UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED MARCH 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9670
-------------------------------
PLM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3041257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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
----------------------------------------------------------------------
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: common stock - $.01 par
value; outstanding as of May 4, 1999 - 8,028,594 shares.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
--------------------------
<S> <C> <C>
REVENUES
Operating lease income $ 6,097 $ 3,892
Finance lease income 3,152 2,652
Management fees 2,368 2,564
Partnership interests and other fees 290 324
Acquisition and lease negotiation fees 461 1,027
Gain on the sale or disposition of assets, net 313 762
Aircraft brokerage and services -- 524
Other 926 799
----------------------------------------------------------------------------------------------------------------------------
Total revenues 13,607 12,544
----------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Operations support 3,831 3,810
Depreciation and amortization 3,399 2,550
General and administrative 1,484 1,913
----------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 8,714 8,273
----------------------------------------------------------------------------------------------------------------------------
Operating income 4,893 4,271
Interest expense (3,685 ) (3,070 )
Interest income 243 395
Other expenses, net (948 ) (6 )
----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 503 1,590
Provision for income taxes 207 607
----------------------------------------------------------------------------------------------------------------------------
Net income before cumulative effect of accounting change 296 983
Cumulative effect of accounting change, net of tax of $165 236 --
----------------------------------------------------------------------------------------------------------------------------
Net income to common shares $ 60 $ 983
============================================================================================================================
Basic earnings per weighted-average common share outstanding $ 0.01 $ 0.12
============================================================================================================================
Diluted earnings per weighted-average common share outstanding $ 0.01 $ 0.11
============================================================================================================================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars, except share amounts)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 3,903 $ 8,786
Receivables (net of allowance for doubtful accounts of $0.5
million and $0.4 million as of March 31, 1999 and December
31, 1998, respectively) 7,500 7,282
Receivables from affiliates 2,766 2,944
Investment in direct finance leases, net 142,318 145,088
Loans receivable 24,696 23,493
Equity interest in affiliates 21,797 22,588
Assets held for sale 6,841 --
Transportation equipment held for operating leases 70,765 63,044
Less accumulated depreciation (16,694 ) (15,516 )
-------------------------------------------
54,071 47,528
Commercial and industrial equipment held for operating leases 24,268 24,520
Less accumulated depreciation (9,180 ) (7,831 )
-------------------------------------------
15,088 16,689
Restricted cash and cash equivalents 11,050 10,349
Other, net 6,294 7,322
-------------------------------------------
Total assets $ 296,324 $ 292,069
===========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Short-term warehouse facilities $ 45,751 $ 34,420
Senior secured notes 26,319 28,199
Senior secured loan 13,235 14,706
Other secured debt 12,844 13,142
Nonrecourse securitized debt 112,104 111,222
Payables and other liabilities 17,478 21,768
Deferred income taxes 18,469 18,415
-------------------------------------------
Total liabilities 246,200 241,872
Shareholders' equity:
Common stock, ($.01 par value, 50,000,000 shares
authorized, 8,135,951 issued and outstanding as of
March 31, 1999 and 8,159,919 as of December 31, 1998) 112 112
Paid-in capital, in excess of par 75,051 74,947
Treasury stock (3,899,804 and 3,875,836 shares at
respective dates) (15,309 ) (15,072 )
Accumulated deficit (9,730 ) (9,790 )
------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 50,124 50,197
-------------------------------------------
Total liabilities and shareholders' equity $ 296,324 $ 292,069
===========================================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
For the Year Ended December 31, 1998 and the
Three Months Ended March 31, 1999
(in thousands of dollars)
<TABLE>
<CAPTION>
Common Stock Accumulated
------------------------------------------- Deficit &
Paid-in Accumulated
Capital in Other Total
At Excess Treasury Comprehensive Comprehensive Shareholders'
Par of Par Stock Income Income Equity
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1997 $ 112 $ 74,650 $ (13,435 ) $ (14,779 ) $ 46,548
Comprehensive income
Net income 4,857 $ 4,857 4,857
Other comprehensive income:
Foreign currency translation
income 132 132 132
=================
Comprehensive income $ 4,989
=================
Exercise of stock options 218 211 429
Common stock repurchases (2,059 ) (2,059 )
Reissuance of treasury stock 79 211 290
- ---------------------------------------------------------------------------------------------------- --------------
Balances, December 31, 1998 112 74,947 (15,072 ) (9,790 ) 50,197
Comprehensive income
Net income 60 $ 60 60
=================
Exercise of stock options 18 18
Common stock repurchases (405 ) (405 )
Reissuance of treasury stock 86 168 254
=========================================================== ==============
Balances, March 31, 1999 $ 112 $ 75,051 $ (15,309 ) $ (9,730 ) $ 50,124
=========================================================== ==============
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
--------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 60 $ 983
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,399 2,550
Cumulative effect of accounting change, net of tax of $165 236 --
Write off of costs associated with initial public offering of AFG 948 --
Foreign currency translation -- 28
Deferred income tax expense 54 537
Gain on sale or disposition of assets, net (313 ) (762 )
Undistributed residual value interests 82 200
(Decrease) increase in payables and other liabilities (1,965 ) 186
(Increase) decrease in receivables and receivables from affiliates (40 ) 1,184
Amortization of organization and offering costs 709 720
(Increase) decrease in other assets (65 ) 283
---------------------------------
Net cash provided by operating activities 3,105 5,909
---------------------------------
INVESTING ACTIVITIES
Principal payments received on finance leases 8,917 6,356
Principal payments received on loans 1,807 967
Investment in direct finance leases (11,604 ) (38,809 )
Investment in loans receivable (3,010 ) (3,020 )
Purchase of property, plant, and equipment (409 ) (126 )
Purchase of transportation equipment and capital improvements (21,907 ) (11,259 )
Purchase of commercial and industrial equipment held for operating lease (2,092 ) (5,255 )
Proceeds from the sale of transportation equipment for lease 103 1,078
Proceeds from the sale of assets held for sale 6,960 5,366
Proceeds from the sale of commercial and industrial equipment 5,771 9,406
(Increase) decrease in restricted cash and restricted cash equivalents (701 ) 1,001
---------------------------------
Net cash used in investing activities (16,165 ) (34,295 )
----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Borrowings of short-term warehouse credit facilities 30,916 36,285
Repayment of short-term warehouse credit facilities (19,585 ) (20,591 )
Repayment of senior secured notes (1,880 ) (1,255 )
Repayment of senior secured loan (1,471 ) (1,470 )
Repayment of other secured debt (298 ) (31 )
Borrowings of other secured debt -- 167
Borrowings of nonrecourse debt 12,904 18,121
Repayment of nonrecourse debt (12,022 ) (2,232 )
Proceeds from exercise of stock options 18 --
Purchase of stock (405 ) (605 )
---------------------------------
Net cash provided by financing activities 8,177 28,389
---------------------------------
Net (decrease) increase in cash and cash equivalents (4,883 ) 3
Cash and cash equivalents at beginning of period 8,786 5,224
=================================
Cash and cash equivalents at end of period $ 3,903 $ 5,227
=================================
SUPPLEMENTAL INFORMATION
Net cash paid for interest $ 3,737 $ 3,451
==================================================================================================================================
Net cash paid for income taxes $ 137 $ 632
==================================================================================================================================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
1. GENERAL
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary, consisting primarily of normal
recurring accruals, to present fairly PLM International, Inc. and its wholly-
and majority-owned subsidiaries (the Company's) financial position as of March
31, 1999 and December 31, 1998, statements of income for the three months ended
March 31, 1999 and 1998, statements of changes in shareholders' equity and
comprehensive income for the year ended December 31, 1998 and the three months
ended March 31, 1999 and statements of cash flows for the three months ended
March 31, 1999 and 1998. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted from the accompanying
consolidated financial statements. For further information, reference should be
made to the financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, on file with
the Securities and Exchange Commission.
2. RECLASSIFICATIONS
Certain prior-period amounts have been reclassified to conform to the current
period's presentation.
3. FINANCING TRANSACTION ACTIVITIES
American Finance Group, Inc. (AFG), a wholly-owned subsidiary of the Company,
originates and manages lease and loan transactions on primarily new commercial
and industrial equipment that is financed by nonrecourse securitized debt for
the Company's own account or for sale to other unaffiliated investors. The
Company uses one of its warehouse credit facilities to finance the acquisition
of the assets, subject to leases, prior to sale or permanent financing by
nonrecourse securitized debt. The majority of these transactions are accounted
for as direct finance leases, while some transactions qualify as operating
leases or loans.
During the three months ended March 31, 1999, the Company funded $11.6 million
in equipment that was placed on finance lease. Also during the three months
ended March 31, 1999, the Company sold equipment on finance lease with an
original equipment cost of $6.2 million, resulting in a net gain of $0.1
million.
4. EQUIPMENT
Equipment held for operating lease includes transportation equipment and
commercial and industrial equipment which is depreciated on the straight-line
method down to the equipment's estimated salvage value.
During the three months ended March 31, 1999, the Company funded $2.1 million in
commercial and industrial equipment that was placed on operating lease. During
the three months ended March 31, 1999, the Company sold commercial and
industrial equipment that was on operating lease, with an original cost of $2.1
million, for a net gain of $0.2 million.
During the first three months of 1999, the Company purchased trailers for $8.1
million and sold trailers with a net book value of $0.1 million for $0.1
million.
The Company classifies equipment as held for sale if the particular asset is
subject to a pending contract for sale or is held for sale to an affiliated
partnership. Equipment held for sale is valued at the lower of the depreciated
cost or the fair value less costs to sell. During the first three months of
1999, the Company purchased marine containers for $13.8 million, and sold marine
containers for $7.0 million to an affiliated program at cost, which approximated
their fair market value. As of March 31, 1999, the Company held containers with
a net book value of $6.8 million for sale to an affiliated program. As of
December 31, 1998, the Company had no equipment held for sale.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
5. DEBT
The Company has warehouse credit facilities for PLM Financial Services, Inc.
(FSI) and AFG. FSI has a $24.5 million warehouse credit facility to be used to
acquire assets on an interim basis prior to sale to affiliated programs or
unaffiliated third parties and to purchase trailers prior to obtaining permanent
financing. FSI's facility is shared with PLM Equipment Growth Fund VI, PLM
Equipment Growth & Income Fund VII, and Professional Lease Management Income
Fund I, LLC. Borrowings under this facility by the other eligible borrowers
reduce the amount available to be borrowed by the Company. All borrowings under
this facility are guaranteed by the Company. AFG has a $60.0 million warehouse
credit facility to be used to acquire assets on an interim basis prior to
placement in the Company's nonrecourse securitization facility or sale to
unaffiliated third parties. These facilities expire December 14, 1999. The
Company believes it will be able to renew these facilities on substantially the
same terms upon expiration. As of March 31, 1999, FSI and PLM Equipment Growth
Fund VI had $11.3 million and $3.7 million in borrowings outstanding on the
$24.5 million facility, respectively. As of March 31, 1999, AFG had $34.5
million in borrowings outstanding on its $60.0 million facility.
The Company has available a nonrecourse securitization facility to be used to
acquire assets by AFG secured by direct finance leases, operating leases, and
loans on commercial and industrial equipment that generally have terms from one
to seven years. The facility allows the Company to borrow up to $150.0 million
through October 12, 1999. The Company believes it will be able to extend this
facility on similar terms prior to its expiration. Repayment of the facility
matches the terms of the underlying leases. As of March 31, 1999 , there were
$105.3 million in borrowings under this facility. The Company is required to
hedge at least 90% of the aggregate discounted lease balance (ADLB) of those
leases and loans used as collateral in its nonrecourse securitization facility.
As of March 31, 1999, 92% of the ADLB had been hedged.
During the first quarter of 1999, the Company made principal payments of $0.8
million on its nonrecourse notes payable. As of March 31, 1999, the Company had
$6.8 million in nonrecourse notes payable. Principal and interest on the notes
are due monthly beginning April 1998 through March 2001. The notes bear interest
ranging from 8.32% to 9.5% per annum and are secured by direct finance leases
for commercial and industrial equipment that have terms corresponding to the
repayment of the notes.
During the first quarter of 1999, the Company repaid $1.5 million of the senior
secured loan, $1.9 million of the senior secured notes, and $0.3 million of the
other secured debt, in accordance with the debt repayment schedules.
6. SHAREHOLDERS' EQUITY
During the first quarter of 1999, the Company repurchased 67,053 shares of the
Company's common stock for $0.4 million, under the $5.0 million common stock
repurchase program authorized by the Company's Board of Directors in December
1998. As of March 31, 1999, 130,353 shares had been repurchased under this plan,
for a total of $0.8 million.
During the three months ended March 31, 1999, 43,085 shares were issued from
treasury stock as part of the senior management bonus program. Consequently, the
total common shares outstanding decreased to 8,135,951 as of March 31, 1999 from
the 8,159,919 outstanding as of December 31, 1998.
Net income per basic weighted-average common share outstanding was computed by
dividing net income to common shares by the weighted-average number of shares
deemed outstanding during the period. The weighted-average number of shares
deemed outstanding for the basic earnings per share calculation during the three
months ended March 31, 1999 and 1998 was 8,164,672 and 8,380,578, respectively.
The weighted-average number of shares deemed outstanding, including potentially
dilutive common shares, for the diluted earnings per weighted-average share
calculation during the three months ended March 31, 1999 and 1998 was 8,288,189
and 8,547,544, respectively.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
7. LEGAL MATTERS
In November 1995, a former employee of PLM International 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 (ESOP), the
ESOP's trustee, and certain individual employees, officers, and directors of the
Company. 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 defendants' allegedly engaging
in prohibited transactions and interfering 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, the Company and other defendants filed a motion to
dismiss the complaint for lack of subject matter jurisdiction, arguing the
plaintiff lacked standing under ERISA. The motion was granted and in May 1996,
the district court entered a judgment dismissing the complaint for lack of
subject matter jurisdiction. Plaintiff appealed to the U.S. Court of Appeals for
the Ninth Circuit seeking a reversal of the district court's dismissal of his
ERISA claims, and in an opinion filed in October 1997, the Ninth Circuit
reversed the decision of the district court and remanded the case to the
district court for further proceedings. The Company filed a petition for
rehearing, which was denied in November 1997. The Ninth Circuit mandate was
filed in the district court in December 1997.
In February 1998, plaintiff was permitted by the district court to file a second
amended complaint in order to bring the fourth, fifth, and sixth claims for
relief as a class action on behalf of himself and all similarly situated people.
These claims allege that the Company and the other defendants breached their
fiduciary duties and entered into prohibited transactions in connection with the
termination of the ESOP and by causing the ESOP to sell or exchange the
preferred shares held for the benefit of the ESOP participants for less than
their fair market value. Also in February 1998, the defendants filed a motion to
dismiss the fourth, fifth, and sixth claims relating to the termination of the
ESOP, and the seventh claim relating to defendants' alleged interference with
plaintiff's rights under ERISA, all for failure to state claims for relief. The
district court, in an order dated July 14, 1998, granted this motion and
dismissed the fourth through seventh claims for relief.
In June 1998, the defendants filed a motion for summary judgment seeking a
ruling that the first two claims for relief, which allege breaches arising out
of the purchase and sale of stock at the inception of the ESOP, are barred by
the applicable statute of limitations. In an order dated July 14, 1998, the
district court granted in part and denied in part this motion and ruled that
these claims for relief are barred by the statute of limitations to the extent
that they rely on a theory that the automatic conversion feature and other terms
and conditions of the purchase and sale of the preferred stock violated ERISA,
but are not so barred to the extent that they rely on a theory that the purchase
and sale of the preferred stock at the inception of the ESOP was for more than
adequate consideration.
On September 30, 1998, plaintiff filed a motion to certify as final, and enter
judgment on, the two July 14, 1998 orders. This motion was denied. Defendants
filed their answer to the second amended complaint on September 18, 1998,
denying the allegations contained in the first, second, and third claims for
relief. The parties reached an agreement to settle this matter on April 15,
1999, subject to preparation, review and execution by all parties of a
settlement agreement and release. Defendants continue to deny each of the claims
and contentions and admit no liability in connection with the settlement. The
matter will be dismissed with prejudice upon the execution of the release and
payment to plaintiff. The amount to be paid by the Company in settlement is not
expected to be material to the financial condition of the Company.
The Company and various of its affiliates are named as defendants in a lawsuit
filed as a purported class action on January 22, 1997 in the Circuit Court of
Mobile County, Mobile, Alabama, Case No. CV-97-251 (the Koch action).
Plaintiffs, who filed the complaint on their own and on behalf of all class
members similarly situated, are six individuals who invested in certain
California limited partnerships (the Partnerships) for which the Company's
wholly-owned subsidiary, PLM Financial Services, Inc. (FSI), acts as the general
partner, including PLM Equipment Growth Funds IV, V, and VI, and PLM Equipment
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
7. LEGAL MATTERS (CONTINUED)
Growth & Income Fund VII (Fund VII). The state court ex parte certified the
action as a class action (i.e., solely upon plaintiffs' request and without the
Company being given the opportunity to file an opposition). The complaint
asserts 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
against PLM Securities Corp. for breach of third party beneficiary contracts in
violation of the National Association of Securities Dealers rules of fair
practice. Plaintiffs allege that each defendant owed plaintiffs and the class
certain duties due to their status as fiduciaries, financial advisors, agents,
and control persons. Based on these duties, plaintiffs assert liability against
defendants 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.
In March 1997, the defendants removed the Koch action from the state court to
the United States District Court for the Southern District of Alabama, Southern
Division (Civil Action No. 97-0177-BH-C) based on the district court's diversity
jurisdiction, following which plaintiffs filed a motion to remand the action to
the state court. Removal of the action to federal court automatically nullified
the state court's ex parte certification of the class. In September 1997, the
district court denied plaintiffs' motion to remand the action to state court and
dismissed without prejudice the individual claims of the California plaintiff,
reasoning that he had been fraudulently joined as a plaintiff. In October 1997,
defendants filed a motion to compel arbitration of plaintiffs' claims, based on
an agreement to arbitrate contained in the limited partnership agreement of each
Partnership, and to stay further proceedings pending the outcome of such
arbitration. Notwithstanding plaintiffs' opposition, the district court granted
defendants' motion in December 1997.
Following various unsuccessful requests that the district court reverse, or
otherwise certify for appeal, its order denying plaintiffs' motion to remand the
case to state court and dismissing the California plaintiff's claims, plaintiffs
filed with the U.S. Court of Appeals for the Eleventh Circuit a petition for a
writ of mandamus seeking to reverse the district court's order. The Eleventh
Circuit denied plaintiffs' petition in November 1997, and further denied
plaintiffs subsequent motion in the Eleventh Circuit for a rehearing on this
issue. Plaintiffs also appealed the district court's order granting defendants'
motion to compel arbitration, but in June 1998 voluntarily dismissed their
appeal pending settlement of the Koch action, as discussed below.
On June 5, 1997, the Company and the affiliates who are also defendants in the
Koch action were named as defendants in another purported class action filed in
the San Francisco Superior Court, San Francisco, California, Case No. 987062
(the Romei action). The plaintiff is an investor in PLM Equipment Growth Fund V,
and filed the complaint on her own behalf and on behalf of all class members
similarly situated who invested in certain California limited partnerships for
which FSI acts as the general partner, including the Partnerships. The complaint
alleges the same facts and the same nine causes of action as in the Koch action,
plus five additional causes of action against all of the defendants, as follows:
violations of California Business and Professions Code Sections 17200, et seq.
for alleged unfair and deceptive practices, constructive fraud, unjust
enrichment, violations of California Corporations Code Section 1507, and a claim
for treble damages under California Civil Code Section 3345.
On July 31, 1997, defendants filed with the district court for the Northern
District of California (Case No. C-97-2847 WHO) a petition (the petition) under
the Federal Arbitration Act seeking to compel arbitration of plaintiff's claims
and for an order staying the state court proceedings pending the outcome of the
arbitration. In connection with this motion, plaintiff agreed to a stay of the
state court action pending the district court's decision on the petition to
compel arbitration. In October 1997, the district court denied the Company's
petition to compel arbitration, but in November 1997, agreed to hear the
Company's motion for reconsideration of this order. The hearing on this motion
has been taken off calendar and the district court has dismissed the petition
pending settlement of the Romei action, as discussed below. The state court
action continues to be stayed pending such resolution. In connection with her
opposition
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
7. LEGAL MATTERS (CONTINUED)
to the petition to compel arbitration, plaintiff filed an amended complaint with
the state court in August 1997, alleging two new causes of action for violations
of the California Securities Law of 1968 (California Corporations Code Sections
25400 and 25500) and for violation of California Civil Code Sections 1709 and
1710. Plaintiff also served certain discovery requests on defendants. Because of
the stay, no response to the amended complaint or to the discovery is currently
required.
In May 1998, all parties to the Koch and Romei actions entered into a memorandum
of understanding (MOU) related to the settlement of those actions (the monetary
settlement). The monetary settlement contemplated by the MOU provides for
stipulating to a class for settlement purposes, and a settlement and release of
all claims against defendants and third party brokers in exchange for payment
for the benefit of the class of up to $6.0 million. The final settlement amount
will depend on the number of claims filed by authorized claimants who are
members of the class, the amount of the administrative costs incurred in
connection with the settlement, and the amount of attorneys' fees awarded by the
Alabama district court. The Company will pay up to $0.3 million of the monetary
settlement, with the remainder being funded by an insurance policy.
The parties to the monetary settlement have also agreed to an equitable
settlement (the equitable settlement) which provides, among other things: (a)
for the extension of the operating lives of Funds V, VI, and VII by judicial
amendment to each of their partnership agreements, such that FSI, the general
partner of each such partnership, will be permitted to reinvest cash flow,
surplus partnership funds or retained proceeds in additional equipment into the
year 2004, and will liquidate the partnerships' equipment in 2006; (b) that FSI
is entitled to earn front-end fees (including acquisition and lease negotiation
fees) in excess of the compensatory limitations set forth in the NASAA Statement
of Policy by judicial amendment to the partnership agreements for Funds V, VI,
and VII; (c) for a one-time redemption of up to 10% of the outstanding units of
Funds V, VI, and VII at 80% of such partnership's net asset value; and (d) for
the deferral of a portion of FSI's management fees. The equitable settlement
also provides for payment of the equitable class attorneys' fees from
partnership funds in the event that distributions paid to investors in Funds V,
VI, and VII during the extension period reach a certain internal rate of return.
Defendants will continue to deny each of the claims and contentions and admit no
liability in connection with the proposed settlements. The parties completed the
documentation of the monetary and equitable settlements in April 1999. The
monetary settlement remains subject to numerous conditions, including but not
limited to, notice to and certification of the monetary class for purposes of
the monetary settlement, and preliminary and final approval of the monetary
settlement by the Alabama district court. The equitable settlement remains
subject to numerous conditions, including but not limited to: (a) notice to the
current unitholders in Funds V, VI, and VII (the equitable class) and
certification of the equitable class for purposes of the equitable settlement,
(b) preparation, review by the Securities and Exchange Commission (SEC), and
dissemination to the members of the equitable class of solicitation statements
regarding the proposed extensions, (c) disapproval by less than 50% of the
limited partners in Funds V, VI, and VII of the proposed amendments to the
limited partnership agreements, (d) judicial approval of the proposed amendments
to the limited partnership agreements, and (e) preliminary and final approval of
the equitable settlement by the Alabama district court. If the district court
grants preliminary approval, notices to the monetary class and equitable class
will be sent following review by the SEC of the solicitation statements to be
prepared in connection with the equitable settlement. The monetary settlement,
if approved, will go forward regardless of whether the equitable settlement is
approved or not. The Company continues to believe that the allegations of the
Koch and Romei actions are completely without merit and intends to continue to
defend this matter vigorously if the monetary settlement is not consummated.
The Company is involved as plaintiff or defendant in various other legal actions
incident to its business. Management does not believe that any of these actions
will be material to the financial condition of the Company.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
8. PURCHASE COMMITMENTS
As of March 31, 1999, the Company had committed to purchase $37.3 million of
equipment for its commercial and industrial lease and finance receivable
portfolio.
From April 1, 1999 to May 4, 1999, the Company funded $18.7 million of the
commitments outstanding as of March 31, 1999 for its commercial and industrial
lease and finance receivable portfolio.
As of May 4, 1999, the Company had committed to purchase $23.9 million of
equipment for its commercial and industrial lease and finance receivable
portfolio.
9. OPERATING SEGMENTS
The Company operates in three operating segments: trailer leasing, commercial
and industrial equipment leasing and financing, and the management of investment
programs and other transportation equipment leasing. The trailer equipment
leasing segment includes 19 trailer rental facilities that engage in short to
mid-term operating leases of refrigerated and dry van trailers to a variety of
customers, and management of trailers for the investment programs. The
commercial and industrial equipment leasing and financing segment originates
finance and operating leases and loans on commercial and industrial equipment
that is financed through a securitization facility, brokers equipment, and
manages institutional programs. The management of investment programs and other
transportation equipment leasing segment manages its syndicated investment
programs, from which it earns fees and equity interests, and arranges short-term
to mid-term operating leases of other transportation equipment.
The Company evaluates the performance of each segment based on profit or loss
from operations before allocating general and administrative expenses and before
allocating income taxes. The segments are managed separately because each
operation requires different business strategies.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
9. OPERATING SEGMENTS (CONTINUED)
The following tables present a summary of the operating segments (in thousands
of dollars):
<TABLE>
<CAPTION>
Commercial Management
and of Investment
Industrial Programs
Equipment and Other
Leasing Transportation
Trailer and Equipment
For the quarter ended March 31, 1999 Leasing Financing Leasing Other<F1> Total
- -------------------------------------
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Lease income $3,691 $ 5,323 $ 235 $ $ 9,249
--
Fees earned 205 215 2,699 -- 3,119
Gain (loss) on sale or disposition of
assets, net (9) 322 -- -- 313
Other -- 562 364 -- 926
-------------------------------------------------------------------------
Total revenues 3,887 6,422 3,298 -- 13,607
-------------------------------------------------------------------------
COSTS AND EXPENSES
Operations support 1,899 1,080 494 358 3,831
Depreciation and amortization 1,459 1,830 110 -- 3,399
General and administrative expenses -- -- -- 1,484 1,484
-------------------------------------------------------------------------
Total costs and expenses 3,358 2,910 604 1,842 8,714
-------------------------------------------------------------------------
Operating income (loss) 529 3,512 2,694 (1,842) 4,893
Interest expense, net (554) (2,442) (446) -- (3,442)
Other expenses, net -- (948) -- -- (948)
-------------------------------------------------------------------------
Income (loss) before income taxes $ (25) $ 122 $2,248 $(1,842) $ 503
=========================================================================
Cumulative effect of accounting change,
net of tax of $165 $ -- $ 236 $ -- $ -- $ 236
=========================================================================
Total assets as of March 31, 1999 $57,316 $193,668 $36,271 $ 9,069 $296,324
=========================================================================
<FN>
<F1> Includes costs not identifiable to a particular segment such as general and
administrative and certain operations support expenses.
</FN>
</TABLE>
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
9. OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
Commercial Management
and of Investment
Industrial Programs
Equipment and Other
Leasing Transportation
Trailer and Equipment
For the quarter ended March 31, 1998 Leasing Financing Leasing Other<F2> Total
- -------------------------------------
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Lease income $1,578 $ 4,240 $ 726 $ -- $6,544
Fees earned 262 220 3,433 -- 3,915
Gain on sale or disposition of assets, net 76 519 167 -- 762
Other 3 151 1,169 -- 1,323
-------------------------------------------------------------------------
Total revenues 1,919 5,130 5,495 -- 12,544
-------------------------------------------------------------------------
COSTS AND EXPENSES
Operations support 854 963 1,595 398 3,810
Depreciation and amortization 677 1,296 577 -- 2,550
General and administrative expenses -- -- -- 1,913 1,913
-------------------------------------------------------------------------
Total costs and expenses 1,531 2,259 2,172 2,311 8,273
-------------------------------------------------------------------------
Operating income (loss) 388 2,871 3,323 (2,311) 4,271
Interest expense, net (214) (2,027) (434) -- (2,675)
Other expenses, net -- -- (6) -- (6)
-------------------------------------------------------------------------
Income (loss) before income taxes $ 174 $ 844 $ 2,883 $(2,311) $ 1,590
=========================================================================
Total assets as of March 31, 1998 $38,252 $176,794 $ 39,023 $ 7,047 $261,116
=========================================================================
<FN>
<F2> Includes costs not identifiable to a particular segment such as general and
administrative and certain operations support expenses.
</FN>
</TABLE>
10. CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"
which requires costs related to start-up activities to be expensed as incurred.
The statement requires that initial application be reported as a cumulative
effect of a change in accounting principle. The Company adopted this statement
during the first quarter of 1999, at which time it took a $0.2 million charge,
net of tax of $0.2 million, related to start-up costs of one of its
subsidiaries.
11. STOCK OFFERING
During 1998, AFG filed a registration statement with the U.S. Securities and
Exchange Commission for the purpose of undertaking an initial public offering of
common stock. During the first quarter of 1999, the Company's Board of Directors
determined that it was in the Company's best interest to sell AFG rather than
proceed with a stock offering. As a result of this decision, the Company wrote
off $0.9 million of costs related to the proposed initial public offering during
the first quarter of 1999, which is included in other expenses, net, on the
consolidated statements of income. The Company has engaged an investment banking
firm to pursue the sale of AFG.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
12. SUBSEQUENT EVENTS
In April 1999, the Company entered into a $5.0 million debt agreement bearing
interest at 6.20%, with payments of $0.1 million due monthly beginning April
1999 with a final payment of $1.3 million due April 2006, secured by certain
trailer equipment. In return for favorable financing terms, this agreement gives
beneficial tax treatment in these secured trailers to the lenders.
On April 28, 1999, the Company amended the Directors' 1995 Nonqualified Stock
Option Plan and the 1998 Management Stock Compensation Plan (1998 Plan) to limit
the amount of common shares that can be purchased in any one calendar year,
pursuant to the exercise of options under the two plans, to no more than 5% of
the Company's outstanding shares on May 12, 1998 (416,880), and to provide that
any excess options sought to be exercised will be purchased by the Company for
the difference between the exercise price of the option and the trading price of
the stock. The 1998 Plan was further amended to reduce the number of shares
reserved for awards under the 1998 Plan from 800,000 to 700,000.
<PAGE>
ITEM 2. MANAGEMENT'S DICUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
TRAILER LEASING
The Company operates 19 trailer rental facilities that engage in short and
mid-term operating leases. Equipment operated in these facilities consists of
refrigerated trailers used to transport temperature-sensitive food products and
dry van (nonrefrigerated) trailers leased to a variety of customers. The Company
opened 3 of these rental yards in 1999 and intends to open additional rental
yard facilities in the future. The Company is selling certain of its older
trailers and is replacing them with new or late-model refrigerated trailers. The
new trailers will be placed in existing rental facilities or in new yards.
COMMERCIAL AND INDUSTRIAL EQUIPMENT LEASING AND FINANCING
The Company funds and manages long-term direct finance leases, operating leases,
and loans through its American Finance Group, Inc. (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 point-of-sale,
materials handling, computer and peripheral, manufacturing, general purpose
plant and warehouse, communications, medical, and construction and mining
equipment. Through AFG, the Company is also engaged in the management of
institutional programs for which it originates leases and receives acquisition
and management fees. The Company also earns syndication fees for arranging
purchases and sales of equipment between other unaffiliated third parties.
During 1998, AFG filed a registration statement with the U.S. Securities and
Exchange Commission (SEC) for the purpose of undertaking an initial public
offering of common stock. During the first quarter of 1999, the Company's Board
of Director's determined that it was in the Company's best interest to sell AFG
rather than proceed with a stock offering. The Company has engaged an investment
banking firm to pursue the sale of AFG.
MANAGEMENT OF INVESTMENT PROGRAMS
The Company has syndicated investment programs from which it earns various fees
and equity interests. Professional Lease Management Income Fund I, LLC (Fund I)
was structured as a limited liability company with a no front-end fee structure.
The previously syndicated limited partnership programs allow the Company to
receive fees for the acquisition and initial leasing of the equipment. The Fund
I program does not provide for acquisition and lease negotiation fees. The
Company invested the equity raised through syndication for these programs in
transportation equipment and related assets, which it then manages 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 a program.
The limited partnership agreements generally entitle the Company to receive a 1%
or 5% interest in the cash distributions and earnings of a 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. The Company's interest in the earnings and
distributions of Fund I will increase to 25% after the investors have received
distributions equal to their original invested capital.
In 1996, the Company announced the suspension of public syndication of
equipment leasing programs with the 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 for these programs becomes permanently reduced.
<PAGE>
COMPARISON OF THE COMPANY'S OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH
31, 1999 AND 1998
The following analysis reviews the operating results of the Company:
REVENUES
- --------
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operating lease income $ 6,097 $ 3,892
Finance lease income 3,152 2,652
Management fees 2,368 2,564
Partnership interests and other fees 290 324
Acquisition and lease negotiation fees 461 1,027
Gain on the sale or disposition of assets, net 313 762
Aircraft brokerage and services -- 524
Other 926 799
-----------------------------------------
Total revenues $ 13,607 $ 12,544
</TABLE>
The fluctuations in revenues for the three months ended March 31, 1999, compared
to the same quarter in 1998, are summarized and explained below.
OPERATING LEASE INCOME BY EQUIPMENT TYPE:
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Refrigerated and dry van over-the-road trailers $ 3,691 $ 1,578
Commercial and industrial equipment 2,225 1,613
Marine containers 179 --
Intermodal trailers -- 589
Other 2 112
-----------------------------------------
Total operating lease income $ 6,097 $ 3,892
</TABLE>
Operating lease income includes revenues generated from assets held for
operating leases and assets held for sale that are on lease. Operating lease
income increased $2.2 million during the first quarter of 1999, compared to the
same quarter of 1998, due to the following:
(a) A $2.1 million increase in operating lease income was generated from
refrigerated and dry van trailer equipment, due to an increase in the
amount of these types of equipment owned and on operating lease. For the
quarter ended March 31, 1999, the average investment in refrigerated and
dry van trailer equipment was $66.7 million, compared to $43.4 million for
the first quarter of 1998.
(b) A $0.6 million increase in operating lease income was generated from
commercial and industrial equipment, due to an increase in the amount of
these types of equipment owned and on operating lease.
(c) A $0.2 million increase in operating lease income was generated from marine
containers. During the first quarter of 1999, the Company purchased $13.8
million in marine containers and sold $7.0 million in marine containers to
an affiliated program at cost, which approximated their fair market value.
The Company earned operating lease income on these marine containers during
the first quarter of 1999. There were no marine containers owned by the
Company during the first quarter of 1998.
<PAGE>
These increases in operating lease income were partially offset by the
following:
(a) A $0.6 million decrease in operating lease income from intermodal trailers
due to the sale of all of the Company's intermodal trailers during August
1998.
(b) A $0.1 million decrease in other operating lease income was due to the
Company's strategic decision to dispose of certain transportation assets
and exit certain equipment markets.
FINANCE LEASE INCOME:
The Company earns finance lease income for certain leases originated by its AFG
subsidiary that are either retained for long-term investment or sold to third
parties. Finance lease income increased $0.5 million in the first quarter of
1999, compared to the same quarter in 1998, due to an increase in commercial and
industrial assets that were on finance lease. For the quarter ended March 31,
1999, the average investment in direct finance leases was $140.4 million,
compared to $120.5 million for the first quarter of 1998.
MANAGEMENT FEES:
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. Management fees were $2.4 million and
$2.6 million for the quarters ended March 31, 1999 and 1998, respectively. The
decrease in management fees resulted from a net decrease in managed equipment
from the PLM Equipment Growth Fund (EGF) programs. With the termination of
syndication activities in 1996, management fees from the older programs are
decreasing and are expected to continue to decrease as the programs liquidate
their equipment portfolios.
The Company also earns management fees from the institutional programs
managed by the Company's AFG subsidiary. During both the quarters ended March
31, 1999 and 1998, management fees for the institutional programs were $0.2
million. The Company does not expect to sell assets in the future to the
institutional programs. It will, however, continue to manage the existing
portfolios for these programs. As a result, management fees from the
institutional programs are expected to decrease in the future as equipment is
sold from the existing portfolios and not replaced.
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 $0.4 million and $0.5 million for the quarters ended
March 31, 1999 and 1998, respectively. In addition, a decrease of $0.1 million
and $0.2 million in the Company's residual interests in the programs was
recorded during the quarters ended March 31, 1999 and 1998, respectively. The
decrease in net earnings and distribution levels and residual interests in 1999,
compared to 1998, resulted mainly from the disposition of equipment in certain
of the EGF programs. Residual income is based on the general partner's share of
the present value of the estimated disposition proceeds of the equipment
portfolios of the affiliated partnerships when the equipment is purchased. Net
decreases in the recorded residual values result when partnership assets are
sold and the proceeds are less than the original investment in the sold
equipment.
ACQUISITION AND LEASE NEGOTIATION FEES:
During the quarter ended March 31, 1999, the Company, on behalf of the EGF
programs, purchased transportation and other equipment for $7.2 million,
compared to the Company purchasing $15.6 million of transportation and other
equipment during the quarter ended March 31, 1998, resulting in a $0.4 million
decrease in acquisition and lease negotiation fees.
Also during the quarter ended March 31, 1999, there was no equipment purchased
by AFG for the institutional investment programs, compared to $6.0 million for
the same quarter in 1998, resulting in a $0.2 million decrease in acquisition
and lease negotiation fees. The Company does not expect to sell assets in the
future to the institutional programs. It will, however, continue to manage the
existing portfolios for these programs. Because of the Company's decision to
halt syndication of equipment
<PAGE>
leasing programs with the close of Fund I in 1996, because Fund I has a no
front-end fee structure, and because the Company does not expect to sell assets
in the future to the institutional programs, acquisition and lease negotiation
fees will be substantially reduced in the future.
GAIN ON THE SALE OR DISPOSITION OF ASSETS, NET:
During the quarter ended March 31, 1999, the Company recorded $0.3
million in gain on the sale or disposition of commercial and industrial
equipment. During the quarter ended March 31, 1998, the Company recorded $0.8
million in gain on the sale or disposition of assets. Of this gain, $0.1 million
resulted from the sale or disposition of trailers and $0.2 million related to
the sale of commercial and industrial equipment. Also during the first quarter
of 1998, the Company purchased and subsequently sold railcars to an unaffiliated
third party for a net gain of $0.5 million.
AIRCRAFT BROKERAGE AND SERVICES:
Aircraft brokerage and services revenue decreased $0.5 million during the
quarter ended March 31, 1999, compared to the same quarter of 1998, due to the
sale of the Company's aircraft leasing and spare parts brokerage subsidiary in
August 1998.
COSTS AND EXPENSES
- ------------------
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operations support $ 3,831 $ 3,810
Depreciation and amortization 3,399 2,550
General and administrative 1,484 1,913
-----------------------------------------
Total costs and expenses $ 8,714 $ 8,273
</TABLE>
OPERATIONS SUPPORT:
Operations support expense, including salary and office-related expenses for
operational activities, equipment insurance, repair and maintenance costs,
equipment remarketing costs, costs of goods sold, and provision for doubtful
accounts, was $3.8 million for both the quarters ended March 31, 1999 and 1998.
Operations support expense related to the trailer leasing segment increased $1.0
million due to the expansion of PLM Rental, with the addition of nine rental
yards and new trailers to existing yards. Operations support expense related to
the commercial and industrial equipment leasing and financing segment increased
$0.1 million due to an increase in compensation and benefits expenses related to
the expansion of the commercial and industrial equipment lease portfolio. These
increases were offset by a $1.1 million decrease in operations support expenses
related to the management of investment programs and other transportation
equipment leasing segment mainly related to the sale of the Company's aircraft
leasing and spare parts brokerage subsidiary in August 1998, and the sale of
other transportation equipment including intermodal trailers (discussed in the
operating lease income section).
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization expenses increased $0.8 million (33%) for
the quarter ended March 31, 1999, compared to the quarter ended March 31, 1998.
The increase resulted from an increase in commercial and industrial equipment
and refrigerated trailer equipment on operating lease, which was partially
offset by the reduction in depreciable intermodal trailers and other equipment
(discussed in the operating lease income section).
<PAGE>
GENERAL AND ADMINISTRATIVE:
General and administrative expenses decreased $0.4 million (22%) during the
quarter ended March 31, 1999, compared to the same quarter in 1998, primarily
due to a $0.2 million decrease in rent and office related expenses, and a $0.2
million decrease in compensation and benefits expenses, net of allocations to
the managed programs.
OTHER INCOME AND EXPENSES
- -------------------------
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Interest expense $ (3,685 ) $ (3,070 )
Interest income 243 395
Other expenses, net (948 ) (6 )
</TABLE>
INTEREST EXPENSE:
Interest expense increased $0.6 million (20%) during the quarter ended
March 31, 1999, compared to the same quarter in 1998, due to an increase in
borrowings of nonrecourse securitized debt for AFG, an increase in borrowings on
the short-term warehouse facilities, and an increase in borrowings of other
secured debt to fund trailer purchases. The increase in interest expense caused
by these increased borrowings was partially offset by lower interest expense
resulting from reductions in the amounts outstanding under the senior secured
debt agreements.
INTEREST INCOME:
Interest income decreased $0.2 million (38%) during the quarter ended
March 31, 1999, compared to the same quarter of 1998, as a result of lower
average cash balances during the quarter ended March 31, 1999, compared to the
same quarter of 1998.
OTHER EXPENSES, NET:
Other expenses of $0.9 million for the quarter ended March 31, 1999 represent
the write off of costs related to the proposed initial public offering of the
Company's AFG subsidiary. During the first quarter of 1999, the Company's Board
of Directors determined that it was in the Company's best interest to sell AFG
rather than proceed with a stock offering, and therefore, wrote-off all
associated offering costs.
PROVISION FOR INCOME TAXES:
For the three months ended March 31, 1999, the provision for income taxes was
$0.2 million, representing an effective rate of 41%. For the three months ended
March 31, 1998, the provision for income taxes was $0.6 million, representing an
effective rate of 38%.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX:
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"
which requires costs related to start-up activities to be expensed as incurred.
The statement requires that initial application be reported as a cumulative
effect of a change in accounting principle. The Company adopted this statement
during the first quarter of 1999, at which time it took a $0.2 million charge,
net of tax of $0.2 million, related to start-up costs of one of its
subsidiaries.
<PAGE>
NET INCOME
- ----------
As a result of the foregoing, for the three months ended March 31, 1999, net
income was $0.1 million, resulting in basic and diluted earnings per
weighted-average common share outstanding of $0.01. For the same quarter in
1998, net income was $1.0 million, resulting in basic and diluted earnings per
weighted-average common share outstanding of $0.12 and $0.11, respectively.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash requirements have historically been satisfied through cash flow from
operations, borrowings, and the sale of equipment.
Liquidity in 1999 and beyond will depend, in part, on the continued remarketing
of the equipment portfolio at similar lease rates, the management of existing
sponsored programs, the effectiveness of cost control programs, the purchase and
sale of equipment, the volume of commercial and industrial and trailer equipment
leasing transactions, additional borrowings, and the potential proceeds from the
sale of AFG. Management believes the Company can accomplish the preceding and
that it will have sufficient liquidity and capital resources for the next twelve
months. Future liquidity is influenced by the factors summarized below.
DEBT FINANCING:
NONRECOURSE SECURITIZED DEBT: The Company has available a nonrecourse debt
facility for up to $150.0 million, secured by direct finance leases, operating
leases, and loans on commercial and industrial equipment at AFG that generally
have terms of one to seven years. The facility is available for a one-year
period expiring October 12, 1999. Repayment of the facility matches the terms of
the underlying leases. The Company believes that it will be able to renew this
facility on substantially the same terms upon its expiration and increase its
borrowing capacity as needed. As of March 31, 1999, $105.3 million in borrowings
was outstanding under this facility. As of May 4, 1999, $115.1 million in
borrowings was outstanding under this facility.
In addition to the $150.0 million nonrecourse debt facility discussed above,
as of March 31, 1999 and May 4, 1999, the Company also had $6.8 million and $6.6
million, respectively, in nonrecourse notes payable secured by direct finance
leases on commercial and industrial equipment at AFG that have terms
corresponding to the note repayment schedule that began April 1998 and ends
March 2001. The notes bear interest from 8.32% to 9.5% per annum.
FSI WAREHOUSE CREDIT FACILITY: Assets acquired and held on an interim basis by
FSI for sale to affiliated programs or third parties have, from time to time,
been partially funded by this warehouse credit facility. This facility is also
used to temporarily finance the purchase of trailers prior to permanent
financing being obtained. This facility expires on December 14, 1999. The
Company believes it will be able to renew this facility on substantially the
same terms upon its expiration.
This facility is shared with EGF VI, PLM Equipment Growth & Income Fund VII (EGF
VII), and Fund I. Borrowings under this facility by the other eligible borrowers
reduce the amount available to be borrowed by the Company. All borrowings under
this facility are guaranteed by the Company. This facility provides 80%
financing for transportation assets purchased by the Company. The Company can
hold assets under this facility for up to 150 days. Interest accrues at prime or
LIBOR plus 162.5 basis points, at the option of the Company. 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 March 31,
1999, the Company and EGF VI had $11.3 million and $3.7 million of outstanding
borrowings under this facility, respectively. As of May 4, 1999, the Company and
EGF VI had $14.8 million and $3.7 million in borrowings outstanding under this
facility, respectively.
<PAGE>
AFG WAREHOUSE CREDIT FACILITY: Assets acquired and held on an interim basis by
AFG for placement in the Company's securitization facility or for sale to
unaffiliated third parties have, from time to time, been partially funded by a
$60.0 million warehouse credit facility. The facility expires December 14, 1999;
however, the Company believes it will be able to renew this facility on
substantially the same terms upon its expiration.
This facility provides for financing of 100% of the present value of the lease
stream of commercial and industrial equipment for up to 90% of original
equipment cost of the assets held on this facility.
Borrowings secured by investment-grade lessees can be held under this facility
until the facility's expiration. Borrowings secured by noninvestment-grade
lessees may by outstanding for 120 days. Interest accrues at prime or LIBOR plus
137.5 basis points, at the option of the Company. 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 March 31, 1999,
the Company had $34.5 million outstanding under this facility. As of May 4,
1999, the Company had $30.9 million in borrowings outstanding under this
facility.
SENIOR SECURED NOTES: The Company's senior secured notes agreement, which had an
outstanding balance of $26.3 million as of March 31, 1999 and May 4, 1999, bears
interest at LIBOR plus 240 basis points. The Company has pledged substantially
all of its future management fees, acquisition and lease negotiation fees, data
processing fees, and partnership distributions as collateral to the facility.
The facility required quarterly interest-only payments through August 15, 1997,
with principal plus interest payments beginning November 15, 1997. Principal
payments of $1.9 million are payable quarterly through termination of the loan
on August 15, 2002.
SENIOR SECURED LOAN: The Company's senior loan with a syndicate of insurance
companies, which had an outstanding balance of $13.2 million as of March 31,
1999 and May 4, 1999, provides that equipment sale proceeds from pledged
equipment or cash deposits be placed into a collateral account or used to
purchase additional equipment to the extent required to meet certain debt
covenants. Pledged equipment for this loan consists of the storage equipment and
virtually all trailer equipment purchased prior to August 1998. As of March 31,
1999, the cash collateral balance for this loan was $0.1 million and is included
in restricted cash and cash equivalents on the Company's balance sheet. The
facility bears interest at 9.78% and required quarterly interest payments
through June 30, 1997, with quarterly principal payments of $1.5 million plus
interest charges beginning June 30, 1997 and continuing until termination of the
loan in June 2001.
OTHER SECURED DEBT: As of March 31, 1999, the Company had $12.8 million in other
secured debt, bearing interest from 5.35% to 5.55%, with payments of $0.2
million due monthly in advance, beginning December 1998 with a final payment of
$3.3 million due November 2005. The debt is secured by certain trailer
equipment.
In April 1999, the Company entered into a $5.0 million secured debt agreement
bearing interest at 6.20%, with payments of $0.1 million due monthly beginning
April 1999 with a final payment of $1.3 million due April 2006, secured by
certain trailer equipment. The Company intends to use this type of debt to
finance the purchase of new trailers in the future as this financing provides
for favorable financing terms in exchange for beneficial tax treatment in these
secured trailers to the lenders.
INTEREST-RATE SWAP CONTRACTS: The Company has entered into interest-rate swap
agreements in order to manage the interest-rate exposure associated with its
nonrecourse securitized debt. As of March 31, 1999, the swap agreements had a
weighted-average duration of 1.15 years, corresponding to the terms of the
related debt. As of March 31, 1999, a notional amount of $98.1 million of
interest-rate swap agreements effectively fixed interest rates at an average of
6.58% on such obligations. For the three months ended March 31, 1999, interest
expense increased by $0.3 million due to these arrangements.
<PAGE>
TRAILER LEASING:
The Company operates 19 trailer rental facilities that engage in short and
mid-term operating leases. Equipment operated in these facilities consists of
refrigerated trailers used to transport temperature-sensitive food products and
dry van trailers leased to a variety of customers. The Company opened 3 of these
rental yards in 1999 and intends to open additional rental yard facilities in
the future. The Company is selling certain of its older trailers and is
replacing them with new or late-model refrigerated trailers. The new trailers
will be placed in existing rental facilities or in new yards. During the three
months ended March 31, 1999, the Company purchased $8.1 million of primarily
refrigerated trailers and sold refrigerated and dry van trailers with a net book
value of $0.1 million for proceeds of $0.1 million.
During 1999, the Company generated proceeds of $0.1 million from the sale of
trailers. The net proceeds from the sale of assets that were collateralized as
part of the senior loan facility were placed in a collateral account.
COMMERCIAL AND INDUSTRIAL EQUIPMENT LEASING AND FINANCING:
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 nonrecourse
securitization facility. AFG also originates loans in which it takes a security
interest in the assets financed. During the three months ended March 31, 1999,
the Company funded lease and loan transactions for commercial and industrial
equipment with an original equipment cost of $16.7 million. During the three
months ended March 31, 1999, the Company sold commercial and industrial
equipment with a net book value of $5.5 million for proceeds of $5.8 million.
The majority of these transactions was financed, on an interim basis, through
the Company's warehouse credit facility.
Some equipment subject to leases is sold to institutional programs for which the
Company is the servicer. Acquisition and management fees are received for the
sale and subsequent servicing of these leases. The Company does not believe it
will be selling assets in the future to the institutional programs. It will,
however, continue to manage the existing portfolios for these programs.
As of March 31, 1999, the Company had committed to purchase $37.3 million of
equipment for its commercial and industrial lease and finance receivables
portfolio, to be held by the Company or sold to third parties, of which $6.2
million had been received by lessees and accrued for as of March 31, 1999.
From April 1, 1999 through May 4, 1999, the Company funded $18.7 million of
commitments outstanding as of March 31, 1999 for its commercial and industrial
lease and finance receivables portfolio.
As of May 4, 1999, the Company had committed to purchase $23.9 million of
equipment for its commercial and industrial lease and finance receivables
portfolio.
During 1998, AFG filed a registration statement with the SEC for the purpose of
undertaking an initial public offering of common stock. During the first quarter
of 1999, the Company's Board of Director's determined that it was in the
Company's best interest to sell AFG rather than proceed with a stock offering.
The Company has engaged an investment banking firm to pursue the sale of AFG.
OTHER TRANSPORTATION EQUIPMENT LEASING AND OTHER:
During the first three months of 1999, the Company purchased marine containers
for $13.8 million, and sold marine containers for $7.0 million to an affiliated
program at cost, which approximated their fair market value.
STOCK REPURCHASE PROGRAM:
In December 1998, the Company announced that its Board of Directors had
authorized the repurchase of up to $5.0 million of the Company's common stock.
As of May 4, 1999, 237,710 shares had been repurchased under this plan for a
total of $1.4 million.
<PAGE>
Management believes that, through debt and equity financing, possible sales of
equipment, proceeds from the potential sale of AFG, and cash flows from
operations, the Company will have sufficient liquidity and capital resources to
meet its projected future operating needs over the next twelve months.
EFFECTS OF THE YEAR 2000:
It is possible that the Company's currently installed computer systems, software
products, and other business systems, or those of the Company's vendors, service
providers, and customers, working either alone or in conjunction with other
software or systems, may not accept input of, store, manipulate, and output
dates on or after January 1, 2000 without error or interruption, a possibility
commonly known as the "Year 2000" or "Y2K" problem.
The Company has established a special Year 2000 oversight committee to review
the impact of Year 2000 issues on its software products and other business
systems in order to determine whether such systems will retain functionality
after December 31, 1999. The Company (a) is currently integrating Year
2000-compliant programming code into its existing internally customized and
internally developed transaction processing software systems and (b) the
Company's accounting and asset management software systems have either already
been made Year 2000 compliant or Year 2000-compliant upgrades of such systems
are planned to be implemented by PLMI before the end of fiscal 1999. The Company
believes that its Year 2000 compliance program can be completed by the end of
1999. As of March 31, 1999, the Company has spent approximately $0.1 million to
become Year 2000-compliant. The Company expects to spend an additional $0.1
million in order to become Year 2000-compliant.
It is possible that certain of the Company's equipment lease portfolio may not
be Year 2000 compliant. The Company is currently contacting equipment
manufacturers of the Company's leased equipment portfolio to assure Year 2000
compliance or to develop remediation strategies. The Company does not expect
that non-Year 2000 compliance of its leased equipment portfolio will have an
adverse material impact on its financial statements.
Some risks associated with the Year 2000 problem are beyond the ability of the
Company to control, including the extent to which third parties can address the
Year 2000 problem. The Company is communicating with vendors, services
providers, and customers in order to assess the Year 2000 compliance readiness
of such parties and the extent to which the Company is vulnerable to any
third-party Year 2000 issues. There can be no assurance that the software
systems of such parties will be converted or made Year 2000 compliant in a
timely manner. Any failure by such other parties to make their respective
systems Year 2000 compliant could have a material adverse effect on the
business, financial position, and results of operations of the Company. The
Company will make an ongoing effort to recognize and evaluate potential exposure
relating to third-party Year 2000 noncompliance, and will develop a contingency
plan if the Company determines that third-party noncompliance would have a
material adverse effect on the Company's business, financial position or results
of operation.
The Company is currently developing a contingency plan to address the possible
failure of any systems due to the Year 2000 problems. The Company anticipates
these plans will be completed by September 30, 1999.
ACCOUNTING PRONOUNCEMENT:
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. This statement is effective for all
quarters of fiscal years beginning after June 15, 1999. As of March 31, 1999,
the Company is reviewing the effect this standard will have on the Company's
consolidated financial statements.
<PAGE>
FORWARD-LOOKING INFORMATION:
Except for historical information contained herein, the discussion in this Form
10-Q contains forward-looking statements that contain risks and uncertainties,
such as statements of the Company's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-Q should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q. The Company's actual results could differ materially from
those discussed here.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is that of interest rate risk. A
change in the U.S. prime interest rate, LIBOR rate, or lender's cost of funds
based on commercial paper market rates, would affect the rate at which the
Company could borrow funds under its various borrowing facilities. Increases in
interest rates to the Company, which may cause the Company to raise the implicit
rates charged to its customers, could in turn, result in a reduction in demand
for the Company's lease financing. The Company's warehouse credit facilities and
senior secured notes are variable rate debt. The Company estimates a one percent
increase or decrease in the Company's variable rate debt would result in an
increase or decrease, respectively, in interest expense of $0.3 million in 1999,
$0.2 million in 2000, $0.1 million in 2001, and $18,000 in 2002. The Company
estimates a two percent increase or decrease in the Company's variable rate debt
would result in an increase or decrease, respectively, in interest expense of
$0.7 million in 1999, $0.3 million in 2000, $0.2 million in 2001, and $35,000 in
2002.
The Company hedges borrowings under the nonrecourse securitization facility,
effectively fixing the rate of these borrowings. The Company is currently
required to hedge against the risk of interest rate increases for 90% of the
aggregate discounted lease balance of those leases and loans used as collateral
for its nonrecourse securitization facility, but the Company generally does not
enter into hedges for leases designated for syndication or for leases of
transportation equipment. Such hedging activities may limit the Company's
ability to participate in the benefits of any decrease in interest rates with
respect to the hedged portfolio of leases, but may also protect the Company from
increases in interest rates for the hedged portfolio. All of the Company's other
financial assets and liabilities are at fixed rates.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 7 to the consolidated financial statements.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
10.1 Master Lease Agreement among PLM International, Inc. and Wells Fargo
Equipment Finance, Inc., dated as of April 2, 1999.
10.2 Amendment to PLM International, Inc. Directors' 1995 Nonqualified Stock
Option Plan, dated April 28, 1999.
10.3 Amendment to PLM International, Inc. 1998 Management Stock Compensation
Plan, dated April 28, 1999.
10.4 Amended Form of Nonqualified Stock Option Agreement.
(B) Reports on Form 8-K
January 18, 1999 - Announcement regarding the election of Howard M. Lorber as a
Class III director of the Board of Directors of the Company.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM INTERNATIONAL, INC.
/s/ Richard K Brock
--------------------------
Richard K Brock
Vice President and
Corporate Controller
Date: May 4, 1999
[Wells Fargo logo - team of horses drawing pioneer carriage]
MASTER LEASE
Wells Fargo Equipment Finance, Inc.
Investors Building, Suite 300
733 Marquette Avenue
Minneapolis, MN 55479-2048
- ----------------------------------------------------------
Master Lease Number 46494 dated as April 02, 1999
Name and Address of Lessee:
PLM INTERNATIONAL, INC.
ONE MARKET STREETt
STEUART TOWER, SUITE #800
SAN FRANCISCO, CA 94105-1301
- ------------------------------------------------------------------------------
MASTER LEASE PROVISIONS
- ------------------------------------------------------------------------------
1. LEASE. Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to
lease from Lessor, the personal property described in a Supplement or
Supplements to this Master Lease from time to time signed by Lessor and
Lessee upon the terms and conditions set forth herein and in the related
Supplement (such property together with all replacements, repairs, and
additions incorporated therein or affixed thereto being referred to herein
as the "Equipment"). The lease of the items described in a particular
Supplement shall be considered a separate lease pursuant to the terms of
the Master Lease and the Supplement the same as if a single lease agreement
containing such terms had been executed covering such items.
2. TERM. The term of this lease with respect to each item of Equipment shall
begin on the date it is accepted by Lessee and shall continue for the
number of consecutive months from the rent commencement date shown in the
related Supplement (the "initial term") unless earlier terminated as
provided herein or unless extended automatically as provided below in this
paragraph. The rent commencement date is the 15th day of the month in which
all of the items of Equipment described in the related Supplement have been
delivered and accepted by Lessee if such delivery and acceptance is
completed on or before the 15th of such month, and the rent commencement
date is the last day of such month if such delivery and acceptance is
completed during the balance of such month. In the event Lessee executes
the related Supplement prior to delivery and acceptance of all items of
Equipment described therein, Lessee agrees that the rent commencement date
may be left blank when Lessee executes the related Supplement and hereby
authorizes Lessor to insert the rent commencement date based upon the date
appearing on the delivery and acceptance certificate signed by Lessee with
respect to the last item of Equipment to be delivered. AUTOMATIC EXTENSION.
Lessee or Lessor may terminate this lease at the expiration of the initial
term by giving the other at least 90 days prior written notice of
termination. If neither Lessee nor Lessor gives such notice, then the term
of this lease shall be extended automatically on the same rental and other
terms set forth herein (except that in any event rent during any extended
term shall be payable in the amounts and at the times provided in paragraph
3) for successive periods of one month until terminated by either Lessee or
Lessor giving the other at least 90 days prior written notice of
termination.
3. RENT. Lessee shall pay as basic rent for the initial term of this lease the
amount shown in the related Supplement as Total Basic Rent. The Total Basic
Rent shall be payable in installments each in the amount of the basic
rental payment set forth in the related Supplement plus sales and use tax
thereon. Lessee shall pay advance installments and any security deposit,
each as shown in the related Supplement, on the date it is executed by
Lessee. Subsequent installments shall be payable on the first day of each
rental payment period shown in the related Supplement beginning after the
first rental payment period; provided, however, that Lessor and Lessee may
agree to any other payment schedule, including irregular payments or
balloon payments, in which event they shall be set forth in the space
provided in the Supplement for additional provisions. If the actual cost of
the Equipment is more or less than the Total Cost as shown in the
Supplement, the amount of each installment of rent will be adjusted up or
down to provide the same yield to Lessor as would have been obtained if the
actual cost had been the same as the Total Cost. Adjustments of 10% or less
may be made by written notice from Lessor to Lessee. Adjustments of more
than 10% shall be made by execution of an amendment to the Supplement
reflecting the change in Total Cost and rent. During any extended term of
this lease, basic rent shall be payable monthly in advance on the first day
of each month during such extended term in the amount equal to the basic
rental payment set forth in the related Supplement if rent is payable
monthly during the initial term or in an amount equal to the monthly
equivalent of the basic rental payment set forth in the related Supplement
if rent is payable other than monthly during the initial term. In addition,
Lessee shall pay any applicable sales and use tax on rent payable during
any extended term. In addition to basic rent, which is payable only from
the rent commencement date as provided above, Lessee agrees to pay interim
rent with respect to each separate item of Equipment covered by a
particular Supplement from the date it is delivered and accepted to the
rent commencement date at a daily rate equal to the percentage of Lessor's
cost of such item specified in such Supplement. Interim rent accruing each
calendar month shall be payable by the 10th day of the following month and
in any event on the rent commencement date. Lessee agrees that if all of
the items of Equipment covered by such Supplement have not been delivered
and accepted thereunder before the date specified as the Cutoff Date in
such Supplement, Lessee shall purchase from Lessor the items of Equipment
then subject to the lease within five days after Lessor's request to do so
for a price equal to Lessor's cost of such items plus all accrued but
unpaid interim rent thereon. Lessee shall also pay any applicable sales and
use tax on such sale.
4. SECURITY DEPOSIT. Lessor may apply any security deposit toward any
obligation of Lessee under this lease, and shall return any unapplied
balance to Lessee without interest upon satisfaction of Lessee's
obligations hereunder.
5. WARRANTIES. Lessee agrees that it has selected each item of Equipment based
upon its own judgment and disclaims any reliance upon any statements or
representations made by Lessor. LESSOR MAKES NO WARRANTY WITH RESPECT TO
THE EQUIPMENT, EXPRESS OR IMPLIED, AND LESSOR SPECIFICALLY DISCLAIMS ANY
WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE AND ANY
LIABILITY FOR CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OF OR THE
INABILITY TO USE THE EQUIPMENT. Lessee agrees to make the rental and other
payments required hereunder without regard to the condition of the
Equipment and to look only to persons other than Lessor such as the
manufacturer, vendor or carrier thereof should any item of Equipment for
any reason be defective. So long as no Event of Default has occurred and is
continuing, Lessor agrees, to the extent they are assignable, to assign to
Lessee, without any recourse to Lessor, any warranty received by Lessor.
6. TITLE. Title to the Equipment shall at all times remain in Lessor, and
Lessee at its expense shall protect and defend the title of Lessor and keep
it free of all claims and liens other than the rights of Lessee hereunder
and claims and liens created by or arising through Lessor. The Equipment
shall remain personal property regardless of its attachment to realty, and
Lessee agrees to take such action at its expense as may be necessary to
prevent any third party from acquiring any interest in the Equipment as a
result of its attachment to realty.
7. LAWS AND TAXES. Lessee shall comply with all laws and regulations relating
to the Equipment and its use and shall promptly pay when due all sales,
use, property, excise and other taxes and all license and registration fees
now or hereafter imposed by any governmental body or agency upon the
Equipment or its use or the rentals hereunder. Upon request by Lessor,
Lessee shall prepare and file all tax returns relating to taxes for which
Lessee is responsible hereunder which Lessee is permitted to file under the
laws of the applicable taxing jurisdiction.
THIS AGREEMENT INCLUDES THE TERMS ON THE ATTACHED PAGE(S).
Lessor: Wells Fargo Equipment Finance, Inc. PLM International, Inc. Lessee
By /s/ Lisa K. Lenton By /s/ J. Michael Allgood
- ------------------------- ---------------------------
Title: Assistant Vice President Title: Vice President and
Chief Financial Officer
- ------------------------ ---------------------------
<PAGE>
8. INDEMNITY. Lessee hereby indemnifies Lessor against and agrees to save
Lessor harmless from any and all liability and expense arising out of the
ordering, ownership, use, condition, or operation of each item of Equipment
during the term of this lease, including liability for death or injury to
persons, damage to property, strict liability under the laws or judicial
decisions of any state or the United States, and legal expenses in
defending any claim brought to enforce any such liability or expense.
9. ASSIGNMENT. WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, LESSEE WILL NOT SELL,
ASSIGN, SUBLET, PLEDGE, OR OTHERWISE ENCUMBER OR PERMIT A LIEN ARISING
THROUGH LESSEE TO EXIST ON OR AGAINST ANY INTEREST IN THIS LEASE OR THE
EQUIPMENT, or remove the Equipment from its location referred to above.
Lessor may assign its interest in this lease and sell or grant a security
interest in all or any part of the Equipment without notice to or the
consent of Lessee. Lessee agrees not to assert against any assignee of
Lessor any claim or defense Lessee may have against Lessor.
10. INSPECTION. Lessor may inspect the Equipment at any time and from time to
time during regular business hours.
11. REPAIRS. Lessee will use the Equipment with due care and for the purpose
for which it is intended. Lessee will maintain the Equipment in good
repair, condition and working order and will furnish all parts and services
required therefor, all at its expense, ordinary wear and tear excepted.
Lessee shall, at its expense, make all modifications and improvements to
the Equipment required by law, and shall not make other modifications or
improvements to the Equipment without the prior written consent of Lessor.
All parts, modifications and improvements to the Equipment shall, when
installed or made, immediately become the property of Lessor and part of
the Equipment for all purposes.
12. LOSS OR DAMAGE. In the event any item of Equipment shall become lost,
stolen, destroyed, damaged beyond repair or rendered permanently unfit for
use for any reason, or in the event of condemnation or seizure of any item
of Equipment, Lessee shall promptly pay Lessor the sum of (a) the amount of
all rent and other amounts payable by Lessee hereunder with respect to such
item due but unpaid at the date of such payment plus (b) the amount of all
unpaid rent with respect to such item for the balance of the term of this
lease not yet due at the time of such payment discounted from the
respective dates installment payments would be due at the rate implicit in
the schedule of rental payments when applied to the cost of such item plus
(c) 10% of the cost of such item as shown in the related Supplement. Upon
payment of such amount to Lessor, such item shall become the property of
Lessee, Lessor will transfer to Lessee, without recourse or warranty, all
of Lessor's right, title and interest therein, the rent with respect to
such item shall terminate, and the basic rental payments on the remaining
items shall be reduced accordingly. Lessee shall pay any sales and use
taxes due on such transfer. Any insurance or condemnation proceeds received
shall be credited to Lessee's obligation under this paragraph and Lessor
shall be entitled to any surplus.
13. INSURANCE. Lessee shall obtain and maintain on or with respect to the
Equipment at its own expense (a) liability insurance insuring against
liability for bodily injury and property damage with a minimum limit of
$500,000 combined single limit and (b) physical damage insurance insuring
against loss or damage to the Equipment in an amount not less than the full
replacement value of the Equipment. Lessee shall furnish Lessor with a
certificate of insurance evidencing the issuance of a policy or policies to
Lessee in at least the minimum amounts required herein naming Lessor as an
additional insured thereunder for the liability coverage and as loss payee
for the property damage coverage. Each such policy shall be in such form
and with such insurers as may be satisfactory to Lessor, and shall contain
a clause requiring the insurer to give to Lessor at least 10 days prior
written notice of any alteration in the terms of such policy or the
cancellation thereof, and a clause specifying that no action or
misrepresentation by Lessee shall invalidate such policy. Lessor shall be
under no duty to ascertain the existence of or to examine any such policy
or to advise Lessee in the event any such policy shall not comply with the
requirements hereof.
14. RETURN OF THE EQUIPMENT. Upon the expiration or earlier termination of this
lease, Lessee will immediately deliver the Equipment to Lessor in the same
condition as when delivered to Lessee, ordinary wear and tear excepted, at
such location within the continental United States as Lessor shall
designate. Lessee shall pay all transportation and other expenses relating
to such delivery.
15. ADDITIONAL ACTION. Lessee will promptly execute and deliver to Lessor such
further documents and take such further action as Lessor may request in
order to carry out more effectively the intent and purpose of this lease,
including the execution and delivery of appropriate financing statements to
protect fully Lessor's interest hereunder in accordance with the Uniform
Commercial Code or other applicable law. Lessee will furnish, from time to
time on request, a copy of Lessee's latest annual balance sheet and income
statement.
16. LATE CHARGES. If any installment of interim rent or basic rent is not paid
when due, Lessor may impose a late charge of up to 5% of the amount of the
installment but in any event not more than permitted by applicable law.
Payments thereafter received shall be applied first to delinquent
installments and then to current installments.
/S/ JMA, LKL
- ----------------------
<PAGE>
17. DEFAULT. Each of the following events shall constitute an "Event of
Default" hereunder: (a) Lessee shall fail to pay when due any installment
of interim rent or basic rent; (b) Lessee shall fail to observe or perform
any other agreement to be observed or performed by Lessee hereunder and the
continuance thereof for 10 calendar days following written notice thereof
by Lessor to Lessee; (c) Lessee or any guarantor of this lease or any
partner of Lessee if Lessee is a partnership shall cease doing business as
a going concern or make an assignment for the benefit of creditors; (d)
Lessee or any guarantor of this lease or any partner of Lessee if Lessee is
a partnership shall voluntarily file, or have filed against it
involuntarily, a petition for liquidation, reorganization, adjustment of
debt, or similar relief under the federal Bankruptcy Code or any other
present or future federal or state bankruptcy or insolvency law, or a
trustee, receiver, or liquidator shall be appointed of it or of all or a
substantial part of its assets; (e) any individual Lessee, guarantor of
this lease, or partner of Lessee if Lessee is a partnership shall die; (f)
any financial or credit information submitted by or on behalf of Lessee
shall prove to have been false or materially misleading when made; (g) an
event of default shall occur under any other obligation Lessee owes to
Lessor; (h) any indebtedness Lessee may now or hereafter owe to Any
affiliate of Lessor shall be accelerated following a default thereunder or,
if any such indebtedness is payable on demand, payment thereof shall be
demanded; (i) if Lessee is a corporation, more than 50% of the shares of
voting stock of Lessee shall become owned by a shareholder or shareholders
who were not owners of voting stock of Lessee on the date this lease begins
or, if Lessee is a partnership, more than 50% of the partnership interests
in the Lessee shall become owned by a partner or partners who were not
partners of Lessee on the date this lease begins; and (j) Lessee shall
consolidate with or merge into, or sell or lease all or substantially all
of its assets to, any individual, corporation, or other entity.
18. REMEDIES. Lessor and Lessee agree that Lessor's damages suffered by reason
of an Event of Default are uncertain and not capable of exact measurement
at the time this lease is executed because the value of the Equipment at
the expiration of this lease is uncertain, and therefore they agree that
for purposes of this paragraph 18 "Lessor's Loss" as of any date shall be
the sum of the following: (1) the amount of all rent and other amounts
payable by Lessee hereunder due but unpaid as of such date plus (2) the
amount of all unpaid rent for the balance of the term of this lease not yet
due as of such date discounted from the respective dates installment
payments would be due at the rate of 5% per annum plus (3) 10% of the cost
of the Equipment subject to this lease as of such date. Upon the occurrence
of an Event of Default and at any time thereafter, Lessor may exercise any
one or more of the remedies listed below as Lessor in its sole discretion
may lawfully elect; provided, however, that upon the occurrence of an Event
of Default specified in paragraph 17(d), an amount equal to Lessor's Loss
as of the date of such occurrence shall automatically become and be
immediately due and payable without notice or demand of any kind.
a) Lessor may, by written notice to Lessee, terminate this lease and declare
an amount equal to Lessor's Loss as of the date of such notice to be
immediately due and payable, and the same shall thereupon be and become
immediately due and payable without further notice or demand, and all
rights of Lessee to use the Equipment shall terminate but Lessee shall be
and remain liable as provided in this paragraph 18. Lessee shall at its
expense promptly deliver the Equipment to Lessor at a location or locations
within the continental United States designated by Lessor. Lessor may also
enter upon the premises where the Equipment is located and take immediate
possession of and remove the same with or without instituting legal
proceedings.
b) Lessor may proceed by appropriate court action to enforce performance by
Lessee of the applicable covenants of this lease or to recover, for breach
of this lease, Lessor's Loss as of the date Lessor's Loss is declared due
and payable hereunder; provided, however, that upon recovery of Lessor's
Loss from Lessee in any such action without having to repossess and dispose
of the Equipment, Lessor shall transfer the Equipment to Lessee at its then
location upon payment of any additional amount due under clauses (d) and
(e) below.
c) In the event Lessor repossesses the Equipment, Lessor shall either retain
the Equipment in full satisfaction of Lessee's obligation hereunder or sell
or lease each item of Equipment in such manner and upon such terms as
Lessor may in its sole discretion determine. The proceeds of such sale or
lease shall be applied to reimburse Lessor for Lessor's Loss and any
additional amount due under clauses (d) and (e) below. Lessor shall be
entitled to any surplus and Lessee shall remain liable for any deficiency.
For purposes of this subparagraph, the proceeds of any lease of all or any
part of the Equipment by Lessor shall be the amount reasonably assigned by
Lessor as the cost of such Equipment in determining the rent under such
lease.
d) Lessor may recover interest on the unpaid balance of Lessor's Loss from the
date it becomes payable until fully paid at the rate of the lesser of 8%
per annum or the highest rate permitted by law.
e) Lessor may exercise any other right or remedy available to it by law or by
agreement, and may in any event recover legal fees and other expenses
incurred by reason of an Event of Default or the exercise of any remedy
hereunder, including expenses of repossession, repair, storage,
transportation, and disposition of the Equipment.
If any Supplement is deemed at any time to be a lease intended as security,
Lessee grants Lessor a security interest in the Equipment to secure its
obligations under this lease and all other indebtedness at any time owing by
Lessee to Lessor and agrees that upon the occurrence of an Event of Default, in
addition to all of the other rights and remedies available to Lessor hereunder,
Lessor shall have all of the rights and remedies of a secured party under the
Uniform Commercial Code.. No remedy given in this paragraph is intended to be
exclusive, and each shall be cumulative but only to the extent necessary to
permit Lessor to recover amounts for which Lessee is liable hereunder. No
express or implied waiver by Lessor of any breach of Lessee's obligations
hereunder shall constitute a waiver of any other breach of Lessee's obligations
hereunder.
19. NOTICES. Any written notice hereunder to Lessee or Lessor shall be deemed
to have been given when delivered personally or deposited in the United
States mails, postage prepaid, addressed to recipient at its address set
forth above or at such other address as may be last known to the sender.
20. NET LEASE AND UNCONDITIONAL OBLIGATION. This lease is a completely net
lease and Lessee's obligation to pay rent and amounts payable by Lessee
under paragraphs 12 and 18 is unconditional and not subject to any
abatement, reduction, setoff or defense of any kind.
21. NON-CANCELABLE LEASE. This lease cannot be canceled or terminated except as
expressly provided herein.
22. SURVIVAL OF INDEMNITIES. Lessee's obligations under paragraphs 7, 8, and 18
shall survive termination or expiration of this lease.
23. COUNTERPARTS. There shall be but one counterpart of the Master Lease and of
each Supplement and such counterpart will be marked "Original." To the
extent that any Supplement constitutes chattel paper (as that term is
defined by the Uniform Commercial Code), a security interest may only be
created in the Supplement marked "Original."
24. MISCELLANEOUS. This Master Lease and related Supplement(s) constitute the
entire agreement between Lessor and Lessee and may be modified only by a
written instrument signed by Lessor and Lessee. Any provision of this lease
which is unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such unenforceability without invalidating
the remaining provisions of this lease, and any such unenforceability in
any jurisdiction shall not render unenforceable such provision in any other
jurisdiction. If this lease shall in all respects be governed by, and
construed in accordance with, the substantive laws of the State of
Minnesota. In the event there is more than one Lessee named herein or in
any Supplement, the obligations of each shall be joint and several.
/S/ JMA, LKL
- -------------------------
<PAGE>
Amendment No. 1 to
Master Lease dated April 2, 1999 ("Lease")
Between
PLM International, Inc. ("Lessee")
And
Wells Fargo Equipment Finance, Inc. ("Lessor")
Lessor and Lessee hereby agree to amend the Lease as follows:
1. Paragraph 6 is amended by adding the following to the end thereof: For
administrative convenience and as an accommodation to Lessee, Lessor agrees
that Lessee may be named as owner on certificate of titles for the
Equipment.
2. Paragraph 9 is amended by adding the following to the end thereof:
Notwithstanding anything to the contrary in this paragraph 9, Lessee may,
from time to time sublet, the Equipment without the prior consent of
Lessor, provided however that Lessee shall remain fully obligated to Lessor
under this Lease and the term of the sublease shall not extend beyond the
term of the Lease.
3. The last sentence of paragraph 12 is amended to read: Any insurance or
condemnation proceeds received shall be credited to Lessee's obligation
under this paragraph and Lessee shall be entitled to any surplus.
4. Except as modified herein, the terms and conditions of the Lease remain the
same.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Amendment this 2nd day
of April, 1999.
Wells Fargo Equipment, Inc. PLM International, Inc.
By:/s/ Lisa K. Lenton By:/s/ J. Michael Allgood
------------------ ----------------------
Its:Assistant Vice President Its: Vice President and
Chief Financial Officer
<PAGE>
SUPPLEMENT TO MASTER LEASE
TRAC
[Wells Fargo logo - team of horses drawing pioneer carriage]
Wells Fargo Equipment Finance, Inc.
Investors Building, Suite 300
733 Marquette Avenue
Minneapolis, MN 55479-2048
- -------------------------------
Supplement Number 46494-100 dated as of April 02, 1999 to
Master Lease Number 7313 dated as of December 28, 1998
Name and Address of Lessee:
PLM International, Inc.
One Market Street
Steuart Tower, Suite #800
San Francisco, CA 94105-1301
- ---------------------------------------------- -------------------------
This is a Supplement to the Master Lease identified above between Lessor and
Lessee (the "Master Lease"). Upon the execution and delivery by Lessor and
Lessee of this Supplement, Lessor hereby agrees to lease to Lessee, and Lessee
hereby agrees to lease from Lessor, the equipment described below upon the terms
and conditions of this Supplement and the Master Lease. All terms and conditions
of the Master Lease shall remain in full force and effect except to the extent
modified by this Supplement. This Supplement and the Master Lease as it relates
to this Supplement are hereinafter referred to as the "Lease".
Equipment Description:
See attached Schedule A
Equipment Location: See Schedule A
- ---------------------------------------------------------------------
SUMMARY OF PAYMENT TERMS
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Initial Term in Months: 84 Total Cost: $10,017,498.34
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Payment Frequency: Monthly Total Basic Rent: $5,156,866.68
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Basic Rental Payment: $61,391.27 plus applicable sales and use tax
Interim Rent Daily Rate: N/A
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Number of Installments: 84 Interim Rent Cutoff Date: N/A
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Advance Payments: First due on signing this Lease Security Deposit: N/A
- ---------------------------------------------------------------------
Terminal Rental Adjustment Clause (TRAC): In accordance with Section 7701(h) of
the Internal Revenue Code of 1986, under penalty of perjury, Lessee hereby
certifies that it intends that more than 50% of the use of the Equipment is to
be in a trade or business of Lessee. Lessor and Lessee hereby agree that at the
expiration of the initial term of the Lease according to its original terms (and
not early on account of default or otherwise) the Equipment will be sold by the
Lessor (or by an agent of Lessor). The proceeds of sale (the "Proceeds") shall
be distributed as follows:
1. First, to reimburse Lessor or its agent for the cost of putting the
Equipment in a condition to be sold, sales commissions, legal fees, expenses
or repossession and all other expenses of sale.
2. Second, the balance to Lessor up to an amount equal to 25.00% of the
original cost of the Equipment.
3. Third, the balance, if any, to Lessee as an adjustment to rent previously
paid by Lessee to Lessor pursuant to the Lease.
In the event the Proceeds are less than the sum of item 1 plus item 2 above, the
Lessee shall pay to the Lessor the deficiency as additional rent pursuant to the
Lease but in any event not more than 25.00% of the original cost of the
Equipment.
Any amount paid to or by the Lessee pursuant to this Addendum shall be the
"Terminal Rental Adjustment".
To be consistent with the Terminal Rental Adjustment, Lessor and Lessee hereby
amend paragraphs 12 and 18 of the Lease (relating to casualty and default) by
amending the figure "10%" where it appears therein to "25.00%".
Provided no Event of Default occurred and is continuing under the lease, Lessor
grants to Lessee the option to purchase the Equipment at the expiration of the
initial term for the fair market value which is equal to 25.00% of the original
cost of the Equipment.
In addition, the second paragraph of paragraph 2 of the Lease relating to
automatic extension is hereby deleted. Lessee acknowledges that it has been
advised that it will not be treated as the owner of the Equipment for federal
income tax purposes.
Lessor: Wells Fargo Equipment Finance, Inc. PLM International, Inc. Lessee
By: /s/ Lisa K. Lenton By: /s/ J. Michael Allgood
- ------------------- ------------------------
Title: Assistant Vice President Title: Vice President and
Chief Financial Officer
- ------------------- ------------------------
- ---------------------------------------
Rent Commencement Date
AMENDMENT TO
PLM INTERNATIONAL, INC.
DIRECTORS' 1995 NONQUALIFIED STOCK OPTION PLAN
This Amendment to PLM International, Inc. Directors' 1995 Nonqualified
Stock Option Plan (the "Amendment") is made as of April 28, 1999, as authorized
and approved by the Board of Directors of PLM International, Inc. (the
"Company") on April 23, 1999. All capitalized terms used herein that are not
otherwise defined shall have the same meaning as set forth in the Directors'
1995 Nonqualified Stock Option Plan (the "Plan").
WHEREAS, the Company intends to list on the American Stock Exchange
(the "AMEX") those shares of common stock of the Company (the "Common Shares")
which would be issued to directors upon the exercise of options granted under
the Plan;
WHEREAS, in order to list such Common Shares the Company intends to
comply with Section 711(b)(ii) of the AMEX Company Guide which provides an
exception to the requirement that shares of stock issuable under an option plan
must be approved by a company's shareholders as a prerequisite to approval of
applications to list additional shares reserved for options granted or to be
granted to officers, directors or key employees;
WHEREAS, pursuant to Section 4 of the Plan, the Board is granted the
power to administer the Plan, to interpret the Plan and to make all
determinations deemed necessary or advisable for the administration of the Plan;
and
WHEREAS, on April 23, 1999, the Board determined and resolved that in
order for the Company to comply with the Section 711(b)(ii) of the AMEX Company
Guide, it is necessary and advisable to, and authorized the Company to, amend
the Plan and all relevant Option Agreements entered into pursuant to the Plan so
as to provide a mechanism for limiting the amount of Common Shares that can
purchased pursuant to the exercise of options under the Plan or the PLM
International, Inc. 1998 Management Stock Compensation Plan (the "1998 Plan") in
any one calendar year to no more than 5% of the Company's outstanding Common
Shares as of May 12, 1998.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. METHOD OF EXERCISE. Section 7(d) of the Plan (Method of Exercise) is
hereby amended by adding new language to the end of the paragraph which reads as
follows:
"Notwithstanding anything in the Plan to the contrary, in the
event an optionee seeks to exercise options under the Plan, and after
giving effect to such exercise, the number of Common Shares purchased
pursuant to the exercise of options granted under the Plan and the PLM
International, Inc. 1998 Management Stock Compensation Plan (the "1998
Plan") during the calendar year in which such option was exercised
would exceed 416,880 Common Shares (the "Annual Maximum"), then
(a) the Company shall sell to the option holder at the
exercise price specified in such option (the
"Exercise Price") only that number of Common Shares
which equals the amount, if any, by which (i) the
Annual Maximum exceeds (ii) the number of Common
Shares purchased pursuant to the exercise of options
granted under the Plan and the 1998 Plan during the
calendar year in which such option was exercised, and
(b) the Company shall pay to the option holder an amount
of cash equal to the number of Common Shares as to
which exercise was sought but which were not
purchasable as a result of the limitation set forth
in clause (a) above multiplied by the excess of (i)
the market price of Common Shares at close of
business on the day prior to the date of such
exercise over (ii) the Exercise Price,
whereupon such option shall cease to be exercisable as to all Common
Shares as to which exercise was sought. This provision shall be set
forth in any Option Agreement entered into between the Company and the
optionee."
2. EXPRESS AMENDMENT. Except as specifically amended herein, the Plan
shall remain unchanged and continue in full force and effect.
IN WITNESS WHEREOF, at the direction of the Board of Directors, the
Company has caused this Amendment to be executed as of the date first written
above.
PLM INTERNATIONAL, INC.
By: ___________________________
Title: ___________________________
AMENDMENT TO
PLM INTERNATIONAL, INC.
1998 MANAGEMENT STOCK COMPENSATION PLAN
This Amendment to PLM International, Inc. 1998 Management Stock
Compensation Plan (the "Amendment") is made as of April 28, 1999, as authorized
and approved by the Board of Directors of PLM International, Inc. (the
"Company") on April 23, 1999. All capitalized terms used herein that are not
otherwise defined shall have the same meaning as set forth in the 1998
Management Stock Compensation Plan (the "Plan").
WHEREAS, the Company intends to list on the American Stock Exchange
(the "AMEX") those shares of common stock of the Company (the "Common Shares")
which would be issued to employees pursuant to Awards granted under the Plan;
WHEREAS, in order to list such Common Shares the Company intends to
comply with Section 711(b)(ii) of the AMEX Company Guide which provides an
exception to the requirement that shares of stock issuable under an option plan
must be approved by a company's shareholders as a prerequisite to approval of
applications to list additional shares reserved for options granted or to be
granted to officers, directors or key employees;
WHEREAS, on April 23, 1999, the Board determined and resolved that in
order for the Company to comply with the Section 711(b)(ii) of the AMEX Company
Guide, it is necessary and advisable to, and authorized the Company to, amend
the Plan to reduce the number of Common Shares that may be made subject to
Awards under the Plan, and to amend the Plan and all relevant Award Agreements
entered into pursuant to the Plan so as to provide a mechanism for limiting the
amount of Common Shares that can purchased pursuant to the exercise of options
under the Plan or the PLM International, Inc. Directors' 1995 Stock Option Plan
(the "1995 Plan") in any one calendar year to no more than 5% of the Company's
outstanding Common Shares as of May 12, 1998;
WHEREAS, Section 17 of the Plan allows the Board to take action to
amend the Plan as described above without shareholder approval.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. SHARES SUBJECT TO THE PLAN. Section 3 of the Plan is hereby amended
by deleting the number "800,000" where it appears in the first and last
sentences of Section 3, and replacing it with the number "700,000".
2. METHOD OF EXERCISE. Section 7(d) of the Plan (Method of Exercise) is
hereby amended by adding new language to the end of the paragraph which reads as
follows:
"Notwithstanding anything in the Plan to the contrary, in the
event a Participant seeks to exercise options under the Plan, and after
giving effect to such exercise, the number of Common Shares purchased
pursuant to the exercise of options granted under the Plan and the PLM
International, Inc. Directors' 1995 Stock Option Plan (the "1995 Plan")
during the calendar year in which such option was exercised would
exceed 416,880 Common Shares (the "Annual Maximum"), then
(a) the Company shall sell to the Participant at the
exercise price specified in such option (the
"Exercise Price") only that number of Common Shares
which equals the amount, if any, by which (i) the
Annual Maximum exceeds (ii) the number of Common
Shares purchased pursuant to the exercise of options
granted under the Plan and the 1995 Plan during the
calendar year in which such option was exercised, and
(b) the Company shall pay to the Participant an amount of
cash equal to the number of Common Shares as to which
exercise was sought but which were not purchasable as
a result of the limitation set forth in clause (a)
above multiplied by the excess of (i) the market
price of the shares at close of business on the day
prior to the date of such exercise over (ii) the
Exercise Price,
whereupon such option shall cease to be exercisable as to all Common
Shares as to which exercise was sought. This provision shall be set
forth in any Award Agreement entered into between the Company and a
Participant."
3. EXPRESS AMENDMENT. Except as specifically amended herein, the Plan
shall remain unchanged and continue in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to be
executed as of the date first written above.
PLM INTERNATIONAL, INC.
By: ___________________________
Title: ___________________________
f:\userdata\plmleg\forms\option plan amendment, 1998 Plan
[Amended Form of Nonqualified Stock Option Agreement [1998 and 1995 Plans])
PLM INTERNATIONAL, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Pursuant to options granted on ___________ under the _______________
adopted by the Board of Directors of PLM International, Inc. on ________, and as
amended on April 28, 1999 (the "Plan"), PLM INTERNATIONAL, INC., a Delaware
corporation (hereinafter called "the Company"), and __________ (hereinafter
called "Optionee") agree and acknowledge that the Optionee has a nonqualified
stock option ( an "NQSO") to purchase _____ shares of the Company's common stock
("Common Shares") at the price of $_________ per share, and that this option:
(a) is granted under, and is subject to all the terms and conditions pertaining
to stock options (other than those applicable only to incentive stock options)
contained in the Plan, a copy of which is attached to, and incorporated by this
reference into, this Nonqualified Stock Option Agreement (this "Agreement"); and
(b) is subject to the terms and conditions of this Agreement.
This option shall expire at the close of business on ________ (the
"Expiration Date"), unless it expires earlier upon the Optionee's ceasing to be
an employee/director of the Company, as provided in the Plan.
Subject to the terms and conditions of the Plan, this option is
exercisable only in accordance with the attached Exercise Schedule. The
applicable portion(s) of this option may be exercised by the Optionee in whole
or, from time to time, in part, on and after the date(s) it or they become(s)
exercisable under the Exercise Schedule, and at any time prior to the Expiration
Date; provided, however, that the Optionee may not exercise this option with
respect to less than 10 shares at any time, except that if at any time the
number of shares remaining subject to this option is less than 10, the Optionee
may exercise with respect to all such remaining shares. The Optionee shall pay
cash for the shares with respect to which this option is exercised, unless the
Company later decides to accept another form of consideration. Notwithstanding
anything in this Agreement to the contrary, in the event an Optionee seeks to
exercise options under the Plan, and after giving effect to such exercise, the
number of Common Shares purchased pursuant to the exercise of options granted
under the Plan and the [PLM International, Inc. Directors' 1995 Stock Option
Plan, as amended (the "1995 Plan")][PLM International, Inc. 1998 Management
Stock Option Plan, as amended (the "1998 Plan")], during the calendar year in
which such option was exercised would exceed 416,880 Common Shares (the "Annual
Maximum"), then
(a) the Company shall sell to the Optionee at the
Exercise Price only that number of Common Shares
which equals the amount, if any, by which (i) the
Annual Maximum exceeds (ii) the number of Common
Shares purchased pursuant to the exercise of options
granted under the Plan and the [1995 Plan][1998 Plan]
during the calendar year in which such option was
exercised, and
(b) the Company shall pay to the Optionee an amount of
cash equal to the number of Common Shares as to which
exercise was sought but which were not purchasable as
a result of the limitation set forth in clause (a)
above multiplied by the excess of (i) the market
price of the shares at close of business on the day
prior to the date of such exercise over (ii) the
Exercise Price,
whereupon such option shall cease to be exercisable as to all Common Shares as
to which exercise was sought.
The Optionee understands that the tax consequences associated with this
option and with Common Shares purchased under this option can be complex and can
depend, in part, upon the Optionee's particular circumstances. The Optionee
understands that, for example, the exercise of this option will under some
circumstances result in the imposition of tax even before the Optionee resells
the option Common Shares, and that under some circumstances it may be advisable
for the Optionee to file an election under Section 83(b) of the Internal Revenue
Code of 1986, as amended, with respect to the exercise of this option.
Accordingly, the Optionee should consult a tax adviser immediately, as there is
a 30-day limit for filing such elections.
If the Optionee ceases to be an employee/director of the Company for
any reason (including death or disability) after the date of the grant of this
option, the Company shall have the right to repurchase from the Optionee -- or
his or her personal representative, heir, or legatee -- any Common Shares issued
by the Company upon the exercise of this option for the same price per share
that the Optionee paid to exercise this option (the price shown on page 1 of
this Agreement); provided, however, that the Company's right of repurchase shall
lapse as set forth in the attached Repurchase Rights Schedule.
Lapse under the Repurchase Rights Schedule shall occur on a
first-in-first-out ("FIFO") basis to the extent possible, and pro rata when
application on a FIFO basis is not possible, to Common Shares with respect to
which the Company's repurchase right has not previously lapsed. Thus if, when
the Company's repurchase right with respect to a number of Common Shares lapses,
the Optionee has exercised this option with respect to a cumulative number of
Common Shares not exceeding the cumulative number of Common Shares with respect
to which the Company's repurchase right lapses, the lapse shall apply to all of
the Common Shares (a) with respect to which this option has previously been
exercised and (b) to which no previous lapse has applied, as well as to (c) all
Common Shares with respect to which this option shall later be exercised until
the cumulative number of Common Shares with respect to which the Company's
repurchase right shall have lapsed shall equal the cumulative amount of Common
Shares with respect to which this option has been exercised. And, if, when a
lapse occurs, the Optionee has exercised this option with respect to a
cumulative number of Common Shares exceeding the cumulative number of Common
Shares with respect to which the Company's repurchase right lapses, the lapse
shall apply to the Common Shares with respect to which both (y) the Company's
repurchase right has not already lapsed in a prior application of the principles
of this paragraph, and (z) the option described in this Agreement was first
exercised. If the number of Common Shares in a block of Common Shares with
respect to which, under the principles of the two preceding sentences, a lapse
of the Company's repurchase right would apply exceeds the number of Common
Shares with respect to which the Company's repurchase right lapses, the Optionee
may, within 30 days of the date as of which the lapse occurs, request the
Company to, and the Company shall, issue new Common Share certificates, one in
the number of Common Shares with respect to which the Company's repurchase right
has lapsed, the other in the number of the remaining Common Shares in the block.
The Company's repurchase right, if any, shall be binding on all
successors and assigns of the Optionee. In exercising any right of repurchase
the Company shall give the Optionee -- or his or her personal representative,
heir, or legatee -- written notice of its intention to repurchase any Common
Shares no later than the later of 10 days prior to the lapse of the Company's
repurchase right with respect to such Common Shares or the date of the
Optionee's termination of employment. The purchase price to be paid by the
Company upon exercising its repurchase right with respect to any Common Share
shall be paid within 30 days after notice to the Optionee -- or his or her
personal representative, heir, or legatee -- of the Company's intent to exercise
its repurchase right.
The Optionee shall not sell, transfer, or otherwise dispose of the
number of Common Shares, if any, which, at any time, continue to be subject to
the Company's repurchase right.
The Company may, in its discretion, cause the Common Share certificates
issued to the Optionee to bear a legend that gives notice of the Company's
repurchase right and of the Optionee's obligation not to transfer the Common
Shares. Alternatively, or additionally, the Company may require that the Common
Shares be placed in escrow until the Company's repurchase right with respect to
the Common Shares evidenced by such certificates shall have lapsed.
PLM INTERNATIONAL, INC.
By:________________________________
Date: _____________ Its:________________________________
The Optionee hereby accepts and agrees to be bound by all of the terms
and conditions of this Agreement, including the Plan, a copy of which is
attached.
--------------------
Date: ________, 1998 Name:
Attachments: (1) Exercise Schedule
(2) Repurchase Right Lapse Schedule
(3) 1998 Management Stock Compensation Plan
<PAGE>
ATTACHMENT 1
EXERCISE SCHEDULE
Subject to the terms and conditions set forth in the PLM International,
Inc. Directors' 1995 Stock Option Plan, as amended][PLM International, Inc. 1998
Management Stock Compensation Plan, as amended], and in the Nonqulaified Stock
Option Agreement of which this schedule is a part (the "Agreement"), the option
granted in the Agreement shall become exercisable as follows:
<TABLE>
<CAPTION>
If the Optionee continues to [be employed by] with respect to an initial or additional
[be a director of] the Company on such date, number of shares equal
to the the option shall become exercisable on percentage shown below of the
total number of shares subject to the option
- ------------------------------------------------- --------------------------------------------
<S> <C>
____________ 33.33%
____________ 66.66%
____________ 100%
</TABLE>
<PAGE>
ATTACHMENT 2
REPURCHASE RIGHTS SCHEDULE
Subject to the terms and conditions set forth in the [PLM
International, Inc. Directors' 1995 Stock Option Plan, as amended][PLM
International, Inc. 1998 Management Stock Compensation Plan, as amended], and in
the Nonqualified Stock Option Agreement of which this schedule is a part (the
"Agreement"), the Company's right to repurchase shares issued upon the exercise
of the option shall be as follows:
<TABLE>
<CAPTION>
The Company's repurchase right shall be on with respect to a number of shares a
"FIFO" basis, as described in the Agreement equal to the percentage shown below
to which this schedule is attached, on of the total number of shares that would
be issued on maximum exercise of this option
- --------------------------------------------- ---------------------------------------------
<S> <C>
____________ 66%
____________ 33%
____________ 0%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 14,953
<SECURITIES> 0
<RECEIVABLES> 177,280
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 95,033
<DEPRECIATION> (25,874)
<TOTAL-ASSETS> 296,324
<CURRENT-LIABILITIES> 0
<BONDS> 210,253
0
0
<COMMON> 59,854
<OTHER-SE> (9,730)
<TOTAL-LIABILITY-AND-EQUITY> 296,324
<SALES> 0
<TOTAL-REVENUES> 13,607
<CGS> 0
<TOTAL-COSTS> 8,714
<OTHER-EXPENSES> 948
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,685
<INCOME-PRETAX> 503
<INCOME-TAX> 207
<INCOME-CONTINUING> 296
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 236
<NET-INCOME> 60
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
