amended
by deleting clause (ii) therein and substituting in lieu thereof the
following:
"(ii) Non-Recourse Secured Debt,"
2. Section 1.3 is amended by adding the following definitions:
"Equipment Assets" means any item of Equipment and
any other item of tangible personal property acquired by the
Company or any Subsidiary for the purpose of lease or sale in
connection with the business of the Company or such
Subsidiary.
"Portfolio Assets" means a portfolio, group or
collection of Equipment Assets.
"Non-Recourse Secured Debt" means Debt with respect
to which (i) none of the Company or any Subsidiary has or will
have under any circumstances (except fraud in the making), any
personal or recourse liability for the repayment of such Debt
(either directly as the primary obligor indirectly as a
guarantor) and (b) the proceeds of such Debt are used to pay
the acquisition price for Equipment Assets and the repayment
thereof is secured by a Security Lien on Equipment Assets so
acquired and the proceeds of such Equipment Assets.
3. Section 6.16 is amended by deleting subsection (a) thereof
in its entirety.
4. Section 6.17 is amended by deleting subsection (g) thereof
in its entirety and replacing the same with the new subsection (g) set
forth below, by deleting the word "and" at the end of paragraph (g)
thereof, by replacing the period at the end of paragraph (h) thereof
with "; and,", and by adding new subsection (i) set forth below:
"(g) Liens securing Non-Recourse Secured Debt (which
Liens shall encumber only the Equipment Assets acquired with
such Non-Recourse Debt and the proceeds of such assets);"
"(i) Liens on the assets and stock of FSI and IMI and
securing the Debt owed by FSI and IMI (which Debt is
guaranteed by the Company and FSI) under that certain Note
Agreement dated June 28, 1996 up to $27,000,000 floating rate
senior secured notes due August 15, 2002 entered into by the
Company, FSI, IMI and SunAmerica Life Insurance Company and/or
one or more of its affiliates or designees as the Purchasers
thereunder (the "New Facility")."
5. Section 6.21 is amended by adding the word "Assets" after
the word "Equipment contained in subjection (f) thereof, by deleting
subsection (j) thereof in its entirety and replacing the same with new
subsection (j), by deleting the word "and" after subsection (m)
thereof, by replacing the period at the end of subsection (n) thereof
with a semicolon, and by adding the following as new subsections (o)
and (p):
"(j) Investments by FSI or TEC in any limited
partnership of which FSI or TEC is the general partner or in
any limited liability company of which FSI or TEC is manager;
provided that (i) without limiting the other provisions of
this Section 6, all Debt of such Person shall be Non-Recourse
to the Company and its Subsidiaries except FSI or TEC, as
applicable, and (ii) such Person shall be engaged in a
business reasonably similar to any of the businesses engaged
in by the Company and its Subsidiaries as of the date of this
Agreement;"
"(o) Investments by the Company consisting of the
acquisition of the Voting Stock or all or substantially all
the assets of Persons engaged in businesses similar to the
business of the Company; and"
"(p) Investments by the Company consisting of the
acquisition of Portfolio Assets."
6. Section 6.25(a) is generally amended to permit the
prepayment of any Approved Subordinated Debt through the use of funds
received by FSI and IMI under the New Facility and subsequently loaned
to the Company by FSI and IMI; provided, no such payment shall be made
if, as of the date of such payment, any Event of Default or Default
shall have occurred and be continuing or if, immediately after giving
effect to such payment, any Event of Default or Default would have
occurred. Section 6.21(e) is generally amended to not require the
subordination of loans made by FSI and IMI to the Company from funds
received by FSI and IMI under the New Facility.
FURTHER, IT IS AGREED (i) the Company's decision to terminate
syndication activities shall not cause a Material Adverse Effect pursuant to
Section 5.1(i) of the Agreement and (ii) the termination of the ESOP shall not
constitute an Event of Default pursuant to Section 5.1(k) of the Agreement.
EXECUTED as of the date first above written.
PLM INTERNATIONAL, INC.
By: _____________________________________
SUNAMERICA LIFE INSURANCE COMPANY
By: _____________________________________
ALEXANDER HAMILTON LIFE INSURANCE
COMPANY OF AMERICA
By: _____________________________________
REPUBLIC WESTERN INSURANCE COMPANY
By: _____________________________________
f:\userdata\plmleg\cd\stephen\96sp0718
AMENDMENT NO. 6 TO NOTE AGREEMENT
This Amendment No. 6 to Note Agreement (this "Amendment"), dated as of
September 15, 1996, is by and among PLM International, Inc., a Delaware
corporation (the "Company"), and each of the purchasers named in Schedule I
hereto (the "Purchasers").
The Company and the Purchasers have entered into the Note Agreement
dated as of June 30, 1994, as amended by Amendment No. 1, dated as of June 30,
1994, Amendment No. 2, dated as of December 27, 1994, Amendment No. 3, dated as
of November 1, 1995, Amendment No. 4, dated as of February 10, 1996, and
Amendment No. 5, dated as of June 28, 1996 (the "Note Agreement"), and the
Company and each Purchaser have entered into the Note Purchase Agreement between
the Company and such Purchaser dated as of June 30, 1994, relating to the
issuance and sale by the Company of its 9.78% Series A Senior Secured Notes (the
"Series A Notes") and its Floating Rate Series B Senior Secured Notes (the
"Series B Notes"). The Company and the Purchasers now wish to enter into this
Amendment to amend certain of the provisions of the Note Agreement to provide
for the prepayment of the Series B Notes totalling $10,000,000 held by
SunAmerica Life Insurance Company ("SunAmerica"), as more fully set forth
herein.
The Company and the Purchasers agree as follows:
1. Capitalized terms used but not defined herein shall have the
meanings given such terms in the Note Agreement.
2. Section 3.4 of the Note Agreement is hereby amended to read in its
entirety as follows:
3.4 Optional Prepayments. Upon compliance with
Section 3.5 and subject to Section 3.6 and the following
limitations, in addition to the prepayments required by
Section 3.3, the Company shall have the privilege, at any time
and from time to time, of prepaying the Outstanding Notes,
either in whole or in part (but if in part then in units of
$5,000,000), by payment of the principal amount of the Notes
or portion thereof to be prepaid, together with accrued
interest thereon, plus, to the extent permitted by law, the
Make-Whole Amount (based on such principal amount). Each
partial prepayment of Notes pursuant to this Section 3.4 shall
be applied to reduce, pro rata, the scheduled principal
payments on the Notes in inverse order of payment; provided,
however, any partial prepayment of Notes aggregating
$10,000,000 or less which partial prepayment is made prior to
October 30, 1996, shall be applied to reduce, pro rata, the
scheduled principal payments provided for in Section 3.3 on
the Series B Notes. The Company acknowledges that the right of
the holders of the Notes to maintain their investment free and
clear of prepayment (except as specifically provided in this
Section 3.4) is a valuable right and the provision for payment
of the Make-Whole Amount by the Company if the Notes are
prepaid under this Section 3.4 or accelerated under Section
5.3 as a result of an Event of Default is intended to provide
compensation for the deprivation of such right under such
circumstances.
3. Section 3.5 of the Note Agreement is hereby amended to read in its
entirety as follows:
3.5 Notice of Prepayments. The Company will give
notice of any prepayment of the Notes (other than the
prepayments required by Section 3.3) to each holder thereof
not less than ten days nor more than 30 days before the date
fixed for such optional prepayment; provided, however, any
prepayments made prior to October 30, 1996 with respect to the
Series B Notes may be made by giving notice of such prepayment
to each holder thereof not less than one nor more than 30 days
before the date fixed for such optional prepayment. Each such
notice and each such prepayment shall be accompanied by a
certificate from a Responsible Officer (a) stating the
principal amount to be prepaid, (b) stating the proposed date
of prepayment, (c) stating the accrued interest on each such
Note to such date through the date of prepayment, and (d)
stating the Make-whole Amounts required under Section 3.4
(calculated as of the date of such notice or prepayment, as
the case may be, and, in the case of any notice, proffered
solely as an estimate of the Make-Whole Amounts due upon
prepayment) and setting forth the calculations used in
computing such Make-Whole Amounts, accompanied by a copy of
the Statistical Release H.15(519) (or other source of market
data) used in determining the Make-Whole Amounts.
4. Section 3.6 of the Note Agreement is hereby amended to read in its
entirety as follows:
3.6 Allocation of Prepayments. All partial
prepayments shall be applied on all Outstanding Notes ratably
in accordance with the unpaid principal amounts thereof but
only in units of $1,000, and to the extent that such ratable
application shall not result in an even multiple of $1,000,
adjustment may be made by the Company to the end that
successive applications shall result in substantially ratable
payments; provided, however, any partial prepayment of Notes
aggregating $10,000,000 or less which partial prepayment is
made prior to October 30, 1996, shall be applied against the
Series B Notes held by SunAmerica, pro rata.
5. Schedule II (amortization schedule for required prepayments as
provided in Section 3.3) is hereby amended to read in its entirety as provided
in Exhibit A attached hereto.
6. This Amendment shall become effective when it is executed by the
Company and all the Noteholders.
7. Except as amended by this Amendment, the Note Agreement remains in
full force and effect as originally written.
8. This Amendment may be executed and delivered in any number of
counterparts, each of such counterparts constituting an original but all
together only one agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
PLM INTERNATIONAL, INC.
By:
J. Michael Allgood, Vice President
& Chief Financial Officer
SUNAMERICA LIFE INSURANCE COMPANY
By:
Sam Tillinghast, Authorized Agent
By:
_______________, Authorized Agent
ALEXANDER HAMILTON LIFE
INSURANCE COMPANY OF AMERICA
By:
Name:______________________
Title:_______________________
REPUBLIC WESTERN INSURANCE
COMPANY
By:
Name:
Title:
AMENDMENT NO. 7 TO NOTE AGREEMENT
This Amendment No. 7 to Note Agreement (this "Amendment"), dated as of
November 15, 1996, is by and among PLM International, Inc., a Delaware
corporation (the "Company"), and each of the purchasers named in Schedule I
hereto (the "Purchasers").
The Company and the Purchasers have entered into the Note Agreement
dated as of June 30, 1994, as amended by Amendment No. 1, dated as of June 30,
1994, Amendment No. 2, dated as of December 27, 1994, Amendment No. 3, dated as
of November 1, 1995, Amendment No. 4, dated as of February 10, 1996, Amendment
No. 5, dated as of June 28, 1996, and Amendment No. 6, dated as of September 15,
1996 (the "Note Agreement"), and the Company and each Purchaser have entered
into the Note Purchase Agreement between the Company and such Purchaser dated as
of June 30, 1994, relating to the issuance and sale by the Company of its 9.78%
Series A Senior Secured Notes (the "Series A Notes") and its Floating Rate
Series B Senior Secured Notes (the "Series B Notes"). The Series B Notes are no
longer outstanding. The Company and the Purchasers now wish to enter into this
Amendment to amend certain of the provisions of the Note Agreement, as more
fully set forth herein.
The Company and the Purchasers agree as follows:
1. Capitalized terms used but not defined herein shall have the
meanings given such terms in the Note Agreement.
2. The definition of "Restricted Cash" in Section 1.3 is amended in its
entirety as follows.
"Restricted Cash" means cash or Cash Equivalents
maintained in a segregated cash collateral account over which
the Company has no dominion or control and which is solely for
the repayment of Indebtedness for Borrowed Money, provided
however, "Restricted Cash" shall not include cash held (i) by
the Collateral Agent pursuant to this Note Agreement or (ii)
by the Collateral Agent (as that term is defined therein)
pursuant to the Note Agreement, dated as of June 28, 1996, by
and among the Company, PLM Financial Services, Inc., PLM
Investment Management, Inc., and SunAmerica Life Insurance
Company and its affiliates."
3. This Amendment shall become effective when it is executed by the
Company and the Required Noteholders.
4. Except as amended by this Amendment, the Note Agreement remains in
full force and effect as originally written.
<PAGE>
5. This Amendment may be executed and delivered in any number of
counterparts, each of such counterparts constituting an original but all
together only one agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
PLM INTERNATIONAL, INC.
By:
J. Michael Allgood, Vice President
& Chief Financial Officer
SUNAMERICA LIFE INSURANCE COMPANY
By:
Sam Tillinghast, Authorized Agent
By:
_______________, Authorized Agent
ALEXANDER HAMILTON LIFE
INSURANCE COMPANY OF AMERICA
By:
Name:______________________
Title:_______________________
REPUBLIC WESTERN INSURANCE
COMPANY
By:
Name:
Title:
SUBLEASE AGREEMENT
BETWEEN
PLM INTERNATIONAL, INC.
AND
ARNELLE, HASTIE, McGEE, WILLIS & GREENE
<PAGE>
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT ("Sublease") is dated for reference purposes
only as of the 1st day of August, 1996 by and between PLM INTERNATIONAL, INC., a
Delaware corporation, (hereinafter referred to as "Sublandlord") and ARNELLE,
HASTIE, McGEE, WILLIS & GREENE, a California general partnership (hereinafter
referred to as "Subtenant").
W I T N E S S E T H:
WHEREAS, ONE MARKET PLAZA, a joint venture, predecessor-in-interest of
ZML-ONE MARKET LIMITED PARTNERSHIP, as landlord ("Landlord"), and Sublandlord,
as tenant, entered into that certain Lease Agreement dated November 28, 1990
("Original Lease"), as modified pursuant to that certain First Amendment to
Office Lease dated January 14, 1992 ("First Amendment"), that certain Second
Amendment to Office Lease dated January 14, 1992 ("Second Amendment"), that
certain Third Amendment to Office Lease dated January 14, 1992 ("Third
Amendment"), and that certain Fourth Amendment effective December 28, 1994
("Fourth Amendment")(the Original Lease, the First Amendment, the Second
Amendment, the Third Amendment and the Fourth Amendment are collectively
hereinafter referred to as "Master Lease") whereby Landlord leased to Tenant the
entire seventh, eighth and ninth floors of Steuart Street Tower ("Master
Premises") of the building commonly know as One Market Plaza, located in the
City and County of San Francisco, State of California (the "Building"), as more
particularly described in the Master Lease, upon the terms and conditions
contained therein. All capitalized terms used herein shall have the same meaning
ascribed to them in the Master Lease unless otherwise defined herein. A copy of
the Master Lease is attached hereto as Exhibit "A" and made a part hereof.
WHEREAS, Sublandlord and Subtenant are desirous of entering into a
sublease of the entire ninth floor ("Sublease Premises") on the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto mutually
covenant and agree as follows:
Demise. Sublandlord hereby subleases and demises to Subtenant
and Subtenant hereby hires and subleases from Sublandlord the Sublease Premises,
which the parties hereto stipulate to contain 15,376 rentable square feet
("RSF"), upon and subject to the terms, covenants and conditions hereinafter set
forth.
Lease Term. The term of this Sublease ("Term") shall commence
on December 1, 1996 (hereinafter referred to as the "Sublease Commencement
Date") and ending, unless sooner terminated as provided herein, on May 31, 2001
(hereinafter referred to as the "Sublease Expiration Date").
Use.
The Premises shall be used and occupied by Subtenant
solely for the uses permitted under and in compliance with Article 5 of the
Original Lease and for no other purpose.
In the use and occupation of the Sublease Premises
and the conduct of its business thereon, Subtenant, at its sole cost and
expense, shall be responsible for obtaining and keeping in effect any license
and permits required in connection with Subtenant's use of the Sublease Premises
and shall promptly comply with all present and future laws, ordinances, orders,
rules, regulations and requirements of all federal, state and municipal
governments, courts, departments, commissions, boards and officers, any national
or local Board of Fire Underwriters or any other body exercising functions
similar to those of any of the foregoing, foreseen or unforeseen, ordinary as
well as extraordinary, which may be applicable to the Sublease Premises or the
owners, tenants or occupants thereof, including, without limitation, all
provisions of Title 24 of the California Code of Regulations and of the
Americans with Disabilities Act of 1990 (collectively, the "ADA").
Notwithstanding any other provision herein, in no event shall Sublandlord be
obligated to incur any cost or expense whatsoever to effect any such compliance.
Subrental
Base Rental. Beginning with the Sublease
Commencement Date and thereafter during the Term of this Sublease and ending on
the Sublease Expiration Date, Subtenant shall pay to Sublandlord for this
subletting the following base rent (the "Base Rental"):
Months 1-12: $28.00 per RSF, full service gross;
Months 13-24: $29.00 per RSF, full service gross;
Months 25-36: $30.00 per RSF, full service gross;
Months 37-54: $32.00 per RSF, full service gross.
Base Rental and any additional rent payable hereunder shall hereinafter
be collectively referred to as "Rent."
Prorations. If the Sublease Commencement Date is not
the first (1st) day of the month, or if the Sublease Expiration Date is not the
last day of a month, a prorated installment of monthly Base Rental shall be paid
for the fractional month during which the Term commenced or terminated.
Escalation Rent. Commencing with the calendar year
subsequent to expiration of the calendar year 1997 ("Base Year") and each
calendar year thereafter during the Term of this Sublease, Subtenant shall pay
to Sublandlord, as additional rent for this subletting, an amount equal to
Subtenant's pro rata share of the excess of Operating Expenses and Property
Taxes (as set forth in Article 4 of the Original Lease) for the Master Premises
over the total dollar amount of Operating Expenses and Property Taxes for the
Master Premises incurred by Sublandlord during the Base Year pursuant to the
terms and conditions of the Master Lease. Subtenant's pro rata share is the
percentage which reflects the ratio of the RSF of the Sublease Premises to the
RSF of the Master Premises. Subtenant's pro rata share as of the Sublease
Commencement Date is 33.52%.
Payment of Rent. Except as otherwise specifically
provided in this Sublease, Rent shall be payable in lawful money without demand,
and without offset, counterclaim, or setoff in monthly installments, in advance,
on the first day of each and every month during the Term of this Sublease. All
of said Rent is to be paid to Sublandlord at its office at the address set forth
in Section 13 herein, or at such other place or to such agent and at such place
as Sublandlord may designate by notice to Subtenant. Any additional rent payable
on account of items which are not payable monthly by Sublandlord to Landlord
under the Master Lease is to be paid to Sublandlord as and when such items are
payable by Sublandlord to Landlord under the Master Lease unless a different
time for payment is elsewhere stated herein. Upon written request therefore,
Sublandlord agrees to provide Subtenant with copies of any statements or
invoices received by Sublandlord from Landlord pursuant to the terms of the
Master Lease.
Advance Rent. Concurrently with the execution of the
Sublease, Subtenant shall pay to Sublandlord the sum of Thirty-Five Thousand
Eight Hundred Seventy-Seven and 33/100 Dollars ($35,877.33) ("Advance Rent"),
which Advance Rent shall be applied by Sublandlord toward the Base Rental for
month one (1) of the Term of the Sublease due and payable by Subtenant pursuant
to the provisions of Section 4(a).
Security Deposit. In addition to the foregoing Advance Rent
and also concurrently with the execution of the Sublease, Subtenant shall
deliver to Sublandlord the original copy of a clean, irrevocable and
unconditional letter of credit in the form attached hereto as Exhibit B (the
"Letter of Credit") issued by a financial institution, and subject only to terms
reasonably acceptable to Sublandlord. The Letter of Credit shall be in the
amount of Thirty-Eight Thousand Four Hundred Forty Dollars ($38,440.00) (the
"Deposit"), which Deposit shall be held by Sublandlord as security for the full
and faithful performance of Subtenant's covenants and obligations under this
Sublease. The Letter of Credit shall provide for its payment to Sublandlord upon
its presentation of a statement from Sublandlord that an event of default by
Subtenant exists hereunder. Upon the failure of Subtenant to deliver a
replacement letter of credit (or an extension of the existing Letter of Credit)
on or before thirty (30) days prior to any maturity date of any such Letter of
Credit, Sublandlord may draw upon the same and thereafter treat such cash as a
portion of the Deposit. The Deposit shall secure Subtenant's obligations under
this Sublease to pay Rent and other monetary amounts, to maintain the Sublease
Premises and repair damages thereto, to surrender the Sublease Premises to
Sublandlord upon the termination of this Sublease in as good order, condition
and repair as they shall be upon the Sublease Commencement Date, except for
reasonable wear and tear and damage or destruction caused by the elements or
casualty not required to be insured against by Subtenant, and to discharge
Subtenant's other obligations hereunder. Sublandlord may use and commingle the
Deposit with other funds of Sublandlord. If an event of default by Subtenant
exists under the terms of this Sublease, Sublandlord may, but without any
obligation to do so, apply all or any portion of the Deposit towards fulfillment
of Subtenant's unperformed obligations. If Sublandlord does so apply any portion
of the Deposit, Subtenant's failure to remit to Sublandlord cash or a
replacement Letter of Credit to restore the Deposit to the original amount
within five (5) days after receipt of Sublandlord's written demand to do so
shall constitute an event of default hereunder.
Signage. To the extent permitted under the Master Lease, and
subject to Landlord's approval, Subtenant may install, at its sole cost and
expense, appropriate signage upon the entry door to the Sublease Premises
identifying Subtenant. Furthermore, to the extent permitted under the Master
Lease or otherwise permitted by Landlord, Subtenant shall be allowed spaces on
the Building directory in the lobby of the Building.
Incorporation of Terms of Master Lease.
This Sublease is subject and subordinate to the
Master Lease. Subject to the modifications as set forth in this Sublease, the
terms of the Master Lease are incorporated herein by reference, and shall, as
between Sublandlord and Subtenant (as if they were the Landlord and Tenant,
respectively, under the Master Lease) constitute the terms of this Sublease
expect to the extent that they are inapplicable to, inconsistent with, or
modified by, the terms of this Sublease. In the event of any inconsistencies
between the terms and provisions of the Master Lease and the terms and
provisions of this Sublease, the terms and provisions of this Sublease shall
govern. Subtenant acknowledges that it has reviewed the Master Lease and is
familiar with the terms and conditions thereof.
For the purposes of incorporation herein, the terms
of the Master Lease are deleted or modified as follows:
Delete in its entirety the following
paragraphs of and exhibits to the Addendum to Original Lease: 2 (Term;
Condition of Premises), 3 (Rental), 25 (Sublease Shortfall), 26
(Relocation Allowance), 27 (Storage Space), 28 (Parking), 29 (Option to
Expand), 30 (Right of First Refusal), Exhibit A (Floor Plans), and
Exhibit C (Work Letter: Initial Improvement of Premises).
Delete in their entirety the First
Amendment, the Second Amendment, the Third Amendment and the Fourth
Amendment.
In all provisions of the Master Lease
(under the terms thereof and without regard to modifications thereof
for purposes of incorporation into this Sublease) requiring the
approval or consent of Landlord, Subtenant shall be required to obtain
the approval or consent of both Sublandlord and Landlord.
In all provisions of the Master Lease
requiring Tenant to submit, exhibit to, supply or provide Landlord with
evidence, certificates, or any other matter or thing, Subtenant shall
be required to submit, exhibit to, supply or provide, as the case may
be, the same to both Landlord and Sublandlord. In any such instance,
Sublandlord shall determine if such evidence, certificate or other
matter or thing shall be satisfactory.
Sublandlord shall have no obligation to
restore or rebuild any portion of the Sublease Premises after any
destruction or taking by eminent domain.
Subtenant's rights, if any, to abatement of
Rent hereunder shall be limited as provided in the Master Lease;
provided, however, Rent shall only abate hereunder if and to the extent
Sublandlord's rent obligation for the Sublease Premises abates under
the Master Lease.
Subtenant's Obligations. Subtenant covenants and agrees that
all obligations to Sublandlord under the Master Lease shall be done or performed
by Subtenant with respect to the Sublease Premises, except as otherwise provided
by this Sublease, and Subtenant's obligations shall run to Sublandlord and
Landlord as Sublandlord may determine to be appropriate or be required by the
respective interests of Sublandlord and Landlord. Subtenant agrees to indemnify
Sublandlord, and hold it harmless, from and against any and all claims, damages,
losses, expenses and liabilities (including reasonable attorneys' fees) incurred
as a result of the nonperformance, observance or nonpayment of any of
Sublandlord's obligations under the Master Lease with respect to the Sublease
Premises which, as a result of this Sublease, became an obligation of Subtenant.
If Subtenant makes any payment to Sublandlord pursuant to this indemnity,
Subtenant shall be subrogated to the rights of Sublandlord concerning said
payment. Subtenant shall not do, nor permit to be done, any act or thing which
is, or with notice or the passage of time would be, a default under this
Sublease or the Master Lease.
Sublandlord's Obligations. Sublandlord agrees that Subtenant
shall be entitled to receive all services and repairs to be provided by Landlord
to Sublandlord with respect to the Sublease Premises under the Master Lease.
Subtenant shall look solely to Landlord for all such services and shall not,
under any circumstances, seek nor require Sublandlord to perform any of such
services, nor shall Subtenant make any claim upon Sublandlord for any damages
which may arise by reason of Landlord's default under the Master Lease. Any
condition resulting from a default by Landlord shall not constitute as between
Sublandlord and Subtenant an eviction, actual or constructive, of Subtenant and
no such default shall excuse Subtenant from the performance or observance of any
of its obligations to be performed or observed under this Sublease, or entitle
Subtenant to receive any reduction or abatement of the rent provided for in this
Sublease. In furtherance of the foregoing, Subtenant does hereby waive any cause
of action and any right to bring any action against Sublandlord by reason of any
action or omission of Landlord under the Master Lease. Sublandlord covenants and
agrees with Subtenant that Sublandlord will pay all fixed rent and additional
rent payable by Sublandlord pursuant to the Master Lease to the extent that
failure to perform the same would adversely affect Subtenant's use or occupancy
of the Sublease Premises. In the event Landlord shall not comply with its
obligation under the Master Lease, then (a) Subtenant shall have the right,
either in its own name or in the name of Sublandlord (as required or permitted
by applicable law, but in any event, without any cost or expense or liability to
Sublandlord), but only to the extent permitted by the Master Lease, to enforce
such obligations against Landlord, but not against Sublandlord herein, and (b)
Sublandlord hereby acknowledges that it shall use its good faith best efforts to
assist Subtenant, but only to the extent permitted by the Master Lease, in
enforcing such obligations against Landlord.
Default by Subtenant
In the event Subtenant shall be in default of any
covenant of, or shall fail to honor any obligation under, this Sublease,
Sublandlord shall have available to it against Subtenant all of the remedies
available (i) to Landlord under the Master Lease in the event of a similar
default on the part of Sublandlord thereunder or (ii) at law. Subtenant agrees
that the occurrence of an event of default under or breach by Subtenant of
either that certain secured promissory note or related security agreement with
respect to the acquisition by Subtenant from Sublandlord of furniture located in
the Sublease Premises shall constitute an event of default hereunder.
In the event of any breach or default in any of the
terms, covenants, conditions, provisions or agreements of this Sublease on the
part of Subtenant, as a result of which the Term is sooner terminated and if
Subtenant's liability to Sublandlord shall continue as herein provided,
Subtenant agrees that the amount for which Subtenant shall remain liable shall
be the highest annual Rent theretofore paid, with the same force and effect as
if that amount were the annual Rent reserved in this Sublease. Any reference in
any Section of this Sublease and/or the Master Lease relating to reentry and
reletting of the Sublease Premises, to rent reserved or payable, or the
application thereof, shall be based upon such highest annual Rent theretofore
paid as set forth herein.
Quiet Enjoyment. So long as Subtenant pays all of the Rent
due hereunder and performs all of Subtenant's other obligations hereunder,
Sublandlord shall do nothing to affect Subtenant's right to peaceably and
quietly have, hold and enjoy the Sublease Premises.
Notices. Anything contained in any provisions of this
Sublease to the contrary notwithstanding, Subtenant agrees, with respect to the
Sublease Premises, to comply with and remedy any default in this Sublease or the
Master Lease which is Subtenant's obligation to cure, and in all events within
the period allowed to Sublandlord under the Master Lease even if such time
period is shorter than the period otherwise allowed therein due to the fact that
notice of default from Sublandlord to Subtenant is given after the corresponding
notice of default from Landlord to Sublandlord. Sublandlord agrees to forward to
Subtenant, promptly upon receipt thereof by Sublandlord, a copy of each notice
of default received by Sublandlord in its capacity as Tenant under the Master
Lease. Subtenant agrees to forward to Sublandlord, promptly upon receipt
thereof, copies of any notices received by Subtenant from Landlord or from any
governmental authorities. All notices, demands and requests shall be in writing
and shall be sent either by hand delivery or by a nationally recognized
overnight courier service (e.g., Federal Express), in either case return receipt
requested, to the address of the appropriate party. Notices, demands and
requests so sent shall be deemed given when the same are received. Notices to
Sublandlord shall be sent to the attention of:
PLM International, Inc.
One Market Plaza
Steuart Street Tower, Suite 800
San Francisco, California 94105
Attention: Vice President, Human Resources
Prior to the Commencement Date, notices to Subtenant shall be sent to
the attention of:
Arnelle, Hastie, McGee, Willis & Greene
One Market Plaza
Spear Street Tower, 39th Floor
San Francisco, California 94105
Attention: Chief Executive Officer
After the Commencement Date, notices to Subtenant shall be sent to the
Sublease Premises.
Broker. Sublandlord and Subtenant represent and warrant to
each other that no brokers were involved in connection with the negotiation or
consummation of this Sublease other than TRI Commercial, as Sublandlord's
representative, and Starboard Commercial Brokerage, as Subtenant's
representative. Each party agrees to indemnity the other, and hold it harmless,
from and against any and all claims, damages, losses, expenses and liabilities
(including reasonable attorneys' fees) incurred by said party as a result of a
breach of this representation and warranty by the other party.
Condition of Sublease Premises.
Subtenant has thoroughly inspected the Sublease
Premises and accepts them in their present condition, AS IS WITH ALL FAULTS.
Subtenant acknowledges that neither Sublandlord nor any agent of Sublandlord has
made any representation as to the condition of the Sublease Premises or their
suitability for the conduct of Subtenant's business. Specifically, neither
Sublandlord nor any agent of Sublandlord has made any representation concerning
the compliance of the Sublease Premises or the building of which the Sublease
Premises are a part with the ADA or similar state laws intended to make business
establishments accessible to persons with a variety of disabilities. Subtenant
and Sublandlord expressly agree that there are and shall be no implied
warranties of merchantability, habitability, fitness for a particular purpose or
any other kind arising out of this Sublease, and there are no warranties that
extend beyond those expressly set forth in this Sublease. Sublandlord is not
obligated to perform any work to prepare the Sublease Premises for Subtenant's
occupancy.
Any time Subtenant proposes to make any alterations
and improvements to the Sublease Premises ("Alterations"), the performance of
the Alterations shall be subject to the following conditions:
The plans and specifications in connection
with the Alterations shall be subject to Sublandlord's prior written
approval, which approval shall not be unreasonably withheld;
Sublandlord shall solicit Landlord's
consent to such plans and specifications in connection with the
Alterations as soon as reasonably practicable; and
Subtenant shall provide Sublandlord with at
least ten (10) days' prior notice of the proposed Alterations.
Subtenant acknowledges that it is not authorized to make or do any
Alterations in or to the Sublease Premises except as permitted by the provisions
of this Sublease and the Master Lease and that it must deliver the Sublease
Premises to Sublandlord on the Sublease Expiration Date in the condition
required by the Master Lease.
Consent of Landlord. Section 17(a) of the Master Lease
requires Sublandlord to obtain the written consent of Landlord to this Sublease.
Sublandlord shall solicit Landlord's consent to this Sublease promptly following
the execution and delivery of this Sublease by Sublandlord and Subtenant. In the
event Landlord's written consent to this Sublease has not been obtained within
thirty (30) days after the execution hereof, then this Sublease may be
terminated by either party hereto upon notice to the other, and upon such
termination all documents and deposits delivered hereunder shall be promptly
returned and neither party hereto shall have any further rights against or
obligations to the other party hereto.
Termination of the Lease. If for any reason the term of the
Master Lease shall terminate prior to the Sublease Expiration Date, this
Sublease shall automatically be terminated and Sublandlord shall not be liable
to Subtenant by reason thereof unless said termination shall have been caused by
the default of Sublandlord under the Master Lease.
Assignment and Subletting
Independent of and in addition to any provisions of
the Master Lease, including without limitation the obligation to obtain
Landlord's consent to any assignment as required by the terms of the Master
Lease, it is understood and agreed that Subtenant shall have no right to sublet
or assign the Sublease Premises or any portion thereof without the prior written
consent of Sublandlord, which consent shall not be unreasonably withheld. Any
assignment or sublease by Subtenant without Sublandlord's and Landlord's prior
written consent shall be void and shall, at the option of Sublandlord, terminate
this Sublease.
Subtenant shall advise Sublandlord by notice of (i)
Subtenant's intent to sublet or assign this Sublease, (ii) the name of the
proposed subtenant or assignee and evidence reasonably satisfactory to
Sublandlord that such proposed subtenant or assignee is comparable in
reputation, stature and financial condition to tenants then leasing comparable
space in comparable buildings, and (iii) the terms of the proposed sublease or
assignment. Sublandlord shall within thirty (30) days of receipt of such notice,
and any additional information requested by Landlord concerning the proposed
subtenant's or assignee's financial responsibility, elect one of the following:
Consent to such proposed sublease or
assignment; or
Refuse such consent, which refusal shall be
on reasonable grounds.
In the event that Sublandlord shall consent to any
subletting or assignment under the provisions of this Section 18, Subtenant
shall pay Sublandlord's reasonable processing costs and reasonable attorneys'
fees incurred in giving such consent. Notwithstanding any permitted sublease or
assignment, Subtenant shall at all times remain directly, primarily and fully
responsible and liable for all payments owed by Subtenant under the Sublease and
for compliance with all obligations under the terms, provisions and covenants of
the Sublease. If for any proposed sublease or assignment, Subtenant receives
Rent or other consideration, either initially or over the term of the
assignment, in excess of the Rent required by this Sublease ("Profit"),
Subtenant shall pay to Sublandlord as additional Rent, one-half (1/2) of such
Profit or other consideration received by Subtenant within five (5) days of its
receipt by Subtenant.
Limitation on Estate. Subtenant's estate shall in all
respects be limited to, and be construed in a fashion consistent with, the
estate granted to Sublandlord by Landlord. Subtenant shall stand in the place of
Sublandlord and shall defend, indemnify and hold Sublandlord harmless with
respect to all covenants, warranties, obligations, and payments made by
Sublandlord under or required of Sublandlord by the Master Lease with respect to
the Sublease Premises. In the event Sublandlord is prevented from performing any
of its obligations under this Sublease by a breach by Landlord of a term of the
Master Lease, then Sublandlord's sole obligation in regard to its obligation
under this Sublease shall be to use reasonable efforts in diligently pursuing
the correction or cure by Landlord of Landlord's breach.
Performance by Subtenant; Late Charges. All covenants and
agreements to be performed by Subtenant under any of the terms of this Sublease
shall be performed at Subtenant's sole cost and expense and without any
abatement of Rent. If Subtenant shall fail to pay any sum of money, other than
Rent, required to be paid by it hereunder or shall fail to perform any other act
on its part to be performed hereunder, and such failure shall continue for ten
(10) days after notice thereof by Sublandlord, Sublandlord may, without waiving
or releasing Subtenant from obligations of Subtenant, but shall not be obligated
to, make any such payment or perform any such other act on Subtenant's part to
be made or performed as in this Sublease provided. All sums so paid by
Sublandlord and all necessary incidental costs together with interest thereon at
the lesser of twelve percent (12%) per annum or the maximum non-usurious
interest rate permissible by law, from the date of such payment by Sublandlord,
shall be payable to Sublandlord on demand. In the event Subtenant fails to pay
any installment of Rent when due, said delinquent installment shall bear
interest at the rate of the lesser of twelve percent (12%) per annum or the
maximum non-usurious interest rate permissible by law from the date such payment
was due until paid. Subtenant covenants to pay any such sums, and Sublandlord
shall have (in addition to any other right or remedy of Sublandlord) the same
rights and remedies in the event of the non-payment thereof by Subtenant as in
the case of default by Subtenant in the payment of the Rent. Subtenant hereby
acknowledges that in addition to lost interest, the late payment by Subtenant to
Sublandlord of Rent or other sums due hereunder will cause Sublandlord to incur
other costs not contemplated in this Sublease, the exact amount of which is
extremely difficult and impractical to ascertain. Such other costs include, but
are not limited to, processing, administrative and accounting costs.
Accordingly, if any installment of Rent or any other sum due from Subtenant
shall not be received by Sublandlord within ten (10) days after such amount
shall be due, Subtenant shall also pay to Sublandlord a late charge equal to
five percent (5%) of the delinquent amount. The parties hereby agree that (i)
such late charge represents a fair and reasonable estimate of the costs
Sublandlord will incur in processing each delinquent payment by Subtenant, (ii)
such late charge shall be paid to Sublandlord as liquidated damages for each
delinquent payment pursuant to California Civil Code Section 1671, and (ii) that
the payment of late charges and the payment of interest are distinct and
separate from one another in that the payment of interest is to compensate
Sublandlord for the use of Sublandlord's money by Subtenant, while the payment
of late charges is to compensate Sublandlord for the additional administrative
expenses incurred by Sublandlord in handling and processing delinquent payments.
Examination of Sublease. SUBMISSION OF THIS INSTRUMENT FOR
EXAMINATION OR SIGNATURE BY SUBTENANT DOES NOT CONSTITUTE A RESERVATION OF OR
OPTION FOR SUBLEASE, AND IT IS NOT EFFECTIVE AS A SUBLEASE OR OTHERWISE UNTIL
EXECUTION BY AND DELIVERY TO BOTH SUBLANDLORD AND SUBTENANT AND CONSENTED TO BY
LANDLORD IN ACCORDANCE WITH THE TERMS OF THE MASTER LEASE.
Entire Agreement. Other than agreements between the parties
concerning the purchase and sale of office furniture for use at the Sublease
Premises, this Sublease sets forth all the agreements between Sublandlord and
Subtenant concerning the Sublease Premises, and there are no other agreements
either oral or written other than as set forth in this Sublease.
Time of Essence. Time is of the essence in this Sublease.
Attorneys' Fees. Subtenant shall pay to Sublandlord all
amounts for costs (including reasonable attorneys' fees) incurred by Sublandlord
in connection with any breach or default by Subtenant under this Sublease or
incurred in order to enforce or interpret the terms or provisions of this
Sublease. Such amounts shall be payable upon demand. In addition, if any action
shall be instituted by either of the parties hereto for the enforcement or
interpretation of any of its rights or remedies under this Sublease, the
prevailing party shall be entitled to recover from the losing party all costs
incurred by the prevailing party in said action and any appeal therefrom,
including reasonable attorneys' fees to be fixed by the court therein. Said
costs and attorneys' fees shall be included as part of the judgment in any such
action. Further, should Sublandlord be made a party to any litigation between
Subtenant and any third party, then Subtenant shall pay all costs and attorneys'
fees incurred by or imposed upon Sublandlord in connection with such litigation.
Authority of Subtenant. The undersigned person executing this
Sublease on behalf of Subtenant warrants that Subtenant is a California general
partnership, that the partnership has the full right and authority to enter into
this Sublease, and that the undersigned person signing on behalf of the
partnership is authorized to do so.
IN WITNESS WHEREOF, the duly authorized representatives of the parties
hereto have set their hand as of the day and year hereafter written.
SUBLANDLORD
PLM INTERNATIONAL, INC.,
a Delaware corporation
By:
Name:
Title:
Dated:
SUBTENANT
ARNELLE, HASTIE, McGEE, WILLIS & GREENE, a California
general partnership
By:
Name:
Title:
Dated:
The Board of Directors
PLM International, Inc.
We consent to incorporation by reference in the registration statements on Form
S-2 (No. 033-55183), on Form S-3 (No. 033-54869), and on Form S-8 (No.
033-56877), of PLM International, Inc. of our report dated February 24, 1997,
relating to the consolidated balance sheets of PLM International, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1996, which report appears in
the December 31, 1996 annual report on Form 10-K of PLM International, Inc.
/S/ KPMG PEAT MARWICK LLP
- ----------------------------
San Francisco, California
February 27, 1997
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1997 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1997.
/s/ Douglas P. Goodrich
- ---------------------------
Douglas P. Goodrich
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1997 and shall apply only to the annual reports and any
amendements thereto filed with respect to the fiscal year ended December 31,
1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1997.
/s/ Robert L. Pagel
- ---------------------------
Robert L. Pagel
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1997 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1997.
/s/ Robert N. Tidball
- ----------------------------
Robert N. Tidball
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1997 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1997.
/s/ Walter E. Hoadley
- --------------------------------
Walter E. Hoadley
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1997 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1997.
/s/ J. Alec Merriam
- -------------------------------
J. Alec Merriam
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1997 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1997.
/s/ Harold R. Somerset
- --------------------------------
Harold R. Somerset
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,638
<SECURITIES> 0
<RECEIVABLES> 5,286
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 82,476
<DEPRECIATION> (44,052)
<TOTAL-ASSETS> 198,749
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0
0
<OTHER-SE> (19,193)
<TOTAL-LIABILITY-AND-EQUITY> 198,749
<SALES> 0
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<CGS> 0
<TOTAL-COSTS> 40,869
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