UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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 Identification No.)
incorporation or organization)
One Market, Steuart Street Tower,
Suite 800, San Francisco, CA 94105-1301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 974-1399
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $0.01 Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of March 17, 2000 was $53,525,506.
The number of shares outstanding of the issuer's classes of common
stock as of March 17, 2000: Common Stock, $0.01 Par Value--7,712,609 shares
<PAGE>
PLM INTERNATIONAL, INC.
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
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Part I
Item 1 Business 2
Item 2 Properties 9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of Security Holders 11
Part II
Item 5 Market for the Company's Common Equity and Related
Stockholder Matters 12
Item 6 Selected Financial Data 13
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 7A Quantitative and Qualitative Disclosures about
Market Risk 26
Item 8 Financial Statements and Supplemental Data 26
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 26
Part III
Item 10 Directors and Executive Officers of the Company 27
Item 11 Executive Compensation 29
Item 12 Security Ownership of Certain Beneficial Owners
and Management 37
Item 13 Certain Relationships and Related Transactions 38
Part IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 39
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<PAGE>
PART I
ITEM 1. BUSINESS
(A) Background
PLM International, Inc. (PLM International, the Company, or PLMI), a Delaware
corporation, is a diversified equipment leasing company that specializes in
transportation, industrial, and commercial equipment, both domestically and
internationally. Through May 1996, the Company also syndicated investment
programs organized to invest primarily in transportation and related equipment.
The Company continues to manage these syndicated investment programs. The
Company operates 19 rental yards specializing in short to mid-term refrigerated
trailer leasing to the food service industries. The Company also has three
rental yards specializing in leasing dry van trailers. As of December 31, 1999,
the Company operated and managed transportation, industrial, and commercial
equipment and related assets for its own account and for various investment
programs and third-party investors with an approximate cost of $1.1 billion. An
organizational chart for PLM International indicating the relationships of
significant active legal entities as of December 31, 1999 is shown in Table 1:
TABLE 1
ORGANIZATIONAL CHART
PLM International, Inc. (Delaware)
Subsidiaries of PLM International, Inc.
PLM Rental, Inc. (Delaware)
PLM Financial Services, Inc. (Delaware)
PLM Railcar Management Services, Inc. (Delaware)
PLM Worldwide Management Services Limited (Bermuda)
American Finance Group, Inc. (Delaware)
Subsidiaries of PLM Financial Services, Inc.
PLM Investment Management, Inc. (California)
PLM Transportation Equipment Corporation (California)
(Subsidiary of PLM Transportation Equipment Corporation:
TEC AcquiSub, Inc. (California)
Subsidiaries of PLM Worldwide Management Services Limited:
PLM Railcar Management Services Canada Limited (Alberta, Canada)
Subsidiary of American Finance Group, Inc.
AFG Credit Corporation (Delaware)
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[PLM INTERNATIONAL GRAPHIC]
In October 1999, the Company announced that the Company had engaged investment
bankers to develop strategic alternatives to maximize shareholder value
including the possible sale of part or all of the Company. In October 1999, the
Company agreed to sell American Finance Group, Inc. (AFG), its commercial and
industrial equipment leasing subsidiary for approximately $28.5 million, net of
transaction costs and income taxes. On February 25, 2000, the shareholders of
PLM International approved the transaction. The sale of AFG was completed on
March 1, 2000, the Company received $29.0 million for AFG. The Company expects
to receive additional proceeds of $1.9 million in the second quarter of 2000
related to the sale of AFG. Taxes and transaction costs related to the sale are
estimated to be $5.0 million resulting in estimated net proceeds to the Company
of $25.9 million. In addition, AFG dividended to PLMI certain assets with a net
book value of $2.7 million immediately prior to the sale.
(B) Description of Business
PLM International, a Delaware corporation formed on May 20, 1987, owns or
manages a portfolio of commercial and industrial equipment, transportation
equipment, and related assets with a combined original cost of approximately
$1.1 billion (refer to Table 2). In 1999, the Company operated in three
operating segments: refrigerated and dry van (non-refrigerated) trailer leasing,
commercial and industrial equipment leasing and financing, and the management of
investment programs and other transportation equipment leasing.
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<PAGE>
<TABLE>
TABLE 2
EQUIPMENT AND RELATED ASSETS
December 31, 1999
(original cost in millions of dollars)
<CAPTION>
Professional
Lease
Management Equipment Other
Income Growth Investor
PLMI Fund I Funds Programs Total
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial and industrial equipment $ 218 $ -- $ -- $ -- $ 218
Refrigerated and dry van trailers 103 9 35 -- 147
Aircraft, aircraft engines, and rotables -- 35 200 -- 235
Marine vessels -- 51 145 -- 196
Railcars -- 20 123 49 192
Marine containers -- 10 77 -- 87
Other 2 19 42 3 66
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Total $ 323 $ 144 $ 622 $ 52 $1,141
==============================================================
</TABLE>
(C) Owned Equipment
(1) Refrigerated and Dry Van Trailers
PLM Rental, Inc., doing business as PLM Trailer Leasing, a wholly owned
subsidiary of PLMI, markets refrigerated trailers used to transport
temperature-sensitive food products and dry van (nonrefrigerated) trailers on
short-term and mid-term operating leases through a network of rental facilities.
These trailers are owned by the Company or managed for the Company's syndicated
investment programs. Presently, the Company has 19 facilities primarily engaged
in leasing refrigerated trailers, located in or near Atlanta, Georgia;
Baltimore, Maryland; Boston, Massachusetts; Chicago, Illinois; Dallas, Texas;
Denver, Colorado; Detroit, Michigan; Houston, Texas; Indianapolis, Indiana;
Kansas City, Kansas; Los Angeles, California; Miami, Florida; Newark, New
Jersey; Orlando, Florida; Philadelphia, Pennsylvania; San Francisco, California;
St. Louis, Missouri; Seattle, Washington; and Tampa, Florida. In addition, the
Company has three additional facilities, primarily engaged in leasing dry van
trailers, located in or near Atlanta, Georgia; Chicago, Illinois; and Newark,
New Jersey. As of December 31, 1999, the Company owned 3,635 trailers and
managed 2,383 trailers for its syndicated investment programs.
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The Company's strategy is to specialize in refrigerated trailers and become the
predominant supplier of refrigerated trailer rentals in the cities in which it
has facilities. During 1999, the Company purchased $42.5 million of refrigerated
trailers and opened six new rental yard facilities. The Company intends to
continue to expand its refrigerated trailer leasing operations by opening
additional rental yard facilities and by continuing to purchase refrigerated
trailers in the future.
Leasing Markets: In general, the trailer leasing industry provides an
alternative to direct trailer ownership. It is a highly competitive industry
offering lease terms ranging from one day to a term equal to the economic life
of the equipment.
Within the trailer leasing industry, there are essentially three types of
leases: the full payout lease, the short-term rental, and the mid-term operating
lease. The full payout lease, in which the combined rental payments are
sufficient to cover a lessor's investment and provide a return on it, is a
common form of leasing. This type of lease is sometimes referred to, and
qualifies as, a direct finance lease under United States generally accepted
accounting principles, and is accounted for by the lessee as a purchase of the
underlying asset. From the lessee's perspective, the election to enter into a
full payout lease is usually made on the basis of a lease-versus- purchase
analysis, which takes into account the lessee's ability to utilize the
depreciation tax benefits of ownership, its liquidity and cost of capital, and
financial reporting considerations. Full payout leases are "net" leases where
the lessee pays for operating expenses such as maintenance, insurance, licenses,
and taxes.
Short-term trailer rentals and mid-term operating leases are "full-service"
leases where the owner/lessor provides and/or pays for operating expenses such
as maintenance, insurance, licenses, and taxes. The addition of these
value-added services enables the lessor to charge higher rentals. The provision
of maintenance services results, in increased expenses, but under a full-service
contract, the lessor levies usage charges for each mile the trailer travels and
each hour the refrigeration unit runs. The provision of maintenance services
also ensures the full- services lessor that the equipment is being properly
maintained.
Short-term rental lessors direct their services to users' short-term trailer
needs. This business requires a more extensive overhead commitment in the form
of marketing, maintenance, and operating personnel by a lessor/owner. There is
normally less than full utilization in a lessor's equipment fleet, as lessee
turnover is frequent. Lessors usually charge a premium for the additional
flexibility provided through short-term rentals. Generally, lessees use
short-term trailer rentals to augment their own fleet when seasonal needs or an
unexpected surge in business occurs.
Mid-term operating leases for trailers run for a period of one to five years.
Mid-term operating lease rates are usually higher than full payout lease rates
but lower than short-term rental rates. From a lessee's perspective, the
advantages of a mid-term operating lease compared to a full payout lease are
flexibility in its equipment commitment, the fact that the rental obligation
under the lease need not be capitalized on the lessee's balance sheet, greater
control over future costs, protection against technological obsolescence, and
the ability to balance equipment requirements over a specific period of time.
The disadvantages of a mid-term operating lease from a lessee's perspective are
that the equipment may be subject to significant increases in lease rates in
future leasing periods or may be required to be returned to the lessor at the
expiration of the initial lease. From the lessor's perspective, the advantages
of a mid-term operating lease (as well as a short-term rental), compared to a
full payout lease, are that rental rates are generally higher, and in periods of
price inflation, there is the potential for increasing rentals during the
equipment's economic life. From the lessor's perspective, the disadvantages of a
mid-term operating lease (as well as a short-term rental), compared to a full
payout lease, are that the equipment must generally be re-leased at the
expiration of the initial lease term in order for the lessor to recover its
investment and that re-lease rates are subject to changes in market conditions
and changes in trailer or refrigeration unit design.
The Company markets short-term trailer rentals and mid-term trailer operating
leases and avoids full payout leases because it believes there is very little
value added beyond the financing provided by the full payout leases. The
Company's emphasis on short-term trailer rentals and mid-term trailer operating
leases requires highly experienced management and local branch personnel, as the
equipment must be properly maintained and periodically re-leased to continue
generating rental income and thus maximize the long-term return on the trailers.
Lessees: Lessees of trailer equipment range from Fortune 1,000 companies to
small privately held corporations and entities. The Company's refrigerated
trailer lessees are primarily engaged in the production, processing, or
distribution of temperature-sensitive food products. The Company believes that
the demand for food products is less cyclical than the general economy.
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<PAGE>
In recent years, the Company has invested in specialized refrigerated trailers
used by the foodservice distribution industry in the local delivery of food
products to restaurants, schools, hospitals, and other institutional customers.
These trailers have refrigeration and delivery features designed to facilitate
multiple stops with multiple products, requiring multiple temperature settings
and compartments. These features are not found on traditional "" trailers used
to carry one product between cities. As a result, foodservice distributors have
become an important customer base for the Company.
Competition: The Company encounters considerable competition from lessors and
financial institutions offering full payout leases on new trailers. Full payout
leases provide longer lease periods and lower monthly rent than the Company
offers. The shorter-length full service operating leases that the Company
provides offer lessees flexibility and value-added services such as the repair
and maintenance of the trailers.
The Company competes with many trailer lessors, including TIP Corporation and
XTRA Corporation, on a national basis, and numerous smaller trailer lessors in
local markets. In addition, truck-leasing companies such as Ryder Transportation
Services and Penske Corporation provides trailer rental and leasing to their
customers.
Demand: Demand conditions for the Company's major trailer types are discussed
below.
Foodservice Distribution Trailers: Sales within the foodservice distribution
industry, which represents the wholesale supply of food and related products to
restaurants, grocers, hospitals, schools, and other purveyors of prepared food,
have grown at a 4.1% annual rate over the past five years. Foodservice
distribution sales with the United States are estimated to have reached over
$150 billion during 1999 and are expected to surpass $180 billion by 2005.
This growth is being driven by changes in consumer demographics and lifestyles,
as more and more consumers' demand fresher, more convenient food products.
Increased service demands by consumers coupled with heightened fears over food
safety have accelerated the development of new technology for refrigerated
trailers and have caused foodservice distributors to seek to upgrade their
fleets by either purchasing or leasing newer, more technologically advanced
trailers. More foodservice distributors are considering leasing trailers due to
the lower capital outlays and quicker access to better equipment that this
option offers, particularly in view of the current six to twelve month backlog
on new trailer orders.
By focusing on meeting the growing needs of the United States food distribution
industry, PLM Trailer Leasing has been able to continue to increase utilization
of its specialized refrigerated trailers, despite a one-third increase in the
size of its overall fleet during 1999. Based on these trends and the attractive
long-term growth potential of the food distribution market, the Company intends
to continue to expand its marketing to this industry.
Refrigerated Trailers: After a very strong year in 1998, the
temperature-controlled trailer market leveled off slightly in 1999, as equipment
users began to absorb the expanded equipment supply created over the prior two
years. Refrigerated trailer users have been actively retiring their older units
and consolidating their fleets in response to improved refrigerated trailer
technology. Concurrently, there is a backlog of six to nine months on orders for
new equipment. As a result of these changes in the refrigerated trailer market,
it is anticipated that trucking companies and shippers will utilize short-term
trailer leases more frequently to supplement their existing fleets. Such a trend
should benefit PLM Trailer Leasing, which typically leases its equipment on a
short-term basis. As a result of continued strong market conditions combined
with PLM Trailer Leasing's increased market penetration, utilization of the
Company's refrigerated trailers increased from nearly 70% in 1998 to
approximately 76% in 1999. These market conditions and utilization rates are
expected to continue during 2000.
Dry Trailers: The United States non-refrigerated (dry) trailer market continued
its recovery during 1999, as the strong domestic economy resulted in heavy
freight volumes. With unemployment low, consumer confidence high, and industrial
production sound, the outlook for leasing this type of trailer remains positive,
particularly as the equipment surpluses of recent years are being absorbed by
the buoyant market. In addition to high freight volumes, improvements in
inventory turnover and tighter turnaround times have led to a stronger overall
trucking industry and increased equipment demand. After remaining well above 70%
during 1998, the Company's dry van fleet ended 1999 at 78% utilization.
Government Regulations: The trailer industry in which the Company operates is
subject to substantial regulation by various federal, state, and local
government authorities. For example, federal regulations by the National Highway
Transportation Safety Association, implemented in March 1998, require all new
trailers to have antilock brake systems installed, adding 2% to 3% to the price
of new trailers but increasing safety while also reducing tire and brake wear.
An enactment such as this affects the performance of trailers owned by the
Company. It is not
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<PAGE>
possible to predict the positive or negative effects of future regulatory
changes in the trailer industry.
(2) Commercial and Industrial Equipment
American Finance Group, Inc. (AFG), a wholly owned subsidiary of PLMI, was a
Boston-based company that originated and managed lease and loan transactions for
commercial and industrial equipment for the Company's owned account or for
institutional programs or other third-party investors. AFG served the capital
equipment financing needs of predominantly investment-grade, Fortune 1,000
companies and creditworthy middle-market companies. AFG originated and managed
leases and loans for commercial and industrial equipment; utilized its
transaction-structuring capabilities to tailor financing solutions that meet the
needs of its customers. AFG took a security interest in the assets on which it
provided loans. Assets purchased and loans provided by AFG were financed by
nonrecourse securitized debt. AFG used its warehouse credit facility to finance
the acquisition of assets prior to their sale or the receipt of permanent
financing by nonrecourse securitized debt. The leases were accounted for as
operating or direct finance leases. In October 1999, the Company agreed to sell
American Finance Group, Inc. (AFG), its commercial and industrial equipment
leasing subsidiary for approximately $28.5 million, net of transaction costs and
income taxes. On February 25, 2000, the shareholders of PLM International
approved the transaction. The sale of AFG was completed on March 1, 2000, the
Company received $29.0 million for AFG. The Company expects to receive
additional proceeds of $1.9 million in the second quarter of 2000 related to the
sale of AFG. Taxes and transaction costs related to the sale are estimated to be
$5.0 million resulting in estimated net proceeds to the Company of $25.9
million. In addition, AFG dividended to PLMI certain assets with a net book
value of $2.7 million immediately prior to the sale.
(D) Management of Investment Programs and Other Transportation Equipment Leasing
Management of Investment Programs
PLM Financial Services, Inc. (FSI), a wholly owned subsidiary of PLMI, along
with its primary subsidiaries, PLM Transportation Equipment Corporation (TEC)
and PLM Investment Management, Inc. (IMI), focus on the management of investment
programs, including a limited liability company, limited partnerships, and
private placement programs, which acquire and lease primarily used
transportation and related equipment. The Company has entered into management
agreements with these programs.
FSI completed the offering of 17 public programs that have invested in
diversified portfolios of transportation and related equipment. From 1986
through April 1995, FSI offered the PLM Equipment Growth Fund (EGF) investment
series. From 1995 through May 1996, FSI offered Professional Lease Management
Income Fund I, a limited liability company (Fund I) with a no front-end fee
structure. In May 1996, the Company announced that it no longer planned to offer
publicly syndicated programs that invest in transportation equipment. The
Company plans to continue to manage the existing programs. Each of the EGF and
Fund I programs is designed to invest primarily in used transportation and
related equipment for lease in order to generate current operating cash flow for
distribution to investors and for reinvestment into additional used
transportation and related equipment. An objective of the programs is to
maximize the value of the equipment portfolio and provide cash distributions to
investors by acquiring and managing equipment for the benefit of the investors.
Cumulative equity raised by PLM International for it's affiliated investment
programs is $1.7 billion.
TEC is responsible for the selection, negotiation and purchase, initial lease
and re-lease, and sale of transportation and related equipment. This process
includes identifying prospective lessees; analyzing lessees' creditworthiness;
negotiating lease terms; and negotiating with equipment owners, manufacturers,
or dealers for the purchase, delivery, and inspection of equipment. TEC or its
wholly owned subsidiary, TEC AcquiSub, Inc., also purchases transportation
equipment for PLM International's own portfolio and on an interim basis prior to
resale to third parties or various affiliated programs at the lower of fair
market value or cost.
IMI manages equipment owned by investors in the various investment programs. The
equipment consists of: aircraft (commercial and commuter), aircraft engines and
rotables, railcars, trailers (highway and intermodal, refrigerated and
nonrefrigerated), marine containers (refrigerated and nonrefrigerated), marine
vessels (dry bulk carriers, marine feeder vessels, and product tankers). IMI is
obligated to invoice and collect rents; arrange for the maintenance and repair
of equipment; arrange for the payment of operating expenses, debt service, and
certain taxes; determine that the equipment is used in accordance with all
operative contractual arrangements; arrange insurance as appropriate; provide or
arrange for clerical and administrative services necessary to the operation of
the equipment; correspond with program investors; prepare quarterly and annual
financial statements and tax information materials; and make distributions to
investors. IMI also monitors equipment regulatory requirements, compliance with
investor program debt covenants and terms of the various investment program
agreements.
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PLM Railcar Management Services, Inc. (RMSI) markets and manages the investment
programs' railcar fleets. RMSI is also involved in negotiating the purchase and
sale of railcars on behalf of IMI and TEC.
PLM Worldwide Management Services Limited (WMS), a wholly owned subsidiary of
PLMI, is a Bermuda-based company that serves as the parent of several PLMI-owned
foreign-operating entities and generates revenue from certain equipment leasing
and brokerage activities.
PLM Railcar Management Services Canada, Limited, a wholly owned subsidiary of
WMS headquartered in Calgary, Alberta, Canada, provides fleet management
services on behalf of IMI to the managed railcars operating in Canada.
Investment in and Management of the EGFs, Other Limited Partnerships, and
Private Placements: FSI earns revenues in connection with its management of the
limited partnerships and private placement programs. Equipment acquisition,
lease negotiation, and debt placement fees are earned through the purchase,
initial lease, and financing of equipment. These fees are recognized as revenue
when FSI has completed substantially all of the services required to earn them,
typically when binding commitment agreements are signed.
Management fees are earned for managing the equipment portfolios and
administering investor programs as provided for in the various agreements, and
are recognized as revenue as they are earned. FSI is also entitled to
reimbursement for providing certain administrative services.
With the termination of syndication activities in 1996, management fees,
acquisition fees, lease negotiation fees, and debt placement fees from the older
programs have decreased and are expected to continue to decrease as the programs
liquidate their equipment portfolios.
In accordance with certain limited partnerships' agreements, four limited
partnerships have entered their liquidation phases and the Company has commenced
an orderly liquidation of the partnerships' assets. Two of the limited
partnerships, PLM Equipment Growth Fund III (EGF III) and PLM Equipment Growth
Fund IV (EGF IV) are expected to be liquidated by the end of 2000. Two of the
limited partnerships, PLM Equipment Growth Fund (EGFI) and PLM Equipment Growth
Fund II (EGFII) will terminate on December 31, 2006, unless terminated earlier
upon the sale of all equipment or by certain other events.
As compensation for organizing a partnership investment program, FSI, as General
Partner, is granted an interest (between 1% and 5%) in the earnings and cash
distributions of the program. FSI recognizes as partnership interests its equity
interest in the earnings of a program, after adjusting such earnings to reflect
the effect of special allocations of the program's gross income allowed under
the respective partnership agreements.
FSI also recognizes as income its interest in the estimated net residual value
of the assets of a partnership as the assets are purchased. The amounts recorded
are based on management's estimate of the net proceeds to be distributed upon
disposition of a partnership's equipment at the end of a partnership's life. As
assets are purchased by a partnership, their residual value is recorded as
partnership interests and other fees at the present value of FSI's share of
estimated disposition proceeds. FSI has not recorded any such residual income
since 1997 at which point the partnerships had invested all original capital. As
required by FASB Technical Bulletin 1986-2, the discount on FSI's residual value
interests is not accreted over the holding period. FSI reviews the carrying
value of its residual interests quarterly or whenever circumstances indicate
that the carrying value of an asset may not be recoverable in relation to
expected future market values for the equipment in which it holds residual
interests. When a limited partnership is in the liquidation phase, distributions
received by FSI are treated as recoveries of its equity interest in the
partnership until the recorded residual is eliminated. Any additional
distributions received are treated as residual interest income.
In accordance with certain investment program and partnership agreements, FSI
received reimbursement for organizational and offering costs incurred during the
offering period, which was between 1.5% and 3% of the equity raised. In the
event organizational and offering costs incurred by FSI, as defined by the
program agreement, exceeded the amounts allowed, the excess costs were
capitalized as an additional investment in the related program and are being
amortized until the projected start of the liquidation phase of the program.
These additional investments are reflected as equity interest in affiliates in
the accompanying consolidated balance sheets.
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Investment in and Management of Limited Liability Company: From 1995 through May
1996, Fund I, a limited liability company with a no front-end fee structure, was
offered as an investor program. FSI serves as the manager for the program. No
compensation was paid to FSI or any of its subsidiaries for the organization and
syndication of interests, the acquisition of equipment, the negotiation of
leases, or the placement of debt in Fund I. FSI funded the cost of organization,
syndication, and offering through the use of operating cash, and has capitalized
these costs as its investment in Fund I, which is reflected as equity interest
in affiliates in the accompanying consolidated balance sheets. FSI is amortizing
its investment in Fund I until the projected start of the liquidation phase of
the program. In return for its investment, FSI is entitled to a 15% interest in
the cash distributions and earnings of Fund I, subject to certain allocation
provisions. FSI's interest in the cash distributions and earnings of Fund I will
increase to 25% after the investors have received distributions equal to their
invested capital. Management fees are earned for managing the equipment
portfolios in Fund I, and are recognized as revenue as they are earned. FSI is
also entitled to reimbursement for providing certain administrative services.
FSI also recognizes as income its interest in the estimated net residual value
of the assets of Fund I as they are purchased. The amounts recorded are based on
management's estimate of the net proceeds to be distributed upon disposition of
the program's equipment at the end of the program. As assets are purchased by
Fund I, these residual-value interests are recorded in partnership interests and
other fees at the present value of FSI's share of estimated disposition
proceeds. As required by FASB Technical Bulletin 1986-2, the discount on FSI's
residual value interests is not accreted over the holding period. FSI reviews
the carrying value of its residual interests quarterly or whenever circumstances
indicate that the carrying value of an asset may not recoverable in relation to
expected future market values for the equipment in which it holds residual
interests. When Fund I is in the liquidation phase, distributions received by
FSI will be treated as recoveries of its equity interest in the program until
the recorded residual is eliminated. Any additional distributions received will
be treated as residual interest income.
Leasing Markets: FSI, on behalf of its affiliated investment programs, leases
its transportation equipment primarily on mid-term operating leases and
short-term rentals. Leases of aircraft are net operating leases. In net
operating leases, expenses such as insurance, taxes, and maintenance are the
responsibility of the lessees. The effect of entering into net operating leases
is to reduce lease rates, compared to full-service lease rates for comparable
lease terms. Per diem rental agreements are used on equipment in the Company's
refrigerated and trailer and container rental operations, in addition to
mid-term operating leases. Railcar leases are full-services leases. Marine
vessel leases may be either net operating leases or full-service leases. In a
full-service lease and a per diem rental, the lessor absorbs the maintenance
costs. This allows the Company to insure proper maintenance of the equipment.
Lessees: Lessees of the investment programs' equipment range from Fortune 1,000
companies to small privately held corporations and entities. All equipment
acquisitions, equipment sales, and lease renewals relating to equipment having
an original cost basis in excess of $1.0 million must be approved by a credit
committee. The credit committee performs an in-depth review of each transaction
and considers many factors, including anticipated residual values from the
eventual sale of the equipment. These residuals may be affected by several
factors during the time the equipment is held, including changes in regulatory
environments in which the equipment is operated, the onset of technological
obsolescence, changes in equipment markets, and perceived values for equipment
at the time of sale. Because the impact of any of these factors is difficult to
forecast with accuracy over extended time horizons, the Company cannot predict
with certainty that the anticipated residual values for equipment selected for
acquisition will actually be realized when the equipment is sold. Deposits,
prepaid rents, corporate and personal guarantees, and letters of credit are
utilized, when necessary, to provide credit support for lessees who do not
satisfy the credit committee's financial requirements.
Competition: When marketing operating leases for transportation assets owned by
the managed investment programs, the Company encounters considerable competition
from lessors offering full payout leases on new equipment. In comparing lease
terms for the same equipment, full payout leases provide longer lease periods
and lower monthly rents than the Company offers. The shorter length of operating
leases also provides lessees with flexibility in their equipment and capital
commitments.
The Company competes with transportation equipment manufacturers who offer
operating leases and full payout leases. Manufacturers may provide ancillary
services that the Company cannot offer; such as specialized maintenance services
(including possible substitution of equipment), warranty services, spare parts,
training, and trade-in privileges.
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<PAGE>
The Company competes with many transportation equipment lessors, including
Penske Corporation, TIP Corporation, GE Capital Railcar Services, Inc., GATX,
Associates Commercial Corporation, Ryder Transportation Services, Inc., XTRA
Corporation, GE Capital Aviation Services, Inc., International Lease Finance
Corporation, Union Tank Car Company, international banks, and certain limited
partnerships, some of which lease the same type of equipment.
Government Regulations: The transportation industry, in which the majority of
the equipment managed by the Company operates, is subject to substantial
regulation by various federal, state, local, and foreign government authorities.
For example, federal regulations issued by the U.S. Department of
Transportation, through the Federal Railroad Administration, implemented in
September 1998, requires the inspection and repair of tanks in Richmond-built
tank cars that were originally equipped with "foam-in-place" insulation,
resulting in additional inspection and repair costs while increasing safety. In
addition, the U.S. Department of Transportation Aircraft Capacity Act of 1990
limits the operation of commercial aircraft in the United States that do not
meet certain noise, aging, and corrosion criteria. Enactments like these could
affect the performance of equipment managed by the Company. It is not possible
to predict the positive or negative effects of future regulatory changes in the
transportation industry.
Transportation Equipment Leasing and Other
The Company owns portable on-site storage units. In January 1997, the Company
entered into an agreement to lease all of its storage equipment assets to a
lessee for a five-year period, with a purchase option when the lease terminates.
The Company had an 80% interest in a company owning 100% of a company located in
Australia that was involved in aircraft brokerage and aircraft spare parts
sales. This company was sold during August 1998.
During the last few years, the Company has exited certain equipment markets by
selling or disposing of underperforming assets including railcars, aircraft, and
intermodal trailers. During 1998, the Company marketed intermodal trailers to
railroads and shippers on short-term arrangements through a licensing agreement
with a short-line railroad. These intermodal trailers were sold in the third
quarter of 1998.
(E) Employees
As of March 17, 2000, the Company and its subsidiaries had 125 employees. None
of the Company's employees are subject to collective bargaining arrangements.
The Company believes that employee relations are good.
ITEM 2. PROPERTIES
As of December 31, 1999, the Company owned trailer equipment and related assets
with an original cost of approximately $103 million, and commercial and
industrial equipment with an original cost of approximately $218 million.
The Company's principal offices are located in leased office space at One
Market, Steuart Street Tower, Suite 800, San Francisco, California. As of
December 31, 1999, the Company or its subsidiaries also leased business offices
in Boston, Massachusetts; Chicago, Illinois; and Calgary, Alberta, Canada. In
addition, the Company or its subsidiaries lease trailer equipment rental yard
facilities in Conley, Georgia; Romeoville, Illinois; Irving, Texas; Dearborn
Heights, Michigan; Indianapolis, Indiana; Kansas City, Kansas; Miami, Florida;
Orlando, Florida; Tampa, Florida; Baltimore, Maryland; Mansfield, Massachusetts;
Denver, Colorado; Bensalem, Philadelphia; San Leandro, California; Fontana,
California; Newark, New Jersey; Houston, Texas; Sumner, Washington; Pagedale,
Missouri; College Park, Georgia; Lemont, Illinois; and Bayonne, New Jersey.
ITEM 3. LEGAL PROCEEDINGS
The Company and various of its wholly owned subsidiaries are named as defendants
in a lawsuit filed as a purported class action in January 1997 in the Circuit
Court of Mobile County, Mobile, Alabama, Case No. CV-97- 251 (the Koch action).
The named plaintiffs are six individuals who invested in PLM Equipment Growth
Fund IV (Fund IV), PLM Equipment Growth Fund V (Fund V), PLM Equipment Growth
Fund VI (Fund VI), and PLM Equipment Growth & Income Fund VII (Fund VII) (the
Partnerships), each a California limited partnership for which the Company's
wholly owned subsidiary, PLM Financial Services, Inc. (FSI), acts as the General
Partner. The complaint asserts causes of action against all defendants for fraud
and deceit, suppression, negligent
-10-
<PAGE>
misrepresentation, negligent and intentional breaches of fiduciary duty, unjust
enrichment, conversion, and conspiracy. 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
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) (the court) based on the court's
diversity jurisdiction. In December 1997, the court granted defendants motion to
compel arbitration of the named plaintiffs' claims, based on an agreement to
arbitrate contained in the limited partnership agreement of each Partnership.
Plaintiffs appealed this decision, but in June 1998 voluntarily dismissed their
appeal pending settlement of the Koch action, as discussed below.
In June 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 Fund V, and filed the complaint
on her own behalf and on behalf of all class members similarly situated who
invested in the Partnerships. The complaint alleges the same facts and the same
causes of action as in the Koch action, plus additional causes of action against
all of the defendants, including alleged unfair and deceptive practices and
violations of state securities law. In July 1997, defendants filed a petition
(the petition) in federal district court under the Federal Arbitration Act
seeking to compel arbitration of plaintiff's claims. In October 1997, the
district court denied the Company's petition, but in November 1997, agreed to
hear the Company's motion for reconsideration. Prior to reconsidering its order,
the district court dismissed the petition pending settlement of the Romei
action, as discussed below. The state court action continues to be stayed
pending such resolution.
In February 1999 the parties to the Koch and Romei actions agreed to settle the
lawsuits, with no admission of liability by any defendant, and filed a
Stipulation of Settlement with the court. The settlement is divided into two
parts, a monetary settlement and an equitable settlement. The monetary
settlement provides for a settlement and release of all claims against
defendants in exchange for payment for the benefit of the class of up to $6.6
million. The final settlement amount will depend on the number of claims filed
by class members, the amount of the administrative costs incurred in connection
with the settlement, and the amount of attorneys' fees awarded by the court to
plaintiffs' attorneys. The Company will pay up to $0.3 million of the monetary
settlement, with the remainder being funded by an insurance policy. For
settlement purposes, the monetary settlement class consists of all investors,
limited partners, assignees, or unit holders who purchased or received by way of
transfer or assignment any units in the Partnerships between May 23, 1989 and
June 29, 1999. The monetary settlement, if approved, will go forward regardless
of whether the equitable settlement is approved or not.
The equitable settlement provides, among other things, for: (a) the extension
(until January 1, 2007) of the date by which FSI must complete liquidation of
the Partnerships' equipment, (b) the extension (until December 31, 2004) of the
period during which FSI can reinvest the Partnerships' funds in additional
equipment, (c) an increase of up to 20% in the amount of front-end fees
(including acquisition and lease negotiation fees) that FSI is entitled to earn
in excess of the compensatory limitations set forth in the North American
Securities Administrator's Association's Statement of Policy; (d) a one-time
repurchase by each of Funds V, VI and VII of up to 10% of that partnership's
outstanding units for 80% of net asset value per unit; and (e) the deferral of a
portion of the management fees paid to an affiliate of FSI until, if ever,
certain performance thresholds have been met by the Partnerships. Subject to
final court approval, these proposed changes would be made as amendments to each
Partnership's limited partnership agreement if less than 50% of the limited
partners of each Partnership vote against such amendments. The limited partners
will be provided the opportunity to vote against the amendments by following the
instructions contained in solicitation statements that will be mailed to them
after being filed with the Securities and Exchange Commission. The equitable
settlement also provides for payment of additional attorneys' fees to the
plaintiffs' attorneys from Partnership funds in the event, if ever, that certain
performance thresholds have been met by the Partnerships. The equitable
settlement class consists of all investors, limited partners, assignees or unit
holders who on June 29, 1999 held any units in Funds V, VI, and VII, and their
assigns and successors in interest.
The court preliminarily approved the monetary and equitable settlements in June
1999. The monetary settlement remains subject to certain conditions, including
notice to the monetary class and final approval by the court following a final
fairness hearing. The equitable settlement remains subject to certain
conditions, including: (a) notice to the equitable class, (b) disapproval of the
proposed amendments to the partnership agreements by less than 50% of the
limited partners in one or more of Funds V, VI, and VII, and (c) judicial
approval of the proposed
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<PAGE>
amendments and final approval of the equitable settlement by the court following
a final fairness hearing. No hearing date is currently scheduled for the final
fairness hearing. 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
incidental to its business. Management does not believe that any of these
actions will be material to the financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Meeting of Stockholders held February 25, 2000, one proposal was
submitted to a vote of the Company's security holders.
The proposal to sell the American Finance Group, Inc. (AFG) was approved.
Votes
For Against Abstentions
---------------------------------------------------------------
4,871,355 26,116 28,013
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<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades under the ticker symbol PLMI on the American
Stock Exchange (AMEX). As of the date of this annual report, the Company has
7,712,609 common shares outstanding and approximately 3,009 shareholders of
record.
Table 3, below, sets forth the quarterly high and low prices of the Company's
common stock for 1999 and 1998, as reported by the AMEX:
TABLE 3
Calendar Period High Low
- -------------------------------------------------------------------------
1999
----
1st Quarter $ 6.250 $ 5.310
2nd Quarter 6.750 5.500
3rd Quarter 5.940 4.500
4th Quarter 6.130 4.440
1998
----
1st Quarter $ 6.250 $ 5.063
2nd Quarter 9.250 5.813
3rd Quarter 7.750 5.438
4th Quarter 7.000 5.063
During 1998, the Company repurchased 106,200 shares for $0.6 million, completing
the $5.0 million common stock repurchases program announced in March 1997.
In 1998, the Company announced that its Board of Directors had authorized the
repurchase of up to $1.1 million of the Company's common stock. During 1998,
170,300 shares were repurchased under this plan for a total of $1.1 million.
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.
During 1998, 63,300 shares had been repurchased under this plan for a total of
$0.4 million. During 1999, 666,779 shares were repurchased under this plan for a
total of $4.0 million.
Additional future repurchases may be made in the open market or through private
transactions.
-13-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
Years ended December 31,
(in thousands of dollars, except per share amounts)
<CAPTION>
1999 1998 1997 1996 1995
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Results of operations:
Revenue $ 37,265 $ 30,120 $ 31,169 $ 39,751 $ 54,748
Income before income taxes 3,832 2,833 375 2,160 7,477
Net Income from continuing operations 2,345 1,679 798 2,968 5,798
Net income from discontinued operations 811 3,178 3,869 1,127 250
Loss on disposition of discontinued
operations (550) -- -- -- --
Net income before cumulative
effect of accounting change 2,606 4,857 4,667 4,095 6,048
Cumulative effect of accounting change (250) -- -- -- --
Net income to common shares 2,356 4,857 4,667 4,095 6,048
Basic earnings per weighted-
average common share outstanding:
Income from continuing operations 0.29 0.20 0.09 0.30 0.50
Income from discontinued operations 0.10 0.38 0.42 0.11 0.02
Loss from disposition of discontinued
operations (0.07) -- -- -- --
Cumulative effect of accounting change (0.03) -- -- -- --
Net income to common shares 0.29 0.58 0.51 0.41 0.52
Financial position:
Total assets $ 152,197 $ 127,546 $ 118,571 $ 120,081 $ 126,209
Long-term secured debt 80,200 56,047 44,844 43,618 47,853
Shareholders' equity 49,413 50,197 46,548 46,320 48,620
</TABLE>
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Trailer Leasing
The Company operates 22 trailer rental facilities that engage in short-term and
mid-term operating leases. Nineteen of these facilities operate predominantly
refrigerated trailers used to transport temperature-sensitive commodities,
consisting primarily of food products. Three facilities operate only dry van
(non-refrigerated) trailers. The Company intends to move virtually all of its
dry van trailers to these facilities. In 1999, the Company opened three new
refrigerated trailer yards. During 1999, the Company purchased $42.5 million of
refrigerated trailers equipment.
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 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 liquidate and the
managed equipment portfolio for these programs becomes permanently reduced.
In accordance with certain limited partnerships' agreements, four limited
partnerships have entered their liquidation phases and the Company has commenced
an orderly liquidation of the partnerships' assets. Two of the limited
partnerships, PLM Equipment Growth Fund III (EGF III) and PLM Equipment Growth
Fund IV (EGF IV) are expected to be liquidated by the end of 2000. Two of the
limited partnerships, PLM Equipment Growth Fund (EGF I) and PLM Equipment Growth
Fund II (EGF II) will terminate on December 31, 2006, unless terminated earlier
upon the sale of all equipment or by certain other events.
The Company will occasionally own transportation equipment prior to sale to
affiliated programs. During this period, the Company earns lease revenue and
incurs interest expense.
Commercial and Industrial Equipment Leasing and Financing
The Company funded and managed long-term direct finance leases, operating
leases, and loans through its American Finance Group, Inc. (AFG) subsidiary.
Master lease agreements were entered into with predominately investment-grade
lessees and served as the basis for marketing efforts. The underlying assets
represented 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 was also engaged in the
management of institutional programs for which it originated leases and received
acquisition and management fees. The Company also earned syndication fees for
arranging purchases and sales of equipment to other unaffiliated third parties.
In October 1999, the Company agreed to sell its commercial and industrial
equipment subsidiary American Finance Group, Inc. (AFG) for approximately $28.5
million, net of transaction costs and income taxes. On February 25, 2000, the
shareholders of PLM International approved the transaction. The sale of AFG was
completed on March 1, 2000, the Company received $29.0 million for AFG. The
Company expects to receive additional proceeds of $1.9 million in the second
quarter of 2000 related to the sale of AFG. Taxes and transaction costs related
to the sale are estimated to be $5.0 million resulting in estimated net proceeds
to the Company of $25.9 million. In addition, AFG dividended to PLMI certain
assets with a net book value of $2.7
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<PAGE>
million immediately prior to the sale.
Accordingly, the Company's commercial and industrial leasing operations are
accounted for as a discontinued operation and prior periods financial statements
have been restated.
Comparison of the Company's Operating Results for the Years Ended December 31,
1999 and 1998
The following analysis reviews the operating results of the Company:
<TABLE>
Revenues
<CAPTION>
1999 1998
--------------------------------
(in thousands of dollars)
<S> <C> <C>
Operating lease income $ 25,755 $ 12,012
Management fees 8,167 9,385
Partnership interests and other fees 657 917
Acquisition and lease negotiation fees 1,354 3,253
Aircraft brokerage and services -- 1,090
(Loss) gain on the sale or disposition of assets, net (49) 1,526
Other 1,381 1,937
-------- --------
Total revenues $ 37,265 $ 30,120
</TABLE>
<TABLE>
The fluctuations in revenues between 1999 and 1998 are summarized and explained
below.
<CAPTION>
1999 1998
----------------------------------
(in thousands of dollars)
<S> <C> <C>
Refrigerated and dry van trailers $24,591 $ 9,743
Lease income from assets held for sale 1,155 412
Intermodal trailers -- 1,706
Other 9 151
------- -------
Total operating lease income $25,755 $12,012
</TABLE>
Operating lease income includes revenues generated from assets held for
operating leases and assets held for sale that are on lease. A $13.7 million
increase in operating lease income during 1999 compared to 1998 was due to the
following:
(a) A $14.8 million increase in operating lease income was generated from
refrigerated and dry van trailers. The increase was due to the addition of
six rental yards in 1998 and an addition of six rental yards in 1999 and
purchase of $34.1 million of trailer equipment in 1998 and purchase of
$42.5 million of trailer equipment in 1999.
(b) A $0.7 million increase in operating lease income was generated from assets
held for sale. During 1999, the Company purchased and sold $21.8 million in
marine containers to affiliated programs at cost, which approximated their
fair market value. The Company earned $1.2 million in operating lease
income on these marine containers during 1999 prior to their sale to the
affiliated programs. During 1998, the Company owned an interest in an
entity owning a marine vessel that generated $0.4 million in operating
lease income. The Company sold its interest in the entity that owned the
marine vessel at cost, which approximated fair market value, to an
affiliated program during 1998.
These increases in operating lease income were partially offset by a $1.8
million decrease in intermodal trailer and other operating lease income due to
the Company's strategic decision to dispose of certain transportation assets and
exit certain equipment markets.
Management fees:
Management fees are, for the most part, based on the gross revenues generated by
equipment under management. Management fees decreased $1.2 million during 1999,
compared to 1998. The decrease in management fees resulted from a net decrease
in managed equipment from the PLM Equipment Growth Fund (EGF) programs and other
managed programs. With the termination of syndication activities in 1996,
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<PAGE>
management fees from the older programs are decreasing and are expected to
continue to decrease as the programs liquidate their equipment portfolios.
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 $1.4 million and $1.7 million for 1999 and 1998,
respectively. In addition, a decrease of $0.8 million in the Company's residual
interests in the programs was recorded during 1999 and 1998. The decrease in the
equity interest in the earnings of the affiliated programs 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. Decreases in the
recorded residual value 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 1999, the Company, on behalf of the EGF programs, purchased
transportation and other equipment, along with beneficial interests in entities
that own marine containers and a commercial aircraft, for $51.7 million. In
1998, $60.4 million in transportation and other equipment and a beneficial
interest in entities that own marine containers and a commercial aircraft were
purchased on behalf of the EGFs. This resulted in a $1.9 million decrease in
acquisition and lease negotiation fees in 1999 compared to 1998. The Company did
not take acquisition and lease negotiation fees on $26.1 million of
transportation and other equipment, as the Company has reached certain fee
limitations for one of its limited partnership programs per the partnership
agreement. Because of the Company's decision to halt syndication of equipment
leasing programs with the close of Fund I in 1996, and because Fund I has a no
front-end fee structure, acquisition and lease negotiation fees will be
substantially reduced in the future.
Aircraft brokerage and services:
Aircraft brokerage and services revenue, which represents revenue earned by
Aeromil Holdings, Inc., the Company's aircraft spare part sales and brokerage
subsidiary, decreased $1.1 million during 1999, compared to 1998, due to the
sale of this subsidiary in August 1998.
(Loss) gain on the sale or disposition of assets, net:
During 1999, the Company recorded a $49,000 net loss on the sale or disposition
of trailers. During 1998, the Company recorded $1.5 million in net gains on the
sale or disposition of assets. Of this gain, $1.0 million resulted from the sale
or disposition of an aircraft engine, a 20% interest in a commuter aircraft, and
trailers, which the company previously leased. Also during 1998, the Company
purchased and subsequently sold railcars to an unaffiliated third party for a
net gain of $0.5 million.
Other:
Other revenues decreased $0.6 million during 1999, compared to 1998. A $0.3
million decrease in other revenue was due to lower data processing fees earned
from the affiliated programs. A $0.2 million decrease in underwriting income
from Transportation Equipment Indemnity Company, Ltd. (TEI) due to TEI providing
less insurance coverage to the investment programs than in previous years. TEI
was liquidated during the first quarter of 2000. A $0.1 million decrease in
miscellaneous income from Aeromil Holdings, Inc. due to the sale of this
subsidiary in August 1998.
<TABLE>
Costs and Expenses
<CAPTION>
1999 1998
------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operations support $14,148 $12,383
Depreciation and amortization 8,097 4,868
General and administrative 6,828 7,624
------- -------
Total costs and expenses $29,073 $24,875
</TABLE>
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<PAGE>
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, increased $1.8 million (14%) for 1999, compared to 1998. Operations
support expense related to the trailer leasing segment increased $6.3 million
due to the expansion of PLM Rental, the addition of a total of 12 rental yards
in 1998 and 1999 and purchase of $76.6 million trailer equipment in 1998 and
1999. This increase was partially offset by a $4.5 million decrease in
operations support expenses related to the management of investment programs and
other transportation equipment leasing segment, and other expenses mainly due 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 $3.2 million (66%) for 1999,
compared to 1998. An increase of $3.8 million was due to an increase in
refrigerated trailer equipment owned and on operating lease. This increase was
partially offset by the reduction of $0.6 million in depreciation expense from
intermodal trailers and other equipment due to the sale of this equipment.
General and administrative:
General and administrative expenses decreased $0.8 million (10%) during 1999,
compared to 1998 due to a $0.6 million decrease in compensation and benefits
expense, a $0.5 million decrease in rent and office related expenses and a $0.1
million decrease in insurance expense. These decreases were due to a decrease in
staffing and office space requirements. These decreases were partially offset by
an increase of $0.4 million in legal fees and professional services related to
the AFG sale.
Other Income and Expenses
1999 1998
--------------------------
(in thousands of dollars)
Interest expense $(5,424) $(3,826)
Interest income 343 941
Other income, net 721 473
Interest expense:
Interest expense increased $1.6 million (42%) during 1999, compared to 1998.
Interest expense increased $1.7 million due to an increase in borrowings to fund
trailer purchases. The increase caused by these borrowings was partially offset
by lower interest expense of $0.1 million resulting from reductions in the
amount outstanding on the senior secured notes.
Interest income:
Interest income decreased $0.6 million (64%) during 1999, compared to 1998. A
decrease of $0.3 million was due to lower cash balances in 1999 compared to
1998. The decrease in interest income was also due to $0.3 million of interest
income recorded in 1998 for a tax refund receivable that had not previously been
recognized. No similar interest income was recorded in 1999.
Other income, net:
Other income in 1999 was $0.7 million, compared to $0.5 million in 1998. Other
income of $0.7 million in 1999 represents $0.8 million of mileage credit income
received from the railroads, partially offset by a litigation settlement of $0.1
million. During 1998, the Company recorded income of $0.7 million related to the
settlement of a lawsuit against Tera Power Corporation and recorded an expense
of $0.3 million related to a legal settlement for the Koch and Romei actions
(refer to Note 11 to the consolidated financial statements).
-18-
<PAGE>
Provision for Income Taxes
For 1999, the provision for income taxes was $1.5 million, representing an
effective rate from continuing operations of 39%. For 1998, the provision for
income taxes was $1.2 million, representing an effective rate from continuing
operations of 41%. The increase in effective rate of 3% was due to a reversal of
investment tax credit taken in 1995. The increase was offset by 1% decrease in
effective rate due to additional tax loss related to Aeromil Holdings, Inc.
which was sold in August 1998.
Net Income from Discontinued Operations
In October 1999, the Company agreed to sell its commercial and industrial
equipment subsidiary American Finance Group, Inc. (AFG) for approximately $28.5
million, net of transaction costs and income taxes. On February 25, 2000, the
shareholders of PLM International approved the transaction. Accordingly, the
Company's commercial and industrial leasing operations are accounted for as a
discontinued operation and prior periods financial statements have been
restated.
Net income from discontinued operations for the year ended December 31, 1999 and
1998 are as follows (in thousands of dollars):
1999 1998
----------------------
Revenues
Operating lease income $ 10,714 $ 7,935
Finance lease income 10,500 12,506
Management fees 743 818
Acquisition and lease negotiation fees -- 721
Gain on sale or disposition of assets, net 2,159 3,167
Other 2,177 1,811
----------------------
Total revenues 26,293 26,958
----------------------
Costs and expenses
Operations support 5,178 4,650
Depreciation and amortization 9,527 6,965
----------------------
Total costs and expenses 14,705 11,615
----------------------
Operating income 11,588 15,343
Interest expense (9,881) (10,782)
Interest income 568 505
Other expenses (975) --
----------------------
Income before income taxes 1,300 5,066
Provision for income taxes 489 1,888
----------------------
Net income from discontinued operations $ 811 $ 3,178
======================
Net income from discontinued operations was $0.8 million for 1999 compared to
$3.2 million for 1998. Income from discontinued operations for 1999 and 1998
included revenues of $26.3 million and $27.0 million, respectively.
Operating lease income from discontinued operations increased to $10.7 million
for 1999, compared to $7.9 million for 1998 due to an increase in the amount of
commercial and industrial equipment owned and on operating leases. Finance lease
income decreased to $10.5 million for 1999 compared to $12.5 million for 1998
due to a decrease in commercial and industrial assets that were on finance
leases.
Acquisition and lease negotiation fees from discontinued operations decreased
$0.7 million for 1999, compared to 1998 due to no equipment being purchased by
AFG for the institutional investment programs during 1999, compared to $26.0
million in 1998, for which the Company earned $0.7 million of acquisition and
lease negotiation fees.
During 1999 and 1998, AFG recorded $2.2 million and $3.2 million in gains on the
sale or disposition of commercial and industrial equipment, respectively. The
decrease in the gain on the sale was due to less equipment being disposed of in
1999 compared to 1998. The original cost of equipment disposed of during 1999
was $59.3 million compared to $98.6 million during 1998.
Operations support from discontinued operations increased to $5.2 million for
1999 compared to $4.7 million for 1998 primarily due to an increase in
compensation expense resulting from a new bonus program initiated in 1999 to
retain AFG employees during AFG's sale. Depreciation and amortization expenses
increased to $9.5 million
-19-
<PAGE>
for 1999, compared to $7.0 million for 1998 due to an increase in commercial and
industrial equipment on operating leases.
Interest expense of AFG decreased to $9.9 million for 1999 compared to $10.8
million for 1998 due to lower average debt outstanding during 1999, compared to
1998. Other expenses of $1.0 million in 1999 represent the expense related to
the proposed initial public offering of AFG. 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.
Loss on disposition of discontinued operations
The Company recorded a $0.6 million loss on disposition of discontinued
operations during 1999, there was no similar loss in 1998.
Cumulative Effect of Accounting Change
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 $0.3 million charge,
net of tax of $0.1 million, related to start-up costs of its commercial and
industrial equipment leasing subsidiary which is being accounted for as
discontinued operations.
Net Income
As a result of the foregoing, 1999 net income was $2.5 million, resulting in
basic and diluted earnings per weighted-average common share outstanding of
$0.32 and $0.31, respectively. For 1998, net income was $4.9 million, resulting
in basic and diluted earnings per weighted-average common share outstanding of
$0.58 and $0.57, respectively.
Comparison of the Company's Operating Results for the Years Ended December 31,
1998 and 1997
The following analysis reviews the operating results of the Company:
Revenues
1998 1997
-------------------------
(in thousands of dollars)
Operating lease income $12,012 $10,602
Management fees 9,385 10,546
Partnership interests and other fees 917 1,306
Acquisition and lease negotiation fees 3,253 2,356
Aircraft brokerage and services 1,090 2,466
Gain on the sale or disposition of assets, net 1,526 1,745
Other 1,937 2,148
-------------------------
Total revenues $30,120 $31,169
The fluctuations in revenues between 1998 and 1997 are summarized and explained
below.
Operating lease income by equipment type:
1998 1997
-------------------------
(in thousands of dollars)
Refrigerated and dry van trailers $ 9,743 $ 5,539
Intermodal trailers 1,706 3,083
Lease income from assets held for sale 412 1,104
Aircraft and aircraft engine 74 655
Marine containers -- 188
Other 77 33
-------------------------
Total operating lease income $12,012 $10,602
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Operating lease income includes revenues generated from assets held for
operating leases and assets held for sales that are on lease. Operating lease
income increased $1.4 million during 1998, compared to 1997, due to a $4.2
million increase in operating lease income which 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.
These increases in operating lease income were partially offset by the
following:
(a) A $2.1 million decrease in marine container, aircraft and aircraft engine,
and intermodal trailer operating lease income due to the Company's
strategic decision to dispose of certain transportation assets and exit
certain equipment markets.
(b) A $0.7 million decrease in operating lease income from assets held for
sale. During 1998, the Company purchased an entity owning a marine vessel
that generated $0.4 million in operating lease income. The Company sold the
entity that owned the marine vessel, at the Company's cost, to affiliated
programs in 1998. During 1997, the Company owned a 47.5% interest in an
entity that owned a marine vessel, which generated $0.5 million in
operating lease income during that year. The Company sold the 47.5%
interest in the entity that owned the marine vessel, at the Company's cost,
to an affiliated program in 1997. In addition, during 1997, the Company
owned one mobile offshore drilling unit, as well as a 25.5% interest in an
entity that owned another mobile offshore drilling unit, which generated
$0.6 million in operating lease income. Both of these drilling units were
sold at the Company's cost to an affiliated program during the first
quarter of 1997.
Management fees:
Management fees are, for the most part, based on the gross revenues generated by
equipment under management. Management fees decreased $1.2 million during 1998,
compared to 1997. The decrease in management fees resulted from a net decrease
in managed equipment from the PLM Equipment Growth Fund (EGF) programs and other
managed 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.
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 $1.7 million and $2.3 million for 1998 and 1997,
respectively. In addition, a decrease of $0.8 million and $1.0 million in the
Company's residual interests in the programs was recorded during 1998 and 1997,
respectively. The decrease in net earnings and distribution levels and residual
interests in 1998, compared to 1997, 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. Decreases in the recorded residual value 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 1998, the Company, on behalf of the EGF programs, purchased
transportation and other equipment, along with beneficial interests in entities
that own marine containers and a commercial aircraft, for $60.4 million,
compared to $42.8 million in transportation equipment and a beneficial interest
in a marine vessel and aircraft purchased on behalf of the EGFs during 1997,
resulting in a $0.9 million increase in acquisition and lease negotiation fees.
Aircraft brokerage and services:
Aircraft brokerage and services revenue, which represents revenue earned by
Aeromil Holdings, Inc., the Company's aircraft spare part sales and brokerage
subsidiary, decreased $1.4 million during 1998, compared to 1997. A decrease of
$1.2 million in spare parts sales was due to decrease demand for this product
and a decrease of $0.2 million was due to the sale of this subsidiary in August
1998.
Gain on the sale or disposition of assets, net:
During 1998, the Company recorded $1.5 million in net gains on the sale or
disposition of assets. Of this gain, $1.0 million resulted from the sale or
disposition of an aircraft engine, a 20% interest in a commuter aircraft, and
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trailers, which the Company previously leased. Also during 1998, the Company
purchased and subsequently sold railcars to an unaffiliated third party for a
net gain of $0.5 million. During 1997, the Company recorded $1.7 million in net
gains on the sale or disposition of assets. Of this gain, $1.1 million resulted
from the sale or disposition of trailers, storage equipment, marine containers,
and commuter aircraft, which the Company previously leased. Also during 1997,
the Company purchased and subsequently sold two commercial aircraft to an
unaffiliated third party for a net gain of $0.8 million. These gains were
partially offset by a $0.2 million adjustment to reduce the estimated net
realizable value of certain trailers.
Costs and Expenses
1998 1997
-------------------------
(in thousands of dollars)
Operations support $12,383 $13,166
Depreciation and amortization 4,868 4,489
General and administrative 7,624 9,536
-------------------------
Total costs and expenses $24,875 $27,191
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, decreased $0.8 million (6%) in 1998, compared to 1997. A $2.6 million
decrease in operations support expenses related to the management of investment
programs and other transportation equipment leasing segment, and other expenses
mainly due 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. These decreases were partially offset
by the increase of $1.8 million in additional costs due to the expansion of PLM
Rental, with the addition of six rental yards in 1998 and new trailers being
purchased for the existing yards.
Depreciation and amortization:
Depreciation and amortization expenses increased $0.4 million (8%) for 1998,
compared to 1997. An increase of $2.1 million was due to an increase in
refrigerated trailer equipment owned and on operating lease. This increase was
partially offset by the reduction in depreciation expense related to aircraft,
marine container, and intermodal trailer portfolios due to the sales and
disposition of this equipment.
General and administrative:
General and administrative expenses decreased $1.9 million (20%) during 1998,
compared to 1997, primarily due to a $0.4 million decrease in compensation and
benefits expense as a result of a decrease in staffing requirements, a $0.5
million decrease in expenses related to the Company's response to
shareholder-sponsored initiatives in 1997, a $0.5 million decrease in legal fees
related to the Koch and Romei actions, a $0.2 million decrease in rent expense,
and a $0.3 million decrease in expenses related to the redemption of stock
options.
Other Income and Expenses
1998 1997
-------------------------
(in thousands of dollars)
Interest expense $(3,826) $(4,572)
Interest income 941 1,311
Other income (expenses), net 473 (342)
Interest expense:
Interest expense decreased $0.7 million (16%) during 1998, compared to 1997,
primarily due to reductions in the amounts outstanding on the senior secured
loan.
Interest income:
Interest income decreased $0.4 million (28%) million during 1998. Interest
income decreased $0.7 million due to decrease in average cash balances in 1998
compared to 1997. This decrease was partially offset by $0.3 million of interest
income related to a tax refund recorded in 1998.
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<PAGE>
Other income (expenses), net:
In 1998, other income was $0.5 million, compared to $0.3 million of expense for
1997. During 1998, the Company recorded income of $0.7 million related to the
settlement of a lawsuit against Tera Power Corporation and recorded expense of
$0.3 million related to a legal settlement for the Koch and Romei actions (refer
to Note 11 to the consolidated financial statements). During 1997, other
expenses of $0.3 million represented an accrual for a litigation settlement that
was paid in 1998.
Provision for Income Taxes
For 1998, the provision for income taxes was $1.2 million, representing an
effective rate from continuing operations of 41%. For 1997, the Company
recognized a benefit for income taxes of $0.4 million. In 1997, the Company's
income tax rate included the benefit of certain income earned from foreign
activities that has been permanently invested outside the United States. The
Company did not earn any income of this type during 1998 (refer to Note 10 to
the consolidated financial statements).
Net Income from Discontinued Operations
In October 1999, the Company agreed to sell its commercial and industrial
equipment subsidiary American Finance Group, Inc. (AFG) for approximately $28.5
million, net of transaction costs and income taxes. On February 25, 2000, the
shareholders of PLM International approved the transaction. Accordingly, the
Company's commercial and industrial leasing operations are accounted for as a
discontinued operation and prior periods financial statements have been
restated.
Net income from discontinued operations for the year ended December 31, 1998 and
1997 are as follows (in thousands of dollars):
1998 1997
----------------------
Revenues
Operating lease income $ 7,935 $ 5,175
Finance lease income 12,506 8,657
Management fees 818 729
Acquisition and lease negotiation fees 721 828
Gain on sale or disposition of assets, net 3,167 1,975
Other 1,811 1,132
----------------------
Total revenues 26,958 18,496
----------------------
Costs and expenses
Operations support 4,650 3,403
Depreciation and amortization 6,965 3,958
----------------------
Total costs and expenses 11,615 7,361
----------------------
Operating income 15,343 11,135
Interest expense (10,782) (5,319)
Interest income 505 324
----------------------
Income before income taxes 5,066 6,140
Provision for income taxes 1,888 2,271
----------------------
Net income from discontinued operations $ 3,178 $ 3,869
======================
Net income from discontinued operations was $3.2 million for 1998 compared to
$3.9 million for 1997. Income from discontinued operations for 1998 and 1997
included revenues of $27.0 million and $18.5 million, respectively.
Operating lease income from discontinued operations increased to $7.9 million
for 1998, compared to $5.2 million for 1997 due to an increase in the amount of
commercial and industrial equipment owned and on operating lease. Finance lease
income increased to $12.5 million for 1999 compared to $8.7 million for 1998 due
to an increase in commercial and industrial assets that were on finance lease.
Acquisition and lease negotiation fees from discontinued operations decreased to
$0.7 million for 1998, compared to $0.8 million for 1997 due to less equipment
being purchased by AFG for the institutional programs. Equipment purchased by
AFG for the institutional programs was $26.0 million during 1998, compared to
$29.6 million for 1997.
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<PAGE>
During 1998 and 1997, AFG recorded $3.2 million and $2.0 million, gain on the
sale or disposition of commercial and industrial equipment, respectively.
Operations support from discontinued operations increased to $4.7 million for
1998 compared to $3.4 million for 1997 primarily due to an increase in
compensation and benefits expense resulting from increased staffing.
Depreciation and amortization expenses increased to $7.0 million for 1998,
compared to $4.0 million for 1997 due to an increase in the commercial and
industrial equipment on operating lease.
Interest expense increased to $10.8 million for 1998 compared to $5.3 million
for 1997 due to higher average debt outstanding during 1998, compared to 1997.
Net Income
As a result of the foregoing, 1998 net income was $4.9 million, resulting in
basic and diluted earnings per weighted-average common share outstanding of
$0.58 and $0.57, respectively. For 1997, net income was $4.7 million, resulting
in basic and diluted earnings per weighted-average common share outstanding of
$0.51 and $0.50, respectively.
Liquidity and Capital Resources
Cash requirements have historically been satisfied through cash flow from
operations, borrowings, and the sale of equipment.
Liquidity in 2000 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 trailer equipment leasing transactions,
additional borrowings, and the proceeds from sale of AFG. Management believes
the Company can accomplish the preceding and that it will have sufficient
liquidity and capital resources for the future. Future liquidity is influenced
by the factors summarized below.
Debt financing:
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 a $24.5 million warehouse credit facility. This
facility is also used to temporarily finance the purchase of trailers prior to
permanent financing being obtained. Borrowings under this facility secured by
trailers are limited to $12.0 million. This facility was amended on December 15,
1999 to extend this facility until June 30, 2000. The Company believes it will
be able to renew this facility on substantially the same terms upon its
expiration.
This facility is shared with Equipment Growth Fund VI (EGF VI), PLM Equipment
Growth & Income Fund VII (EGF VII), and Professional Lease Management Income
Fund I (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. The Company can hold transportation 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. As of December 31, 1999 and
March 17, 2000, the Company had no outstanding borrowings under this facility
and there were no other borrowings outstanding under this facility by any other
eligible borrower. No other eligible borrowers had amounts outstanding.
Senior Secured Notes: On June 28, 1996, the Company closed a floating-rate
senior secured note agreement that allowed the Company to borrow up to $27.0
million within a one-year period. On September 22, 1998, the Company amended the
note agreement to allow the Company to borrow an additional $10.0 million under
the facility during the period from September 22, 1998 through October 15, 1998.
During this period, the Company borrowed $10.0 million. During 1999, the Company
repaid $7.5 million on this facility. The facility bears interest at LIBOR plus
240 basis points. As of December 31, 1999, the Company had $20.7 million
outstanding under this agreement. As of March 17, 2000, the Company had $18.8
million outstanding under this agreement. 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
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outstanding balance of $8.8 million as of December 31, 1999 and March 17, 2000,
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 December 31, 1999, the cash collateral balance for
this loan was $46,000 and is included in restricted cash and cash equivalents on
the Company's balance sheet. During 1999, the Company repaid $5.9 million on
this facility. 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. The senior secured loan agreement contains
financial covenants related to net worth, ratios for leverage, interest coverage
ratios, and collateral coverage. The senior secured loan also contains a
covenant requiring diversification of the equipment in the collateral pool. The
Company is not in compliance with this covenant as virtually all of the pledged
equipment are trailers. The lender has verbally waived this covenant and is
expected to waive it in the future.
Other Secured Debt: As of December 31, 1999, the Company had $36.0 million
outstanding under eight debt agreements, bearing interest from 5.35% to 7.05%,
each with payments of $0.1 million due monthly in advance. The debt is secured
by certain trailer equipment and allows the Company to buy the equipment at a
fixed price at the end of the loan. During 1999, the Company repaid $2.2 million
on the eight debt agreements. The final payments under these eight debt
agreements total $9.1 million due between December 2005 and October 2006.
In the second quarter of 1999, the Company entered into a $15.0 million credit
facility loan agreement bearing interest at LIBOR plus 1.5%. This facility
allows the Company to borrow up to $15.0 million within a one-year period. As of
December 31, 1999 and March 17, 2000, the Company had borrowed $14.7 million
under this facility. Payments of $0.1 million are due quarterly beginning August
2000, with a final payment of $1.4 million due August 2006.
AFG Warehouse Credit Facility: The Company had a warehouse credit facility which
allowed the Company to borrow up to $50.0 million to be used to acquire assets
on an interim basis prior to placement in the Company's nonrecourse
securitization facility, sold to institutional programs or syndication to
unaffiliated third parties. Interest accrued at prime or LIBOR plus 137.5 basis
points, at the option of the Company. On December 10, 1999, the Company amended
AFG's warehouse credit facility to extend the facility to April 21, 2000, and
lowered the amount available to be borrowed from $60.0 million to $50.0 million.
As of December 31, 1999, the Company had $38.2 million in borrowings outstanding
under this facility. The Company was the sole borrower under this facility. This
facility provided borrowings for 100% of the present value of the lease stream
from the assets collateralized in this facility, up to 90% of original equipment
cost of the assets held in this facility. This facility was repaid and
terminated on March 1, 2000 concurrent with the sale of AFG.
Nonrecourse Securitized Debt: The Company had 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 had terms from one to seven years. The facility allowed the
Company to borrow up to $125.0 million through October 10, 2000. Repayment of
the facility matched the terms of the underlying leases. The securitized debt
beard interest equivalent to the lender's cost of funds based on commercial
paper market rates for the determined period of borrowing, plus an interest rate
spread and fees (6.39% and 6.46% as of December 31, 1999 and 1998,
respectively). As of December 31, 1999 and 1998, there were $102.1 million and
$103.6 million in borrowings under this facility, respectively. The Company was
required to hedge at least 90% of the aggregate discounted lease balance (ADLB)
of those leases used as collateral in its nonrecourse securitization facility.
As of December 31, 1999, 90% of the ADLB had been hedged. This debt was repaid
and terminated on March 1, 2000 concurrent with the sale of AFG.
In addition to the $125.0 million nonrecourse debt facility discussed above, the
Company also had $4.4 million in nonrecourse notes payable outstanding at
December 31, 1999 secured by direct finance leases on commercial and industrial
equipment at AFG that had terms corresponding to the note repayment schedule
that began November 1997 and ends March 2001. The notes bore interest from 8.32%
to 9.5% per annum. This debt was repaid and terminated on March 1, 2000
concurrent with the sale of AFG.
Trailer leasing:
The Company operates 22 trailer rental facilities that engage in short-term and
mid-term operating leases. Nineteen of these facilities operate predominantly
refrigerated trailers used to transport temperature-sensitive commodities,
consisting primarily of food products. Three facilities lease only dry van
(non-refrigerated) trailers. The Company intends to move virtually all of its
dry van trailers to these facilities. In 1999, the Company opened
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<PAGE>
three new refrigerated trailer yards. During 1999, the Company purchased $42.5
million in refrigerated trailer equipment and sold refrigerated and dry van
trailers with a net book value of $0.6 million for proceeds of $0.5 million.
Other transportation equipment leasing and other:
During 1999, the Company generated proceeds of $21.8 million from the sale of
assets sold to affiliated programs at cost, which approximated their fair market
value.
Management believes that, through debt financing, possible sales of equipment,
proceeds from the sale of AFG, and cash flows from operations, the Company will
have sufficient liquidity and capital resources to meet its projected future
operating needs.
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 March 17, 2000, 784,080 shares had been repurchased under this plan for a
total of $4.7 million.
Effects of the Year 2000
To date, the Company has not experienced any material Year 2000 issues with
either its internally developed software or purchased software. In addition, to
date the Company has not been impacted by any Year 2000 problems that may have
impacted our customers and suppliers. The amount the Company has spent related
to Year 2000 issues has not been material. The Company continues to monitor its
systems for any potential Year 2000 issues.
Inflation
There was no material impact on the Company's operations as a result of
inflation during 1999, 1998, or 1997.
Geographic Information
For geographic information, refer to Note 17 to the consolidated financial
statements.
Forward-Looking Information
Except for historical information contained herein, the discussion in this Form
10-K contains forward-looking statements that involve risks and uncertainties,
such as statements of the Company's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-K should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-K. The Company's actual results could differ materially from
those discussed here.
Trends
The Company opened six new rental facilities in 1999 and purchased $42.5 million
in refrigerated trailer equipment. The Company expects to continue to purchase
additional refrigerated trailer equipment in the future.
In 1996, the Company announced that it would no longer syndicate equipment
leasing programs. 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
programs liquidate and the managed equipment portfolio becomes permanently
reduced.
In October 1999, the Company announced that the Company had engaged investment
bankers to develop strategic alternatives to maximize shareholder value
including the possible sale of part or all of the Company. In October 1999, the
Company agreed to sell American Finance Group, Inc. (AFG), its commercial and
industrial equipment leasing subsidiary for approximately $28.5 million, net of
transaction costs and income taxes. On February 25, 2000, the shareholders of
PLM International approved the transaction. The sale of AFG was completed on
March 1, 2000, the Company received $29.0 million for AFG. The Company expects
to receive additional proceeds of $1.9 million in the second quarter of 2000
related to the sale of AFG. Taxes and transaction costs related to the sale are
estimated to be $5.0 million resulting in estimated net proceeds to the
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<PAGE>
Company of $25.9 million. In addition, AFG dividended to PLMI certain assets
with a net book value of $2.7 million immediately prior to the sale.
The Company continues to monitor costs and expenses for potential reductions in
all areas.
ITEM 7A. 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,
senior secured notes, and certain other secured debt financing for trailer
equipment 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 2000, $0.1
million in 2001, $36,000 in 2002, and $19,000 in 2003. 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 $0.5
million in 2000, $0.2 million in 2001, $0.1 million in 2002, and $36,000 in
2003.
The Company hedged borrowings under the nonrecourse securitization facility,
effectively fixing the rate of these borrowings. The Company was required to
hedge against the risk of interest rate increased for those leases used as
collateral for its nonrecourse securitization facility, but the Company
generally did not enter into hedges for leases designated for sale to
institutional programs, or for syndication, or for leases of transportation
equipment. Such hedging activities limited the Company's ability to participate
in the benefits of any decrease in interest rates with respect to the hedged
portfolio of leases, but also protected the Company from increases in interest
rates for the hedged portfolio. This debt was repaid and terminated in March 1,
2000 concurrent with the sale of AFG. All of the Company's other financial
assets and liabilities are at fixed rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The response to this item is submitted as a separate section of this report. See
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
As of the filing date of this report, the directors and executive officers of
PLM International (and key executive officers of its subsidiaries) are as
follows:
<CAPTION>
Name Age Position
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert N. Tidball 61 Chairman of the Board, Director, President, and Chief
Executive Officer, PLM International, Inc.
Randall L-W. Caudill 52 Director, PLM International, Inc.
Douglas P. Goodrich 53 Director and Senior Vice President, PLM International, Inc.
Warren G. Lichtenstein 34 Director, PLM International, Inc.
Howard M. Lorber 51 Director, PLM International, Inc.
Harold R. Somerset 64 Director, PLM International, Inc.
Robert L. Witt 60 Director, PLM International, Inc.
Stephen M. Bess 53 President, PLM Investment Management, Inc.; Vice
President and Director, PLM Financial Services, Inc.
Richard K Brock 37 Vice President and Chief Financial Officer, PLM
International, Inc.
Susan C. Santo 37 Vice President, Secretary, and General Counsel, PLM
International, Inc.
</TABLE>
Robert N. Tidball was appointed Chairman of the Board of Directors in August
1997 and President and Chief Executive Officer of PLM International in March
1989. At the time of his appointment as President and Chief Executive Officer,
he was Executive Vice President of PLM International. Mr. Tidball became a
director of PLM International in April 1989, and his current three-year term as
a Class I director expires at the 2000 annual meeting of shareholders of the
Company. Mr. Tidball also serves as the Chairman of the Executive Committee of
the Board of Directors. Between 1987 and 1989, Mr. Tidball held various
executive positions with subsidiaries of PLM International.
Randall L-W. Caudill was elected to the Board of Directors in September 1997 and
his current three-year term as a Class II director expires at the 2001 annual
meeting of shareholders of the Company. He serves on the Executive Committee,
the Compensation Committee and the Audit Committee (Chairman) of the Board of
Directors. Mr. Caudill is President of Dunsford Hill Capital Partners, a San
Francisco-based financial consulting firm serving emerging growth companies.
Prior to founding Dunsford Hill Capital Partners in 1997, Mr. Caudill held
senior investment banking positions at Prudential Securities from 1987 to 1997,
and before that at Morgan Grenfell Inc. and The First Boston Corporation. Mr.
Caudill also serves as a director of SBE, Inc., a publicly-held company, and
various other companies.
Douglas P. Goodrich was elected to the Board of Directors in July 1996, and
appointed Senior Vice President of PLM International in March 1994. Prior to
1994, Mr. Goodrich served as an executive officer of the Company and several of
its subsidiaries since joining the Company in 1987. Mr. Goodrich's current
three-year term as a Class II director expires at the 2001 annual meeting of
shareholders of the Company.
Warren G. Lichtenstein was elected to the Board of Directors in December 1998
and his current three-year term as a Class III director expires at the 2002
annual meeting of shareholders of the Company. Mr. Lichtenstein is the Chief
Executive Officer of Steel Partners L.L.C., the general partner of Steel
Partners II, L.P., which is PLM International's largest shareholder.
Additionally, Mr. Lichtenstein is Chairman of the Board of Directors for each of
Aydin Corporation, a New York Stock Exchange-listed defense electronics concern,
and Gateway Industries, Inc., and serves on the boards of directors of Rose's
Holdings, Inc. and Saratoga Beverage Group, Inc., each a
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<PAGE>
publicly-held company.
Howard M. Lorber was elected to the Board of Directors in January 1999 and his
current three-year term as a Class III director expires at the 2002 annual
meeting of shareholders of the Company. Mr. Lorber is President and Chief
Operating Officer of New Valley Corporation, an investment banking and real
estate concern. He is also Chairman of the Board and Chief Executive Officer of
Nathan's Famous, Inc., a fast food company. Additionally, Mr. Lorber is a
director of United Capital Corporation and Prime Hospitality Corporation, and
serves on the boards of several community service organizations.
Harold R. Somerset was elected to the Board of Directors of PLM International in
July 1994 and his current three- year term as a Class II director expires at the
2001 annual meeting of shareholders of the Company. Mr. Somerset serves on the
Executive Committee, the Compensation Committee (Chairman) and the Audit
Committee of the Board of Directors. From February 1988 to December 1993, Mr.
Somerset was President and Chief Executive Officer of California & Hawaiian
Sugar Corporation (C&H Sugar), a subsidiary of Alexander & Baldwin, Inc. Mr.
Somerset also serves on the boards of directors for various other companies and
organizations, including Longs Drug Stores, Inc., a publicly-held company.
Robert L. Witt was elected to the Board of Directors in June 1997 and his
current three-year term as a Class I director expires at the 2000 annual meeting
of shareholders of the Company. He serves on the Executive Committee, the
Compensation Committee and the Audit Committee of the Board of Directors. Since
January 2000, Mr. Witt has been the President and Chief Executive Officer of
1201 Financial & Insurance Services, Inc., a financial and insurance services
company. He also has been a principal with WWS Associates, a consulting and
investment group specializing in start-up situations and private organizations
about to go public, since 1993. Prior to that, he was Chief Executive Officer
and Chairman of the Board of Hexcel Corporation, an international advanced
materials company with sales primarily in the aerospace, transportation and
general industrial markets. Mr. Witt also serves on the boards of directors for
various other companies and organizations.
Stephen M. Bess was appointed a Director of PLM Financial Services, Inc., a
subsidiary of PLM International, in July 1997. Mr. Bess has served as President
of PLM Investment Management, Inc., an indirect wholly-owned subsidiary of PLM
International, since August 1989, and as an executive officer of certain other
of PLM International's subsidiaries or affiliates since 1982.
Richard K Brock was appointed Vice President and Chief Financial Officer of PLM
International in January 2000, having served as Acting Chief Financial Officer
since June 1999 and as Vice President and Corporate Controller of PLM
International since June 1997. Prior to June 1997, Mr. Brock served the Company
as an accounting manager beginning in September 1991 and as Director of Planning
and General Accounting beginning in February 1994.
Susan C. Santo was appointed Vice President, Secretary, and General Counsel of
PLM International in November 1997. She has worked as an attorney for PLM
International since 1990 and served as its Senior Attorney from 1994 until her
appointment as General Counsel.
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ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended December 31, 1999,
1998 and 1997, a summary of compensation awarded to, earned by or paid to the
Company's Chief Executive Officer and each of its four other most highly
compensated executive officers (together, the "named executive officers") at
December 31, 1999:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
Restricted Securities
Stock Underlying All Other
Salary(1) Bonus (2) Awards (3) Options (4) Compensation(5)
Name and Principal Position Year ($) ($) ($) (#) ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert N. Tidball 1999 323,400 -- -- -- 5,304
President, Chief 1998 311,000 180,000 80,000 110,000 5,971
Executive Officer 1997 300,000 172,500 76,670 -- 6,682
Douglas P. Goodrich 1999 205,333 -- -- -- 5,304
Senior Vice President 1998 197,733 80,000 106,672 85,000 5,971
1997 190,000 75,000 100,000 -- 6,682
Donald R. Dugan(6) 1999 188,817 202,250 -- -- 5,304
President, American 1998 179,733 50,000 -- 50,000 5,971
Finance Group, Inc. 1997 150,000 105,000 46,669 -- 6,682
Stephen M. Bess 1999 183,417 42,560 -- -- 5,304
President, PLM Investment 1998 176,417 52,500 23,334 20,000 5,971
Management, Inc. 1997 170,000 52,500 23,334 -- 6,682
Susan C. Santo 1999 176,417 40,000 -- -- 5,304
Vice President, General 1998 170,000 80,000 -- 40,000 5,971
Counsel and Secretary 1997 115,167 25,000 -- -- 6,682
<FN>
(1) Amounts shown do not include the cost to the Company of personal benefits,
the value of which did not exceed the lesser of $50,000 or 10% of the
aggregate salary and bonus compensation for each named executive officer.
(2) Bonus compensation reflects the amount earned in the designated year, but
paid in the immediate subsequent year, except that, Mr. Bess, as the
officer responsible for marine container transactions for the Company's
equipment acquisition subsidiary, PLM Transportation Equipment Corporation,
was paid $32,560 in 1999 pursuant to a commission incentive plan based on
the dollar amount of certain containers purchased in 1998/1999.
(3) Restricted stock (also referred to as "Bonus Shares") was awarded pursuant
to the 1996 PLM International, Inc. (Mandatory Management Stock Bonus Plan.
Bonus Shares were granted in substitution of cash bonus compensation earned
in the designated year, though shares were actually granted in January of
the subsequent year. The number of Bonus Shares granted equals the amount
of cash bonus awarded by the Board of Directors to a designated recipient,
multiplied by an allocation ratio applicable to such recipient, multiplied
by 1.334 (to compensate recipients for the restricted nature of the shares
and risk of forfeiture) divided by the fair market value of the Company's
common stock on the effective date of grant. The fair market value is equal
to the closing price of the Company's common stock on the effective date of
grant or the immediately preceding trading day if the grant day was a
non-trading day. Cash bonus compensation earned in a designated year is
reduced by an amount equal to the amount of cash bonus earned in the
designated year multiplied by the allocation ratio applicable to the
recipient. Bonus Shares granted pursuant to this plan generally vest
ratably over three years, except that in connection with the Company's sale
of all of the issued and outstanding common stock of American Finance
Group, Inc. on March 1, 2000, the Bonus Shares granted to Mr. Dugan were
fully vested as of March 1, 2000. Non-vested Bonus Shares are subject to
forfeiture in the event the recipient voluntarily terminates his or her
employment with the Company. The
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allocation ratio for the Bonus Shares granted in substitution of cash bonus
earned in 1998 and 1997, the resulting awards of Bonus Shares, and the
reduction in cash bonus are as follows for each of the named executive
officers:
Bonus Shares Awarded Reduction in Cash Bonus
Allocation --------------------- ---------------------
Name Ratio 1998 1997 1998 1997
---- ----- ---- ---- ---- ----
Robert N. Tidball 25% 13,606 14,960 $60,000 $57,500
Douglas P. Goodrich 50% 18,141 19,513 80,000 75,000
Donald R. Dugan 25% -- 9,106 -- 35,000
Stephen M. Bess 25% 3,968 4,553 17,500 17,500
(4) Comprised of options granted effective May 12, 1998, pursuant to the
Company's 1998 Management Stock Compensation Plan, which was approved by
the Board of Directors on May 12, 1998. The options have an exercise price
of $6.813 per share. All options vest ratably over three years and expire
on May 12, 2008, except that in connection with the Company's sale of all
of the issued and outstanding common stock of American Finance Group, Inc.
on March 1, 2000, the options granted to Mr. Dugan were fully vested as of
March 1, 2000.
(5) Includes for 1999, contributions made by the Company pursuant to the PLM
International, Inc. Profit Sharing and 401(k) Plan to each of the named
executive officer's accounts as follows: $4,000 in 401(k) matching
contributions and $731 in profit-sharing contributions (an equal amount of
profit-sharing contributions were made to the retirement accounts of each
of the Company's eligible employees). Also includes for each named
executive officer Company-paid premiums in the amount of $573 for term life
insurance.
(6) On March 1, 2000, the Company sold all of the issued and outstanding common
stock of American Finance Group, Inc. to Guaranty Federal Bank, FSB.
Accordingly, Mr. Dugan is no longer employed by the Company or any of its
subsidiaries.
</FN>
</TABLE>
STOCK OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the exercise of stock
options during the last fiscal year by each of the named executive officers and
the December 31, 1999 value of unexercised options held by each of the named
executive officers as of such date:
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options at Options at
December 31, 1999 December 31, 1999
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (1) Realized Unexercisable Unexercisable(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert N. Tidball (3) 65,000 $243,750 121,666/73,334 $304,375/--
Douglas P. Goodrich(4) 10,000 36,250 83,333/56,667 156,875/--
Donald R. Dugan, Jr.(5) -- -- 46,667/33,333 78,750/--
Stephen M. Bess (6) -- -- 16,667/13,333 38,750/--
Susan C. Santo (7) -- -- 13,333/36,667 --/--
<FN>
- ---------------------
(1) All of the options exercised were granted in 1992 and had an exercise price
of $2.00 per share.
(2) Options granted in 1992 have an exercise price of $2.00; options granted in
1996 have an exercise price of $3.25; and options granted in 1998 have an
exercise price of $6.813. The closing price of the Company's common stock
on the American Stock Exchange on December 31, 1999 was $5.875 per share.
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<PAGE>
(3) On December 31, 1999, Mr. Tidball had outstanding options granted in 1992
to purchase 65,000 shares of common stock, options granted in 1996 to
purchase 20,000 shares of common stock and options granted in 1998 to
purchase 110,000 shares of common stock.
(4) On December 31, 1999, Mr. Goodrich had outstanding options granted in 1992
to purchase 10,000 shares of common stock, options granted in 1996 to
purchase 45,000 shares of common stock and options granted in 1998 to
purchase 85,000 shares of common stock.
(5) On December 31, 1999, Mr. Dugan had outstanding options granted in 1996 to
purchase 30,000 shares of common stock and options granted in 1998 to
purchase 50,000 shares of common stock.
(6) On December 31, 1999, Mr. Bess had outstanding options granted in 1992 to
purchase 10,000 shares of common stock and options granted in 1998 to
purchase 20,000 shares of common stock.
(7) On December 31, 1999, Ms. Santo had outstanding options granted in 1998 to
purchase 40,000 shares of common stock.
</FN>
</TABLE>
PENSION BENEFITS
The following table sets forth certain information regarding annual benefits
payable in specified compensation and years of service classifications under the
Company's nonqualified supplemental retirement income plan:
Average Annual Compensation Annual Payout to be Received in Each of Five
During Last Five Years of Years Following Later of Termination of
Employment(1,2) Employment or Attainment of Age 60
- --------------------------------------------------------------------------------
Credited Years of Service(3)
-----------------------------------------------
5 10 15
-------- -------- --------
$100,000 $ 25,000 $ 50,000 $ 75,000
140,000 35,000 70,000 105,000
180,000 45,000 90,000 135,000
220,000 55,000 110,000 165,000
260,000 65,000 130,000 195,000
300,000 75,000 150,000 225,000
400,000 100,000 200,000 300,000
(1) The Company's nonqualified supplemental retirement income plan provides
that an executive participating in the plan is generally entitled to
receive for a period of 60 months, commencing upon the later of attainment
of age 60 or termination of employment, an amount equal to the product of
(a) 5%, (b) number of years of employment with PLM International, its
affiliates or predecessors (up to a maximum of 15 years) and (c) average
monthly base compensation during the most recent consecutive months of
employment (not to exceed 60) preceding termination of employment.
Obligations under the plan are funded by general corporate funds and
insurance policies on the lives of the participants. For purposes of
computing benefits under the plan, compensation includes only salaries and
wages and does not include bonuses. Benefits payable are not subject to any
deduction for social security or other offset amounts. The annual base
compensation 60-month averages at December 31, 1999 for the named executive
officers were as follows: Mr. Tidball, $306,800; Mr. Goodrich, $194,200;
Mr. Bess, $166,467; and Ms. Santo, $117,694.
(2) Benefits under the plan generally vest over a five-year period. Vesting is
accelerated immediately to 100% in the event of a change in control of the
Company, and the participating executive is deemed to have attained age 60
prior to such change in control. The Board of Directors has discretion to
accelerate the date for making payments under the plan in the event of a
change in control.
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<PAGE>
(3) Years of credited service for the named executive officers are as follows:
Years
-----
Robert N. Tidball 14
Douglas P. Goodrich 12
Stephen M. Bess 17
Susan C. Santo 9
COMPENSATION OF DIRECTORS
Each non-employee director of the Company (Messrs. Caudill, Lichtenstein,
Lorber, Somerset, and Witt) receives a monthly retainer of $2,000 and a
per-meeting fee of $1,000 for meetings of the Board of Directors and the
Executive Committee attended in person ($250 for meetings attended by
telephone). A fee of $250 per meeting is paid to all non-employee directors for
meetings of all other committees of the Board of Directors.
Additionally, each non-employee director of the Company is entitled to
participate in the Directors' 1995 Nonqualified Stock Option Plan (the "1995
Directors' Plan") which was adopted by the Board of Directors on January 25,
1995, and the Directors' 2000 Nonqualified Stock Option Plan (the "1995
Directors' Plan") which was adopted by the Board of Directors on February 1,
2000. The Company reserved 120,000 shares with respect to which options may be
granted under the 1995 Directors' Plan, and 70,000 shares with respect to which
options may be granted under the 2000 Directors' Plan. The 1995 Directors' Plan
provides that each non-employee director of the Company is granted on February 1
of each year options to purchase 10,000 shares of common stock of the Company,
or, if the number of shares available for grant is insufficient, options are
granted pro rata to each eligible director to the extent shares are available
under the Directors' 1995 Plan. On February 1, 2000, 10,000 shares were
available for grant under the Directors' 1995 Plan, and each of the five
non-employee directors of the Company were granted options to purchase 2,000
shares of common stock. The 2000 Directors' Plan provides for a grant on
February 1, 2000 to each non-employee director of the Company, an option to
purchase 8,000 shares of common stock. Both directors' plans provide that the
exercise price of options granted under such plans shall be the closing price of
the common stock on the American Stock Exchange as of the date as of which the
options were granted, that such options generally vest pro rata over a
three-year period, and that vested options held by a non-employee director who
ceases to be a director of the Company may be exercised within six months after
ceasing to be a director. Accordingly, on February 1, 2000, each non-employee
director of the Company was granted options to purchase a total of 10,000 shares
of common stock of the Company at an exercise price of $6.188 per share.
AGREEMENTS WITH EXECUTIVE OFFICERS
The Company and its Chief Executive Officer and four other named executive
officers are parties to employment agreements, termination of employment
arrangements and/or change in control arrangements as further described herein.
The Company has entered into an Employment Agreement (the "Employment
Agreement") with each of Robert N. Tidball, Douglas P. Goodrich, Stephen M. Bess
and Susan C. Santo. The Employment Agreements are designed to encourage those
employees to remain in the employ of the Company and to reinforce their
continued attention and dedication to their duties in the event of an
unsolicited attempt to take over control of the Company. The Employment
Agreements have three-year terms from the date on which they were entered into
(the "Original Term") and are automatically extended for one additional year on
each succeeding anniversary thereof unless earlier terminated by the Company or
the employee. Each Employment Agreement contains provisions governing salary,
bonus and participation in Company benefit plans, and provides in certain events
for payments to the employee upon termination of his or her employment with the
Company.
The Employment Agreements provide that, if, following an unsolicited change in
control, the Company terminates the employee other than for cause or if the
employee terminates his or her employment for good reason (including, without
limitation, any demonstrable and material diminution of the compensation,
duties, responsibilities, authority or powers of the employee), then the Company
is required to pay the employee the sum of (a) the employee's annual base
compensation rate then in effect multiplied by the number of years in the
Original Term (up to 2.99 years), (b) an amount equal to the greater of the
amount paid and/or payable to or due the employee under the Company's bonus or
incentive plans (i) for the Company's fiscal year prior to the fiscal year of
any change in control or (ii) for the immediately preceding fiscal year,
multiplied by the number of years in the Original Term (up to 2.99 years) and
(c) all other cash benefits due the employee. In addition if, following an
unsolicited change in control, the employee terminates his or her employment for
good reason, all options to
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<PAGE>
purchase stock of the Company granted to such employee immediately become fully
vested and any restrictions on the exercise of such options lapse.
For purposes of the Employment Agreements, a change in control is generally
defined to include, among other things, (a) any Person acquiring Beneficial
Ownership (as such terms are defined in the Employment Agreements) of 36% or
more of the combined voting power of the Company's securities, (b) any Person,
who did not have Beneficial Ownership of 5% or more of the voting power of the
Company's securities on the date the Employment Agreement was entered into,
subsequently acquiring Beneficial Ownership of more than 15% of such voting
power or (c) a change in the Board of Directors of the Company due to proxy
solicitations or other actions to influence voting at a meeting of stockholders
of the Company by a Person who has Beneficial Ownership of 5% or more of the
voting power of the Company, and which causes the Continuing Directors (as
defined below) to cease to be a majority of the Board of Directors, unless such
event(s) have been approved by a majority of the Continuing Directors.
"Continuing Directors" are those who (a) were directors on the date the
Employment Agreement was entered into, (b) were appointed or recommended for
election by a majority of those who were directors on such date, or (c) were
appointed or recommended by a majority of those directors described in (a) and
(b) above.
The Employment Agreements are structured so that no excess payments within the
meaning of Section 280G of the Code will be made to the employee. If a change in
control as defined in the Employment Agreements occurred on the date hereof and
the employment of each of the following named executive officers was immediately
terminated without cause, based on certain assumptions, the following would be
the amounts of post- employment compensation benefits provided under the
Employment Agreements: Mr. Tidball, $1,007,510; Mr. Goodrich, $640,577; Mr.
Bess, $572,166; and Ms. Santo, $669,999.
The Company has also entered into a Severance Agreement (the "Severance
Agreement") with each of Robert N. Tidball, Douglas P. Goodrich and Susan C.
Santo. The Severance Agreements were entered into in connection with the Board
of Director's decision to explore strategic and financial alternatives for
maximizing shareholder value, including a transaction or transactions
representing a merger, consolidation, business combination or sale of all or a
substantially all of the business, securities or assets of the Company, and are
designed to encourage those employees to remain in the employ of the Company and
to act vigorously and constructively in connection with any negotiations being
conducted regarding any such transaction. The Severance Agreements have a term
from January 1, 2000 through December 31, 2000 so long as no change in control
has occurred on or before December 31, 2000, or, in the event a change in
control has occurred prior to December 31, 2000, until the employee's employment
has been terminated by the Company or the employee, and all obligations under
the Severance Agreement have been met.
For purposes of the Severance Agreements, a change in control is generally
defined to mean (a) any Person acquiring Beneficial Ownership (as such terms are
defined in Rule 13d-3 of the Exchange Act) of more than 50% of the combined
voting power of the Company's securities, (b) a merger, consolidation or
reorganization involving the Company, (c) the sale or other disposition of the
Company's subsidiary American Finance Group, Inc. followed by the sale or other
disposition of the Company's trailer leasing business, (d) the sale or other
disposition of all or substantially all of the assets of the Company (excluding
the sales or dispositions referred to in (c)), or a sale or other disposition of
the Company's subsidiary PLM Financial Services, Inc., or (e) the stockholders
of the Company approve a plan of dissolution or liquidation of the Company.
Upon the occurrence of a change in control, each Severance Agreement provides
for the acceleration and full vesting of all stock grants and options to
purchase stock of the Company granted to the employee, that any restrictions on
the grants and options shall lapse, and that the employee may elect that the
Company "cash-out" the grants and/or options by paying the employee the value of
the grants and/or options. Additionally, upon a change in control, the employee
is deemed to have attained age 60 prior to the change in control and to be fully
vested under and for the purposes of the Company's nonqualified supplemental
retirement income plan. Each of the Severance Agreements also provides that,
following a termination which requires the payment of severance (as described
below), the employee may elect that the Company pay to employee in a lump sum
the present value of the total amount of any payments due to be paid pursuant to
the Company's nonqualified supplemental retirement income plan.
The Severance Agreements entered into with each of Mr. Tidball and Mr. Goodrich
provide that, in the event employee's employment with the Company is terminated
at will by either the Company or the employee following a change in control
consisting of the sale or other disposition of the Company's subsidiary American
Finance Group, Inc. followed by the sale or other disposition of the Company's
trailer leasing business, or without cause by the Company or for good reason by
the executive following any other change in control transaction, then,
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<PAGE>
following any such termination, Mr. Tidball will be paid a severance amount
equal to three years of his annual base salary and Mr. Goodrich will be paid a
severance amount equal to two years of his annual base salary.
The Severance Agreement entered into with Ms. Santo provides that in the event
her employment with the Company is terminated without cause by the Company or
for good reason by Ms. Santo following a change in control transaction, then,
following any such termination, Ms. Santo will be paid a severance amount equal
to one year of her annual base salary.
The Severance Agreements are structured so that no excess payments within the
meaning of Section 280G of the Code will be made to the employee pursuant to the
Severance Agreements. Additionally, if a change in control transaction as
defined in the Severance Agreements occurs, and the transaction is also deemed
to be a change in control as defined under the Employment Agreements, then the
terms and conditions of the Employment Agreements govern and supercede the
Severance Agreements.
If a change in control as defined in the Severance Agreements occurred on the
date hereof and the employment of each of the following named executive officers
was immediately terminated without cause, based on certain assumptions, the
following would be the amounts of post-employment compensation benefits provided
under the Severance Agreements: Mr. Tidball, $1,010,880; Mr. Goodrich, $428,480;
and Ms. Santo, $184,080.
The Company's wholly owned subsidiary PLM Financial Services, Inc. entered into
a Severance Agreement (the "Agreement") with Stephen M. Bess in December 1996,
in order to provide incentives to retain Mr. Bess. The Agreement provides that
Mr. Bess will be paid a severance amount equal to twenty four months of his base
salary in the event he is terminated from employment with PLM Financial
Services, Inc. for any reason other than a resignation, cause or disability. If
Mr. Bess was immediately terminated without cause, based on certain assumptions,
he would be paid $16,666 per month for 24 months under the Agreement.
The Company's former wholly owned subsidiary American Finance Group, Inc.
("AFG") entered into an Employment Agreement (the "AFG Agreement") with Donald
R. Dugan, Jr. in January 1999, with a term through June 30, 2000, in order to
provide incentives to retain Mr. Dugan during the time that the Company explored
strategic alternatives for AFG. The AFG Agreement contains provisions governing
salary, bonus and participation in AFG benefit plans. The AFG Agreement provides
that Mr. Dugan would be paid a retention bonus of $47,250 in the event that he
remained employed by AFG through December 31, 1999 so long as no change in
control of AFG occurred during that period, or for six months following a change
in control of AFG occurring on or before December 31, 1999. Mr. Dugan was paid
this retention bonus in January 2000 because there was no change in control of
AFG as of December 31, 1999. The Agreement also provides that, in the event Mr.
Dugan's employment is terminated by AFG without cause or by Mr. Dugan for good
reason on or before June 30, 2000, then he will be paid a severance amount equal
to two years of his annual base salary. The Company has no further obligations
under the AFG Agreement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for advising and recommending to the Board of Directors of the
Company policies governing executive compensation and the Company's incentive
compensation plans. The Company's executive compensation programs are designed
to attract and retain executives capable of leading the Company to meet its
business objectives and to motivate them to enhance long-term stockholder value.
The Committee is also responsible for determining the annual compensation levels
for the Company's Chief Executive Officer and other executive officers, subject
to review by the disinterested members of the Board of Directors. The Committee
reviews the policies and specific programs annually to determine if they are
meeting the goals of attracting and retaining qualified executives.
Compensation for the Company's executive officers may consist of both fixed
(base salary) and variable (incentive) compensation elements, including annual
cash incentives, stock option grants and stock grants. These elements are
designed to operate on an integrated basis and together comprise total
compensation value. Base compensation for the executive officers is determined
at the beginning of each fiscal year based, in part, on an evaluation of the
individual's performance for the prior fiscal year, as well as reference to
compensation data included in a variety of salary surveys. Incentive
compensation for the executive officers for each fiscal year is
- -----------------------
(1) The material in this report is not "soliciting material," is not deemed
filed with the Securities and Exchange Commission and is not to be
incorporated by reference in any filing of the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended.
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<PAGE>
determined after the end of the fiscal year, based on individual and Company
performance as compared to goals set at the beginning of the year. The
disinterested members of the Board of Directors review the Committee's
recommendations regarding the compensation of executive officers.
Base Salary
Base salary levels of the Company's executive officers other than the Chief
Executive Officer are largely determined based on the executive's performance,
as reflected by the appraisal and recommendation of the Chief Executive Officer
after he has completed written performance reviews of the executives. These
reviews are designed to assess the extent to which each executive has met
certain goals which are established at the beginning of the year by the Chief
Executive Officer and are tied to the functional responsibilities of each
executive. Individual goals may include objective and subjective factors, such
as improving the performance of assets managed by the executive, successful
acquisitions or sales, management of operating expenses, development of
leadership skills, and personal training and education. The base salary level of
the Chief Executive Officer is determined by the Committee on an annual basis
based on the Committee's evaluation of his performance, including factors such
as leadership and strategic planning for the future of the Company, and the
financial results of the Company.
Additionally, from time to time, for comparison purposes, the Committee reviews
salary surveys complied by the Company. These surveys include information about
comparable salary levels from outside compensation consultants and/or
compensation information for companies located in the San Francisco Bay area,
companies with total revenues of between $100 to $650 million, companies with a
gross leasing portfolio between $500 million and $1 billion, companies in the
transportation leasing and financial services industries, and companies with
less than 500 employees. The companies included in the salary comparisons are
generally not the same as the companies included in the index in the stock
performance graph included below in this report on Form 10-K. The Committee
believes that the Company's most direct competitors for executive talent in the
San Francisco Bay Area are not necessarily the same companies to which the
Company would be compared for stock performance purposes.
In determining base compensation for the Company's named executive officers
other than the Chief Executive Officer for 1999, the Committee considered the
1998 compensation of each executive, along with the individual performance of
each executive, in order to determine the amount, if any, of a base salary
increase. The Summary Compensation Table above shows, under the caption
"Salary," the base compensation for the named executive officers in 1999.
Mr. Tidball's base compensation was set at $324,000, effective February 1, 1999.
Mr. Tidball's annual base salary was in part determined based on the Committee's
evaluation of his performance during fiscal year 1998. The Committee also took
into consideration the fact that Mr. Tidball's base compensation was
approximately 21% less than the average compensation of chief executive officers
as reflected in the most recent salary survey conducted by the Company in
December 1997.
Annual Cash Incentives
The annual cash incentive is designed to provide short-term (one-year)
incentives to executive officers. Generally, the cash incentive is paid from a
senior management bonus pool established by the Committee at the beginning of
each year based on a targeted level of profitability which is measured by an
increase in earnings compared to the prior fiscal year. The Committee retains
the right to increase or decrease the size of the bonus pool during the year.
Consideration of whether the Company has met the targeted level of profitability
is a significant factor in determining the amount, if any, of cash incentives to
be paid.
Incentive awards for the Company's executive officers participating in the
single bonus pool (other than the Chief Executive Officer) are also based on the
achievement of predetermined individual performance goals. Specific individual
goals for each executive are established at the beginning of the year by the
Chief Executive Officer and are tied to the functional responsibilities of each
executive. Individual goals may include objective and subjective factors, such
as improving the performance of assets managed by the executive, successful
acquisitions or sales, management of operating expenses, development of
leadership skills, and personal training and education. No specific weights are
assigned to the individual goals. In fiscal 1999, certain of the individual
performance targets were met, but the targeted level of profitability for the
Company was not. The Summary Compensation Table above shows, under the caption
"Bonus," incentive awards for the named executive officers for 1999.
-36-
<PAGE>
In establishing the annual cash incentive for the Chief Executive Officer for
1999, the Committee primarily considered the profitability of the Company in
1999. The Compensation Committee did not recommend an incentive bonus for the
Chief Executive Officer in 1999, as reflected in the Summary Compensation Table
above under the caption "Bonus," because the Company did not meet its targeted
level of profitability.
The Members of the Compensation Committee
HAROLD R. SOMERSET, Chairman
RANDALL L-W. CAUDILL
ROBERT L. WITT
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
The following stock performance graph compares the performance of the Company's
common stock to the S&P 500 Index and the Russell 2000 Index, an index of small
market capitalization companies. The Company believes it cannot reasonably
identify a peer group of issuers leasing similar portfolios of diversified
transportation equipment on operating leases, numerous other equipment types of
equipment on finance leases and refrigerated trailers on a short term basis.
Therefore, the Company has used an index composed of companies with similar
market capitalizations. The graph assumes that the value of the investment in
the Company's common stock and each index was $100 on December 31 of the
applicable year.
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
December 1994:
PLM INTERNATIONAL, INC.: $100
S & P 500: $100
RUSSEL 2000: $100
December 1995
PLM INTERNATIONAL, INC.: $130
S & P 500: $138
RUSSELL 2000: $127
December 1996
PLM INTERNATIONAL, INC.: $117
S & P 500: $169
RUSSELL 2000: $155
December 1997
PLM INTERNATIONAL, INC.: $196
S & P 500: $226
RUSSELL 2000: $204
December 1998
PLM INTERNATIONAL, INC.: $231
S & P 500: $290
RUSSELL 2000: $191
December 1999
PLM INTERNATIONAL, INC.: $205
S & P 500: $351
RUSSELL 2000: $188
* $100 INVESTED ON 12/31/94 IN STOCK OR INDEX INCLUDING REINVESTMENT OF
DIVIDENDS (FISCAL YEAR ENDING DECEMBER 31.)
-37-
<PAGE>
[GRAPH OMITTED]
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the common stock by (a) each stockholder
known by the Company to be the beneficial owner of more than 5% of the common
stock, (b) each of its directors and the named executive officers identified in
the Summary Compensation Table below, and (c) all directors and executive
officers of the Company as a group.
<CAPTION>
Number of Shares of Percent of Common
Name and Address of Beneficial Owner Common Stock(1) Stock(1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Steel Partners II, L.P(2) ................... 1,337,300 17.34%
750 Lexington Avenue, 27th Floor
New York, New York 10022
-38-
<PAGE>
Dimensional Fund Advisors, Inc.(3) .......... 501,600 6.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Oak Forest Investment Management, Inc.(4) ... 464,200 6.02%
6701 Democracy Blvd., Ste. 402
Bethesda, MD 20817
Stephen M. Bess(5) .......................... 53,354 *
Randall L-W. Caudill(6) ..................... 12,000 *
Donald R. Dugan(7) .......................... 89,106 1.14%
Douglas P. Goodrich(8) ...................... 212,143 2.71%
Warren G. Lichtenstein (9) .................. 1,340,633 17.37%
750 Lexington Avenue, 27th Floor
New York, New York 10022
Howard M. Lorber(10) ........................ 3,333 *
Susan C. Santo(11) .......................... 29,166 *
Harold R. Somerset(12) ...................... 46,000 *
Robert N. Tidball(13) ....................... 377,338 4.83%
Robert L. Witt(14) .......................... 15,000 *
All directors and executive officers as a
group (11 people)(15) ....................... 2,211,156 27.16%
<FN>
- -----------------------
* Represents less than 1% of the outstanding shares.
(1) Computed on the basis of 7,712,609 shares of common stock outstanding
(excluding treasury stock) as of March 17, 2000. Beneficial ownership as
reported in the above table has been determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended.
(2) As reported on Schedule 13D/A Amendment 6 filed with the Securities and
Exchange Commission (SEC) on April 30, 1998, Steel Partners II, L.P. holds
1,337,300 shares. The general partner of Steel Partners II, L.P. is Steel
Partners L.L.C., of which Mr. Lichtenstein is the chief executive officer,
and Steel Partners II, L.P. reports that Mr. Lichtenstein may be deemed to
be the beneficial owner of all of such shares by virtue of his power to
vote and dispose of such shares.
(3) As reported on Schedule 13G filed with the SEC on February 3, 2000,
Dimensional Fund Advisors Inc. ("Dimensional") holds 501,600 shares as
investment advisor and investment manager on behalf of four investment
companies registered under the Investment Company Act of 1940 and other
investment vehicles, including commingled group trusts. In its role as
investment advisor and investment manager, Dimensional reports that it
possesses both voting and investment power over the shares, and Dimensional
disclaims beneficial ownership of all such shares.
(4) As reported on Schedule 13G/A filed with the SEC on February 8, 2000, Oak
Forest Investment Management, Inc. holds 464,200 shares as an investment
advisor registered under the Investment Company Act of 1940. In its role as
investment advisor, Oak Forest Investment Management, Inc. reports that it
possesses both the power to vote and to dispose or direct the disposition
of all such shares.
(5) Includes 23,333 shares of common stock issuable to Mr. Bess pursuant to
options exercisable within 60 days of March 17, 2000.
(6) Includes 10,000 shares of common stock issuable to Mr. Caudill pursuant to
options exercisable within 60 days of March 17, 2000.
(7) Includes 80,000 shares of common stock issuable to Mr. Dugan pursuant to
options exercisable within 60 days of March 17, 2000.
(8) Includes 111,666 shares of common stock issuable to Mr. Goodrich pursuant
to options exercisable within 60 days of March 17, 2000.
(9) Includes 1,337,300 shares held by Steel Partners II, L.P. The general
partner of Steel Partners II, L.P. is Steel Partners L.L.C., of which Mr.
Lichtenstein is the chief executive officer. Mr. Lichtenstein may be
-39-
<PAGE>
deemed to be the beneficial owner of all of such shares by virtue of his
power to vote and dispose of such shares. Also includes 3,333 shares of
common stock issuable to Mr. Lichtenstein pursuant to options exercisable
within 60 days of March 17, 2000.
(10) Comprised of 3,333 shares of common stock issuable to Mr. Lorber pursuant
to options exercisable within 60 days of March 17, 2000.
(11) Includes 26,666 shares of common stock issuable to Ms. Santo pursuant to
options exercisable within 60 days of March 17, 2000.
(12) Includes 40,000 shares of common stock issuable to Mr. Somerset pursuant to
options exercisable within 60 days of March 17, 2000.
(13) Includes 93,333 shares of common stock issuable to Mr. Tidball pursuant to
options exercisable within 60 days of March 17, 2000.
(14) Includes 10,000 shares of common stock issuable to Mr. Witt pursuant to
options exercisable within 60 days of March 17, 2000.
(15) Includes 428,330 shares of common stock issuable to members of the Board of
Directors and executive officers pursuant to options exercisable within 60
days of March 17, 2000.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
-40-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements
(1) The consolidated financial statements listed in the accompanying
index to financial statements are filed as part of this Annual
Report on Form 10-K.
(2) Exhibits are listed at Item (c), below.
(3) Financial Statement Schedules
- Schedule II Valuation and qualifying accounts All other schedules
are omitted, since the required information is not pertinent or
is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the
consolidated financial statements and notes thereto.
(b) Reports on Form 8-K Filed in the Last Quarter of 1999
None.
(c) Exhibits
3.1 Certificate of Incorporation, incorporated by reference to the
Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission on April 2, 1990.
3.2 Bylaws, incorporated by reference to the Company's Annual Report
on Form 10-K filed with the Securities and Exchange Commission on
April 2, 1990.
10.1 $45,000,000 Senior Secured Note Agreement, dated as of June 30,
1994, as amended, incorporated by reference to the Company's
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 15, 1995.
10.2 $27,000,000 Floating Rate Senior Secured Notes Agreement, dated
as of June 28, 1996, incorporated by reference to the Company's
Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on August 5, 1996.
10.3 Form of Employment contracts for Executive Officers, incorporated
by reference to the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1993.
10.4 Form of Company Nonqualified Stock Option Agreement, incorporated
by reference to the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1993.
10.5 Directors' 1995 Nonqualified Stock Option Plan, incorporated by
reference to the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 15, 1995.
10.6 PLM International, Inc. Mandatory Management Stock Bonus Plan,
incorporated by reference to the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission on
February 24, 1997.
10.7 Form of Executive Deferred Compensation Agreement, incorporated
by reference to the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1993.
10.8 Asset Purchase Agreement, dated as of July 1, 1995, incorporated
by reference to the Company's Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission
-41-
<PAGE>
on November 1, 1995.
10.9 Pooling and Servicing Agreement and Indenture of Trust, dated as
of July 1, 1995, incorporated by reference to the Company's
Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on November 1, 1995.
10.10 Series 1997-1 Supplemental Indenture to Pooling and Servicing
Agreement and Indenture of Trust among AFG Credit Corporation,
American Finance Group, Inc., First Union Capital Markets Corp.,
and Bankers Trust Company, dated as of October 14, 1997,
incorporated by reference to the Company's Form 10-Q filed with
the Securities and Exchange Commission on October 24, 1997.
10.11 Note Purchase Agreement among AFG Credit Corporation, Variable
Funding Capital Corporation, and First Union Capital Markets
Corp., dated as of October 14, 1997, incorporated by reference to
the Company's Form 10-Q filed with the Securities and Exchange
Commission on October 24, 1997.
10.12 Office Lease for Premises at One Market, San Francisco,
California, incorporated by reference to the Company's Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on April 1, 1991.
10.13 First Amendment to Restated Warehousing Credit Agreement among
American Finance Group, Inc., First Union National Bank of North
Carolina, and Bank of Montreal, dated as of June 1, 1998,
incorporated by reference to the Company's Form 10-Q filed with
the Securities and Exchange Commission on July 22, 1998.
10.14 Second Amendment to Restated Warehousing Credit Agreement among
American Finance Group, Inc., First Union National Bank, and Bank
of Montreal, dated as of June 8, 1998, incorporated by reference
to the Company's Form 10-Q filed with the Securities and Exchange
Commission on July 22, 1998.
10.15 1998 Management Stock Compensation Plan, dated May 12, 1998,
incorporated by reference to the Company's Form 10-Q filed with
the Securities and Exchange Commission on July 22, 1998.
10.16 Amendment No. 4 to Pooling and Servicing Agreement and Indenture
of Trust, dated April 14, 1998, incorporated by reference to the
Company's Form 10-Q filed with the Securities and Exchange
Commission on October 27, 1998.
10.17 Master Amendment to Floating Rate Senior Secured Notes Agreement,
dated September 22, 1998, incorporated by reference to the
Company's Form 10-Q filed with the Securities and Exchange
Commission on October 27, 1998.
10.18 Third Amended and Restated Warehousing Credit Agreement among TEC
Acquisub, Inc., the Lenders, and First Union National Bank, dated
December 15, 1998 incorporated by reference to the Company Form
10-K filed with the Securities and Exchange Commission on March
9, 1999.
10.19 Fourth Amended and Restated Warehousing Credit Agreement among
PLM Equipment Growth Fund VI, PLM Equipment Growth & Income Fund
VII, Professional Lease Management Income Fund I, LLC, PLM
Financial Services, Inc., the Lenders, and First Union National
Bank, dated December 15, 1998 incorporated by reference to the
Company Form 10-K filed with the Securities and Exchange
Commission on March 9, 1999.
10.20 Master Lease Agreement among PLM International, Inc. and Norwest
Equipment Finance, Inc., dated December 28, 1998 incorporated by
reference to the Company Form 10-K filed with the Securities and
Exchange Commission on March 9, 1999.
10.21 Master Lease Agreement among PLM International, Inc. and U.S.
Bancorp Leasing & Financial, dated December 11, 1998 incorporated
by reference to the Company Form 10-K filed with the Securities
and Exchange Commission on March 9, 1999.
10.22 Warehousing Credit Agreement among American Finance Group, Inc.,
the Lenders, and First
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<PAGE>
Union National Bank, dated December 15, 1998 incorporated by
reference to the Company Form 10-K filed with the Securities and
Exchange Commission on March 9, 1999.
10.23 Amendment No. 1 to Series 1997-1 Supplemental Indenture among AFG
Credit Corporation, American Finance Group, Inc., and First Union
Capital Markets, dated December 9, 1998 incorporated by reference
to the Company Form 10-K filed with the Securities and Exchange
Commission on March 9, 1999.
10.24 Amendment No. 2 to Note Purchase Agreement among Variable Funding
Capital Corporation, First Union Capital Markets, and AFG Credit
Corporation, dated December 9, 1998 incorporated by reference to
the Company Form 10-K filed with the Securities and Exchange
Commission on March 9, 1999.
10.25 $1,813,449 Note Payable and Security Agreement among American
Finance Group, Inc. and Transamerica Business Credit Corporation,
dated July 28, 1998 incorporated by reference to the Company Form
10-K filed with the Securities and Exchange Commission on March
9, 1999.
10.26 $1,118,010 Promissory Note, Pledge, and Security Agreement among
American Finance Group, Inc. and General Electric Capital
Corporation, dated June 30, 1998 incorporated by reference to the
Company Form 10-K filed with the Securities and Exchange
Commission on March 9, 1999.
10.27 $6,579,350 Term Notes and Loan and Security Agreements among
American Finance Group, Inc. and Varilease Corporation, dated
March 27, 1998, incorporated by reference to the Company's Form
10-K filed with the Securities and Exchange Commission on March
9, 1999.
10.28 Employment Agreement dated December 18, 1992 between PLM
International, Inc. and Robert N. Tidall, incorporated by
reference to the Company's Form 10-K/A filed with the Securities
and Exchange Commission on January 19, 2000.
10.29 Employment Agreement dated December 18, 1992 between PLM
International, Inc. and Douglas P. Goodrich, incorporated by
reference to the Company's Form 10-K/A filed with the Securities
and Exchange Commission on January 19, 2000.
10.30 Employment Agreement dated December 18, 1992 between PLM
International, Inc. and Stephen M. Bess, incorporated by
reference to the Company's Form 10-K/A filed with the Securities
and Exchange Commission on January 19, 2000.
10.31 Severance Agreement dated December 2, 1996 between PLM Financial
Services, Inc. and Stephen M. Bess, incorporated by reference to
the Company's Form 10-K/A filed with the Securities and Exchange
Commission on January 19, 2000.
10.32 Employment Agreement dated May 12, 1998 between PLM
International, Inc. and Richard K Brock, incorporated by
reference to the Company's Form 10-K/A filed with the Securities
and Exchange Commission on January 19, 2000.
10.33 Amendment to Employment Agreement dated November 18, 1998 between
PLM International, Inc. and Richard K Brock, incorporated by
reference to the Company's Form 10-K/A filed with the Securities
and Exchange Commission on January 19, 2000.
10.34 Employment Agreement dated November 19, 1997 between PLM
International, Inc. and Susan C. Santo, incorporated by reference
to the Company's Form 10-K/A filed with the Securities and
Exchange Commission on January 19, 2000.
10.35 Amendment to Employment Agreement dated November 17, 1998 between
PLM International, Inc. and Susan C. Santo, incorporated by
reference to the Company's Form 10-K/A filed with the Securities
and Exchange Commission on January 19, 2000.
10.36 Executive Deferred Compensation Agreement dated December 18, 1992
between PLM International, Inc. and Robert N. Tidball,
incorporated by reference to the Company's Form 10- K/A filed
with the Securities and Exchange Commission on January 19, 2000.
-43-
<PAGE>
10.37 Executive Deferred Compensation Agreement dated July 7, 1993
between PLM International, Inc. and Douglas P. Goodrich,
incorporated by reference to the Company's Form 10-K/A filed with
the Securities and Exchange Commission on January 19, 2000.
10.38 Executive Deferred Compensation Agreement dated December 18, 1992
between PLM International, Inc. and Stephen M. Bess, incorporated
by reference to the Company's Form 10- K/A filed with the
Securities and Exchange Commission on January 19, 2000.
10.39 Executive Deferred Compensation Agreement dated January 18, 1999
between PLM International, Inc. and Richard K Brock, incorporated
by reference to the Company's Form 10-K/A filed with the
Securities and Exchange Commission on January 19, 2000.
10.40 Executive Deferred Compensation Agreement dated January 18, 1999
between PLM International, Inc. and Susan C. Santo, incorporated
by reference to the Company's Form 10-K/A filed with the
Securities and Exchange Commission on January 19, 2000.
10.41 Master Lease Agreement among PLM International, Inc. and Wells
Fargo Equipment Finance, Inc., dated as of April 2, 1999,
incorporated by reference to the Company's Form 10-Q filed with
the Securities and Exchange Commission on May 4, 1999.
10.42 Amendment to PLM International, Inc. Directors' 1995 Nonqualified
Stock Option Plan, dated April 28, 1999, incorporated by
reference to the Company's Form 10-Q filed with the Securities
and Exchange Commission on May 4, 1999.
10.43 Amendment to PLM International, Inc. 1998 Management Stock
Compensation Plan, dated April 28, 1999, incorporated by
reference to the Company's Form 10-Q filed with the Securities
and Exchange Commission on May 4, 1999.
10.44 Amended Form of Nonqualified Stock Option Agreement, incorporated
by reference to the Company's Form 10-Q filed with the Securities
and Exchange Commission on May 4, 1999.
10.45 $15,000,000 Facility Agreement among PLM International, Inc. and
Meespierson N.V., dated May 6, 1999, incorporated by reference to
the Company's Form 10-Q filed with the Securities and Exchange
Commission on July 26, 1999.
10.46 Second Amendment to PLM International, Inc. 1998 Management Stock
Compensation Plan, dated May 29, 1999, incorporated by reference
to the Company's Form 10-Q filed with the Securities and Exchange
Commission on July 26, 1999.
10.47 Employment Agreement among American Finance Group, Inc. and
certain employees, dated January 1, 1999, incorporated by
reference to the Company's Form 10-Q filed with the Securities
and Exchange Commission on July 26, 1999.
10.48 Retention Agreement among American Finance Group, Inc. and
certain employees, dated April 1999, incorporated by reference to
the Company's Form 10-Q filed with the Securities and Exchange
Commission on July 26, 1999.
10.49 Severance Agreement among PLM International, Inc. and certain
employees dated August 1999, incorporated by reference to the
Company's Form 10-Q filed with the Securities and Exchange
Commission on October 28, 1999.
10.50 Amendment #1 dated April 2, 1999 to Master Lease Agreement among
PLM International, Inc. and Wells Fargo Equipment Finance, Inc.
dated April 2, 1999, incorporated by reference to the Company's
Form 10-Q filed with the Securities and Exchange Commission on
October 28, 1999.
10.51 Master Lease Agreement among PLM International, Inc. and
Associates Leasing, Inc. dated August 25, 1999, incorporated by
reference to the Company's Form 10-Q filed with the Securities
and Exchange Commission on October 28, 1999.
10.52 Master Lease Agreement among PLM Rental Inc. and Fleet Capital,
Inc. dated September 23,
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<PAGE>
1999, incorporated by reference to the Company's Form 10-Q filed
with the Securities and Exchange Commission on October 28, 1999.
10.53 Amendment #2 dated October 12, 1999 to Master Lease Agreement
among PLM International, Inc. and Wells Fargo Equipment Finance,
Inc. dated April 2, 1999, incorporated by reference to the
Company's Form 10-Q filed with the Securities and Exchange
Commission on October 28, 1999.
10.54 Master Lease Agreement among PLM Rental Inc. and US Bancorp dated
September 22, 1999, incorporated by reference to the Company's
Form 10-Q filed with the Securities and Exchange Commission on
October 28, 1999.
10.55 Stock Sales Agreement among PLM International, Inc. and Guaranty
Federal Bank dated October 26, 1999, incorporated by reference to
the Company's Form 10-Q filed with the Securities and Exchange
Commission on October 28, 1999.
10.56 Amendment #2 dated March 1, 2000 to Stock Sales Agreement among
PLM International, Inc. and Guaranty Federal Bank, incorporated
by reference to the Company's Form 8-K filed with the Securities
and Exchange Commission on March 9, 2000.
10.57 Amendment #1 dated January 24, 2000 to Stock Sales Agreement
among PLM International, Inc. and Guaranty Federal Bank.
10.58 Amendment number one to third amended and restated Warehousing
Credit Agreement among TEC Acquisub, Inc., the Lenders, and First
Union National Bank, dated December 10, 1999.
10.59 Amendment number one to fourth amended and restated Warehousing
Credit Agreement among PLM Equipment Growth Fund VI, PLM
Equipment Growth & Income Fund VII, Professional Lease Management
Income Fund I, LLC, PLM Financial Services, Inc., the Lenders,
and First Union National Bank, dated December 10, 1999.
10.60 Amendment number one to amended and restated Warehousing Credit
Agreement among American Finance Group, Inc., the Lenders, and
First Union National Bank, dated December 10, 1999.
10.61 Severance Agreement dated December 17, 1999 between PLM
International, Inc. and Robert N. Tidall.
10.62 Severance Agreement dated December 17, 1999 between PLM
International, Inc. and Richard K Brock.
10.63 Severance Agreement dated December 17, 1999 between PLM
International, Inc. and Douglas P. Goodrich.
10.64 Severance Agreement dated December 17, 1999 between PLM
International, Inc. and Susan C. Santo.
10.65 Employment Agreement dated January 1, 1999 between American
Finance Group, Inc. and D. R. Dugan
10.66 Directors 2000 Nonqualified Stock Option Plan.
23.2 Independent Auditors' Report and Consent
24.1 Powers of Attorney.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: March 17, 2000 PLM International, Inc.
By: /s/ Robert N. Tidball
---------------------
Robert N. Tidball
Chairman, President, and
Chief Executive Officer
By: /s/ Richard K Brock
-------------------
Richard K Brock
Chief Financial Officer
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company, in the
capacities and on the dates indicated.
<S> <C> <C>
* Director, Senior March 17, 2000
- ---------------------------------- Vice President
Douglas P. Goodrich
* Director March 17, 2000
- ----------------------------------
Randall L.-W. Caudill
* Director March 17, 2000
- ----------------------------------
Warren G. Lichtenstein
* Director March 17, 2000
- ----------------------------------
Howard M. Lorber
* Director March 17, 2000
- ----------------------------------
Harold R. Somerset
* Director March 17, 2000
- ----------------------------------
Robert L. Witt
<FN>
* Susan C. Santo, by signing her name hereto, does sign this document on
behalf of the persons indicated above, pursuant to powers of attorney duly
executed by such persons and filed with the Securities and Exchange
Commission.
/s/ Susan C. Santo
------------------
Susan C. Santo
Attorney-in-Fact
</FN>
</TABLE>
-46-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
(Item 14(a)(1)(2))
Description Page
- ----------- ----
Independent Auditors' Report 46
Consolidated Statements of Income for Years Ended
December 31, 1999, 1998, and 1997 47
Consolidated Balance Sheets as of December 31, 1999 and 1998 48
Consolidated Statements of Changes in Shareholders' Equity
and Comprehensive Income for Years Ended December 31,
1999, 1998, and 1997 49
Consolidated Statements of Cash Flows for Years
Ended December 31, 1999, 1998, and 1997 50-51
Notes to Consolidated Financial Statements 52-74
-47-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
PLM International, Inc.
We have audited the consolidated financial statements of PLM International, Inc.
and subsidiaries (the Company), as listed in the accompanying index. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of PLM International,
Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
SAN FRANCISCO, CALIFORNIA
MARCH 15, 2000
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<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
(in thousands of dollars, except per share amounts)
<CAPTION>
1999 1998 1997
------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Operating lease income (Note 5) $ 25,755 $ 12,012 $ 10,602
Management fees (Note 1) 8,167 9,385 10,546
Partnership interests and other fees (Note 1) 657 917 1,306
Acquisition and lease negotiation fees (Note 1) 1,354 3,253 2,356
Aircraft brokerage and services -- 1,090 2,466
(Loss) gain on the sale or disposition of assets, net (49) 1,526 1,745
Other 1,381 1,937 2,148
------------------------------------------
Total revenues 37,265 30,120 31,169
------------------------------------------
Costs and expenses
Operations support (Notes 11 and 14) 14,148 12,383 13,166
Depreciation and amortization (Note 1) 8,097 4,868 4,489
General and administrative (Notes 11 and 14) 6,828 7,624 9,536
------------------------------------------
Total costs and expenses 29,073 24,875 27,191
------------------------------------------
Operating income 8,192 5,245 3,978
Interest expense (Notes 8 and 9) (5,424) (3,826) (4,572)
Interest income 343 941 1,311
Other income (expenses), net 721 473 (342)
------------------------------------------
Income before income taxes 3,832 2,833 375
Provision for (benefit from) income taxes (Note 10) 1,487 1,154 (423)
------------------------------------------
Net income from continuing operations 2,345 1,679 798
Income from operations of discontinued operations, net of tax (Note 2) 811 3,178 3,869
Loss on disposition of discontinued operations (550) -- --
------------------------------------------
Net income before cumulative effect of accounting change 2,606 4,857 4,667
Cumulative effect of accounting change, net of tax (Note 20) (250) -- --
------------------------------------------
Net income to common shares $ 2,356 $ 4,857 $ 4,667
==========================================
Basic earnings per weighted-average common share outstanding:
Income from continuing operations $ 0.29 $ 0.20 $ 0.09
Discontinued operations 0.10 0.38 0.42
Loss on disposition of discontinued operations (0.07) -- --
Cumulative effect of accounting change (0.03) -- --
------------------------------------------
$ 0.29 $ 0.58 $ 0.51
==========================================
Diluted earnings per weighted-average common share outstanding:
Income from continuing operations $ 0.29 $ 0.20 $ 0.09
Discontinued operations 0.10 0.37 0.41
Loss on disposition of discontinued operations (0.07) -- --
Cumulative effect of accounting change (0.03) -- --
------------------------------------------
$ 0.29 $ 0.57 $ 0.50
==========================================
<FN>
See accompanying notes to these consolidated financial statements
</FN>
</TABLE>
-49-
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31,
(in thousands of dollars, except share amounts)
<CAPTION>
ASSETS
1999 1998
------------------------------
<S> <C> <C>
Cash and cash equivalents $ 2,089 $ 8,786
Receivables (net of allowance for doubtful accounts of $0.8 million and
$0.4 million as of December 31, 1999 and 1998, respectively) 8,437 5,003
Receivables from affiliates (Note 3) 2,962 2,944
Net assets of discontinued operations (Note 2) 30,990 32,930
Equity interest in affiliates (Note 3) 18,145 22,588
Trailers held for operating leases (Note 5) 103,000 63,044
Less accumulated depreciation (21,093) (15,516)
------------------------------
81,907 47,528
Restricted cash and cash equivalents (Note 6) 1,812 2,261
Other assets, net (Note 9) 5,855 5,506
------------------------------
Total assets $ 152,197 $ 127,546
==============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Senior secured notes (Note 9) $ 20,679 $ 28,199
Senior secured loan (Note 9) 8,824 14,706
Other secured debt (Note 9) 50,697 13,142
Payables and other liabilities 8,445 9,675
Deferred income taxes (Note 10) 14,139 11,627
------------------------------
Total liabilities 102,784 77,349
Commitments and contingencies (Note 11) -- --
Shareholders' equity (Note 12)
Preferred stock ($0.01 par value, 10.0 million shares
authorized, none outstanding as of December 31, 1999 and 1998) -- --
Common stock ($0.01 par value, 50.0 million shares
authorized, and 7,675,410 and 8,159,919 shares
issued and outstanding as of December 31, 1999
and 1998, respectively) 112 112
Paid-in capital, in excess of par 75,059 74,947
Treasury stock (4,360,345 and 3,875,836 shares at
respective dates) (18,324) (15,072)
Accumulated deficit (7,434) (9,790)
------------------------------
Total shareholders' equity 49,413 50,197
------------------------------
Total liabilities and shareholders' equity $ 152,197 $ 127,546
==============================
<FN>
See accompanying notes to these consolidated financial statements
</FN>
</TABLE>
-50-
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Years Ended December 31, 1999, 1998, and 1997
(in thousands of dollars)
<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, 1996 $ 117 $ 77,778 $(12,382) $(19,193) $ 46,320
Comprehensive income:
Net income 4,667 $ 4,667 4,667
Other comprehensive loss:
Foreign currency translation loss (123) (123) (123)
--------
Total comprehensive income 4,544
========
Common stock purchases (5) (3,128) (1,268) (4,401)
Reissuance of treasury stock, net 215 (38) 177
Redemption of shareholder rights (92) (92)
--------------------------------------------------- --------
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
--------
Total comprehensive income 4,989
========
Exercise of stock options 218 211 429
Common stock purchases (2,059) (2,059)
Reissuance of treasury stock, net 79 211 290
--------------------------------------------------- --------
Balances, December 31, 1998 112 74,947 (15,072) (9,790) 50,197
Comprehensive income:
Net income 2,356 $ 2,356 2,356
========
Exercise of stock options 11 591 602
Common stock purchases (3,951) (3,951)
Reissuance of treasury stock, net 101 108 209
--------------------------------------------------- --------
Balances, December 31, 1999 $ 112 $ 75,059 $(18,324) $ (7,434) $ 49,413
=================================================== ========
<FN>
See accompanying notes to these consolidated financial statements.
</FN>
</TABLE>
-51-
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in thousands of dollars)
<CAPTION>
1999 1998 1997
--------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income from continuing operations $ 2,345 $ 1,679 $ 798
Adjustments to reconcile net income from continuing operations
to net cash provided by operating activities:
Depreciation and amortization 8,097 4,868 4,489
Foreign currency translation -- (80) (123)
Deferred income tax 2,512 (3,324) (474)
Loss (gain) on the sale or disposition of assets, net 49 (1,526) (1,745)
Loss on sale of investment in subsidiary -- 245 --
Undistributed residual value interests 958 1,057 1,052
Minority interest in net loss of subsidiaries -- (100) (39)
(Decrease) increase in payables and other liabilities (1,021) (1,665) 1,785
(Increase) decrease in receivables and receivables from
affiliates (3,452) 739 1,482
Amortization of organization and offering costs 3,485 2,839 2,913
(Increase) decrease in other assets (657) 560 308
--------------------------------------------
Cash provided by operating activities of
continuing operations 12,316 5,292 10,446
Cash provided by operating activities of discontinued
operations 8,607 12,578 7,726
Cumulative effect of accounting change 250 -- --
--------------------------------------------
Net cash provided by operating activities 21,173 17,870 18,172
Investing activities
Principal payments received on finance leases 281 225 12
Purchase of property, plant, and equipment (521) (265) (300)
Purchase of transportation equipment and capital improvements (64,347) (58,916) (33,725)
Proceeds from the sale of transportation equipment held for lease 565 6,230 12,318
Proceeds from the sale of assets held for sale 21,805 25,328 25,857
Sale of investment in subsidiary -- 176 --
Decrease in restricted cash and cash equivalents 449 12,242 159
Investing activities of discontinued operations (5,989) (50,673) (49,624)
--------------------------------------------
Net cash used in investing activities (47,757) (65,653) (45,303)
--------------------------------------------
<FN>
(continued)
See accompanying notes to these consolidated financial statements.
</FN>
</TABLE>
-52-
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in thousands of dollars)
(continued)
<CAPTION>
1999 1998 1997
-----------------------------------------------
<S> <C> <C> <C>
Financing activities
Borrowings of warehouse credit facilities 46,608 22,990 15,639
Repayment of warehouse credit facilities (46,608) (22,990) (19,719)
Borrowings of senior secured notes -- 10,000 9,000
Repayment of senior secured notes (7,520) (5,644) (3,157)
Repayment of senior secured loan (5,882) (5,882) (4,412)
Borrowings of other secured debt 39,727 13,471 --
Repayment of other secured debt (2,172) (270) (205)
Purchase of stock (3,951) (2,059) (4,401)
Redemption of shareholder rights -- -- (92)
Proceeds from exercise of stock options 602 429 --
Financing activities of discontinued operations (917) 41,300 32,064
-----------------------------------------------
Net cash provided by financing activities 19,887 51,345 24,717
-----------------------------------------------
Net (decrease) increase in cash and cash equivalents (6,697) 3,562 (2,414)
Cash and cash equivalents at beginning of year 8,786 5,224 7,638
-----------------------------------------------
Cash and cash equivalents at end of year $ 2,089 $ 8,786 $ 5,224
===============================================
Supplemental information
Net cash paid for interest from continuing operations $ 5,122 $ 3,886 $ 4,338
===============================================
Net cash paid for interest from discontinued operations $ 9,382 $ 10,168 $ 5,057
===============================================
Net cash paid for income taxes $ 331 $ 1,656 $ 1,119
===============================================
<FN>
See accompanying notes to these consolidated financial statements.
</FN>
</TABLE>
-53-
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements contain all necessary
adjustments, consisting primarily of normal recurring accruals, to present
fairly the results of operations, financial position, changes in shareholders'
equity and comprehensive income, and cash flows of PLM International, Inc. and
its wholly and majority owned subsidiaries (PLM International, the Company, or
PLMI). All intercompany transactions among the consolidated group have been
eliminated.
PLM International is a diversified equipment leasing and management company
specializing in the leasing of transportation and commercial and industrial
equipment. The Company specializes in creating equipment leasing solutions for
domestic and international customers.
These financial statements have been prepared on the accrual basis of accounting
in accordance with generally accepted accounting principles. This requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosures of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Leasing Operations
PLM International's owned transportation leasing assets consist primarily of
trailers on operating leases. The Company's commercial and industrial subsidiary
leasing operations consists of operating and direct finance leases on a variety
of equipment including point-of-sale, computer, communications, manufacturing,
and materials-handling equipment. Equipment held for operating lease includes
transportation equipment and commercial and industrial equipment, which are
depreciated over their estimated useful life. Rental payments are recorded as
revenue over the lease term as earned.
Under the direct finance lease method of accounting, the leased asset is
recorded as an investment in direct finance leases and represents the minimum
net lease payments receivable, including third-party guaranteed residuals, plus
the unguaranteed residual value of the equipment, less unearned income. Rental
payments consist of principal and interest on the lease, principal payments
reduce the investment in the finance lease, and the interest is recorded as
revenue over the lease term.
Prior to 1998, the Company expensed initial direct lease origination costs as
incurred since they were not material. Under generally accepted accounting
principles, initial direct costs, if material, should be capitalized. As the
Company's portfolio of equipment on lease continued to grow, the resulting
initial direct lease origination costs became material. Effective January 1,
1998, the Company began capitalizing these costs. During 1998 and 1999, the
Company capitalized a total of $1.1 million of these costs, of which $0.5
million had been amortized as of December 31, 1999. Amounts capitalized related
to direct finance leases are included in the net investment in finance leases
and are amortized using the effective interest method.
Equipment
Trailer equipment held for operating lease is stated at cost. Depreciation is
computed on the straight-line method down to the equipment's estimated salvage
value, utilizing the following estimated useful lives in years: trailers, 10 to
12; and commercial and industrial equipment, 1 to 7. Salvage values for
transportation equipment are 20% of original equipment cost. Salvage values for
commercial and industrial equipment vary according to the type of equipment.
In accordance with Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company
reviews the carrying value of its equipment at least quarterly and whenever
circumstances indicate that the carrying value of an asset may not be
recoverable. If projected undiscounted future cash flows are lower than the
carrying value of the equipment, the loss on revaluation is recorded for
operating leases or as
-54-
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equipment (continued)
a reduction to finance lease income (if the assets were on finance lease). Total
reductions were $0.6 million in 1999, $0.2 million in 1998, and $0.2 million in
1997.
The Company classifies assets as held for sale when management has committed to
a plan to dispose of the asset, whether by sale or abandonment. Equipment held
for sale is valued at the lower of depreciated cost or estimated fair value less
cost to sell.
Repairs and maintenance costs are usually the obligation of the Company. Repair
and maintenance expenses were $4.7 million, $2.7 million, and $2.7 million for
1999, 1998, and 1997, respectively.
Investment in and Management of Equipment Growth Funds, Other Limited
Partnerships, and Private Placement Programs
The Company earns revenues in connection with the management of limited
partnerships and private placement programs. Equipment acquisition and lease
negotiation fees are earned through the purchase and initial lease of equipment,
and are recognized as revenue when the Company completes all of the services
required to earn the fees, typically when binding commitment agreements are
signed.
Management fees are earned for managing the equipment portfolios and
administering investor programs as provided for in various agreements, and are
recognized as revenue over time as they are earned.
As compensation for organizing a partnership investment program, the Company was
granted an interest (between 1% and 5%) in the earnings and cash distributions
of the program, in which PLM Financial Services, Inc. (FSI) is the General
Partner. The Company recognizes as partnership interests its equity interest in
the earnings of the partnerships, after adjusting such earnings to reflect the
effect of special allocations of the programs' gross income allowed under the
respective partnership agreements.
The Company also recognizes as income its interest in the estimated net residual
value of the assets of the partnerships as they are purchased. The amounts
recorded are based on management's estimate of the net proceeds to be
distributed upon disposition of the partnerships' equipment at the end of the
respective partnerships. As assets are purchased by the partnerships, these
residual value interests are recorded in other fees at the present value of the
Company's share of estimated disposition proceeds. FSI has not recorded any such
residual income since 1997 at which point the partnerships had invested all
original capital. Special distributions received by the Company resulting from
the sale of equipment are treated as recoveries of its equity interest in the
partnership until the recorded residual is eliminated. Any additional
distributions received are treated as residual interest income.
The Company is entitled to reimbursement from the investment programs for
providing certain administrative services.
In accordance with certain investment program and partnership agreements, the
Company received reimbursement for organization and offering costs incurred
during the offering period. The reimbursement was between 1.5% and 3% of the
equity raised. In the event organizational and offering costs incurred by the
Company, as defined by the partnership agreement, exceeded amounts allowed, the
excess costs were capitalized as an additional investment in the related
partnership and are being amortized until the projected start of the liquidation
phase of the partnership. These additional investments are reflected as equity
interest in affiliates in the accompanying consolidated balance sheets.
-55-
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment in and Management of Limited Liability Company
From May 1995 through May 1996, Professional Lease Management Income Fund I, LLC
(Fund I), a limited liability company with a no front-end fee structure, was
offered as an investor program. FSI serves as the manager for the program. No
compensation was paid to the Company for the organization and syndication of
interests, the acquisition of equipment, the negotiation of leases for
equipment, or the placement of debt. The Company funded the costs of
organization, syndication, and offering through the use of operating cash and
has capitalized these costs as its investment in Fund I. The Company is
amortizing its investment in Fund I over eight years to the beginning of the
liquidation period of Fund I in 2003.
In return for its investment, the Company is entitled to a 15% interest in the
cash distributions and earnings of Fund I, subject to certain allocation
provisions. The Company's interest in the cash distributions and earnings of
Fund I will increase to 25% after the investors have received distributions
equal to their invested capital. The Company is entitled to monthly fees for
equipment management services and reimbursement for providing certain
administrative services.
FSI also recognized as income its interest in the estimated net residual value
of the assets of Fund I purchased with the proceeds from the offering of the
fund. The amounts recorded are based on management's estimate of the net
proceeds to be distributed upon disposition of the program's equipment at the
end of the program. As assets are purchased by Fund I, these residual value
interests are recorded in partnership interests and other fees at the present
value of FSI's share of estimated disposition proceeds. Special distributions
resulting from the sale of equipment received by FSI will be treated as
recoveries of its equity interest in the program until the recorded residual is
eliminated. Any additional distributions received will be treated as residual
interest income.
Institutional Programs
The Company earned revenues in connection with lease origination's and servicing
equipment leases for institutional programs, which were managed by AFG.
Acquisition fees were earned through the purchase and initial lease of
equipment, and were recognized as revenue when the Company completed
substantially all of the services required in earning the fees, typically when
binding commitment agreements were signed. Management fees were earned for
servicing the equipment portfolios and leases as provided for in various
agreements, and were recognized as revenue over time as they were earned. AFG
was sold on March 1, 2000.
Residual Interests
The Company has residual interests in equipment owned by the managed programs,
which are recorded as equity interest in affiliates. As required by FASB
Technical Bulletin 1986-2, the discount on the Company's residual value
interests in the equipment owned by the managed programs is not accreted over
the holding period. Residual interests in equipment on finance leases are
included in investment in direct finance leases, net. The Company reviews the
carrying value of its residual interests quarterly or whenever circumstances
indicate that the carrying value of an asset may not be recoverable in relation
to expected future market values for the equipment in which it holds residual
interests for the purpose of assessing recoverability of recorded amounts.
-56-
<PAGE>
Earnings Per Weighted-Average Common Share
<TABLE>
Basic earnings per common share are computed by dividing net income to common
shares by the weighted- average number of shares outstanding during the period.
The computation of diluted earnings per share is similar to the computation of
basic earnings per share, except for the inclusion of all potentially dilutive
common shares. Basic and diluted earnings per share are presented below for the
years ended December 31:
<CAPTION>
1999 1998 1997
--------------------------------------------
(in thousands of dollars, except per share data)
<S> <C> <C> <C>
Basic:
Net income from continuing operations $ 2,345 $ 1,679 $ 798
Net income from discontinued operations 811 3,178 3,869
Loss on disposition of discontinued operations (550) -- --
Cumulative effect of accounting change (250) -- --
--------------------------------------------
Net income to common shares $ 2,356 $ 4,857 $ 4,667
============================================
Shares:
Weighted-average number of common shares outstanding 8,025 8,325 9,081
Basic earnings per common share:
Income from continuing operations 0.29 0.20 0.09
Income from discontinued operations 0.10 0.38 0.42
Loss on disposition of discontinued operations (0.07) -- --
Cumulative effect of accounting change (0.03) -- --
--------------------------------------------
Net income to common shares $ 0.29 $ 0.58 $ 0.51
============================================
Diluted:
Net income from continuing operations $ 2,345 $ 1,679 $ 798
Net income from discontinued operations 811 3,178 3,869
Loss on disposition of discontinued operations (550) -- --
Cumulative effect of accounting change (250) -- --
--------------------------------------------
Net income to common shares $ 2,356 $ 4,857 $ 4,667
============================================
Shares:
Weighted-average number of common shares outstanding 8,025 8,325 9,081
Potentially dilutive common shares 99 155 196
--------------------------------------------
Total shares 8,124 8,480 9,277
Diluted earnings per weighted-average common share:
Income from continuing operations 0.29 0.20 0.09
Income from discontinued operations 0.10 0.37 0.41
Loss on disposition of discontinued operations (0.07) -- --
Cumulative effect of accounting change (0.03) -- --
--------------------------------------------
Net income to common shares $ 0.29 $ 0.57 $ 0.50
============================================
</TABLE>
Income Taxes
The Company recognizes income tax expense using the liability method. Deferred
income taxes are recognized for the tax consequences of "temporary differences"
by applying enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities.
Deferred income taxes arise primarily because of differences in the timing of
reporting equipment depreciation, partnership income, and certain accruals for
financial statement and income tax reporting purposes.
Intangibles
Intangibles consist primarily of goodwill related to acquisitions, loan fees,
software, and lease origination costs. They are reported at the lower of net
amortized cost or fair value and are generally included on the balance sheet in
other assets, net. Lease origination costs related to finance leases are
reported as investment in finance leases. Goodwill is amortized over eight years
from the acquisition date. The Company annually reviews the valuation of
goodwill based on projected undiscounted future cash flows. Loan fees are
amortized over the life of
-57-
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangibles (continued)
the related loan. Software is amortized over three to five years from the
acquisition date. Lease origination costs are amortized over the life of the
related lease.
Cash and Cash Equivalents
The Company considers highly liquid investments readily convertible into known
amounts of cash, with original maturities of 90 days or less as cash
equivalents.
Comprehensive Income
The Company discloses its foreign currency translation gain (loss) as a
component of comprehensive income on a gross basis, because it relates to a
foreign investment permanently reinvested outside of the United States.
Reclassifications
Certain prior-year amounts have been reclassified in order to conform to the
current year's presentation.
Interest-Rate Swap Agreements
The Company has entered into interest rate swap agreements to hedge its interest
rate exposure on its nonrecourse securitization facility. The terms of the swap
agreements correspond to the hedged debt. The impact of the swap agreement is to
increase or decrease interest expense by the amount to be paid or received due
to the swap in that period. In accordance with SFAS 80, "Accounting For Futures
Contracts", the Company does not adjust interest expense for future amounts that
may be paid or received from these swaps.
Discontinued Operations
The Company's commercial and industrial equipment subsidiary American Finance
Group, Inc. (AFG) is accounted for as a discontinued operation and prior periods
financial statements have been restated. AFG was sold on March 1, 2000.
2. DISCONTINUED OPERATIONS
In October 1999, the Company announced that the Company had engaged investment
bankers to develop strategic alternatives to maximize shareholder value
including the possible sale of part or all of the Company. In October 1999, the
Company agreed to sell American Finance Group, Inc. (AFG), its commercial and
industrial equipment leasing subsidiary for approximately $28.5 million, net of
transaction costs and income taxes. On February 25, 2000, the shareholders of
PLM International approved the transaction. The sale of AFG was completed on
March 1, 2000, the Company received $29.0 million for AFG. The Company expects
to receive additional proceeds of $1.9 million (unaudited) in the second quarter
of 2000 related to the sale of AFG. Taxes and transaction costs related to the
sale are estimated to be $5.0 million resulting in estimated net proceeds to the
Company of $25.9 million. In addition, AFG dividended to PLMI certain assets
with a net book value of $2.7 million immediately prior to the sale. The loss on
disposition of AFG of $0.6 million includes $0.3 million (unaudited) of AFG's
estimated net income for the period from January 1, 2000 through February 29,
2000.
Accordingly, the Company's commercial and industrial leasing operations are
accounted for as a discontinued operation and prior periods have been restated.
For business segment reporting purposes, AFG's is reported in the segment
"Commercial and industrial equipment leasing and financing". Costs and expenses
included in discontinued operations includes all direct expenses of AFG that
will be eliminated on the completion of the sale and allocated costs from PLMI
that will be eliminated as a result of the sale.
-58-
<PAGE>
2. DISCONTINUED OPERATIONS (continued)
<TABLE>
Net income from discontinued operations for the year ended December 31, 1999,
1998 and 1997 are as follows (in thousands of dollars):
<CAPTION>
1999 1998 1997
----------------------------------------------
<S> <C> <C> <C>
Revenue $ 26,293 $ 26,958 $ 18,496
Costs and expenses (14,705) (11,615) (7,361)
----------------------------------------------
Operating income 11,588 15,343 11,135
Interest expense (9,881) (10,782) (5,319)
Interest income and other expenses (407) 505 324
----------------------------------------------
Net income from discontinued operations before income taxes 1,300 5,066 6,140
Income tax (489) (1,888) (2,271)
----------------------------------------------
Net income from discontinued operations $ 811 $ 3,178 $ 3,869
==============================================
Loss on disposition of discontinued operations $ (550) $ -- $ --
==============================================
</TABLE>
Net assets of discontinued operations on the balance sheet as of December 31,
1999 and 1998 are as follow (in thousands of dollars):
1999 1998
--------------------------
Cash and cash equivalents $ 382 $ --
Restricted cash 7,380 8,088
Receivables 2,330 2,279
Investment in direct finance leases 123,632 143,006
Loan receivables 28,115 23,493
Commercial and industrial equipment, net 23,464 16,689
Other assets, net 1,895 3,898
Warehouse credit facility (38,240) (34,420)
Nonrecourse securitized debt (106,485) (111,222)
Payables and other liabilities (5,382) (12,093)
Deferred income taxes (6,101) (6,788)
--------------------------
Net assets of discontinued operations $ 30,990 $ 32,930
==========================
Financing Transaction Activities
AFG originated and managed lease and loan transactions on primarily new
commercial and industrial equipment that was financed by nonrecourse securitized
debt or sold to institutional programs or other unaffiliated investors. AFG used
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 were accounted for as
direct finance leases, while some transactions qualify as operating leases or
loans.
During 1999, AFG funded $55.7 million in equipment that was placed on finance
lease. Also during 1999, the Company sold equipment on finance lease with an
original cost of $41.0 million, resulting in net gains of $0.4 million. During
1998, AFG funded $129.1 million in equipment that was placed on finance lease.
Also during 1998, AFG sold equipment on finance lease with an original cost of
$56.0 million, resulting in net gains of $1.5 million.
-59-
<PAGE>
2. DISCONTINUED OPERATIONS (continued)
Financing Transaction Activities (continued)
The following table lists the components of the investment in direct finance
leases of AFG as of December 31 (in thousands of dollars):
1999 1998
--------- ---------
Minimum lease payments receivable $ 122,314 $ 145,119
Estimated unguaranteed residual values
Initial direct lease origination costs, net 548 435
--------- ---------
146,397 170,336
Less unearned income (22,765) (27,330)
--------- ---------
Investment in direct finance leases, net $ 123,632 $ 143,006
========= =========
The schedule of the minimum future lease revenues was projected as follows (in
thousands of dollars):
2000 $ 44,106
2001 31,586
2002 21,375
2003 15,421
2004 7,359
Thereafter 2,467
----------
Total minimum lease payments receivable $ 122,314
==========
Equipment Held for Operating Leases
During 1999, AFG funded $20.7 million in commercial and industrial equipment,
which was placed on operating lease. During 1999, AFG sold commercial and
industrial equipment that was on operating lease, for a net gain of $1.7
million. During 1998, AFG funded $24.0 million in commercial and industrial
equipment, which was placed on operating lease. During 1998, AFG sold commercial
and industrial equipment that was on operating lease, for a net gain of $1.7
million. Future minimum rentals receivable for commercial and industrial
equipment under noncancelable leases as of December 31, 1999 are approximately
$8.0 million in 2000, $4.1 million in 2001, $2.4 million in 2002, $1.0 million
in 2003, $0.3 million in 2004, and $26,000 thereafter.
Warehouse Credit Facility
AFG had a warehouse credit facility which allowed AFG to borrow up to $50.0
million to be used to acquire assets on an interim basis prior to placement in
AFG's nonrecourse securitization facility, sold to institutional programs or
syndication to unaffiliated third parties. Interest accrued at prime or LIBOR
plus 137.5 basis points, at the option of AFG. On December 10, 1999, PLMI
amended AFG's warehouse credit facility to extend the facility to April 21,
2000, and lowered the amount available to be borrowed from $60.0 million to
$50.0 million. As of December 31, 1999, AFG had $38.2 million in borrowings
outstanding under this facility. PLMI was the sole borrower under this facility.
This facility provided borrowings for 100% of the present value of the lease
stream from the assets collateralized in this facility, up to 90% of original
equipment cost of the assets held in 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 be outstanding for 120 days. Interest accrues at prime or LIBOR plus
137.5 basis points, at the option of the Company. The weighted-average interest
rates on the Company's warehouse credit facility were 7.47% and 7.22% for 1999
and 1998, respectively. Repayment of the borrowings for commercial and
industrial equipment matches the terms of the underlying leases. As of December
31, 1999, the Company had $38.2 million outstanding under this facility. This
facility was repaid and terminated on March 1, 2000 concurrent with the sale of
AFG.
-60-
<PAGE>
2. DISCONTINUED OPERATIONS (continued)
Nonrecourse Securitized Debt
AFG had 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 had terms from one to seven years. The
facility allowed AFG to borrow up to $125.0 million through October 10, 2000.
Repayment of the facility matched the terms of the underlying leases. The
securitized debt beard interest equivalent to the lender's cost of funds based
on commercial paper market rates for the determined period of borrowing, plus an
interest rate spread and fees (6.39% and 6.46% as of December 31, 1999 and 1998,
respectively). As of December 31, 1999 and 1998, there were $102.1 million and
$103.6 million in borrowings under this facility, respectively. AFG was required
to hedge at least 90% of the aggregate discounted lease balance (ADLB) of those
leases used as collateral in its nonrecourse securitization facility. As of
December 31, 1999, 90% of the ADLB had been hedged. This facility was repaid and
terminated on March 1, 2000 concurrent with the sale of AFG.
In addition to the $125.0 million nonrecourse debt facility discussed above, AFG
also had $4.4 million in nonrecourse notes payable outstanding at December 31,
1999 secured by direct finance leases on commercial and industrial equipment at
AFG that had terms corresponding to the note repayment schedule that began
November 1997 and ends March 2001. The notes beard interest from 8.32% to 9.5%
per annum. This debt was repaid and terminated on March 1, 2000 concurrent with
the sale of AFG.
Purchase Commitments
As of December 31, 1999, the Company had committed to purchase $43.6 million of
equipment for its commercial and industrial equipment lease and finance
receivable portfolio, of which $1.7 million had been received by lessees and
accrued as a liability by the Company as of December 31, 1999. This includes
equipment that will be held by the Company and equipment that will be sold to
third parties.
From January 1, 2000 through March 1, 2000, the Company funded $0.8 million of
commitments outstanding for its commercial and industrial equipment lease and
finance receivables portfolio as of December 31, 1999.
Concentrations of Credit Risk
As of December 31, 1999, AFG's five largest customers accounted for
approximately 30% of its commercial and industrial equipment lease and finance
receivables.
Interest-Rate Risk Management
AFG was required to hedge at least 90% of the ADLB of those leases designated
for its nonrecourse securitization facility. As of December 31, 1999, 90% of the
ADLB had been hedged. AFG had entered into interest-rate swap agreements in
order to meet the hedge requirements and to manage the interest-rate exposure
associated with its nonrecourse debt. As of December 31, 1999, the swap
agreements had a weighted-average duration of 1.55 years, corresponding to the
terms of the remaining debt. As of December 31, 1999, a notional amount of $91.9
million of interest-rate swap agreements effectively fixed interest rates at an
average of 6.77% on such obligations. Interest expense was increased by $0.6
million, $0.4 million, and $0.3 million due to these arrangements in 1999, 1998,
and 1997, respectively.
3. EQUITY INTEREST IN AFFILIATES
FSI, a wholly owned subsidiary of the Company, is the General Partner or manager
in 11 investment programs. Distributions of the programs are allocated as
follows: 99% to the limited partners and 1% to the General Partner in PLM
Equipment Growth Fund (EGF I), PLM Passive Income Investors 1988, and PLM
Passive Income Investors 1988-II; 95% to the limited partners and 5% to the
General Partner in EGFs II, III, IV, V, VI, PLM Equipment Growth & Income Fund
VII (EGF VII); 85% to the members and 15% to the manager in Professional Lease
Management Income Fund I (Fund I). Net income is allocated to the General
Partner subject to certain allocation provisions. FSI also receives a management
fee on a per car basis at a fixed rate each month, plus an incentive management
fee equal to 15% of "Net Earnings" over $750 per car per quarter from Covered
Hopper Program 1979-1. The Company's interest in the cash distributions of Fund
I will increase to 25% after the investors have received distributions equal to
their invested capital.
-61-
<PAGE>
3. EQUITY INTEREST IN AFFILIATES (continued)
The summarized combined financial data for FSI's affiliates as of and for the
years ended December 31, reflecting straight-line depreciation, are as follows
(in thousands of dollars, unaudited):
1999 1998
---------------------
Financial position:
Cash and other assets $ 40,129 $ 35,994
Transportation equipment and other assets,
net of accumulated depreciation of $163,926
in 1999 and $223,621 in 1998 473,973 604,474
---------------------
Total assets 514,102 640,468
Less liabilities, primarily long-term financings 118,409 158,259
Less minority interests -- 24,995
---------------------
Partners' equity $395,693 $457,214
=====================
PLM International's share thereof,
Recorded as equity interest in affiliates: $ 18,145 $ 22,588
=====================
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------------------
<S> <C> <C> <C>
Operating results:
Revenue from equipment leases and other $ 165,682 $ 163,100 $ 200,884
Depreciation (68,650) (76,978) (66,543)
Equipment operating expenses (14,605) (13,852) (14,391)
Repairs and maintenance expenses (20,863) (22,553) (21,367)
Interest expenses (8,938) (10,917) (14,481)
Minority interests (8,403) (714) 495
Other costs and expenses (16,387) (7,530) (25,992)
Reduction in carrying value of certain assets (10,397) (4,276) --
Cumulative effect of accounting change (132) -- --
---------------------------------------------------
Net income $ 17,307 $ 26,280 $ 58,605
===================================================
PLM International's share of partnership interests
And other fees (net of related expenses) $ 657 $ 917 $ 1,306
===================================================
Distributions received $ 4,448 $ 4,883 $ 5,818
===================================================
</TABLE>
Most of the investment program agreements contain provisions for special
allocations of the programs gross income.
While none of the partners or members, including the General Partner and
manager, are liable for programs borrowings, and while the General Partner
maintains insurance against liability for bodily injury, death, and property
damage for which an investment program may be liable, the General Partner or
manager may be contingently liable for nondebt claims against the partnership
that exceed asset values.
4. ASSETS HELD FOR SALE
As of December 31, 1999 and 1998, the Company had no assets held for sale.
During 1999, the Company purchased and sold $21.8 million in marine containers
to affiliated programs at cost, which approximated their fair market value.
During 1998, the Company purchased railcars for $4.8 million, portable heaters
for $3.0 million, and an entity that owns a marine vessel for $17.0 million.
Railcars with a cost of $1.8 million were sold to an unaffiliated third party
for a net gain of $0.5 million. Railcars with a cost of $3.0 million were sold
to an affiliated program at cost, which approximated fair market value. The
portable heaters and the entity that owns a marine vessel were sold to
-62-
<PAGE>
4. ASSETS HELD FOR SALE (continued)
affiliated programs at cost, which approximated fair market value. Periodically,
the Company purchases groups of assets whose ownership may be allocated among
affiliated programs and the Company. Generally in these cases, only assets that
are on lease are purchased by affiliated programs. The Company assumes the
ownership and remarketing risks associated with off-lease equipment. Allocation
of the purchase price is determined by a combination of third-party industry
sources, recent transactions, and published fair market value references. During
1998, the Company realized $0.5 million of gains from the sale of 27 railcars to
an unaffiliated third party. These railcars were purchased in 1998 as part of a
group of assets that had been allocated between the Company and Fund I. No
similar purchases during 1999.
5. EQUIPMENT HELD FOR OPERATING LEASES
As of December 31, 1999 and 1998, transportation equipment held for operating
leases consisted of refrigerated and dry van trailers.
During 1999, the Company purchased trailers for $42.5 million and sold trailers
with a net book value of $0.6 million for $0.5 million. During 1998, the Company
purchased trailers for $34.1 million and sold trailers with a net book value of
$4.8 million for $5.1 million.
Per diem and short-term rentals consisting of utilization rate lease payments
included in revenue amounted to approximately $20.9 million in 1999, $10.1
million in 1998, and $8.5 million in 1997.
6. RESTRICTED CASH
Restricted cash consists of bank accounts and short-term investments that are
primarily subject to withdrawal restrictions per loan agreements. The Company's
senior loan agreement requires proceeds from the sale of pledged assets to be
deposited into a collateral bank account and the funds used to purchase
additional equipment to the extent required to meet certain debt requirements or
to reduce the outstanding loan balance (refer to Note 9). The Company's senior
notes require virtually all management fees, acquisition and lease negotiation
fees, data processing fees, and partnership distributions to be deposited into a
collateral bank account, to the extent required to meet certain debt
requirements or to reduce the outstanding note balance (refer to Note 9).
Management fees can be withdrawn from the account monthly if the collateral
account amount is at certain defined levels. All of the cash is released
quarterly when the principal and interest payments are made.
7. OTHER ASSETS, NET
<TABLE>
Other assets, net consists of the following as of December 31 (in thousands of
dollars):
<CAPTION>
1999 1998
--------------------------
<S> <C> <C>
Finance lease receivable $1,801 $2,081
Cash surrender value of officers' life insurance policies 1,671 1,369
Furniture, fixtures, and equipment, net of accumulated
depreciation of $1,725 and $2,682 in 1999 and 1998, respectively 769 893
Prepaid expenses, deposits, and other 635 476
Investments 495 340
Loan fees, net of accumulated amortization of $1,279 and $1,139
in 1999 and 1998, respectively 386 344
Software, net of accumulated amortization of $49 and $10 as of
1999 and 1998, respectively 98 3
--------------------------
Total other assets, net $5,855 $5,506
==========================
</TABLE>
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<PAGE>
8. WAREHOUSE CREDIT FACILITY
FSI Warehouse Credit Facility: This $24.5 million facility, which is shared with
EGFs VI and VII and Fund I, allows the Company to purchase equipment prior to
its designation to a specific program or prior to obtaining permanent financing.
Total borrowings for trailer equipment are limited to $12.0 million. 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 assets. The Company can
hold transportation 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 weighted-average interest rates on the Company's warehouse credit facility
were 6.72% and 7.25% for 1999 and 1998, respectively. On December 10, 1999 the
Company amended FSI's warehouse credit facility to extend the facility to June
30, 2000. As of December 31, 1999 and March 17, 2000, the Company had no
borrowings outstanding under this facility and there were no other borrowings
outstanding under this facility by any other eligible borrower. There were no
other borrowings outstanding under this facility. The Company believes it will
be able to renew this facility on substantially the same terms upon its
expiration.
9. LONG-TERM SECURED DEBT
Long-term secured debt consisted of the following as of December 31 (in
thousands of dollars):
1999 1998
-------------------
Senior secured notes:
Institutional notes, bearing interest at LIBOR plus
2.40% per annum (8.47% and 7.80% as of December 31,
1999 and 1998, respectively), interest due quarterly,
principal payments due quarterly beginning November
15, 1997 through August 15, 2002, secured by
management fees, acquisition and lease negotiation
fees, data processing fees, partnership
distributions, and cash in a cash collateral account $ 20,679 $ 28,199
Senior secured loan:
Institutional debt, bearing interest at 9.78%,
interest due quarterly, principal payments due
quarterly beginning June 30, 1997 through June 30,
2001, secured by certain of the Company's trailer
equipment assets and associated leases, and cash in a
cash collateral account 8,824 14,706
Other secured debt:
Eight debt agreements, bearing interest from 5.35% to
7.05%, each with payments of $0.1 million due monthly
in advance secured by certain trailer equipment. The
final payments total $9.1 million and are due between
December 2005 and October 2006. In return for
favorable financing terms, these agreements give
beneficial tax treatment in these secured trailers to
the lenders 35,970 13,142
Credit facility agreement, bearing interest at LIBOR
plus 1.5%, the facility allows the Company to borrow
up to $15.0 million within a one- year period with
quarterly payments of $0.5 million. This debt is
secured by certain trailer equipment. A final payment
of $2.9 million is due August 2006 14,727 --
-------------------
Total long-term secured debt $ 80,200 $ 56,047
===================
During 1999, the Company repaid $7.5 million on the senior secured notes in
accordance with its debt amortization schedule. The institutional debt
agreements contain financial covenants related to net worth, ratios for
leverage, interest coverage ratios, and collateral coverage. In addition, there
are restrictions on the payment of dividends, purchase of stock, and certain
investments based on computations of tangible net worth, financial ratios, and
cash flows.
-64-
<PAGE>
9. LONG-TERM SECURED DEBT (continued)
During 1999, the Company repaid $5.9 million of the senior secured loan, in
accordance with the debt repayment schedule. The senior secured loan facility
provides that equipment sale proceeds from collateralized equipment or cash
deposits be placed into cash collateral accounts or used to purchase additional
equipment to the extent required to meet certain debt covenants. The senior
secured loan agreement contains financial covenants related to net worth, ratios
for leverage, interest coverage ratios, and collateral coverage. The senior
secured loan also contains a covenant requiring diversification of the equipment
in the collateral pool. The Company is not in compliance with this covenant as
virtually all of the pledged equipment are trailers. The lender has verbally
waived this covenant and is expected to waive it in the future. As of December
31, 1999, the cash collateral balance was $46,000.
As of December 31, 1999, the Company had $36.0 million outstanding in eight debt
agreements, bearing interest from 5.35% to 7.05%, each with monthly payments of
$0.1 million. The debt is secured by certain trailer equipment. During 1999, the
Company repaid $2.2 million on the eight debt agreements accordance with its
debt amortization schedules. The final payments due under these agreements,
which equal 15% to 25% of the original loan total $9.1 million and are due
between December 2005 and October 2006.
In the second quarter of 1999, the Company entered into a $15.0 million credit
facility loan agreement bearing interest at LIBOR plus 1.5%. This facility
allows the Company to borrow up to $15.0 million within a one-year period. The
credit facility agreement contains financial covenants related to net worth,
ratios for leverage, interest coverage ratios, and collateral coverage. As of
December 31, 1999, the Company had borrowed $14.7 million under this facility.
Payments of $0.5 million are due quarterly beginning August 2000, with a final
payment of $2.9 million due August 2006.
Scheduled principal payments on long-term secured debt as of December 31, 1999,
are (in thousands of dollars):
2000 $ 17,863
2001 16,059
2002 11,481
2003 6,101
2004 6,378
Thereafter 22,318
--------
Total $ 80,200
========
10. INCOME TAXES
<TABLE>
The provision for (benefit from) income taxes attributable to income from
operations consists of the following (in thousands of dollars):
<CAPTION>
1999
-----------------------------------------------------
Federal State Total
-----------------------------------------------------
<S> <C> <C> <C>
Current $ -- $ -- $ --
Deferred 1,625 200 1,825
-----------------------------------------------------
Total 1,625 200 1,825
-----------------------------------------------------
Allocated to discontinued operations 435 54 489
Allocated to accounting change (135) (16) (151)
-----------------------------------------------------
Continuing Operations $ 1,325 $ 162 $ 1,487
=====================================================
1998
-----------------------------------------------------
Federal State Total
-----------------------------------------------------
Current $ (575) $ 62 $ (513)
Deferred 3,296 259 3,555
-----------------------------------------------------
Total 2,721 321 3,042
-----------------------------------------------------
Allocated to discontinued operations (1,687) (201) (1,888)
-----------------------------------------------------
Continuing Operations $ 1,034 $ 120 $ 1,154
=====================================================
</TABLE>
-65-
<PAGE>
<TABLE>
10. INCOME TAXES (continued)
<CAPTION>
1997
------------------------------------------------------------------
Federal State Foreign Total
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current $ 2,255 $ 64 3 $ 2,322
Deferred (349) (125) -- (474)
------------------------------------------------------------------
Total 1,906 (61) 3 1,848
------------------------------------------------------------------
Allocated to discontinued operations (2,026) (245) -- (2,271)
------------------------------------------------------------------
Continuing Operations $ (120) $ (306) 3 $ (423)
==================================================================
</TABLE>
Amounts for the current year are based upon estimates and assumptions as of the
date of this report and could vary significantly from amounts shown on the tax
returns ultimately filed.
<TABLE>
The difference between the effective rate and the expected federal statutory
rate is reconciled below:
<CAPTION>
1999 1998 1997
-----------------------------------------
<S> <C> <C> <C>
Federal statutory tax expense rate 34% 34% 34%
State income tax rate 3 3 --
Effect of foreign operations 1 -- (2)
Reversal of excess accrual -- 1 --
Abandonment of identifiable intangibles -- -- (5)
Other 1 1 1
-----------------------------------------
Effective tax expense (benefit) rate 39% 39% 28%
=========================================
</TABLE>
Net operating loss carryforwards for federal income tax purposes amounted to
$17.5 million and $4.0 million as of December 31, 1999 and 1998, respectively.
Alternative minimum tax credit carryforwards are $5.2 million and $5.2 million
as of December 31, 1999 and 1998, respectively.
<TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax liabilities as of December 31 are presented below (in
thousands of dollars):
<CAPTION>
1999 1998
-----------------------------
<S> <C> <C>
Deferred tax assets from continuing operations:
Tax credit carryforwards $ 5,228 $ 5,228
State net operating loss carryforwards 717 620
Federal net operating loss carryforwards 2,234 1,375
Federal benefit of state taxes 605 581
Other 828 729
-----------------------------
Total deferred tax assets 9,612 8,533
-----------------------------
Deferred tax liabilities from continuing operations:
Equipment, principally differences in depreciation 17,880 12,860
Partnership interests 2,664 4,129
Other 3,207 3,171
-----------------------------
Total deferred tax liabilities 23,751 20,160
-----------------------------
Net deferred tax liabilities from continuing operations $14,139 $11,627
Net deferred tax liabilities from discontinued operations 6,101 6,788
-----------------------------
Total net deferred tax liabilities 20,240 18,415
=============================
</TABLE>
Management has reviewed all established tax interpretations of items reflected
in its consolidated tax returns and believes that these interpretations do not
require valuation allowances, as described in SFAS No. 109 "Accounting for
Income Taxes". As of December 31, 1999, the deferred taxes not provided on
cumulative earnings of consolidated foreign subsidiaries that are designated as
permanently invested were approximately $2.1 million.
-66-
<PAGE>
11. COMMITMENTS AND CONTINGENCIES
Litigation
The Company and various of its wholly owned subsidiaries are named as defendants
in a lawsuit filed as a purported class action in January 1997 in the Circuit
Court of Mobile County, Mobile, Alabama, Case No. CV-97- 251 (the Koch action).
The named plaintiffs are six individuals who invested in PLM Equipment Growth
Fund IV (Fund IV), PLM Equipment Growth Fund V (Fund V), PLM Equipment Growth
Fund VI (Fund VI), and PLM Equipment Growth & Income Fund VII (Fund VII) (the
Partnerships), each a California limited partnership for which the Company's
wholly owned subsidiary, PLM Financial Services, Inc. (FSI), acts as the General
Partner. The complaint asserts causes of action against all defendants for fraud
and deceit, suppression, negligent misrepresentation, negligent and intentional
breaches of fiduciary duty, unjust enrichment, conversion, and conspiracy.
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 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) (the court) based on the court's
diversity jurisdiction. In December 1997, the court granted defendants motion to
compel arbitration of the named plaintiffs' claims, based on an agreement to
arbitrate contained in the limited partnership agreement of each Partnership.
Plaintiffs appealed this decision, but in June 1998 voluntarily dismissed their
appeal pending settlement of the Koch action, as discussed below.
In June 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 Fund V, and filed the complaint
on her own behalf and on behalf of all class members similarly situated who
invested in the Partnerships. The complaint alleges the same facts and the same
causes of action as in the Koch action, plus additional causes of action against
all of the defendants, including alleged unfair and deceptive practices and
violations of state securities law. In July 1997, defendants filed a petition
(the petition) in federal district court under the Federal Arbitration Act
seeking to compel arbitration of plaintiff's claims. In October 1997, the
district court denied the Company's petition, but in November 1997, agreed to
hear the Company's motion for reconsideration. Prior to reconsidering its order,
the district court dismissed the petition pending settlement of the Romei
action, as discussed below. The state court action continues to be stayed
pending such resolution.
In February 1999 the parties to the Koch and Romei actions agreed to settle the
lawsuits, with no admission of liability by any defendant, and filed a
Stipulation of Settlement with the court. The settlement is divided into two
parts, a monetary settlement and an equitable settlement. The monetary
settlement provides for a settlement and release of all claims against
defendants in exchange for payment for the benefit of the class of up to $6.6
million. The final settlement amount will depend on the number of claims filed
by class members, the amount of the administrative costs incurred in connection
with the settlement, and the amount of attorneys' fees awarded by the court to
plaintiffs' attorneys. The Company will pay up to $0.3 million of the monetary
settlement, with the remainder being funded by an insurance policy. For
settlement purposes, the monetary settlement class consists of all investors,
limited partners, assignees, or unit holders who purchased or received by way of
transfer or assignment any units in the Partnerships between May 23, 1989 and
June 29, 1999. The monetary settlement, if approved, will go forward regardless
of whether the equitable settlement is approved or not.
The equitable settlement provides, among other things, for: (a) the extension
(until January 1, 2007) of the date by which FSI must complete liquidation of
the Partnerships' equipment, (b) the extension (until December 31, 2004) of the
period during which FSI can reinvest the Partnerships' funds in additional
equipment, (c) an increase of up to 20% in the amount of front-end fees
(including acquisition and lease negotiation fees) that FSI is entitled to earn
in excess of the compensatory limitations set forth in the North American
Securities Administrator's Association's Statement of Policy; (d) a one-time
repurchase by each of Funds V, VI and VII of up to 10% of that partnership's
outstanding units for 80% of net asset value per unit; and (e) the deferral of a
portion of the management fees paid to an affiliate of FSI until, if ever,
certain performance thresholds have been met by the Partnerships. Subject to
final court approval, these proposed changes would be made as amendments to each
Partnership's limited partnership agreement if less than 50% of the limited
partners of each Partnership vote against such amendments. The limited partners
will be provided the opportunity to vote against the amendments by following the
instructions contained in solicitation statements that will be mailed to them
after being filed with
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<PAGE>
11. COMMITMENTS AND CONTINGENCIES (continued)
Litigation (continued)
the Securities and Exchange Commission. The equitable settlement also provides
for payment of additional attorneys' fees to the plaintiffs' attorneys from
Partnership funds in the event, if ever, that certain performance thresholds
have been met by the Partnerships. The equitable settlement class consists of
all investors, limited partners, assignees or unit holders who on June 29, 1999
held any units in Funds V, VI, and VII, and their assigns and successors in
interest.
The court preliminarily approved the monetary and equitable settlements in June
1999. The monetary settlement remains subject to certain conditions, including
notice to the monetary class and final approval by the court following a final
fairness hearing. The equitable settlement remains subject to certain
conditions, including: (a) notice to the equitable class, (b) disapproval of the
proposed amendments to the partnership agreements by less than 50% of the
limited partners in one or more of Funds V, VI, and VII, and (c) judicial
approval of the proposed amendments and final approval of the equitable
settlement by the court following a final fairness hearing. No hearing date is
currently scheduled for the final fairness hearing. 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
incidental to its business. Management does not believe that any of these
actions will be material to the financial condition of the Company.
Lease Agreements
The Company and its subsidiaries have entered into operating leases for office
space and rental yard operations. The Company's total net rent expense was $1.8
million, $1.7 million, and $2.1 million in 1999, 1998, and 1997, respectively.
The portion of rent expense related to its principal office, net of sublease
income of $1.0 million, $0.8 million, and $0.4 million in 1999, 1998, and 1997,
respectively, was $0.3 million, $0.5 million, and $0.9 million in 1999, 1998,
and 1997, respectively. The remaining rent expense was related to other office
space and rental yard operations. The future rent expense related to
discontinued operations is not material.
Annual lease commitments for all of the Company's locations total $2.7 million
in 2000, $1.3 million in 2001, $0.4 million in 2002, $0.3 million in 2003, and
$0.1 million in 2004.
Corporate Guarantee
As of December 31, 1999, the Company had guaranteed certain obligations up to
$0.4 million of a Canadian railcar repair facility, in which the Company has a
10% ownership interest.
Employment Agreements
The Company has entered into employment agreements with 12 individuals that
require the Company to pay a severance to these individuals equal to from six
months to three years of their base salaries if their employment is terminated
after a change in control as defined in the employee agreement. In addition, the
Company would be required to pay for certain benefits of the employee for a
similar period. As of December 31, 1999, the total future contingent liability
for these payments was $3.2 million.
Other
The Company has agreed to provide supplemental retirement benefits to eight
current or former members of management. The benefits accrue over a maximum of
15 years and will result in payments over 5 years based on the average base rate
of pay during the 60-month period prior to retirement, as adjusted for length of
participation in the program. Expenses for these arrangements were $0.3 million
for 1999, $0.3 million for 1998, and $0.4 million for 1997. As of December 1999,
the total estimated future obligation relating to the current participants is
$2.9 million, including vested benefits of $1.7 million included in accrued
liabilities. The Company has life insurance policies of certain employees which
has $1.7 million in cash surrender values and are included in other assets.
-68-
<PAGE>
12. SHAREHOLDERS' EQUITY
Common Stock
During 1998, the Company repurchased 106,200 shares for $0.6 million, which
completed the $5.0 million common stock repurchases program announced in March
1997.
During the third quarter of 1998, the Company announced that its Board of
Directors had authorized the repurchase of up to $1.1 million of the Company's
common stock. During 1998, 170,300 shares, for a total of $1.1 million were
repurchased under this plan.
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.
During 1998, 63,300 shares were repurchased under this plan, for a total of $0.4
million.
During 1999, the Company purchased 666,779 shares under this program for a total
of $4.0 million. The Company may repurchase additional stock under this program
in the future.
The following table summarizes changes in common stock during 1998 and 1999:
Issued Outstanding
Common Treasury Common
Shares Shares Shares
---------- ---------- ----------
Shares as of December 31, 1997 12,034,847 3,641,485 8,393,362
Reissuance of treasury stock, net 908 (113,088) 113,996
Stock repurchased -- 347,439 (347,439)
---------- ---------- ----------
Shares as of December 31, 1998 12,035,755 3,875,836 8,159,919
Reissuance of treasury stock, net -- (197,869) 197,869
Stock canceled -- 15,599 (15,599)
Stock repurchased -- 666,779 (666,779)
---------- ---------- ----------
Shares as of December 31, 1999 12,035,755 4,360,345 7,675,410
========== ========== ==========
Preferred Stock
PLM International has authorized 10.0 million shares of preferred stock at $0.01
par value, none of which were outstanding as of December 31, 1999 or December
31, 1998.
Stock Option Plans
Prior to 1998, the Company had two nonqualified stock options plans that
reserved up to 780,000 shares of the Company's common stock for key employees
and directors. Under these plans, the price of the shares issued under an option
must be at least 85% of the fair market value of the common stock at the date of
granting. All options currently outstanding under these plans are exercisable at
prices equal to the fair market value of the shares at the date of granting.
Vesting of options granted occurs in three equal installments of 33.3% per year,
initiating from the date of the grant. As of December 31, 1999, grants could no
longer be made under the employee option plan and 10,000 shares were available
for grant under the directors' plan.
In May 1998, the Company's Board of Directors adopted the 1998 Management Stock
Compensation Plan, which reserved 800,000 shares (in addition to the 780,000
shares above) of the Company's common stock for issuance to certain management
and key employees of the Company upon the exercise of stock options. During
1998, 500,000 nonqualified options were granted under this plan at $6.81 per
share, which equaled 110% of the average daily closing price of such shares on
the American Stock Exchange for the 10 trading days immediately preceding the
grant (as required by the plan). Vesting of options granted occurs in three
equal installments of 33.3% per year, initiating from the date of the grant.
-69-
<PAGE>
12. SHAREHOLDERS' EQUITY (continued)
Stock Option Plans (continued)
Stock option transactions during 1997, 1998, and 1999 are summarized as follows:
Number of Average
Options/ Option Price
Shares Per Share
---------------------------
Balance, December 31, 1996 686,800 $ 2.61
Granted 40,000 3.31
Canceled (251,244) 2.72
---------------------------
Balance, December 31, 1997 475,556 $ 2.62
Granted 530,000 6.72
Canceled (19,556) 3.25
Exercised (56,500) 3.06
---------------------------
Balance, December 31, 1998 929,500 $ 4.92
Granted 50,000 5.88
Canceled (69,166) 5.98
Exercised (143,000) 2.31
---------------------------
Balance, December 31, 1999 767,334 $ 5.37
===========================
As of December 31, 1999, 1998, and 1997, respectively, 398,445, 337,500, and
343,037 of these options were exercisable.
The following table summarizes information about fixed stock options outstanding
as of December 31, 1999:
Options outstanding:
Range of exercise prices $2.00-6.81
Number outstanding, December 31, 1999 767,334
Weighted-average exercise price $5.37
Options exercisable:
Number exercisable, December 31, 1999 398,445
Weighted-average exercise price $4.34
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its plans. The fair value of each option grant is estimated on the date of
the grant using an option-pricing model that computes the value of employee
stock options consistent with FASB SFAS No.123. The following weighted-average
assumptions were used for grants in 1999, 1998, and 1997, no dividend yield;
expected lives of three years for the management plan and eight years for the
director plan options; shorter-term adjustment of six years; expected volatility
of 30% for all years; and risk-free interest rates of 6.48%, 5.16%, and 5.58%,
respectively. The weighted-average fair market value per share of options
granted during 1999, 1998, and 1997 was $2.54, $1.86, and $1.38, respectively.
-70-
<PAGE>
12. SHAREHOLDERS' EQUITY (continued)
Stock Option Plans (continued)
<TABLE>
Had compensation expense for the Company's stock-based compensation plans been
recorded consistent with FASB SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below for the years ended December 31 (in thousands of dollars, except per share
amounts):
<CAPTION>
1999 1998 1997
-----------------------------------------
<S> <C> <C> <C> <C>
Net income As reported $ 2,356 $ 4,857 $ 4,667
Pro forma 2,060 4,578 4,562
Basic earnings per share As reported 0.29 0.58 0.51
Pro forma 0.26 0.55 0.50
Diluted earnings per share As reported 0.29 0.57 0.50
Pro forma 0.25 0.54 0.49
</TABLE>
13. PROFIT SHARING AND 401(k) PLAN
The Company adopted the PLM International, Inc. Profit Sharing and 401(k) Plan
(the Plan) effective as of February 1996. The Plan provides for deferred
compensation as described in Section 401(k) of the Internal Revenue Code. The
Plan is a contributory plan available to essentially all full-time employees of
the Company in the United States. In 1999, employees who participated in the
Plan could elect to defer and contribute to the trust established under the Plan
up to 9% of pretax salary or wages up to $10,000. The Company matched up to a
maximum of $4,000 of employees' 401(k) contributions in 1999, 1998, and 1997 to
vest in four equal installments over a four-year period. The Company's total
401(k) contributions, net of forfeitures, were $0.3 million for 1999, 1998, and
1997, respectively.
During 1999, 1998, and 1997, the Company accrued discretionary profit-sharing
contributions. Profit-sharing contributions are allocated equally among the
number of eligible Plan participants. The Company's total profit- sharing
contributions were $0.1 million, $0.1 million, and $0.2 million for 1999, 1998,
and 1997, respectively.
14. TRANSACTIONS WITH AFFILIATES
In addition to various fees payable to the Company or its subsidiaries (refer to
Note 1), the affiliated programs reimburse the Company for certain expenses, as
allowed in the program agreements. Reimbursed expenses totaling $5.5 million,
$6.1 million, and $6.4 million in 1999, 1998, and 1997, respectively, have been
recorded as reductions of operations support or general and administrative
expenses. Outstanding amounts are paid under normal business terms.
15. RISK MANAGEMENT
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments and receivables
from loans, leases, and affiliated entities.
The Company places its temporary cash investments with financial institutions
and other creditworthy issuers and limits the amount of credit exposure to any
one party. Concentrations of credit risk with respect to lease and loan
receivables are limited, due to the large number of customers comprising the
Company's customer base and their dispersion across different businesses and
geographic areas. Currently, none of the Company's equipment is leased
internationally. The Company's involvement with management of the receivables
from affiliated entities limits the amount of credit exposure from affiliated
entities.
No single lessee of the Company's equipment accounted for more than 10% of
revenues for the years ended December 31, 1999, 1998, or 1997. As of December
31, 1999 and 1998, management believes the Company had no significant
concentrations of credit risk that could have a material adverse effect on the
Company's business, financial condition, or results of operations.
-71-
<PAGE>
16. 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 leasing segment
includes 22 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 management of investment
programs and other transportation equipment leasing segment involves managing
the Company's syndicated investment programs, from which it earns fees and
equity interests, and arranging short to mid-term operating leases of other
transportation equipment. 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 owning
commercial and industrial equipment. In October 1999, the Company announced that
the Company had engaged investment bankers to develop strategic alteratives to
maximize shareholder value including the possible sale of part or all of the
Company. In October 1999, the Company agreed to sell American Finance Group,
Inc. (AFG), its commercial and industrial equipment leasing subsidiary for
approximately $28.5 million, net of transaction costs and income taxes. On
February 25, 2000, the shareholders of PLM International approved the
transaction. This segment is accounted for as discontinued operations as of and
for the year ended December 31, 1999. Prior periods financial statements have
been restated.
<TABLE>
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 following tables present a summary of the operating
segments (in thousands of dollars):
<CAPTION>
Commercial Management
and of Investment
Industrial Programs
Equipment and Other
Leasing Transportation
Trailer and Equipment
For the year ended December 31, 1999 Leasing Financing Leasing Other(2) Total
- ------------------------------------ -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Lease revenue $ 24,561 $ -- $ 1,194 $ -- $ 25,755
Fees earned 835 -- 9,343 -- 10,178
Loss on sale or disposition of assets, net (49) -- -- -- (49)
Other 23 -- 1,358 -- 1,381
-----------------------------------------------------------------------
Total revenues 25,370 -- 11,895 -- 37,265
-----------------------------------------------------------------------
Costs and expenses
Operations support 11,422 -- 1,735 991 14,148
Depreciation and amortization 7,620 -- 477 -- 8,097
General and administrative expenses -- -- -- 6,828 6,828
-----------------------------------------------------------------------
Total costs and expenses 19,042 -- 2,212 7,819 29,073
-----------------------------------------------------------------------
Operating income (loss) 6,328 -- 9,683 (7,819) 8,192
Interest (expense) income, net (3,163) -- (2,261) 343 (5,081)
Other income (expenses), net -- -- 833 (112) 721
-----------------------------------------------------------------------
Income (loss) before income taxes $ 3,165 $ -- $ 8,255 $ (7,588) $ 3,832
=======================================================================
Income from discontinued operations before
income taxes $ -- $ 1,300 $ -- $ -- $ 1,300
=======================================================================
Cumulative effect of accounting change
before income taxes $ -- $ (401) $ -- $ -- $ (401)
=======================================================================
Total assets as of December 31, 1999 $ 88,901 $ 30,990 $ 25,796 $ 6,510 $ 152,197
=======================================================================
- -----------------------
(2) Includes costs not identifiable to a particular segment such as general and
administrative and certain operations support expenses.
-72-
<PAGE>
16. OPERATING SEGMENTS (continued)
Commercial Management
and of Investment
Industrial Programs
Equipment and Other
Leasing Transportation
Trailer and Equipment
For the year ended December 31, 1998 Leasing Financing Leasing Other(1) Total
- ------------------------------------ -----------------------------------------------------------------------
Revenues
Lease revenue $ 9,743 $ -- $ 2,269 $ -- $ 12,012
Fees earned 1,022 -- 12,533 -- 13,555
Gain on sale or disposition of assets, net 94 -- 1,432 -- 1,526
Other 4 -- 3,023 -- 3,027
-----------------------------------------------------------------------
Total revenues 10,863 -- 19,257 -- 30,120
-----------------------------------------------------------------------
Costs and expenses
Operations support 5,127 -- 4,731 2,526 12,383
Depreciation and amortization 3,802 -- 1,066 -- 4,868
General and administrative expenses -- -- -- 7,624 7,624
-----------------------------------------------------------------------
Total costs and expenses 8,929 -- 5,797 10,150 24,875
-----------------------------------------------------------------------
Operating income (loss) 1,934 -- 13,460 (10,150) 5,245
Interest (expense) income, net (1,754) -- (1,343) 212 (2,885)
Other income (expenses), net -- -- 474 -- 473
-----------------------------------------------------------------------
Income (loss) before income taxes $ 180 $ -- $ 12,591 $ (9,938) $ 2,833
=======================================================================
Income from discontinued operations before
income taxes $ -- $ 5,066 $ -- $ -- $ 5,066
=======================================================================
Total assets as of December 31, 1998 $ 50,819 $ 32,930 $ 31,499 $ 12,298 $ 127,546
=======================================================================
Commercial Management
and of Investment
Industrial Programs
Equipment and Other
Leasing Transportation
Trailer and Equipment
For the year ended December 31, 1997 Leasing Financing Leasing Other(1) Total
- ------------------------------------ -----------------------------------------------------------------------
Revenues
Lease revenue $ 5,544 $ -- $ 5,058 $ -- $ 10,602
Fees earned 1,283 -- 12,925 -- 14,208
Gain on sale or disposition of assets, net 313 -- 1,432 -- 1,745
Other 2 -- 4,612 -- 4,614
-----------------------------------------------------------------------
Total revenues 7,142 -- 24,027 -- 31,169
-----------------------------------------------------------------------
Costs and expenses
Operations support 3,282 -- 6,878 3,006 13,166
Depreciation and amortization 1,672 -- 2,817 -- 4,489
General and administrative expenses -- -- -- 9,536 9,536
-----------------------------------------------------------------------
Total costs and expenses 4,954 -- 9,695 12,542 27,191
-----------------------------------------------------------------------
Operating income (loss) 2,188 -- 14,332 (12,542) 3,978
Interest expense, net (1,201) -- (2,060) -- (3,261)
Other expenses, net (2) -- (340) -- (342)
-----------------------------------------------------------------------
Income (loss) before income taxes $ 985 $ -- $ 11,932 $ (12,542) $ 375
=======================================================================
Income from discontinued operations before
income taxes $ -- $ 6,140 $ -- $ -- $ 6,140
=======================================================================
Total assets as of December 31, 1997 $ 37,146 $ 32,957 $ 41,817 $ 6,651 $ 118,571
=======================================================================
<FN>
- -----------------------
(1) Includes costs not identifiable to a particular segment such as general and
administrative and certain operations support expenses.
</FN>
</TABLE>
-73-
<PAGE>
17. GEOGRAPHIC INFORMATION
Financial information about the Company's foreign and domestic operations
follow:
Revenues from continuing operations for the years ended December 31, 1999, 1998,
and 1997 are as follows (in thousands of dollars):
1999 1998 1997
---------------------------------------
Domestic $37,265 $28,167 $27,462
International -- 1,953 3,707
---------------------------------------
Total revenues $37,265 $30,120 $31,169
=======================================
Long-lived assets from continuing operations as of December 31, 1999, 1998, and
1997 are as follows (in thousands of dollars):
1999 1998 1997
---------------------------------------
Domestic $104,512 $ 74,090 $ 53,744
International 811 1,091 1,938
---------------------------------------
Total long-lived assets $105,323 $ 75,181 $ 55,682
=======================================
International operations are comprised primarily of international leasing,
brokerage, and other activities conducted primarily through the Company's
subsidiaries operated in Bermuda, Canada, and Australia (Australian operations
were sold in August 1998).
18. ESTIMATED FAIR VALUE OF THE COMPANY'S FINANCIAL INSTRUMENTS
<TABLE>
The Company estimates the fair value of it's financial instruments based on
recent similar transactions the Company has entered into. The estimated fair
values of the Company's financial instruments are as follows as of December 31
(in thousands of dollars):
<CAPTION>
1999 1998
--------------------------- ---------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------- ------- ------- -------
<S> <C> <C> <C> <C>
Financial assets:
Restricted cash (Note 6) $ 1,812 $ 1,812 $ 2,261 $ 2,261
Financial liabilities:
Senior secured notes (Note 9) 20,679 20,679 28,199 28,199
Senior loan (Note 9) 8,824 8,940 14,706 15,137
Other secured debt (Note 9) 50,697 50,191 13,142 13,142
</TABLE>
-74-
<PAGE>
19. QUARTERLY RESULTS OF OPERATIONS (unaudited)
<TABLE>
The following is a summary of the quarterly results of operations for the years
ended December 31, 1999 (in thousands of dollars, except per share amounts):
<CAPTION>
March June September December
31, 30, 30, 31, Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue from continuing operations $ 7,136 $ 8,459 $ 9,889 $ 11,781 $ 37,265
Income from continuing operations 231 10 991 1,113 2,345
Income (loss) from discontinued operations 79 711 386 (365) 811
Loss on disposition of discontinued
operations -- -- -- (550) (550)
Cumulative effect of accounting
change (250) -- -- -- (250)
-------------------------------------------------------------------------
Net income to common shares $ 60 $ 721 $ 1,377 $ 198 $ 2,356
=========================================================================
Basic income per common share
Income from continuing operations 0.03 -- 0.12 0.14 0.29
Income (loss) from discontinued operations 0.01 0.09 0.05 (0.05) 0.10
Loss on disposition of discontinued
operations -- -- -- (0.07) (0.07)
Cumulative effect of accounting
change (0.03) -- -- -- (0.03)
-------------------------------------------------------------------------
Net income to common shares $ 0.01 $ 0.09 $ 0.17 $ 0.02 $ 0.29
=========================================================================
Diluted income per common share
Income from continuing operations 0.03 -- 0.12 0.14 0.29
Income (loss) from discontinued operations 0.01 0.09 0.05 (0.05) 0.10
Loss on disposition of discontinued
operations -- -- -- (0.07) (0.07)
Cumulative effect of accounting
change (0.03) -- -- -- (0.03)
-------------------------------------------------------------------------
Net income to common shares $ 0.01 $ 0.09 $ 0.17 $ 0.02 $ 0.29
=========================================================================
The following is a summary of the quarterly results of operations for the years
ended December 31, 1998 (in thousands of dollars, except per share amounts):
<CAPTION>
March June September December
31, 30, 30, 31, Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue from continuing operations $ 7,501 $ 7,890 $ 7,079 $ 7,650 $ 30,120
Income from continuing operations 658 314 151 556 1,679
Income from discontinued operations 325 887 1,211 755 3,178
-------------------------------------------------------------------------
Net income to common shares $ 983 $ 1,201 $ 1,362 $ 1,311 $ 4,857
=========================================================================
Basic income per common share
Income from continuing operations 0.08 0.04 0.02 0.06 0.20
Income from discontinued operations 0.04 0.10 0.14 0.10 0.38
-------------------------------------------------------------------------
Net income to common shares $ 0.12 $ 0.14 $ 0.16 $ 0.16 $ 0.58
=========================================================================
Diluted income per common share
Income from continuing operations 0.08 0.04 0.02 0.06 0.20
Income from discontinued operations 0.03 0.10 0.14 0.10 0.37
-------------------------------------------------------------------------
Net income to common shares $ 0.11 $ 0.14 0.16 $ 0.16 $ 0.57
=========================================================================
</TABLE>
-75-
<PAGE>
19. QUARTERLY RESULTS OF OPERATIONS (unaudited) (continued)
During the fourth quarter of 1999, a loss on revaluation of $0.6 million was
recorded on certain AFG rental schedules.
During the fourth quarter of 1999, the Company recorded the estimated loss of
$0.6 million on the sale of AFG.
20. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
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 $0.3 million charge,
net of tax of $0.1 million, related to start-up costs of its commercial and
industrial equipment operations which is being accounted for as discontinued
operations.
21. SUBSEQUENT EVENTS
In February 2000, the Company's Board of Directors adopted the 2000 Director's
Nonqualified Stock Option Plan, which reserved 70,000 shares of the Company's
common stock for issuance to the outside directors of the Company. In February
2000, 40,000 options were granted under this plan at $6.19 per share, which
equaled the closing price of the stock on the date of grant. Vesting of these
options occurs in three equal installments of 33.3% per year, initiating from
the date of grant.
On February 25, 2000, the Company`s shareholders approved the sale of AFG. The
sale of AFG was completed on March 1, 2000, the Company received $29.0 million
for AFG. The Company expects to receive additional proceeds of $1.9 million
(unaudited) in the second quarter of 2000 related to the sale of AFG. Taxes and
transaction costs related to the sale are estimated to be $5.0 million resulting
in estimated net proceeds to the Company of $25.9 million. In addition, AFG
dividended to PLMI certain assets with a net book value of $2.7 million
immediately prior to the sale.
-76-
<PAGE>
The material in this report is not "soliciting material," is not deemed filed
with the Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.
Includes costs not identifiable to a particular segment such as general and
administrative and certain operations support expenses.
-77-
AMENDMENT NO. 1 TO STOCK SALE AGREEMENT
This Amendment No. 1 to Stock Sale Agreement (this
"Amendment") is made as of January 24, 2000 by and between Guaranty Federal
Bank, F.S.B., a federally chartered savings bank ("Purchaser"), and PLM
International, Inc., a Delaware corporation ("Seller"), in connection with that
certain Stock Sale Agreement, dated as of October 26, 1999, by and between
Purchaser and Seller (the "Stock Sale Agreement").
WHEREAS, Purchaser and Seller constitute all of the parties to
the Stock Sale Agreement; and
WHEREAS, the parties hereto desire to enter into this Amend-
ment to amend Section 7.1( c ) of the Stock Sale Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants and agreements set forth herein, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the respective meanings assigned to such terms in the
Stock Sale Agreement.
2. Termination Date. The date "March 1, 2000" that appears
in Section 7.1( c) of the Stock Sale Agreement is hereby amended and changed to
"March 15, 2000."
3. Effect on Stock Sale Agreement. Except as set forth
above, all provisions of the Stock Sale Agreement shall remain in full force or
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by there duly authorized representatives
as of the day and year first above written.
PLM INTERNATIONAL, INC., Seller
By: /s/ Robert N. Tidball
Title: Chairman of the Board
GUARANTY FEDERAL BANK, F.S.B.,
Purchaser
By: /s/ Ronald D. Murff
Title: Chief Financial Officer
AMENDMENT NO. 1
TO THIRD AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
(TEC AcquiSub, Inc.)
THIS AMENDMENT NO. 1 TO THIRD AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT
dated as of December 10, 1999 (the "Amendment"), is entered into by and among
TEC ACQUISUB, INC., a California special purpose corporation ("Borrower"), the
banks, financial institutions and institutional lenders from time to time party
hereto and defined as Lenders herein and FIRST UNION NATIONAL BANK as agent on
behalf of Lenders (not in its individual capacity, but solely as agent,
"Agent"). Capitalized terms used herein without definition shall have the same
meanings herein as given to them in the Credit Agreement.
RECITALS
A. Borrower, Lenders and Agent entered into that Third Amended and
Restated Warehousing Credit Agreement dated as of December 15, 1998 (the "Credit
Agreement"), pursuant to which Lenders have agreed to extend and make available
to Borrower certain advances of money.
B. Borrower desires to amend the Credit Agreement to extend the
Commitment Termination Date to June 30, 2000.
C. Subject to the representations and warranties of Borrower and upon
the terms and conditions set forth in this Amendment, Lenders and Agent are
willing to so amend the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
SECTION 1. AMENDMENT TO CREDIT AGREEMENT.
1.1 BORROWING BASE. The definition of "Borrowing
Base" set forth in Section 1.1 of the Credit Agreement is deleted in its
entirety and is replaced with the following:
"Borrowing Base" means, as at and for any date of
determination, an amount not to exceed an amount equal to eighty
percent (80.0%) of the aggregate Invoice Price of all Eligible
Inventory then owned of record by Borrower or any Marine Subsidiary or
of record by an Owner Trustee for the beneficial interest of Borrower
or any Marine Subsidiary (provided, however, that there shall be
excluded from this clause (a) the aggregate Invoice Price of all items
of Eligible Inventory subject to a Lease under which any applicable
lease or rental payment is more than ninety (90) days past due),
computed (1) with respect to any requested Loan, as of the requested
Funding Date (and shall include the item(s) of Eligible Inventory to be
acquired with the proceeds of the requested Loan), and (2) with respect
to the delivery of any monthly Borrowing Base Certificate to be
furnished pursuant to Section 5.1.3, as of the last day of the calendar
month for which such Borrowing Base Certificate is furnished (provided
that if any portion of Borrower's, such Marine Subsidiary's or such
Owner Trustee's ownership interest in any such item of Eligible
Inventory is sold or assigned to one or more of the Equipment Growth
Funds such that Borrower, such Marine Subsidiary or such Owner Trustee
continues to retain less than the entire record or beneficial ownership
interest therein, then for the purpose of computing the Borrowing Base
under this clause (a), the Invoice Price of such item of Eligible
Inventory shall be deemed to be equal to Borrower's or such Marine
Subsidiary's ratable portion of the Invoice Price of such item of
Eligible Inventory), computed (x) with respect to any requested Loan,
as of the requested Funding Date (and shall include the aggregate
Invoice Price of all item(s) of Eligible Inventory to be acquired with
the proceeds of the requested Loan), and (y) with respect to the
delivery of any monthly Borrowing Base Certificate to be furnished
pursuant to Section 5.1.3, as of the last day of the calendar month for
which such Borrowing Base Certificate is furnished (provided, that for
the purpose of computing the Borrowing Base, in the event that
Borrower, any Marine Subsidiary or any Owner Trustee shall own less
than one hundred percent (100.0%) of the record or beneficial interests
in any item of Equipment, with one or more of the other Equipment
Growth Funds owning of record or beneficially the remaining interests,
there shall be included only Borrower's, such Marine Subsidiary's or
such Owner Trustee's, as the case may be, ratable interest in such item
of Equipment).
1.2 COMMITMENT TERMINATION DATE. The definition of
"Commitment Termination Date" set forth in Section 1.1 of the Credit Agreement
is deleted in its entirety and is replaced with the following:
"COMMITMENT TERMINATION DATE" means June 30, 2000.
1.3 REVOLVING FACILITY. Section 2.1.1 of the Credit
Agreement is amended by inserting at the end of the first sentence of such
section after the words "as more fully set forth in this Section 2.1.1" the
words "and Section 2.1.3."
1.4 UTILIZATION OF LOANS. Section 2.1.3 of the
Credit Agreement is amended by inserting at the end of the first sentence of
such section after the "to be purchased with the proceeds of such Loan" the
following provisons:
and provided further that in no event shall the proceeds of any Loan be
used to acquire Trailers if and to the extent, together with all others
Loans then outstanding, the total amounts of the total Loan proceeds
used to acquire Trailers exceeds $12,000,000.
SECTION 2. PERFECTION OF LIENS IN COLLATERAL COMPRISING TRAILERS.
Pursuant to Section 5(a) of the Security Agreement and Section 5.8 of the Credit
Agreement, Agent, on behalf of Lenders and itself, hereby notifies Borrower that
commencing with the effective date of this Amendment it will require Borrower to
take all necessary and desirable actions, including such actions as Agent may
reasonably further direct, to perfect Agent's Lien in all Collateral comprising
Trailers hereafter purchased or acquired by Borrower or any Owner Trustee, which
Lien is to be perfected immediately upon or concurrent with Borrower or such
Owner Trustee obtaining rights in such Collateral, and shall include such
actions as are required under any vehicle registration statutes applicable to
such Collateral. Borrower acknowledges and agrees that Borrower's or any such
Owner Trustee's failure to perform, keep or observe its obligations under this
Section 2 shall be an Event of Default under Section 8.1.5 of the Credit
Agreement.
SECTION 3. LIMITATIONS ON AMENDMENTS.
(a) The amendments set forth in Sections 1 and 2,
above, are effective for the purposes set forth herein and shall be limited
precisely as written and shall not be deemed to (i) be a consent to any
amendment, waiver or modification of any other term or condition of any Loan
Document or (ii) otherwise prejudice any right or remedy which Lenders or Agent
may now have or may have in the future under or in connection with any Loan
Document.
(b) This Amendment shall be construed in connection
with and as part of the Loan Documents and all terms, conditions,
representations, warranties, covenants and agreements set forth in the Loan
Documents, except as herein amended, are hereby ratified and confirmed and shall
remain in full force and effect.
SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders
and Agent to enter into this Amendment, Borrower represents and warrants to each
Lender and Agent as follows:
(a) Immediately after giving effect to this
Amendment (i) the representations and warranties contained in the Loan Documents
(other than those which expressly speak as of a different date which shall be
true as of such different date) are true, accurate and complete in all material
respects as of the date hereof and (ii) no Event of Default, or event which
constitutes a Potential Event of Default, has occurred and is continuing;
(b) Borrower has the corporate power and authority
to execute and deliver this Amendment and to perform its Obligations under the
Credit Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party;
(c) The Amended and Restated Articles of
Incorporation and the Amended and Restated Bylaws of Borrower delivered to each
Lender in connection with the closing of the Second Amended and Restated
Warehousing Credit Agreement dated as of December 2, 1997 are true, accurate and
complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;
(d) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party have been duly authorized by all necessary corporate action
on the part of Borrower;
(e) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party do not and will not contravene (i) any law or regulation
binding on or affecting Borrower, (ii) the certificate of incorporation, bylaws,
or other organizational documents of Borrower, (iii) any order, judgment or
decree of any court or other governmental or public body or authority, or
subdivision thereof, binding on Borrower or (iv) any contractual restriction
binding on or affecting Borrower;
(f) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by any governmental or public body or authority, or subdivision
thereof, binding on Borrower, except as already has been obtained or made; and
(g) This Amendment has been duly executed and
delivered by Borrower and is the binding Obligation of Borrower, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws of general application and equitable principles relating to
or affecting creditors' rights.
SECTION 5. REAFFIRMATION. Borrower hereby reaffirms its Obligations
under each Loan Document to which it is a party.
SECTION 6. EFFECTIVENESS. This Amendment shall become effective upon
the last to occur of :
(a) The execution and delivery of this Amendment,
whether the same or different copies, by Borrower and each Lender to Agent;
(b) The execution and delivery by PLMI to Agent of
the Acknowledgment of Amendment and Reaffirmation of Guaranty attached to this
Amendment; and
(c) The receipt by Agent of a certificate of the
secretary of Borrower, with incumbency signatures, attaching copies, certified
to be true and correct, of (i) the current articles of incorporation and bylaws
of Borrower (which certificate may instead refer to and incorporate by reference
to such documents as previously delivered to Agent under an identified prior
certificate of the secretary of Borrower) and certifying that such
organizational documents have not been further amended and remain in full force
and effect, and (ii) resolutions of the board of directors of Borrower approving
this Amendment.
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
SECTION 8. CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF.
BORROWER HEREBY REPRESENTS AND WARRANTS TO AGENT AND EACH LENDER THAT IT HAS NO
KNOWLEDGE OF ANY FACTS THAT WOULD SUPPORT A CLAIM, COUNTERCLAIM, DEFENSE OR
RIGHT OF SET-OFF.
SECTION 9. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, and by different parties hereto in separate counterparts, with the
same effect as if the signatures to each such counterpart were upon a single
instrument. All counterparts shall be deemed an original of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWER TEQ ACQUISUB, INC.
By: /s/Richard K Brock
Title: Acting CFO, Vice President and
Corporate Controller
LENDERS FIRST UNION NATIONAL BANK
By: /s/Bill A. Shirley
Title: Senior Vice President
AGENT FIRST UNION NATIONAL BANK , as Agent
By: /s/Bill A. Shirley
Title: Senior Vice President
AMENDMENT NO. 1
TO FOURTH AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
(Growth Funds)
THIS AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT
dated as of December 10, 1999 (the "Amendment"), is entered into by and among
PLM EQUIPMENT GROWTH FUND VI, a California limited partnership ("EGF VI"), PLM
EQUIPMENT GROWTH & INCOME FUND VII, a California limited partnership ("EGF
VII"), and PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C., a Delaware
limited liability company ("Income Fund I") (EGF V, EGF VI, EGF VII and Income
Fund I each individually being a "Borrower" and, collectively, the "Borrowers"),
and PLM FINANCIAL SERVICES, INC., a Delaware corporation and the sole general
partner, in the case of EGF V, EGF VI and EGF VII, and the sole manager, in the
case of Income Fund I ("FSI"), the banks, financial institutions and
institutional lenders from time to time party hereto and defined as Lenders
herein and FIRST UNION NATIONAL BANK as agent on behalf of Lenders (not in its
individual capacity, but solely as agent, "Agent"). Capitalized terms used
herein without definition shall have the same meanings herein as given to them
in the Credit Agreement.
RECITALS
A. Borrowers, Lenders and Agent entered into that Fourth Amended and
Restated Warehousing Credit Agreement dated as of December 15, 1998 (the "Credit
Agreement"), pursuant to which Lenders have agreed to extend and make available
to Borrowers certain advances of money.
B. Borrowers desire to amend the Credit Agreement to extend the
Commitment Termination Date to June 30, 2000.
C. Subject to the representations and warranties of Borrowers and upon
the terms and conditions set forth in this Amendment, Lenders and Agent are
willing to so amend the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
Section 1. Amendments to Credit Agreement.
1.1 Commitment Termination Date. The definition of
"Commitment Termination Date" set forth in Section 1.1 of the Credit Agreement
is deleted in its entirety and is replaced with the following:
"Commitment Termination Date" means June 30, 2000.
1.2 Cash Balances. Section 7.3 of the Credit
Agreement is deleted in its entirety and is replaced with the following:
7.3 CASH BALANCES. The Equipment Growth Funds of which FSI is
the sole general partner shall maintain aggregate unrestricted cash
balances of $8,500,000.
SECTION 2. LIMITATIONS ON AMENDMENTS
(a) The amendments set forth in Section 1, above,
are effective for the purposes set forth herein and shall be limited precisely
as written and shall not be deemed to (i) be a consent to any amendment, waiver
or modification of any other term or condition of any Loan Document or (ii)
otherwise prejudice any right or remedy which Lenders or Agent may now have or
may have in the future under or in connection with any Loan Document.
(b) This Amendment shall be construed in connection
with and as part of the Loan Documents and all terms, conditions,
representations, warranties, covenants and agreements set forth in the Loan
Documents, except as herein amended, are hereby ratified and confirmed and shall
remain in full force and effect.
SECTION 3. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders
and Agent to enter into this Amendment, each Borrower severally as to itself,
but not jointly as to the other Borrowers and FSI, and FSI jointly and severally
with each Borrower and as to itself represents and warrants to each Lender and
Agent as follows:
(a) Immediately after giving effect to this
Amendment (i) the representations and warranties contained in the Loan Documents
(other than those which expressly speak as of a different date which shall be
true as of such different date) are true, accurate and complete in all material
respects as of the date hereof and (ii) no Event of Default, or event which
constitutes a Potential Event of Default, has occurred and is continuing;
(b) each Borrower and FSI has the power and
authority to execute and deliver this Amendment and to perform its Obligations
under the Credit Agreement, as amended by this Amendment, and each of the other
Loan Documents to which it is a party;
(c) The respective LP-1s, certificates of formation
and certificates of incorporation and the respective agreements of limited
partnership, operating agreements and bylaws delivered by Borrowers and FSI to
each Lender in connection with the closing of the Credit Agreement or, if
earlier, the Third Amended and Restated Warehousing Credit Agreement dated as of
December 2, 1997 are true, accurate and complete and have not been amended,
supplemented or restated and are and continue to be in full force and effect;
(d) The execution and delivery by Borrowers and FSI
of this Amendment and the performance by Borrowers and FSI of its Obligations
under the Credit Agreement, as amended by this Amendment, and each of the other
Loan Documents to which it is a party have been duly authorized by all necessary
corporate action on the part of Borrowers and FSI;
(e) The execution and delivery by each Borrower and
FSI of this Amendment and the performance by each Borrower and FSI of its
Obligations under the Credit Agreement, as amended by this Amendment, and each
of the other Loan Documents to which it is a party do not and will not
contravene (i) any law or regulation binding on or affecting such Borrower or
FSI, (ii) the organizational documents of such Borrower or FSI, (iii) any order,
judgment or decree of any court or other governmental or public body or
authority, or subdivision thereof, binding on such Borrower or FSI or (iv) any
contractual restriction binding on or affecting such Borrower or FSI;
(f) The execution and delivery by each Borrower and
FSI of this Amendment and the performance by each Borrower and FSI of its
Obligations under the Credit Agreement, as amended by this Amendment, and each
of the other Loan Documents to which it is a party do not require any order,
consent, approval, license, authorization or validation of, or filing, recording
or registration with, or exemption by any governmental or public body or
authority, or subdivision thereof, binding on each Borrower and FSI, except as
already has been obtained or made; and
(g) This Amendment has been duly executed and
delivered by each Borrower and FSI and is the binding Obligation of each
Borrower and FSI, enforceable against it in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
liquidation, moratorium or other similar laws of general application and
equitable principles relating to or affecting creditors' rights.
SECTION 4. REAFFIRMATION. Each Borrower and FSI hereby reaffirms its
Obligations under each Loan Document to which it is a party.
SECTION 5. EFFECTIVENESS. This Amendment shall become effective upon
the last to occur of :
(a) The execution and delivery of this Amendment,
whether the same or different copies, by each Borrower, FSI and each Lender to
Agent;
(b) The execution and delivery by PLMI to Agent of
the Acknowledgment of Amendment and Reaffirmation of Guaranty attached to this
Amendment; and
(c) The receipt by Agent of a certificate of the
secretary of FSI for itself and as the sole general partner or manager, as
applicable of each Borrower, with incumbency signatures, attaching copies,
certified to be true and correct, of (i) the current organizational documents of
each Borrower and FSI (which certificate may instead refer to and incorporate by
reference to such documents as previously delivered to Agent under an identified
prior certificate of the secretary of Borrower) and certifying that such
organizational documents have not been further amended and remain in full force
and effect, and (ii) resolutions of the board of directors of FSI approving this
Amendment.
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
SECTION 7. CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF. EACH
BORROWER AND FSI HEREBY REPRESENTS AND WARRANTS TO AGENT AND EACH LENDER THAT IT
HAS NO KNOWLEDGE OF ANY FACTS THAT WOULD SUPPORT A CLAIM, COUNTERCLAIM, DEFENSE
OR RIGHT OF SET-OFF.
SECTION 8. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, and by different parties hereto in separate counterparts, with the
same effect as if the signatures to each such counterpart were upon a single
instrument. All counterparts shall be deemed an original of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWER PLM EQUIPMENT GROWTH FUND VI
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By: /s/Richard K Brock
Title: Acting CFO, Vice President and Corporate
Controller
PLM EQUIPMENT GROWTH & INCOME FUND VII
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By: /s/Richard K Brock
Title: Acting CFO, Vice President and Corporate
Controller
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I,
L.L.C.
BY PLM FINANCIAL SERVICES, INC.,
ITS MANAGER
By: /s/Richard K Brock
Title: Acting CFO, Vice President and Corporate
Controller
FSI PLM FINANCIAL SERVICES, INC.
By: /s/Richard K Brock
Title: Acting CFO, Vice President and Corporate
Controller
LENDERS FIRST UNION NATIONAL BANK
By: /s/Bill A. Shirley
Title: Senior Vice President
AGENT FIRST UNION NATIONAL BANK
By: /s/Bill A. Shirley
Title: Senior Vice President
AMENDMENT NO. 1
TO WAREHOUSING CREDIT AGREEMENT
(American Finance Group, Inc.)
THIS AMENDMENT NO. 1 TO WAREHOUSING CREDIT AGREEMENT dated as
of December 10, 1999 (the "Amendment"), is entered into by and among AMERICAN
FINANCE GROUP, INC., a Delaware corporation ("Borrower"), the banks, financial
institutions and institutional lenders from time to time party hereto and
defined as Lenders herein and FIRST UNION NATIONAL BANK ("FUNB") as agent on
behalf of Lenders (not in its individual capacity, but solely as agent,
"Agent"). Capitalized terms used herein without definition shall have the same
meanings herein as given to them in the Credit Agreement.
RECITALS
A. Borrower, Lenders and Agent entered into that Warehousing Credit
Agreement dated as of December 15, 1998 (the "Credit Agreement"), pursuant to
which Lenders have agreed to extend and make available to Borrower certain
advances of money.
B. Borrower desires to amend the Credit Agreement to extend the
Commitment Termination Date to April 21, 2000 and to decrease the aggregate
Commitments set forth on Schedule A to the Credit Agreement from $60,000,000 to
$50,000,000.
C. Subject to the representations and warranties of Borrower and upon
the terms and conditions set forth in this Amendment, Lenders and Agent are
willing to so amend the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
Section 1. Amendments.
1.1 COMMITMENT. The definition of "Commitment" set
forth in Section 1.1 of the Credit Agreement is amended by deleting Schedule A
in its entirety and replacing such schedule with a new Schedule A in the form
attached to this Amendment as Attachment I.
1.2 COMMITMENT TERMINATION DATE. The definition of
"Commitment Termination Date" set forth in Section 1.1 of the Credit Agreement
is deleted in its entirety and is replaced with the following:
"Commitment Termination Date" means April 21, 2000.
SECTION 2. LIMITATIONS ON AMENDMENTS.
2.1 The amendments set forth in Section 1, above,
are effective for the purposes set forth herein and shall be limited precisely
as written and shall not be deemed to (i) be a consent to any amendment, waiver
or modification of any other term or condition of any Loan Document or (ii)
otherwise prejudice any right or remedy which Lenders or Agent may now have or
may have in the future under or in connection with any Loan Document.
2.2 This Amendment shall be construed in connection
with and as part of the Loan Documents and all terms, conditions,
representations, warranties, covenants and agreements set forth in the Loan
Documents, except as herein amended, are hereby ratified and confirmed and shall
remain in full force and effect.
SECTION 3. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders
and Agent to enter into this Amendment, Borrower represents and warrants to each
Lender and Agent as follows:
(a) Immediately after giving effect to this
Amendment (i) the representations and warranties contained in the Loan Documents
(other than those which expressly speak as of a different date which shall be
true as of such different date) are true, accurate and complete in all material
respects as of the date hereof and (ii) no Event of Default, or event which
constitutes a Potential Event of Default, has occurred and is continuing;
(b) Borrower has the corporate power and authority
to execute and deliver this Amendment and to perform its Obligations under the
Credit Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party;
(c) The certificate of incorporation of Borrower and
the bylaws of Borrower delivered to each Lender as a condition precedent to the
effectiveness of the Credit Agreement are true, accurate and complete and have
not been amended, supplemented or restated and are and continue to be in full
force and effect;
(d) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party have been duly authorized by all necessary corporate action
on the part of Borrower;
(e) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party do not and will not contravene (i) any law or regulation
binding on or affecting Borrower, (ii) the certificate of incorporation, bylaws,
or other organizational documents of Borrower, (iii) any order, judgment or
decree of any court or other governmental or public body or authority, or
subdivision thereof, binding on Borrower or (iv) any contractual restriction
binding on or affecting Borrower;
(f) The execution and delivery by Borrower of this
Amendment and the performance by Borrower of its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by any governmental or public body or authority, or subdivision
thereof, binding on Borrower, except as already has been obtained or made; and
(g) This Amendment has been duly executed and
delivered by Borrower and is the binding Obligation of Borrower, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws of general application and equitable principles relating to
or affecting creditors' rights.
SECTION 4. REAFFIRMATION. Borrower hereby reaffirms its Obligations
under each Loan Document to which it is a party.
SECTION 5. EFFECTIVENESS. This Amendment shall become effective upon
the last to occur of :
(a) The execution and delivery of this Amendment,
whether the same or different copies, by Borrower and each Lender to Agent; and
(b) The execution and delivery by PLMI to Agent of
the Acknowledgment of Amendment and Reaffirmation of Guaranty attached to this
Amendment.
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
SECTION 7. CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF.
BORROWER HEREBY REPRESENTS AND WARRANTS TO AGENT AND EACH LENDER THAT IT HAS NO
KNOWLEDGE OF ANY FACTS THAT WOULD SUPPORT A CLAIM, COUNTERCLAIM, DEFENSE OR
RIGHT OF SET-OFF.
SECTION 8. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, and by different parties hereto in separate counterparts, with the
same effect as if the signatures to each such counterpart were upon a single
instrument. All counterparts shall be deemed an original of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWER AMERICAN FINANCE GROUP, INC.
By: /s/Susan Santo
Title: Secretary
LENDERS FIRST UNION NATIONAL BANK
By: /s/Bill A. Shirley
Title: Senior Vice President
EUROPEAN AMERICAN BANK
By: /s/Robert W. Peck
Title: Vice President
IMPERIAL BANK
By: /s/Kevin Coonan
Title: Vice President
MEES PIERSON, N.V.
By: /s/B.M. Kool
Title:
AGENT FIRST UNION NATIONAL BANK , as Agent
By: /s/Bill A. Shirley
Title: Senior Vice President
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is made and entered into on this
17th day of December, 1999, by and between PLM INTERNATIONAL, INC., its
successors and/or assigns (the "Company"), and Robert N. Tidball ("Employee").
WHEREAS, Employee currently holds the position(s) of President and
Chief Executive Officer of the Company;
WHEREAS, the Board of Directors of the Company has recently engaged the
investment banking firm of Imperial Capital, LLC to explore various strategic
and financial alternatives for maximizing shareholder value on a near-term
basis, including, but not limited to, a possible transaction or series of
transactions representing a merger, consolidation, or any other business
combination, a sale of all or a substantial amount of the business, securities,
or assets of the Company, or a recapitalization or spin-off;
WHEREAS, the consideration of any such transaction by the Board of
Directors has led to uncertainty regarding the future path of the Company and
the long-term prospects for executive employment with the Company;
WHEREAS, the Company's Board of Directors believes it is important to
the enhancement of shareholder value that, notwithstanding such uncertainty,
Employee act vigorously and constructively in any negotiations being conducted
in connection with any such transaction to achieve the results most favorable to
the Company's shareholders and to continue to manage the on-going business of
the Company in order to achieve the most positive results attainable; and
WHEREAS, as an inducement for Employee to remain in the employ of the
Company during this period of uncertainty, this Agreement provides for certain
incentives for Employee upon a change in control (as defined herein) and for
certain severance benefits to be paid and provided to Employee in the event
Employee's employment is terminated following a change in control.
NOW, THEREFORE, in consideration of the above premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Employee agree as follows:
1. Term. The term of this Agreement shall commence on January 1, 2000
and shall continue (i) until December 31, 2000 so long as no Change in Control
(as defined below) has occurred on or before December 31, 2000; or (ii) in the
event a Change in Control has occurred on or before December 31, 2000, until
Employee's employment has been terminated (by the Company or by Employee) and
all obligations under this Agreement have been met.
<PAGE>
2. Change in Control.
A. For the purposes of this Agreement only, the term "Change
in Control" shall mean the occurrence of any one of the following events:
(i) Any person or group (a "Person"), within the
meaning of Sections 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), acquiring
"beneficial ownership" ("Beneficial Ownership"), as defined in
Rule 13d-3 under the Exchange Act, of securities of the
Company representing more than fifty percent (50%) of the
combined voting power of the Company's then outstanding
securities; provided, however, in determining whether a Change
in Control has occurred, voting securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall
not constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an acquisition
by (a) an employee benefit plan (or trust forming a part
thereof) maintained by the Company or any corporation or other
Person of which a majority of its voting power or its voting
equity securities or equity interests is owned, directly or
indirectly, by the Company (for purposes of this definition, a
"Subsidiary"), (b) the Company or its Subsidiaries, or (c) any
Person in connection with a "Non-Control Transaction" (as
hereinafter defined);
(ii) A merger, consolidation or reorganization
(collectively, a "Transaction") involving the Company unless
such Transaction is a "Non-Control Transaction." A
"Non-Control Transaction" shall mean a Transaction involving
the Company where:
(a) The stockholders of the Company
immediately before such Transaction own, directly or
indirectly, immediately following such Transaction,
at least fifty percent (50%) of the combined voting
power of the outstanding voting securities of the
corporation resulting from such Transaction (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the voting
securities of the Company immediately before such
Transaction, or
(b) No Person, other than (1) the Company,
(2) any Subsidiary, or (3) any employee benefit plan
(or any trust forming a part thereof) maintained by
the Company or any Subsidiary, has Beneficial
Ownership of more than fifty percent (50%) of the
combined voting power of the Surviving Corporation's
then outstanding voting securities;
<PAGE>
(iii) The sale or other disposition (other than a
transfer to a Subsidiary of the Company) of the Company's
subsidiary American Finance Group, Inc. (AFG) or the sale or
other disposition of the Company's trailer leasing business
(through a sale of substantially all of the Company's trailer
assets and/or sale of the stock of the Company's subsidiary
PLM Rental, Inc.)(Trailer Leasing), followed by the sale or
other disposition of Trailer Leasing (in the case of an
earlier sale or disposition of AFG) or AFG (in the case of an
earlier sale or disposition of Trailer Leasing);
(iv) The sale or other disposition (other than a
transfer to a Subsidiary of the Company) of all or
substantially all of the assets of the Company (excluding the
sales or dispositions specified in Section 2(A)(iii) above),
and/or the sale or other disposition of the Company's
subsidiary PLM Financial Services, Inc. (through an asset sale
or stock sale); or
(v) The stockholders of the Company approve a plan of
dissolution or liquidation of the Company.
B. In the event that a Change in Control transaction as
defined in this Agreement occurs, and such transaction is also deemed to be a
Change in Control as defined in and under the Employment Agreement (the
"Employment Agreement") dated as of December 18, 1992 between the Company and
Employee (specifically, a majority of the members of the Continuing Directors of
the Board of Directors of the Company does not approve the Change in Control
event specifically for purposes of the Employment Agreement), then the terms and
conditions of the Employment Agreement, including but not limited to Sections
10.2, 11, 12 and 13 thereof, shall govern and supercede this Agreement.
3. Acceleration and Vesting.
A. Stock Options and Grants.
(i) Upon the occurrence of a Change in Control, any
and all options to purchase stock and grants of stock (common
or otherwise) in the Company granted to Employee pursuant to
any plan or otherwise, including options granted pursuant to
the 1988 Management Stock Compensation Plan and/or the 1998
Management Stock Compensation Plan, and any and all grants of
stock in the Company granted to Employee pursuant to the 1996
Mandatory Management Stock Bonus Plan (collectively, any or
all of these plans shall be referred to herein as the "Stock
Plans"), shall become immediately accelerated and fully vested
and any restrictions on such options and grants shall, to the
extent permissible under applicable securities laws, fully
lapse. The Company shall endeavor to cause any restrictions on
the options or grants not lapsed by operation of this Section
3(A)(i) to so lapse.
(ii) Upon the vesting of all such options and grants
pursuant to Section 3(A)(i) or Section 5(A)(ii) below and, in
the case of options, so long as such options have not expired,
Employee may elect by written notice to the Company at any
time following such vesting that the Company "cash-out" such
options and/or grants by paying to Employee within five (5)
days of such notice the value of the options and/or grants so
long as Employee surrenders to the Company, and agrees to the
cancellation of, the options or grants. The value of the
options and/or grants shall be calculated as follows: (a) in
the event that the Change in Control is a result of a tender
offer and so long as Employee provides his "cash-out" notice
to the Company within 30 days of the conclusion of the tender
offer, then Employee shall be paid the per share price paid to
the Company's shareholders in connection with such tender
offer, or (b) in all other circumstances, the Employee shall
be paid the average daily closing price of the common stock of
the Company for the ten trading days immediately preceding the
date of Employee's "cash-out" notice, less in the case of both
(a) and (b) for the cash-out options, the exercise price of
the option. In the event Employee does not elect to "cash-out"
pursuant to this Section 3(A)(ii), then Employee's rights
regarding such options and grants shall be as set forth in the
respective Stock Plans and agreements governing such options
and grants, except that Employee shall be deemed to be fully
vested and any restrictions on such options and grants shall
remain fully lapsed.
B. Executive Deferred Compensation Agreement. In the event of
a Change in Control as defined in this Agreement, a Change in Control of the
Company shall also be deemed to have occurred for the purpose of Section 10.1 of
the Executive Deferred Compensation Agreement (the "Executive Deferred
Compensation Agreement") dated as of December 18, 1992 between the Company and
Employee, so that effective with the occurrence of the Change in Control,
Employee shall be treated for purposes of the Executive Deferred Compensation
Agreement as if Employee had attained age 60 on the first day of the second
calendar month preceding the calendar month in which the Change in Control of
the Company occurs, and Employee's Vesting Factor under Section 1.4 of the
Executive Deferred Compensation Agreement shall become and forever thereafter
remain 1.
4. Termination Upon a Change in Control. Employee's employment may be
terminated as follows:
A. At will by either the Company or by Employee following a
Change in Control pursuant to Section 2(A)(iii), and if so terminated, Employee
shall be paid and provided the benefits specified in Section 5(A) below.
B. At will by the Company or for "Good Reason" (as defined in
Section 7, below) by Employee following a Change in Control pursuant to Section
2(A)(i), 2(A)(ii), 2(A)(iv) or 2(A)(v), and if so terminated, Employee shall be
paid and provided the benefits specified in Section 5(A) below. In the event
Employee terminates his employment for Good Reason and the Company disputes that
the termination was for Good Reason, the Company shall have the burden of
proving that any such reason was not "Good Reason".
C. For "Cause" or "Disability" (each as defined in Section 7,
below) by the Company or for a reason other than Good Reason by Employee
following a Change in Control pursuant to Section 2(A)(i), 2(A)(ii), 2(A)(iv) or
2(A)(v), and if so terminated, Employee shall be paid and provided the benefits
specified in Section 5(B) below.
D. If either party chooses to terminate the Employee's
employment with the Company pursuant to this Section 4, the terminating party
shall deliver to the other party a Notice of Termination (as defined in Section
7, below), and Employee's termination shall be effective on the Date of
Termination (as defined in Section 7, below).
E. Upon termination by either party pursuant to the terms of
this Agreement, the Employment Agreement shall be terminated as of the Date of
Termination, and neither party shall have any further rights or obligations
thereunder.
5. Compensation Upon Termination.
A. Termination Pursuant to Section 4(A) or 4(B). If either the
Company or Employee elects to terminate Employee's employment with the Company
under the circumstances described in Section 4(A) or 4(B) above, the Company
shall, in addition to paying Employee his full Base Salary through the Date of
Termination at the rate in effect at the time the Notice of Termination is given
and any accrued but unused vacation and personal days (as required by law), pay
to Employee, and provide to Employee, the following severance benefits:
(i) The Company shall pay to Employee an amount equal
to three years of Employee's annual base salary at the highest
rate in effect during the twelve (12) months immediately
preceding the Date of Termination, less customary payroll
deductions, such payment to be made at Employee's option
either on the Date of Termination in a lump sum, or in
semi-monthly installments (starting on the first regularly
scheduled payday following the Date of Termination, and
continuing on each regularly scheduled payday thereafter until
paid). In the event Employee fails to notify the Company of
his option, the amount shall be paid in a lump sum;
<PAGE>
(ii) Any and all options to purchase stock (common or
otherwise) in the Company granted to Employee following a
Change in Control pursuant to any plan or otherwise, and any
and all grants of stock in the Company granted to Employee
following a Change in Control pursuant to any plan or
otherwise, shall become immediately accelerated and fully
vested and any restrictions on such options, grants or
equivalent or similar rights shall, to the extent permissible
under applicable securities laws, fully lapse. The Company
shall endeavor to cause any restrictions on the options,
grants or equivalent or similar rights not lapsed by operation
of this Section 5(A)(ii) to so lapse. Employee shall have the
same rights in such accelerated and vested options and grants
as provided in Section 3(A)(ii) and the Company shall pay to
Employee the value of the options and/or grants following
receipt of Employee's written notice of his/her election to
"cash-out" pursuant to Section 3(A)(ii);
(iii) At the Employee's election by written notice to
the Company made within five (5) business days following the
Notice of Termination, the Company shall pay to Employee on
the Date of Termination in a lump sum the total amount of any
Monthly Executive Compensation Benefit payments that are
payable under the Executive Deferred Compensation Agreement,
which amount shall have been determined pursuant to the terms
of Sections 5(a) and 5(b) of the Executive Deferred
Compensation Agreement after taking into consideration the
automatic acceleration of vesting as provided in Section 10.1
(including Section 10.1(a) and 10.1(b)) of the Executive
Deferred Compensation Agreement. In the event Employee is paid
his executive deferred compensation in a lump sum as provided
in this Section 5(A)(ii), the Executive Deferred Compensation
Agreement shall be terminated and of no further force or
effect. In the event Employee does not elect to receive a lump
sum payment of his executive deferred compensation, then the
Monthly Executive Compensation Benefit payments that are
payable under the Executive Deferred Compensation Agreement
shall be paid pursuant to the terms of that agreement, which
shall remain in full force and effect; and
(iv) Employee shall continue to participate in all
life insurance, medical, health, dental and disability plans,
programs or arrangements ("Insurance Plans") in which Employee
participated immediately prior to the Date of Termination on
the same terms as Employee participated immediately prior to
the Date of Termination for the shorter period of (a) three
years from the Date of Termination or (b) Employee's
commencement of full time employment with a new company that
provides Employee with benefits at least as favorable as those
provided by the Company, so long as Employee's continued
participation is possible under the general terms and
provisions of such plans and programs and Employee will
continue to be obligated to pay the same employee portion of
any premium and any deductible and/or co-payments associated
with such insurance Plans as was required immediately prior to
the Date of Termination. Employee's right to continued group
benefits after any period covered by the Company under this
Agreement will be determined in accordance with federal and
state law.
(v) The payments and benefits provided for in this
Section 5(A) are in addition to, and shall not be deemed to be
in lieu of, any other payments and/or benefits to which
Employee is otherwise entitled, including without limitation
any and all payments and benefits under the PLM International,
Inc. 401K and Profit Sharing Plan and any other insurance
and/or disability plans.
B. Termination Pursuant to Section 4(C). Following a Change in
Control, if Employee's employment is terminated pursuant to Section 4(C) (for
Cause, Disability or other than Good Reason), the Company shall pay Employee his
full Base Salary (and any accrued but unused vacation and personal days) through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, and the Company shall have no further obligations to Employee under
this Agreement. The rights, limitations and obligations of each of the Employee
and the Company under any other agreement or plan (other than the Employment
Agreement), including but not limited to any stock option plan, stock grant
plan, deferred compensation plan and related agreement(s), each as may have been
modified by the terms of this Agreement, shall remain in full force and effect.
C. Termination Prior to a Change in Control. This Agreement
does not provide for the payment or provision of severance benefits in
connection with a termination by Employee or the Company prior to and not in
connection with a Change in Control. Employee's rights to any such benefits
shall continue to be governed by law or other written agreement, if any exists
between Employee and the Company, and nothing in this Agreement is intended to
change, or shall be construed as changing, any of the legal or contractual
rights of either party to terminate Employee's employment (for Cause, at-will,
for Good Reason, or otherwise) prior to and not in connection with a Change in
Control.
D. Section 280G. Notwithstanding any other provisions of this
Agreement or any other agreement between the Company and the Executive, in the
event that any payment or benefit received or to be received by the Executive in
connection with a Change in Control or the termination of the Executive's
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company or any Person whose actions result in
a Change in Control or any Person affiliated with the Company or such Person)
(all such payments and benefits, including the severance benefits provided
hereunder, being hereinafter called "Total Payments") would not be deductible
(in whole or part), by the Company, an affiliate or Person making such payment
or providing such benefit as a result of section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), then, to the extent necessary to make
such portion of the Total Payments deductible (and after taking into account any
reduction in the Total Payments provided by reason of section 280G of the Code
in such other plan, arrangement or agreement), the benefits provided hereunder
shall be reduced (if necessary, to zero); provided, however, that,
notwithstanding the terms of any other plan or agreement, the Executive may
elect to have the benefits payable under any other plan or agreement reduced (or
eliminated) prior to any reduction of the benefits payable under this Agreement,
which may include, in the case of the Executive Deferred Compensation Agreement
(if Employee is a party to such agreement), an election to reduce the
Executive's Compensation Period under the Executive Deferred Compensation
Agreement (without increasing the amount determined under Section 1.1 of the
Executive Deferred Compensation Agreement as Executive's Monthly Deferred
Compensation Benefit).
(i) For purposes of this limitation in the event the
Company asserts that the limitation would apply, (a) no
portion of the Total Payments the receipt or enjoyment of
which the Executive shall have waived at such time and in such
manner as not to constitute a "payment" within the meaning of
section 280G(b) of the Code shall be taken into account, (b)
no portion of the Total Payments shall be taken into account
that, in the opinion of tax counsel ("Tax Counsel") selected
by the Executive and reasonably accepted by the Company, does
not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (c) the benefits payable under this
Agreement shall be reduced only to the extent necessary so
that the Total Payments (other than those referred to in
clauses (a) or (b)) in their entirety constitute reasonable
compensation for services actually rendered within the meaning
of section 280G(b)(4)(B) of the Code or are otherwise not
subject to disallowance as deductions by reason of section
280G of the Code, in the opinion of Tax Counsel, and (d) the
value of any noncash benefit or any deferred payment or
benefit included in the Total Payments shall be determined in
accordance with the principles of sections 280G(d)(3) and (4)
of the Code.
(ii) If it is established pursuant to a final
determination of a court or an Internal Revenue Service
proceeding that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this
Section 6(F), the Total Payments paid to or for the
Executive's benefit are in an amount that would result in any
portion of such Total Payments being subject to the Excise
Tax, then, if such repayment would result in (a) no portion of
the remaining Total Payments being subject to the Excise Tax
and (b) a dollar-for-dollar reduction in the Executive's
taxable income and wages for purposes of federal, state and
local income and employment taxes, the Executive shall have an
obligation to pay the Company upon demand an amount equal to
the sum of (x) the excess of the Total Payments paid to or for
the Executive's benefit over the Total Payments that could
have been paid to or for the Executive's benefit without any
portion of such Total Payments being subject to the Excise
Tax; and (y) interest on the amount set forth in clause (x) of
this sentence at the rate provided in section 1274(b)(2)(B) of
the Code from the date of the Executive's receipt of such
excess until the date of such payment.
(iii) By execution and delivery of this Agreement,
the provisions of Section 10.4 of the Executive Deferred
Compensation Agreement are hereby superseded and such section
is hereby declared null and void.
6. Mitigation. Employee shall not be required to mitigate the amount of
any payment or benefit provided for in this Agreement by seeking other
employment or otherwise and, except as otherwise provided in Section 5(A)(iv),
no payment or benefit provided for in this Agreement shall be reduced by any
compensation earned by Employee as the result of employment by another employer
after the termination of his/her employment with the Company.
7. Other Definitions. The following definitions shall apply for
purposes of this Agreement:
A. Good Reason. "Good Reason" shall mean:
(i) Any breach by the Company of any material
provision of this Agreement which has not been cured within
ten (10) days after written notice detailing such
non-compliance is given by Employee to the Company;
(ii) Any demonstrable and material diminution of the
base compensation, duties, responsibilities, authority or
powers of Employee as they relate to any positions or offices
held by Employee during the term of this Agreement; provided
that Employee provides a reasonable description of any such
diminution(s) and a statement that Employee finds, in good
faith, such diminution to be a material diminution and that,
as such, he/she elects to terminate his/her employment
hereunder for Good Reason. Notwithstanding the foregoing, a
reduction in the staff of the Company following a Change in
Control which results in the Employee taking on additional
responsibilities shall not be considered a diminution of the
duties, responsibilities, authority or powers of Employee for
the purposes of this Agreement;
(iii) The failure of the Company to include Employee
in any employee benefit plan or incentive compensation plan
for which Employee has previously participated or would
reasonably expect to participate in. Employee may reasonably
expect to participate in a benefit plan or incentive
compensation plan if, without limitation, other employees of
the Company with similar titles, levels of responsibilities or
salaries participate or have participated in such plan.
Notwithstanding the foregoing, (a) to the extent not otherwise
determined pursuant to the incentive compensation plan, the
Board of Directors shall have the sole discretion to determine
the amount of such bonus, or incentive compensation, if any,
and (b) the Company may change the terms of any benefit plan
so long as such changes occur pursuant to a program applicable
to all employees or executives of the Company and do not
result in a proportionately greater reduction in the rights of
or benefits to the Employee as compared with any other
employee or executive of the Company; or
(iv) Any requirement by the Company that Employee
relocate his/her primary business office to a geographical
area greater than twenty (20) miles from the Company 's
principal executive offices as existing on January 1, 1999, or
if Employee is based in an office other than the Company's
principal executive offices, twenty (20) miles from the
Company's office where Employee is based as of the date of
this Agreement.
B. Cause. "Cause" shall mean:
(i) The willful and continued failure by Employee to
perform his/her day to day responsibilities substantially in
the same manner as performed prior to the Change in Control
(other than any failure resulting from Employee's incapacity
due to physical or mental illness), which has not been cured
within ten (10) days after written demand for substantial
performance is delivered by the Company to Employee, which
demand specifically identifies the manner in which Employee
has not substantially performed his/her day to day
responsibilities. The financial condition of the Company
(including any subsidiary, division or department thereof),
and/or Employee's contribution thereto, shall not be
considered for the purposes of determining whether Employee
has willfully failed to perform his/her day to day
responsibilities;
(ii) A willful and intentional act or omission by
Employee which is, in the reasonable determination of the
Company, materially injurious to the Company, monetarily or
otherwise. For purposes of subsection (i) above and this
subsection (ii), no act or omission on Employee's part shall
be considered willful and intentional unless done, or omitted
to be done, by him/her not in good faith and without the
reasonable belief that his/her action(s) or omission(s) was in
the best interests of the Company; or
<PAGE>
(iii) The conviction of Employee of, or his/her admission or
plea of nolo contendere to, a crime involving an act of moral
turpitude, which is a felony or which results or is intended
to result, directly or indirectly, in gain or personal
enrichment of Employee, relatives of Employee, or their
affiliates at the expense of the Company;
provided, however, that, notwithstanding anything to the contrary
contained in this Section 7(B), "Cause" shall not be deemed to include
a refusal by Employee to execute any certificate or document that
Employee in good faith determines contains any untrue statement of a
material fact.
C. Disability. "Disability" shall mean if, as a result of
Employee's incapacity due to physical or mental illness, Employee shall have
been absent or substantially absent from his/her duties hereunder for a period
of six (6) consecutive months, and within thirty (30) days after a Notice of
Termination (as hereinafter defined) is given, which Notice of Termination may
be given before or after the end of such six month period, Employee shall not
have returned to the performance of his/her duties hereunder on a full-time
basis, Employee's employment shall terminate upon the expiration of such thirty
(30) days (but in no event earlier than the 6 months). Employee's absence or
substantial absence from his/her duties will be treated as resulting from
incapacity due to physical or mental illness if Employee is "totally disabled
from his/her own occupation." Total disability from Employee's own occupation
will exist where (i) because of sickness or injury, Employee cannot perform the
important duties of his/her occupation, (ii) Employee is either receiving
Doctor's Care or has furnished written proof acceptable to the Company that
further Doctor's Care would be of no benefit, and (iii) Employee does not work
at all. Doctor's Care means regular and personal care of a Doctor which, under
prevailing medical standards, is appropriate for the condition causing the
disability.
E. Notice of Termination. "Notice of Termination" shall mean a
written notice which states that a Change in Control has occurred and that the
party providing the notice elects to terminate Employee's employment pursuant to
the terms of this Agreement, and which Notice of Termination specifies the
provision of Section 4 of this Agreement relied upon for the termination.
F. Date of Termination. "Date of Termination" shall mean the
effective date of the termination of Employee's employment, which date shall be
thirty (30) days after the Notice of Termination is given, or as otherwise may
be agreed to by the parties.
8. Successors; Binding Agreement.
A. The Company shall require any successors or assigns
(whether direct or indirect by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent as if they were an original party hereto, and this Agreement shall inure
to the benefit of any such successor or assign.
B. This Agreement shall inure to the benefit of and be
enforceable by Employee's executors, administrators, successors, heirs,
distributes, devisees and legatees.
9. Other Agreements. Except as expressly set forth herein, nothing in
this Agreement is intended to alter the obligations of the Company and/or the
Employee in connection with any other written agreement between the Company and
the Employee.
10. Miscellaneous.
10.1 Written notices required by this Agreement shall be delivered to
the Company or Employee in person or sent by overnight courier or certified
mail, with a return receipt requested, to the Company's registered address and
to Employee's last shown address on the Company's records, respectively. Notice
sent by certified mail shall be deemed to be delivered two days after mailing,
and all other notices shall be deemed to be delivered when received.
10.2 This Agreement contains the full and complete understanding of the
parties regarding the subject matter contained herein and supersedes all prior
representations, promises, agreements and warranties, whether oral or written.
10.3 This Agreement shall be governed by and interpreted according to
the laws of the state of California.
10.4 The captions of the various sections of this Agreement are
inserted only for convenience and shall not be considered in construing this
Agreement.
10.5 This Agreement can be modified, amended or any of its terms waived
only by a writing signed by both parties.
10.6 If any provision of this Agreement shall be held invalid, illegal
or unenforceable, the remaining provisions of the Agreement shall remain in full
force and effect and the invalid, illegal or unenforceable provision shall be
limited or eliminated only to the extent necessary to remove such invalidity,
illegality or unenforceability in accordance with the applicable law at that
time.
10.7 If either party institutes an action to enforce the terms of this
Agreement, the prevailing party in such action shall be entitled to recover
reasonable attorneys' fee, costs and expenses.
10.9 No remedy made available to either party by any of the provisions
of this Agreement is intended to be exclusive of any other remedy. Each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder as well as those remedies existing at law, in equity, by statute
or otherwise.
IN WITNESS WHEREOF, the parties have executed this document as of the
date specified above.
PLM INTERNATIONAL, INC. EMPLOYEE
By: /s/Douglas P. Goodrich /s/Robert N. Tidball
----------------------------- -----------------------------
Its: Senior Vice President Robert N. Tidball
ATTEST: _______________________ ATTEST: _____________________
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is made and entered into on this
17th day of December, 1999, by and between PLM INTERNATIONAL, INC., its
successors and/or assigns (the "Company"), and Richard K Brock ("Employee").
WHEREAS, Employee currently holds the position of Vice President,
Controller and Acting Chief Financial Officer of the Company; and
WHEREAS, the Board of Directors of the Company has recently engaged the
investment banking firm of Imperial Capital, LLC to explore various strategic
and financial alternatives for maximizing shareholder value on a near-term
basis, including, but not limited to, a possible transaction or series of
transactions representing a merger, consolidation, or any other business
combination, a sale of all or a substantial amount of the business, securities,
or assets of the Company, or a recapitalization or spin-off;
WHEREAS, the consideration of any such transaction by the Board of
Directors has led to uncertainty regarding the future path of the Company and
the long-term prospects for executive employment with the Company;
WHEREAS, the Company's Board of Directors believes it is important to
the enhancement of shareholder value that, notwithstanding such uncertainty,
Employee act vigorously and constructively in connection with any negotiations
being conducted regarding any such transaction to achieve the results most
favorable to the Company's shareholders and to continue to manage the on-going
business of the Company in order to achieve the most positive results
attainable; and
WHEREAS, as an inducement for Employee to remain in the employ of the
Company during this period of uncertainty, this Agreement provides for certain
incentives for Employee upon a change in control (as defined herein) and for
certain severance benefits to be paid and provided to Employee in the event
Employee's employment is terminated following a change in control.
NOW, THEREFORE, in consideration of the above premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Employee agree as follows:
1. Term. The term of this Agreement shall commence on January 1, 2000
and shall continue (i) until December 31, 2000 so long as no Change in Control
(as defined below) has occurred on or before December 31, 2000; or (ii) in the
event a Change in Control has occurred on or before December 31, 2000, until
Employee's employment has been terminated (by the Company or by Employee) and
all obligations under this Agreement have been met.
2. Change in Control.
A. For the purposes of this Agreement only, the term "Change
in Control" shall mean the occurrence of any one of the following events:
(i) Any person or group (a "Person"), within the
meaning of Sections 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), acquiring
"beneficial ownership" ("Beneficial Ownership"), as defined in
Rule 13d-3 under the Exchange Act, of securities of the
Company representing more than fifty percent (50%) of the
combined voting power of the Company's then outstanding
securities; provided, however, in determining whether a Change
in Control has occurred, voting securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall
not constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an acquisition
by (a) an employee benefit plan (or trust forming a part
thereof) maintained by the Company or any corporation or other
Person of which a majority of its voting power or its voting
equity securities or equity interests is owned, directly or
indirectly, by the Company (for purposes of this definition, a
"Subsidiary"), (b) the Company or its Subsidiaries, or (c) any
Person in connection with a "Non-Control Transaction" (as
hereinafter defined);
(ii) A merger, consolidation or reorganization
(collectively, a "Transaction") involving the Company unless
such Transaction is a "Non-Control Transaction." A
"Non-Control Transaction" shall mean a Transaction involving
the Company where:
(a) The stockholders of the Company
immediately before such Transaction own, directly or
indirectly, immediately following such Transaction,
at least fifty percent (50%) of the combined voting
power of the outstanding voting securities of the
corporation resulting from such Transaction (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the voting
securities of the Company immediately before such
Transaction, or
(b) No Person, other than (1) the Company,
(2) any Subsidiary, or (3) any employee benefit plan
(or any trust forming a part thereof) maintained by
the Company or any Subsidiary, has Beneficial
Ownership of more than fifty percent (50%) of the
combined voting power of the Surviving Corporation's
then outstanding voting securities;
(iii) The sale or other disposition of all or
substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary of the Company) and/or
the sale or other disposition of the Company's subsidiary PLM
Financial Services, Inc. (through an asset sale or stock sale)
to any Person (other than a transfer to a Subsidiary of the
Company); provided, however, that in no event shall the sale
or other disposition of the Company's subsidiary American
Finance Group, Inc. (AFG) by itself, or the sale or other
disposition of the Company's trailer leasing business (through
a sale of substantially all of the Company's trailer assets
and/or sale of the stock of the Company's subsidiary PLM
Rental, Inc.) (Trailer Leasing) by itself, be deemed to be a
sale or other disposition of all or substantially all of the
assets of the Company for the purposes of this Agreement; and
further provided, that the sale or other disposition of AFG or
the sale or other disposition of Trailer Leasing, followed by
the sale or other disposition of Trailer Leasing (in the case
of an earlier sale or disposition of AFG) or AFG (in the case
of an earlier sale or disposition of Trailer Leasing), shall
be deemed to be a sale or other disposition of all or
substantially all of the assets of the Company; or
(iv) The stockholders of the Company approve a plan
of dissolution or liquidation of the Company.
B. In the event that a Change in Control transaction as
defined in this Agreement occurs, and such transaction is also deemed to be a
Change in Control as defined in and under the Employment Agreement (the
"Employment Agreement") dated as of May 12, 1998 between the Company and
Employee (specifically, a majority of the members of the Continuing Directors of
the Board of Directors of the Company does not approve the Change in Control
event specifically for purposes of the Employment Agreement), then the terms and
conditions of the Employment Agreement, including but not limited to Sections
10.2, 11, 12 and 13 thereof, shall govern and supercede this Agreement.
3. Acceleration and Vesting.
A. Stock Options and Grants.
(i) Upon the occurrence of a Change in Control, any
and all options to purchase stock and grants of stock (common
or otherwise) in the Company granted to Employee pursuant to
any plan or otherwise, including options granted pursuant to
the 1988 Management Stock Compensation Plan and/or the 1998
Management Stock Compensation Plan, and any and all grants of
stock in the Company granted to Employee pursuant to the 1996
Mandatory Management Stock Bonus Plan (collectively, any or
all of these plans shall be referred to herein as the "Stock
Plans"), shall become immediately accelerated and fully vested
and any restrictions on such options and grants shall, to the
extent permissible under applicable securities laws, fully
lapse. The Company shall endeavor to cause any restrictions on
the options or grants not lapsed by operation of this Section
3(A)(i) to so lapse.
(ii) Upon the vesting of all such options and grants
pursuant to Section 3(A)(i) or Section 6(C)(ii) below and, in
the case of options, so long as such options have not expired,
Employee may elect by written notice to the Company at any
time following such vesting that the Company "cash-out" such
options and/or grants by paying to Employee within five (5)
days of such notice the value of the options and/or grants so
long as Employee surrenders to the Company, and agrees to the
cancellation of, the options or grants. The value of the
options and/or grants shall be calculated as follows: (a) in
the event that the Change in Control is a result of a tender
offer and so long as Employee provides his "cash-out" notice
to the Company within 30 days of the conclusion of the tender
offer, then Employee shall be paid the per share price paid to
the Company's shareholders in connection with such tender
offer, or (b) in all other circumstances, the Employee shall
be paid the average daily closing price of the common stock of
the Company for the ten trading days immediately preceding the
date of Employee's "cash-out" notice, less in the case of both
(a) and (b) for the cash-out options, the exercise price of
the option. In the event Employee does not elect to "cash-out"
pursuant to this Section 3(A)(ii), then Employee's rights
regarding such options and grants shall be as set forth in the
respective Stock Plans and agreements governing such options
and grants, except that Employee shall be deemed to be fully
vested and any restrictions on such options and grants shall
remain fully lapsed.
B. Executive Deferred Compensation Agreement. In the event of
a Change in Control as defined in this Agreement, a Change in Control of the
Company shall also be deemed to have occurred for the purpose of Section 10.1 of
the Executive Deferred Compensation Agreement (the "Executive Deferred
Compensation Agreement") dated as of January 18, 1999 between the Company and
Employee, so that effective with the occurrence of the Change in Control,
Employee shall be treated for purposes of the Executive Deferred Compensation
Agreement as if Employee had attained age 60 on the first day of the second
calendar month preceding the calendar month in which the Change in Control of
the Company occurs, and Employee's Vesting Factor under Section 1.4 of the
Executive Deferred Compensation Agreement shall become and forever thereafter
remain 1.
4. Termination By Company In Connection With a Change in Control.
A. In the event that Employee's employment is terminated by
the Company subsequent to or in connection with a Change in Control for a reason
other than Cause or Disability, the Company shall pay Employee the Severance
Benefits specified in Section 6(C).
B. For purposes of this Agreement, "Cause" shall be limited
to:
(i) The willful and continued failure by Employee to
perform his/her day to day responsibilities substantially in
the same manner as performed prior to the Change in Control
(other than any failure resulting from Employee's incapacity
due to physical or mental illness), which has not been cured
within ten (10) days after written demand for substantial
performance is delivered by the Company to Employee, which
demand specifically identifies the manner in which Employee
has not substantially performed his/her day to day
responsibilities. The financial condition of the Company
(including any subsidiary, division or department thereof),
and/or Employee's contribution thereto, shall not be
considered for the purposes of determining whether Employee
has willfully failed to perform his/her day to day
responsibilities;
(ii) A willful and intentional act or omission by
Employee which is, in the reasonable determination of the
Company, materially injurious to the Company, monetarily or
otherwise. For purposes of subsection (i) above and this
subsection (ii), no act or omission on Employee's part shall
be considered willful and intentional unless done, or omitted
to be done, by him/her not in good faith and without the
reasonable belief that his/her action(s) or omission(s) was in
the best interests of the Company; or
(iii) The conviction of Employee of, or his/her
admission or plea of nolo contendere to, a crime involving an
act of moral turpitude, which is a felony or which results or
is intended to result, directly or indirectly, in gain or
personal enrichment of Employee, relatives of Employee, or
their affiliates at the expense of the Company;
provided, however, that, notwithstanding anything to the contrary contained in
this Section 4(B), "Cause" shall not be deemed to include a refusal by Employee
to execute any certificate or document that Employee in good faith determines
contains any untrue statement of a material fact.
C. For the purposes of this Agreement, Disability shall mean
if, as a result of Employee's incapacity due to physical or mental illness,
Employee shall have been absent or substantially absent from his/her duties
hereunder for a period of six (6) consecutive months, and within thirty (30)
days after a Notice of Termination (as hereinafter defined) is given, which
Notice of Termination may be given before or after the end of such six month
period, Employee shall not have returned to the performance of his/her duties
hereunder on a full-time basis, Employee's employment shall terminate upon the
expiration of such thirty (30) days. Employee's absence or substantial absence
from his/her duties will be treated as resulting from incapacity due to physical
or mental illness if Employee is "totally disabled from his/her own occupation."
Total disability from Employee's own occupation will exist where (i) because of
sickness or injury, Employee cannot perform the important duties of his/her
occupation, (ii) Employee is either receiving Doctor's Care or has furnished
written proof acceptable to the Company that further Doctor's Care would be of
no benefit, and (iii) Employee does not work at all. Doctor's Care means regular
and personal care of a Doctor which, under prevailing medical standards, is
appropriate for the condition causing the disability.
5. Termination by Employee.
A. Employee may terminate his/her employment during the term
of this Agreement upon thirty (30) days' Notice of Termination to the Company
for any reason. If Employee terminates his/her employment hereunder subsequent
to a Change in Control and such termination is made for any of the reasons
listed in Section 5(B) (such reason(s) to be detailed in the Notice of
Termination), such termination shall be deemed to have been done for good reason
("Good Reason") and the Company shall pay Employee the Severance Benefits
specified in Section 6(C), below.
B. Reasons constituting "Good Reason" shall include:
(i) Any breach by the Company of any material
provision of this Agreement which has not been cured within
ten (10) days after written notice detailing such
non-compliance is given by Employee to the Company;
(ii) Any demonstrable and material diminution of the
base compensation, duties, responsibilities, authority or
powers of Employee as they relate to any positions or offices
held by Employee during the term of this Agreement; provided
that Employee provides a reasonable description of any such
diminution(s) and a statement that Employee finds, in good
faith, such diminution to be a material diminution and that,
as such, he/she elects to terminate his/her employment
hereunder for Good Reason. Notwithstanding the foregoing, a
reduction in the staff of the Company following a Change in
Control which results in the Employee taking on additional
responsibilities shall not be considered a diminution of the
duties, responsibilities, authority or powers of Employee for
the purposes of this Agreement;
(iii) The failure of the Company to include Employee
in any employee benefit plan or incentive compensation plan
for which Employee has previously participated or would
reasonably expect to participate in. Employee may reasonably
expect to participate in a benefit plan or incentive
compensation plan if, without limitation, other employees of
the Company with similar titles, levels of responsibilities or
salaries participate or have participated in such plan.
Notwithstanding the foregoing, (a) to the extent not otherwise
determined pursuant to the incentive compensation plan, the
Board of Directors shall have the sole discretion to determine
the amount of such bonus, or incentive compensation, if any,
and (b) the Company may change the terms of any benefit plan
so long as such changes occur pursuant to a program applicable
to all employees or executives of the Company and do not
result in a proportionately greater reduction in the rights of
or benefits to the Employee as compared with any other
employee or executive of the Company; or
(iv) Any requirement by the Company that Employee
relocate his/her primary business office to a geographical
area greater than twenty (20) miles from the Company 's
principal executive offices as existing on January 1, 1999, or
if Employee is based in an office other than the Company's
principal executive offices, twenty (20) miles from the
Company's office where Employee is based as of January 1,
1999.
C. In the event Employee terminates his/her employment for
Good Reason and the Company disputes that the termination was for Good Reason,
the Company shall have the burden of proving that any such reason was not "Good
Reason".
6. Compensation Upon Termination.
A. Termination For Cause. Following a Change in Control, if
Employee's employment is terminated for Cause as defined in this Agreement, the
Company shall pay Employee his/her full Base Salary (and any accrued but unused
vacation and personal days) through the Date of Termination at the rate in
effect at the time Notice of Termination is given, and the Company shall have no
further obligations to Employee under this Agreement. The Employment Agreement
shall also be terminated as of the Date of Termination, and neither party shall
have any further rights or obligations thereunder. The rights, limitations and
obligations of each of the Employee and the Company under any other agreement or
plan, including but not limited to any stock option plan, stock grant plan,
deferred compensation plan and related agreement(s), each as may have been
modified by the terms of this Agreement, shall remain in full force and effect.
B. Termination for Disability. Following a Change in Control,
if Employee's employment is terminated for Disability as defined in this
Agreement, the Company shall pay to Employee his/her full Base Salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given. The Company shall also pay to Employee any accrued but unused vacation
and personal days, and the Company shall also provide benefits to Employee
pursuant to the standard policy of the Company with respect to terminated
disabled employees. The Employment Agreement shall also be terminated as of the
Date of Termination, and neither party shall have any further rights or
obligations thereunder. The rights, limitations and obligations of each of the
Employee and the Company under any other agreement or plan, including but not
limited to any stock option plan, stock grant plan, deferred compensation plan
and related agreement(s), each as may have been modified by the terms of this
Agreement, shall remain in full force and effect.
C. Termination Without Cause or Termination by Employee For
Good Reason. If, (a) subsequent to or resulting from a Change in Control the
Company terminates Employee's employment hereunder other than for Cause or
Disability, or (b) subsequent to a Change in Control Employee terminates his/her
employment for Good Reason, the Company shall, in addition to paying Employee
his/her full Base Salary through the Date of Termination at the rate in effect
at the time the Notice of Termination is given and any accrued but unused
vacation and personal days (as required by law), pay to Employee within seven
(7) business days of the Date of Termination, and provide to Employee, the
following severance benefits:
(i) The Company shall pay to Employee an amount equal
to twelve (12) months of Employee's annual base salary at the
highest rate in effect during the twelve (12) months
immediately preceding the Date of Termination, less customary
payroll deductions, such payment to be made at Employee's
option either in a lump sum, or in semi-monthly installments
(starting on the first regularly scheduled payday following
the Date of Termination, and continuing on each regularly
scheduled payday thereafter until paid). In the event Employee
fails to notify the Company of his/her option, the amount
shall be paid in a lump sum;
(ii) Any and all options to purchase stock (common or
otherwise) in the Company granted to Employee following a
Change in Control pursuant to any plan or otherwise, and any
and all grants of stock in the Company granted to Employee
following a Change in Control pursuant to any plan or
otherwise, shall become immediately accelerated and fully
vested and any restrictions on such options, grants or
equivalent or similar rights shall, to the extent permissible
under applicable securities laws, fully lapse. The Company
shall endeavor to cause any restrictions on the options,
grants or equivalent or similar rights not lapsed by operation
of this Section 6(C)(ii) to so lapse. Employee shall have the
same rights in such accelerated and vested options and grants
as provided in Section 3(A)(ii) and the Company shall pay to
Employee the value of the options and/or grants upon receipt
of Employee's written notice of his/her election to "cash-out"
pursuant to Section 3(A)(ii); and
(iii) At the Employee's election by written notice to
the Company made within five (5) business days following the
Notice of Termination, the Company shall pay to Employee in a
lump sum the total amount of any Monthly Executive
Compensation Benefit payments that are payable under the
Executive Deferred Compensation Agreement, which amount shall
have been determined pursuant to the terms of Sections 5(a)
and 5(b) of the Executive Deferred Compensation Agreement
after taking into consideration the automatic acceleration of
vesting as provided in Section 10.1 (including Section 10.1(a)
and 10.1(b)) of the Executive Deferred Compensation Agreement.
In the event Employee is paid his executive deferred
compensation in a lump sum as provided in this Section
5(A)(ii), the Executive Deferred Compensation Agreement shall
be terminated and of no further force or effect. In the event
Employee does not elect to receive a lump sum payment of his
executive deferred compensation, then the Monthly Executive
Compensation Benefit payments that are payable under the
Executive Deferred Compensation Agreement shall be paid
pursuant to the terms of that agreement, which shall remain in
full force and effect; and
(iv) Employee shall continue to participate in all
life insurance, medical, health, dental and disability plans,
programs or arrangements ("Insurance Plans") in which Employee
participated immediately prior to the Date of Termination on
the same terms as Employee participated immediately prior to
the Date of Termination for the shorter period of (a) twelve
(12) months from the Date of Termination or (b) Employee's
commencement of full time employment with a new company that
provides Employee with benefits at least as favorable as those
provided by the Company; provided that Employee's continued
participation is possible under the general terms and
provisions of such plans and programs and Employee will
continue to be obligated to pay the same employee portion of
any premium and any deductible and/or co-payments associated
with such insurance Plans as was required immediately prior to
the Date of Termination. Employee's right to continued group
benefits after any period covered by the Company will be
determined in accordance with federal and state law.
(v) The payments and benefits provided for in this
Section 6(C) are in addition to, and shall not be deemed to be
in lieu of, any other payments and/or benefits to which
Employee is entitled, including without limitation any and all
payments and benefits under the PLM International, Inc. 401K
and Profit Sharing Plan and any other insurance and disability
plans.
D. Other Termination by Employee. If following a Change in
Control Employee terminates his/her employment for any reason other than Good
Reason, the Company shall pay to Employee his/her full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given and any accrued but unused vacation and personal days, and the Company
shall have no further obligations to Employee under this Agreement. The
Employment Agreement shall also be terminated as of the Date of Termination, and
neither party shall have any further rights or obligations thereunder. The
rights, limitations and obligations of each of the Employee and the Company
under any other agreement or plan, including but not limited to any stock option
plan, stock grant plan, deferred compensation plan and related agreement(s),
each as may have been modified by the terms of this Agreement, shall remain in
full force and effect.
E. Termination Prior to a Change in Control. This Agreement
does not provide for the payment or provision of severance benefits in
connection with a termination by Employee or the Company prior to and not in
connection with a Change in Control. Employee's rights to any such benefits
shall continue to be governed by law or other written agreement, if any exists
between Employee and the Company, and nothing in this Agreement is intended to
change, or shall be construed as changing, any of the legal or contractual
rights of either party to terminate Employee's employment (for Cause, at-will,
for Good Reason, or otherwise) prior to and not in connection with a Change in
Control.
F. Section 280G. Notwithstanding any other provisions of this
Agreement or any other agreement between the Company and the Employee, in the
event that any payment or benefit received or to be received by the Employee in
connection with a Change in Control or the termination of the Employee's
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company or any Person whose actions result in
a Change in Control or any Person affiliated with the Company or such Person)
(all such payments and benefits, including the severance benefits provided
hereunder, being hereinafter called "Total Payments") would not be deductible
(in whole or part), by the Company, an affiliate or Person making such payment
or providing such benefit as a result of section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), then, to the extent necessary to make
such portion of the Total Payments deductible (and after taking into account any
reduction in the Total Payments provided by reason of section 280G of the Code
in such other plan, arrangement or agreement), the benefits provided hereunder
shall be reduced (if necessary, to zero); provided, however, that,
notwithstanding the terms of any other plan or agreement, the Employee may elect
to have the benefits payable under any other plan or agreement reduced (or
eliminated) prior to any reduction of the benefits payable under this Agreement,
which may include, in the case of the Executive Deferred Compensation Agreement,
an election to reduce the Employee's Compensation Period under the Executive
Deferred Compensation Agreement (without increasing the amount determined under
Section 1.1 of the Executive Deferred Compensation Agreement as Employee's
Monthly Deferred Compensation Benefit).
(i) For purposes of this limitation in the event the
Company asserts that the limitation would apply, (a) no
portion of the Total Payments the receipt or enjoyment of
which the Employee shall have waived at such time and in such
manner as not to constitute a "payment" within the meaning of
section 280G(b) of the Code shall be taken into account, (b)
no portion of the Total Payments shall be taken into account
that, in the opinion of tax counsel ("Tax Counsel") selected
by the Employee and reasonably accepted by the Company, does
not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (c) the benefits payable under this
Agreement shall be reduced only to the extent necessary so
that the Total Payments (other than those referred to in
clauses (a) or (b)) in their entirety constitute reasonable
compensation for services actually rendered within the meaning
of section 280G(b)(4)(B) of the Code or are otherwise not
subject to disallowance as deductions by reason of section
280G of the Code, in the opinion of Tax Counsel, and (d) the
value of any noncash benefit or any deferred payment or
benefit included in the Total Payments shall be determined in
accordance with the principles of sections 280G(d)(3) and (4)
of the Code.
(ii) If it is established pursuant to a final
determination of a court or an Internal Revenue Service
proceeding that, notwithstanding the good faith of the
Employee and the Company in applying the terms of this Section
6(F), the Total Payments paid to or for the Employee's benefit
are in an amount that would result in any portion of such
Total Payments being subject to the Excise Tax, then, if such
repayment would result in (a) no portion of the remaining
Total Payments being subject to the Excise Tax and (b) a
dollar-for-dollar reduction in the Employee's taxable income
and wages for purposes of federal, state and local income and
employment taxes, the Employee shall have an obligation to pay
the Company upon demand an amount equal to the sum of (x) the
excess of the Total Payments paid to or for the Employee's
benefit over the Total Payments that could have been paid to
or for the Employee's benefit without any portion of such
Total Payments being subject to the Excise Tax; and (y)
interest on the amount set forth in clause (x) of this
sentence at the rate provided in section 1274(b)(2)(B) of the
Code from the date of the Employee's receipt of such excess
until the date of such payment.
(iii) By execution and delivery of this Agreement,
the provisions of Section 10.4 of the Executive Deferred
Compensation Agreement are hereby superseded and such section
is hereby declared null and void.
7. Mitigation. Employee shall not be required to mitigate the amount of
any payment or benefit provided for in this Agreement by seeking other
employment or otherwise and, except as otherwise provided in Section 6(C)(iv),
no payment or benefit provided for in this Agreement shall be reduced by any
compensation earned by Employee as the result of employment by another employer
after the termination of his/her employment with the Company.
8. Other Definitions. The following definitions shall apply for
purposes of this Agreement:
A. Notice of Termination. Any purported termination by the
Company or by Employee shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon. Any purported termination of Employee's
employment which is not effected pursuant to a Notice of Termination satisfying
the requirements of this paragraph shall not be effective.
B. Date of Termination. "Date of Termination" shall mean, as
applicable, (a) if Employee's employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that Employee shall not
have returned to the performance of his/her duties on a full-time basis during
such thirty (30) day period), (b) the date specified in the Notice of
Termination in compliance with the terms of this Agreement, or (c) if no date is
specified, the date on which a Notice of Termination is given.
9. Successors; Binding Agreement.
A. The Company shall require any successors or assigns
(whether direct or indirect by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent as if they were an original party hereto, and this Agreement shall inure
to the benefit of any such successor or assign.
B. This Agreement shall inure to the benefit of and be
enforceable by Employee's executors, administrators, successors, heirs,
distributes, devisees and legatees.
10. Other Agreements. Except as expressly set forth herein, nothing in
this Agreement is intended to alter the obligations of the Company and/or the
Employee in connection with any other written agreement between the Company and
the Employee.
11. Miscellaneous.
11.1 Written notices required by this Agreement shall be delivered to
the Company or Employee in person or sent by overnight courier or certified
mail, with a return receipt requested, to the Company's registered address and
to Employee's last shown address on the Company's records, respectively. Notice
sent by certified mail shall be deemed to be delivered two days after mailing,
and all other notices shall be deemed to be delivered when received.
11.2 This Agreement contains the full and complete understanding of the
parties regarding the subject matter contained herein and supersedes all prior
representations, promises, agreements and warranties, whether oral or written.
11.3 This Agreement shall be governed by and interpreted according to
the laws of the state of California.
11.4 The captions of the various sections of this Agreement are
inserted only for convenience and shall not be considered in construing this
Agreement.
11.5 This Agreement can be modified, amended or any of its terms waived
only by a writing signed by both parties.
11.6 If any provision of this Agreement shall be held invalid, illegal
or unenforceable, the remaining provisions of the Agreement shall remain in full
force and effect and the invalid, illegal or unenforceable provision shall be
limited or eliminated only to the extent necessary to remove such invalidity,
illegality or unenforceability in accordance with the applicable law at that
time.
11.7 If either party institutes an action to enforce the terms of this
Agreement, the prevailing party in such action shall be entitled to recover
reasonable attorneys' fee, costs and expenses.
11.8 No remedy made available to either party by any of the provisions
of this Agreement is intended to be exclusive of any other remedy. Each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder as well as those remedies existing at law, in equity, by statute
or otherwise.
IN WITNESS WHEREOF, the parties have executed this document as of the
date specified above.
PLM INTERNATIONAL, INC. EMPLOYEE
By: /s/Robert N. Tidball /s/Richard K Brock
------------------------ ---------------------
Its: President Richard K Brock
ATTEST: _______________________ ATTEST: _____________________
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is made and entered into on this
17th day of December, 1999, by and between PLM INTERNATIONAL, INC., its
successors and/or assigns (the "Company"), and Douglas P. Goodrich ("Employee").
WHEREAS, Employee currently holds the position(s) of Senior Vice
President of the Company;
WHEREAS, the Board of Directors of the Company has recently engaged the
investment banking firm of Imperial Capital, LLC to explore various strategic
and financial alternatives for maximizing shareholder value on a near-term
basis, including, but not limited to, a possible transaction or series of
transactions representing a merger, consolidation, or any other business
combination, a sale of all or a substantial amount of the business, securities,
or assets of the Company, or a recapitalization or spin-off;
WHEREAS, the consideration of any such transaction by the Board of
Directors has led to uncertainty regarding the future path of the Company and
the long-term prospects for executive employment with the Company;
WHEREAS, the Company's Board of Directors believes it is important to
the enhancement of shareholder value that, notwithstanding such uncertainty,
Employee act vigorously and constructively in any negotiations being conducted
in connection with any such transaction to achieve the results most favorable to
the Company's shareholders and to continue to manage the on-going business of
the Company in order to achieve the most positive results attainable; and
WHEREAS, as an inducement for Employee to remain in the employ of the
Company during this period of uncertainty, this Agreement provides for certain
incentives for Employee upon a change in control (as defined herein) and for
certain severance benefits to be paid and provided to Employee in the event
Employee's employment is terminated following a change in control.
NOW, THEREFORE, in consideration of the above premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Employee agree as follows:
1. Term. The term of this Agreement shall commence on January 1, 2000
and shall continue (i) until December 31, 2000 so long as no Change in Control
(as defined below) has occurred on or before December 31, 2000; or (ii) in the
event a Change in Control has occurred on or before December 31, 2000, until
Employee's employment has been terminated (by the Company
<PAGE>
or by Employee) and all obligations under this Agreement have been met.
2. Change in Control.
A. For the purposes of this Agreement only, the term "Change in
Control" shall mean the occurrence of any one of the following events:
(i) Any person or group (a "Person"), within the
meaning of Sections 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), acquiring
"beneficial ownership" ("Beneficial Ownership"), as defined in
Rule 13d-3 under the Exchange Act, of securities of the
Company representing more than fifty percent (50%) of the
combined voting power of the Company's then outstanding
securities; provided, however, in determining whether a Change
in Control has occurred, voting securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall
not constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an acquisition
by (a) an employee benefit plan (or trust forming a part
thereof) maintained by the Company or any corporation or other
Person of which a majority of its voting power or its voting
equity securities or equity interests is owned, directly or
indirectly, by the Company (for purposes of this definition, a
"Subsidiary"), (b) the Company or its Subsidiaries, or (c) any
Person in connection with a "Non-Control Transaction" (as
hereinafter defined);
(ii) A merger, consolidation or reorganization
(collectively, a "Transaction") involving the Company unless
such Transaction is a "Non-Control Transaction." A
"Non-Control Transaction" shall mean a Transaction involving
the Company where:
(a) The stockholders of the Company
immediately before such Transaction own, directly or
indirectly, immediately following such Transaction,
at least fifty percent (50%) of the combined voting
power of the outstanding voting securities of the
corporation resulting from such Transaction (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the voting
securities of the Company immediately before such
Transaction, or
(b) No Person, other than (1) the Company,
(2) any Subsidiary, or (3) any employee benefit plan
(or any trust forming a part thereof) maintained by
the Company or any Subsidiary, has Beneficial
Ownership
2
<PAGE>
of more than fifty percent (50%) of the combined
voting power of the Surviving Corporation's then
outstanding voting securities;
(iii) The sale or other disposition (other than a
transfer to a Subsidiary of the Company) of the Company's
subsidiary American Finance Group, Inc. (AFG) or the sale or
other disposition of the Company's trailer leasing business
(through a sale of substantially all of the Company's trailer
assets and/or sale of the stock of the Company's subsidiary
PLM Rental, Inc.)(Trailer Leasing), followed by the sale or
other disposition of Trailer Leasing (in the case of an
earlier sale or disposition of AFG) or AFG (in the case of an
earlier sale or disposition of Trailer Leasing);
(iv) The sale or other disposition (other than a
transfer to a Subsidiary of the Company) of all or
substantially all of the assets of the Company (excluding the
sales or dispositions specified in Section 2(A)(iii) above),
and/or the sale or other disposition of the Company's
subsidiary PLM Financial Services, Inc. (through an asset sale
or stock sale); or
(v) The stockholders of the Company approve a plan of
dissolution or liquidation of the Company.
B. In the event that a Change in Control transaction as
defined in this Agreement occurs, and such transaction is also deemed to be a
Change in Control as defined in and under the Employment Agreement (the
"Employment Agreement") dated as of December 18, 1992 between the Company and
Employee (specifically, a majority of the members of the Continuing Directors of
the Board of Directors of the Company does not approve the Change in Control
event specifically for purposes of the Employment Agreement), then the terms and
conditions of the Employment Agreement, including but not limited to Sections
10.2, 11, 12 and 13 thereof, shall govern and supercede this Agreement.
3. Acceleration and Vesting.
A. Stock Options and Grants.
(i) Upon the occurrence of a Change in Control, any
and all options to purchase stock and grants of stock (common
or otherwise) in the Company granted to Employee pursuant to
any plan or otherwise, including options granted pursuant to
the 1988 Management Stock Compensation Plan and/or the 1998
Management Stock Compensation Plan, and any and all grants of
stock in the Company granted to Employee pursuant to the 1996
Mandatory Management Stock Bonus Plan
3
<PAGE>
(collectively, any or all of these plans shall be referred to
herein as the "Stock Plans"), shall become immediately
accelerated and fully vested and any restrictions on such
options and grants shall, to the extent permissible under
applicable securities laws, fully lapse. The Company shall
endeavor to cause any restrictions on the options or grants
not lapsed by operation of this Section 3(A)(i) to so lapse.
(ii) Upon the vesting of all such options and grants
pursuant to Section 3(A)(i) or Section 5(A)(ii) below and, in
the case of options, so long as such options have not expired,
Employee may elect by written notice to the Company at any
time following such vesting that the Company "cash-out" such
options and/or grants by paying to Employee within five (5)
days of such notice the value of the options and/or grants so
long as Employee surrenders to the Company, and agrees to the
cancellation of, the options or grants. The value of the
options and/or grants shall be calculated as follows: (a) in
the event that the Change in Control is a result of a tender
offer and so long as Employee provides his "cash-out" notice
to the Company within 30 days of the conclusion of the tender
offer, then Employee shall be paid the per share price paid to
the Company's shareholders in connection with such tender
offer, or (b) in all other circumstances, the Employee shall
be paid the average daily closing price of the common stock of
the Company for the ten trading days immediately preceding the
date of Employee's "cash-out" notice, less in the case of both
(a) and (b) for the cash-out options, the exercise price of
the option. In the event Employee does not elect to "cash-out"
pursuant to this Section 3(A)(ii), then Employee's rights
regarding such options and grants shall be as set forth in the
respective Stock Plans and agreements governing such options
and grants, except that Employee shall be deemed to be fully
vested and any restrictions on such options and grants shall
remain fully lapsed.
B. Executive Deferred Compensation Agreement. In the event of
a Change in Control as defined in this Agreement, a Change in Control of the
Company shall also be deemed to have occurred for the purpose of Section 10.1 of
the Executive Deferred Compensation Agreement (the "Executive Deferred
Compensation Agreement") dated as of July 3, 1993 between the Company and
Employee, so that effective with the occurrence of the Change in Control,
Employee shall be treated for purposes of the Executive Deferred Compensation
Agreement as if Employee had attained age 60 on the first day of the second
calendar month preceding the calendar month in which the Change in Control of
the Company occurs, and Employee's Vesting Factor under Section 1.4 of the
Executive Deferred Compensation Agreement shall become and forever thereafter
remain 1.
4. Termination Upon a Change in Control. Employee's employment may be
terminated as follows:
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A. At will by either the Company or by Employee following a
Change in Control pursuant to Section 2(A)(iii), and if so terminated, Employee
shall be paid and provided the benefits specified in Section 5(A) below.
B. At will by the Company or for "Good Reason" (as defined in
Section 7, below) by Employee following a Change in Control pursuant to Section
2(A)(i), 2(A)(ii), 2(A)(iv) or 2(A)(v), and if so terminated, Employee shall be
paid and provided the benefits specified in Section 5(A) below. In the event
Employee terminates his employment for Good Reason and the Company disputes that
the termination was for Good Reason, the Company shall have the burden of
proving that any such reason was not "Good Reason".
C. For "Cause" or "Disability" (each as defined in Section 7,
below) by the Company or for a reason other than Good Reason by Employee
following a Change in Control pursuant to Section 2(A)(i), 2(A)(ii), 2(A)(iv) or
2(A)(v), and if so terminated, Employee shall be paid and provided the benefits
specified in Section 5(B) below.
D. If either party chooses to terminate the Employee's
employment with the Company pursuant to this Section 4, the terminating party
shall deliver to the other party a Notice of Termination (as defined in Section
7, below), and Employee's termination shall be effective on the Date of
Termination (as defined in Section 7, below).
E. Upon termination by either party pursuant to the terms of
this Agreement, the Employment Agreement shall be terminated as of the Date of
Termination, and neither party shall have any further rights or obligations
thereunder.
5. Compensation Upon Termination.
A. Termination Pursuant to Section 4(A) or 4(B). If either the
Company or Employee elects to terminate Employee's employment with the Company
under the circumstances described in Section 4(A) or 4(B) above, the Company
shall, in addition to paying Employee his full Base Salary through the Date of
Termination at the rate in effect at the time the Notice of Termination is given
and any accrued but unused vacation and personal days (as required by law), pay
to Employee, and provide to Employee, the following severance benefits:
(i) The Company shall pay to Employee an amount equal
to two years of Employee's annual base salary at the highest
rate in effect during the twelve (12) months immediately
preceding the Date of Termination, less customary payroll
deductions, such payment to be made at Employee's option
either on
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the Date of Termination in a lump sum, or in semi-monthly
installments (starting on the first regularly scheduled payday
following the Date of Termination, and continuing on each
regularly scheduled payday thereafter until paid). In the
event Employee fails to notify the Company of his option, the
amount shall be paid in a lump sum;
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(ii) Any and all options to purchase stock (common or
otherwise) in the Company granted to Employee following a
Change in Control pursuant to any plan or otherwise, and any
and all grants of stock in the Company granted to Employee
following a Change in Control pursuant to any plan or
otherwise, shall become immediately accelerated and fully
vested and any restrictions on such options, grants or
equivalent or similar rights shall, to the extent permissible
under applicable securities laws, fully lapse. The Company
shall endeavor to cause any restrictions on the options,
grants or equivalent or similar rights not lapsed by operation
of this Section 5(A)(ii) to so lapse. Employee shall have the
same rights in such accelerated and vested options and grants
as provided in Section 3(A)(ii) and the Company shall pay to
Employee the value of the options and/or grants following
receipt of Employee's written notice of his/her election to
"cash-out" pursuant to Section 3(A)(ii);
(iii) At the Employee's election by written notice to
the Company made within five (5) business days following the
Notice of Termination, the Company shall pay to Employee on
the Date of Termination in a lump sum the total amount of any
Monthly Executive Compensation Benefit payments that are
payable under the Executive Deferred Compensation Agreement,
which amount shall have been determined pursuant to the terms
of Sections 5(a) and 5(b) of the Executive Deferred
Compensation Agreement after taking into consideration the
automatic acceleration of vesting as provided in Section 10.1
(including Section 10.1(a) and 10.1(b)) of the Executive
Deferred Compensation Agreement. In the event Employee is paid
his executive deferred compensation in a lump sum as provided
in this Section 5(A)(ii), the Executive Deferred Compensation
Agreement shall be terminated and of no further force or
effect. In the event Employee does not elect to receive a lump
sum payment of his executive deferred compensation, then the
Monthly Executive Compensation Benefit payments that are
payable under the Executive Deferred Compensation Agreement
shall be paid pursuant to the terms of that agreement, which
shall remain in full force and effect; and
(iv) Employee shall continue to participate in all
life insurance, medical, health, dental and disability plans,
programs or arrangements ("Insurance Plans") in which Employee
participated immediately prior to the Date of Termination on
the same terms as Employee participated immediately prior to
the Date of Termination for the shorter period of (a) two
years from the Date of Termination or (b) Employee's
commencement of full time employment with a new company that
provides Employee with benefits at least as favorable as those
provided by the Company, so long as Employee's continued
participation is possible under the general terms and
provisions of such plans and programs and
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Employee will continue to be obligated to pay the same
employee portion of any premium and any deductible and/or
co-payments associated with such insurance Plans as was
required immediately prior to the Date of Termination.
Employee's right to continued group benefits after any period
covered by the Company under this Agreement will be determined
in accordance with federal and state law.
(v) The payments and benefits provided for in this
Section 5(A) are in addition to, and shall not be deemed to be
in lieu of, any other payments and/or benefits to which
Employee is otherwise entitled, including without limitation
any and all payments and benefits under the PLM International,
Inc. 401K and Profit Sharing Plan and any other insurance
and/or disability plans.
B. Termination Pursuant to Section 4(C). Following a Change in
Control, if Employee's employment is terminated pursuant to Section 4(C) (for
Cause, Disability or other than Good Reason), the Company shall pay Employee his
full Base Salary (and any accrued but unused vacation and personal days) through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, and the Company shall have no further obligations to Employee under
this Agreement. The rights, limitations and obligations of each of the Employee
and the Company under any other agreement or plan (other than the Employment
Agreement), including but not limited to any stock option plan, stock grant
plan, deferred compensation plan and related agreement(s), each as may have been
modified by the terms of this Agreement, shall remain in full force and effect.
C. Termination Prior to a Change in Control. This Agreement
does not provide for the payment or provision of severance benefits in
connection with a termination by Employee or the Company prior to and not in
connection with a Change in Control. Employee's rights to any such benefits
shall continue to be governed by law or other written agreement, if any exists
between Employee and the Company, and nothing in this Agreement is intended to
change, or shall be construed as changing, any of the legal or contractual
rights of either party to terminate Employee's employment (for Cause, at-will,
for Good Reason, or otherwise) prior to and not in connection with a Change in
Control.
D. Section 280G. Notwithstanding any other provisions of this
Agreement or any other agreement between the Company and the Employee, in the
event that any payment or benefit received or to be received by the Employee in
connection with a Change in Control or the termination of the Employee's
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company or any Person whose actions result in
a Change in Control or any Person affiliated with the Company or such Person)
(all such payments and benefits, including the severance benefits provided
hereunder, being hereinafter called "Total Payments") would not be deductible
(in whole or part), by the Company, an
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affiliate or Person making such payment or providing such benefit as a result of
section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
then, to the extent necessary to make such portion of the Total Payments
deductible (and after taking into account any reduction in the Total Payments
provided by reason of section 280G of the Code in such other plan, arrangement
or agreement), the benefits provided hereunder shall be reduced (if necessary,
to zero); provided, however, that, notwithstanding the terms of any other plan
or agreement, the Employee may elect to have the benefits payable under any
other plan or agreement reduced (or eliminated) prior to any reduction of the
benefits payable under this Agreement, which may include, in the case of the
Executive Deferred Compensation Agreement, an election to reduce the Employee's
Compensation Period under the Executive Deferred Compensation Agreement (without
increasing the amount determined under Section 1.1 of the Executive Deferred
Compensation Agreement as Employee's Monthly Deferred Compensation Benefit).
(i) For purposes of this limitation in the event the
Company asserts that the limitation would apply, (a) no
portion of the Total Payments the receipt or enjoyment of
which the Employee shall have waived at such time and in such
manner as not to constitute a "payment" within the meaning of
section 280G(b) of the Code shall be taken into account, (b)
no portion of the Total Payments shall be taken into account
that, in the opinion of tax counsel ("Tax Counsel") selected
by the Employee and reasonably accepted by the Company, does
not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (c) the benefits payable under this
Agreement shall be reduced only to the extent necessary so
that the Total Payments (other than those referred to in
clauses (a) or (b)) in their entirety constitute reasonable
compensation for services actually rendered within the meaning
of section 280G(b)(4)(B) of the Code or are otherwise not
subject to disallowance as deductions by reason of section
280G of the Code, in the opinion of Tax Counsel, and (d) the
value of any noncash benefit or any deferred payment or
benefit included in the Total Payments shall be determined in
accordance with the principles of sections 280G(d)(3) and (4)
of the Code.
(ii) If it is established pursuant to a final
determination of a court or an Internal Revenue Service
proceeding that, notwithstanding the good faith of the
Employee and the Company in applying the terms of this Section
6(F), the Total Payments paid to or for the Employee's benefit
are in an amount that would result in any portion of such
Total Payments being subject to the Excise Tax, then, if such
repayment would result in (a) no portion of the remaining
Total Payments being subject to the Excise Tax and (b) a
dollar-for-dollar reduction in the Employee's taxable income
and wages for purposes of federal, state and local income and
employment taxes, the Employee shall have an obligation to pay
the
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Company upon demand an amount equal to the sum of (x) the
excess of the Total Payments paid to or for the Employee's
benefit over the Total Payments that could have been paid to
or for the Employee's benefit without any portion of such
Total Payments being subject to the Excise Tax; and (y)
interest on the amount set forth in clause (x) of this
sentence at the rate provided in section 1274(b)(2)(B) of the
Code from the date of the Employee's receipt of such excess
until the date of such payment.
(iii) By execution and delivery of this Agreement,
the provisions of Section 10.4 of the Executive Deferred
Compensation Agreement are hereby superseded and such section
is hereby declared null and void.
6. Mitigation. Employee shall not be required to mitigate the amount of
any payment or benefit provided for in this Agreement by seeking other
employment or otherwise and, except as otherwise provided in Section 5(A)(iv),
no payment or benefit provided for in this Agreement shall be reduced by any
compensation earned by Employee as the result of employment by another employer
after the termination of his/her employment with the Company.
7. Other Definitions. The following definitions shall apply for
purposes of this Agreement:
A. Good Reason. "Good Reason" shall mean:
(i) Any breach by the Company of any material
provision of this Agreement which has not been cured within
ten (10) days after written notice detailing such
non-compliance is given by Employee to the Company;
(ii) Any demonstrable and material diminution of the
base compensation, duties, responsibilities, authority or
powers of Employee as they relate to any positions or offices
held by Employee during the term of this Agreement; provided
that Employee provides a reasonable description of any such
diminution(s) and a statement that Employee finds, in good
faith, such diminution to be a material diminution and that,
as such, he/she elects to terminate his/her employment
hereunder for Good Reason. Notwithstanding the foregoing, a
reduction in the staff of the Company following a Change in
Control which results in the Employee taking on additional
responsibilities shall not be considered a diminution of the
duties, responsibilities, authority or powers of Employee for
the purposes of this Agreement;
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(iii) The failure of the Company to include Employee
in any employee benefit plan or incentive compensation plan
for which Employee has previously participated or would
reasonably expect to participate in. Employee may reasonably
expect to participate in a benefit plan or incentive
compensation plan if, without limitation, other employees of
the Company with similar titles, levels of responsibilities or
salaries participate or have participated in such plan.
Notwithstanding the foregoing, (a) to the extent not otherwise
determined pursuant to the incentive compensation plan, the
Board of Directors shall have the sole discretion to determine
the amount of such bonus, or incentive compensation, if any,
and (b) the Company may change the terms of any benefit plan
so long as such changes occur pursuant to a program applicable
to all employees or executives of the Company and do not
result in a proportionately greater reduction in the rights of
or benefits to the Employee as compared with any other
employee or executive of the Company; or
(iv) Any requirement by the Company that Employee
relocate his/her primary business office to a geographical
area greater than twenty (20) miles from the Company 's
principal executive offices as existing on January 1, 1999, or
if Employee is based in an office other than the Company's
principal executive offices, twenty (20) miles from the
Company's office where Employee is based as of the date of
this Agreement.
B. Cause. "Cause" shall mean:
(i) The willful and continued failure by Employee to
perform his/her day to day responsibilities substantially in
the same manner as performed prior to the Change in Control
(other than any failure resulting from Employee's incapacity
due to physical or mental illness), which has not been cured
within ten (10) days after written demand for substantial
performance is delivered by the Company to Employee, which
demand specifically identifies the manner in which Employee
has not substantially performed his/her day to day
responsibilities. The financial condition of the Company
(including any subsidiary, division or department thereof),
and/or Employee's contribution thereto, shall not be
considered for the purposes of determining whether Employee
has willfully failed to perform his/her day to day
responsibilities;
(ii) A willful and intentional act or omission by
Employee which is, in the reasonable determination of the
Company, materially injurious to the Company, monetarily or
otherwise. For purposes of subsection (i) above and this
subsection (ii), no act or omission on Employee's part shall
be considered willful
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and intentional unless done, or omitted to be done, by him/her
not in good faith and without the reasonable belief that
his/her action(s) or omission(s) was in the best interests of
the Company; or
(iii) The conviction of Employee of, or his/her
admission or plea of nolo contendere to, a crime involving an
act of moral turpitude, which is a felony or which results or
is intended to result, directly or indirectly, in gain or
personal enrichment of Employee, relatives of Employee, or
their affiliates at the expense of the Company;
provided, however, that, notwithstanding anything to the contrary
contained in this Section 7(B), "Cause" shall not be deemed to include
a refusal by Employee to execute any certificate or document that
Employee in good faith determines contains any untrue statement of a
material fact.
C. Disability. "Disability" shall mean if, as a result of
Employee's incapacity due to physical or mental illness, Employee shall have
been absent or substantially absent from his/her duties hereunder for a period
of six (6) consecutive months, and within thirty (30) days after a Notice of
Termination (as hereinafter defined) is given, which Notice of Termination may
be given before or after the end of such six month period, Employee shall not
have returned to the performance of his/her duties hereunder on a full-time
basis, Employee's employment shall terminate upon the expiration of such thirty
(30) days (but in no event earlier than the 6 months). Employee's absence or
substantial absence from his/her duties will be treated as resulting from
incapacity due to physical or mental illness if Employee is "totally disabled
from his/her own occupation." Total disability from Employee's own occupation
will exist where (i) because of sickness or injury, Employee cannot perform the
important duties of his/her occupation, (ii) Employee is either receiving
Doctor's Care or has furnished written proof acceptable to the Company that
further Doctor's Care would be of no benefit, and (iii) Employee does not work
at all. Doctor's Care means regular and personal care of a Doctor which, under
prevailing medical standards, is appropriate for the condition causing the
disability.
E. Notice of Termination. "Notice of Termination" shall mean a
written notice which states that a Change in Control has occurred and that the
party providing the notice elects to terminate Employee's employment pursuant to
the terms of this Agreement, and which Notice of Termination specifies the
provision of Section 4 of this Agreement relied upon for the termination.
F. Date of Termination. "Date of Termination" shall mean the
effective date of the termination of Employee's employment, which date shall be
thirty (30) days after the Notice of Termination is given, or as otherwise may
be agreed to by the parties.
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8. Successors; Binding Agreement.
A. The Company shall require any successors or assigns
(whether direct or indirect by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent as if they were an original party hereto, and this Agreement shall inure
to the benefit of any such successor or assign.
B. This Agreement shall inure to the benefit of and be
enforceable by Employee's executors, administrators, successors, heirs,
distributes, devisees and legatees.
9. Other Agreements. Except as expressly set forth herein, nothing in
this Agreement is intended to alter the obligations of the Company and/or the
Employee in connection with any other written agreement between the Company and
the Employee.
10. Miscellaneous.
10.1 Written notices required by this Agreement shall be delivered to
the Company or Employee in person or sent by overnight courier or certified
mail, with a return receipt requested, to the Company's registered address and
to Employee's last shown address on the Company's records, respectively. Notice
sent by certified mail shall be deemed to be delivered two days after mailing,
and all other notices shall be deemed to be delivered when received.
10.2 This Agreement contains the full and complete understanding of the
parties regarding the subject matter contained herein and supersedes all prior
representations, promises, agreements and warranties, whether oral or written.
10.3 This Agreement shall be governed by and interpreted according to
the laws of the state of California.
10.4 The captions of the various sections of this Agreement are
inserted only for convenience and shall not be considered in construing this
Agreement.
10.5 This Agreement can be modified, amended or any of its terms waived
only by a writing signed by both parties.
10.6 If any provision of this Agreement shall be held invalid, illegal
or unenforceable, the remaining provisions of the Agreement shall remain in full
force and effect and the invalid, illegal or unenforceable provision shall be
limited or eliminated only to the extent necessary to
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remove such invalidity, illegality or unenforceability in accordance with the
applicable law at that time.
10.7 If either party institutes an action to enforce the terms of this
Agreement, the prevailing party in such action shall be entitled to recover
reasonable attorneys' fee, costs and expenses.
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10.8 No remedy made available to either party by any of the provisions
of this Agreement is intended to be exclusive of any other remedy. Each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder as well as those remedies existing at law, in equity, by statute
or otherwise.
IN WITNESS WHEREOF, the parties have executed this document as of the
date specified above.
PLM INTERNATIONAL, INC. EMPLOYEE
By: _____________________________ _________________________________
Its: _____________________________ Douglas P. Goodrich
ATTEST: _______________________ ATTEST: _____________________
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is made and entered into on this
17th day of December, 1999, by and between PLM INTERNATIONAL, INC., its
successors and/or assigns (the "Company"), and Susan C. Santo ("Employee").
WHEREAS, Employee currently holds the position of Vice President,
General Counsel and Secretary of the Company; and
WHEREAS, the Board of Directors of the Company has recently engaged the
investment banking firm of Imperial Capital, LLC to explore various strategic
and financial alternatives for maximizing shareholder value on a near-term
basis, including, but not limited to, a possible transaction or series of
transactions representing a merger, consolidation, or any other business
combination, a sale of all or a substantial amount of the business, securities,
or assets of the Company, or a recapitalization or spin-off;
WHEREAS, the consideration of any such transaction by the Board of
Directors has led to uncertainty regarding the future path of the Company and
the long-term prospects for executive employment with the Company;
WHEREAS, the Company's Board of Directors believes it is important to
the enhancement of shareholder value that, notwithstanding such uncertainty,
Employee act vigorously and constructively in connection with any negotiations
being conducted regarding any such transaction to achieve the results most
favorable to the Company's shareholders and to continue to manage the on-going
business of the Company in order to achieve the most positive results
attainable; and
WHEREAS, as an inducement for Employee to remain in the employ of the
Company during this period of uncertainty, this Agreement provides for certain
incentives for Employee upon a change in control (as defined herein) and for
certain severance benefits to be paid and provided to Employee in the event
Employee's employment is terminated following a change in control.
NOW, THEREFORE, in consideration of the above premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Employee agree as follows:
1. Term. The term of this Agreement shall commence on January 1, 2000
and shall continue (i) until December 31, 2000 so long as no Change in Control
(as defined below) has occurred on or before December 31, 2000; or (ii) in the
event a Change in Control has occurred on or before December 31, 2000, until
Employee's employment has been terminated (by the Company or by Employee) and
all obligations under this Agreement have been met.
2. Change in Control.
A. For the purposes of this Agreement only, the term "Change
in Control" shall mean the occurrence of any one of the following events:
(i) Any person or group (a "Person"), within the
meaning of Sections 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), acquiring
"beneficial ownership" ("Beneficial Ownership"), as defined in
Rule 13d-3 under the Exchange Act, of securities of the
Company representing more than fifty percent (50%) of the
combined voting power of the Company's then outstanding
securities; provided, however, in determining whether a Change
in Control has occurred, voting securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall
not constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an acquisition
by (a) an employee benefit plan (or trust forming a part
thereof) maintained by the Company or any corporation or other
Person of which a majority of its voting power or its voting
equity securities or equity interests is owned, directly or
indirectly, by the Company (for purposes of this definition, a
"Subsidiary"), (b) the Company or its Subsidiaries, or (c) any
Person in connection with a "Non-Control Transaction" (as
hereinafter defined);
(ii) A merger, consolidation or reorganization
(collectively, a "Transaction") involving the Company unless
such Transaction is a "Non-Control Transaction." A
"Non-Control Transaction" shall mean a Transaction involving
the Company where:
(a) The stockholders of the Company
immediately before such Transaction own, directly or
indirectly, immediately following such Transaction,
at least fifty percent (50%) of the combined voting
power of the outstanding voting securities of the
corporation resulting from such Transaction (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the voting
securities of the Company immediately before such
Transaction, or
(b) No Person, other than (1) the Company,
(2) any Subsidiary, or (3) any employee benefit plan
(or any trust forming a part thereof) maintained by
the Company or any Subsidiary, has Beneficial
Ownership of more than fifty percent (50%) of the
combined voting power of the Surviving Corporation's
then outstanding voting securities;
(iii) The sale or other disposition of all or
substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary of the Company) and/or
the sale or other disposition of the Company's subsidiary PLM
Financial Services, Inc. (through an asset sale or stock sale)
to any Person (other than a transfer to a Subsidiary of the
Company); provided, however, that in no event shall the sale
or other disposition of the Company's subsidiary American
Finance Group, Inc. (AFG) by itself, or the sale or other
disposition of the Company's trailer leasing business (through
a sale of substantially all of the Company's trailer assets
and/or sale of the stock of the Company's subsidiary PLM
Rental, Inc.) (Trailer Leasing) by itself, be deemed to be a
sale or other disposition of all or substantially all of the
assets of the Company for the purposes of this Agreement; and
further provided, that the sale or other disposition of AFG or
the sale or other disposition of Trailer Leasing, followed by
the sale or other disposition of Trailer Leasing (in the case
of an earlier sale or disposition of AFG) or AFG (in the case
of an earlier sale or disposition of Trailer Leasing), shall
be deemed to be a sale or other disposition of all or
substantially all of the assets of the Company; or
(iv) The stockholders of the Company approve a plan
of dissolution or liquidation of the Company.
B. In the event that a Change in Control transaction as
defined in this Agreement occurs, and such transaction is also deemed to be a
Change in Control as defined in and under the Employment Agreement (the
"Employment Agreement") dated as of November 19, 1997 between the Company and
Employee (specifically, a majority of the members of the Continuing Directors of
the Board of Directors of the Company does not approve the Change in Control
event specifically for purposes of the Employment Agreement), then the terms and
conditions of the Employment Agreement, including but not limited to Sections
10.2, 11, 12 and 13 thereof, shall govern and supercede this Agreement.
3. Acceleration and Vesting.
A. Stock Options and Grants.
(i) Upon the occurrence of a Change in Control, any
and all options to purchase stock and grants of stock (common
or otherwise) in the Company granted to Employee pursuant to
any plan or otherwise, including options granted pursuant to
the 1988 Management Stock Compensation Plan and/or the 1998
Management Stock Compensation Plan, and any and all grants of
stock in the Company granted to Employee pursuant to the 1996
Mandatory Management Stock Bonus Plan (collectively, any or
all of these plans shall be referred to herein as the "Stock
Plans"), shall become immediately accelerated and fully vested
and any restrictions on such options and grants shall, to the
extent permissible under applicable securities laws, fully
lapse. The Company shall endeavor to cause any restrictions on
the options or grants not lapsed by operation of this Section
3(A)(i) to so lapse.
(ii) Upon the vesting of all such options and grants
pursuant to Section 3(A)(i) or Section 6(C)(ii) below and, in
the case of options, so long as such options have not expired,
Employee may elect by written notice to the Company at any
time following such vesting that the Company "cash-out" such
options and/or grants by paying to Employee within five (5)
days of such notice the value of the options and/or grants so
long as Employee surrenders to the Company, and agrees to the
cancellation of, the options or grants. The value of the
options and/or grants shall be calculated as follows: (a) in
the event that the Change in Control is a result of a tender
offer and so long as Employee provides his "cash-out" notice
to the Company within 30 days of the conclusion of the tender
offer, then Employee shall be paid the per share price paid to
the Company's shareholders in connection with such tender
offer, or (b) in all other circumstances, the Employee shall
be paid the average daily closing price of the common stock of
the Company for the ten trading days immediately preceding the
date of Employee's "cash-out" notice, less in the case of both
(a) and (b) for the cash-out options, the exercise price of
the option. In the event Employee does not elect to "cash-out"
pursuant to this Section 3(A)(ii), then Employee's rights
regarding such options and grants shall be as set forth in the
respective Stock Plans and agreements governing such options
and grants, except that Employee shall be deemed to be fully
vested and any restrictions on such options and grants shall
remain fully lapsed.
B. Executive Deferred Compensation Agreement. In the event of
a Change in Control as defined in this Agreement, a Change in Control of the
Company shall also be deemed to have occurred for the purpose of Section 10.1 of
the Executive Deferred Compensation Agreement (the "Executive Deferred
Compensation Agreement") dated as of January 18, 1999 between the Company and
Employee, so that effective with the occurrence of the Change in Control,
Employee shall be treated for purposes of the Executive Deferred Compensation
Agreement as if Employee had attained age 60 on the first day of the second
calendar month preceding the calendar month in which the Change in Control of
the Company occurs, and Employee's Vesting Factor under Section 1.4 of the
Executive Deferred Compensation Agreement shall become and forever thereafter
remain 1.
4. Termination By Company In Connection With a Change in Control.
A. In the event that Employee's employment is terminated by
the Company subsequent to or in connection with a Change in Control for a reason
other than Cause or Disability, the Company shall pay Employee the Severance
Benefits specified in Section 6(C).
B. For purposes of this Agreement, "Cause" shall be limited
to:
(i) The willful and continued failure by Employee to
perform his/her day to day responsibilities substantially in
the same manner as performed prior to the Change in Control
(other than any failure resulting from Employee's incapacity
due to physical or mental illness), which has not been cured
within ten (10) days after written demand for substantial
performance is delivered by the Company to Employee, which
demand specifically identifies the manner in which Employee
has not substantially performed his/her day to day
responsibilities. The financial condition of the Company
(including any subsidiary, division or department thereof),
and/or Employee's contribution thereto, shall not be
considered for the purposes of determining whether Employee
has willfully failed to perform his/her day to day
responsibilities;
(ii) A willful and intentional act or omission by
Employee which is, in the reasonable determination of the
Company, materially injurious to the Company, monetarily or
otherwise. For purposes of subsection (i) above and this
subsection (ii), no act or omission on Employee's part shall
be considered willful and intentional unless done, or omitted
to be done, by him/her not in good faith and without the
reasonable belief that his/her action(s) or omission(s) was in
the best interests of the Company; or
(iii) The conviction of Employee of, or his/her
admission or plea of nolo contendere to, a crime involving an
act of moral turpitude, which is a felony or which results or
is intended to result, directly or indirectly, in gain or
personal enrichment of Employee, relatives of Employee, or
their affiliates at the expense of the Company;
provided, however, that, notwithstanding anything to the contrary contained in
this Section 4(B), "Cause" shall not be deemed to include a refusal by Employee
to execute any certificate or document that Employee in good faith determines
contains any untrue statement of a material fact.
C. For the purposes of this Agreement, Disability shall mean
if, as a result of Employee's incapacity due to physical or mental illness,
Employee shall have been absent or substantially absent from his/her duties
hereunder for a period of six (6) consecutive months, and within thirty (30)
days after a Notice of Termination (as hereinafter defined) is given, which
Notice of Termination may be given before or after the end of such six month
period, Employee shall not have returned to the performance of his/her duties
hereunder on a full-time basis, Employee's employment shall terminate upon the
expiration of such thirty (30) days. Employee's absence or substantial absence
from his/her duties will be treated as resulting from incapacity due to physical
or mental illness if Employee is "totally disabled from his/her own occupation."
Total disability from Employee's own occupation will exist where (i) because of
sickness or injury, Employee cannot perform the important duties of his/her
occupation, (ii) Employee is either receiving Doctor's Care or has furnished
written proof acceptable to the Company that further Doctor's Care would be of
no benefit, and (iii) Employee does not work at all. Doctor's Care means regular
and personal care of a Doctor which, under prevailing medical standards, is
appropriate for the condition causing the disability.
5. Termination by Employee.
A. Employee may terminate his/her employment during the term
of this Agreement upon thirty (30) days' Notice of Termination to the Company
for any reason. If Employee terminates his/her employment hereunder subsequent
to a Change in Control and such termination is made for any of the reasons
listed in Section 5(B) (such reason(s) to be detailed in the Notice of
Termination), such termination shall be deemed to have been done for good reason
("Good Reason") and the Company shall pay Employee the Severance Benefits
specified in Section 6(C), below.
B. Reasons constituting "Good Reason" shall include:
(i) Any breach by the Company of any material
provision of this Agreement which has not been cured within
ten (10) days after written notice detailing such
non-compliance is given by Employee to the Company;
(ii) Any demonstrable and material diminution of the
base compensation, duties, responsibilities, authority or
powers of Employee as they relate to any positions or offices
held by Employee during the term of this Agreement; provided
that Employee provides a reasonable description of any such
diminution(s) and a statement that Employee finds, in good
faith, such diminution to be a material diminution and that,
as such, he/she elects to terminate his/her employment
hereunder for Good Reason. Notwithstanding the foregoing, a
reduction in the staff of the Company following a Change in
Control which results in the Employee taking on additional
responsibilities shall not be considered a diminution of the
duties, responsibilities, authority or powers of Employee for
the purposes of this Agreement;
(iii) The failure of the Company to include Employee
in any employee benefit plan or incentive compensation plan
for which Employee has previously participated or would
reasonably expect to participate in. Employee may reasonably
expect to participate in a benefit plan or incentive
compensation plan if, without limitation, other employees of
the Company with similar titles, levels of responsibilities or
salaries participate or have participated in such plan.
Notwithstanding the foregoing, (a) to the extent not otherwise
determined pursuant to the incentive compensation plan, the
Board of Directors shall have the sole discretion to determine
the amount of such bonus, or incentive compensation, if any,
and (b) the Company may change the terms of any benefit plan
so long as such changes occur pursuant to a program applicable
to all employees or executives of the Company and do not
result in a proportionately greater reduction in the rights of
or benefits to the Employee as compared with any other
employee or executive of the Company; or
(iv) Any requirement by the Company that Employee
relocate his/her primary business office to a geographical
area greater than twenty (20) miles from the Company 's
principal executive offices as existing on January 1, 1999, or
if Employee is based in an office other than the Company's
principal executive offices, twenty (20) miles from the
Company's office where Employee is based as of January 1,
1999.
C. In the event Employee terminates his/her employment for
Good Reason and the Company disputes that the termination was for Good Reason,
the Company shall have the burden of proving that any such reason was not "Good
Reason".
6. Compensation Upon Termination.
A. Termination For Cause. Following a Change in Control, if
Employee's employment is terminated for Cause as defined in this Agreement, the
Company shall pay Employee his/her full Base Salary (and any accrued but unused
vacation and personal days) through the Date of Termination at the rate in
effect at the time Notice of Termination is given, and the Company shall have no
further obligations to Employee under this Agreement. The Employment Agreement
shall also be terminated as of the Date of Termination, and neither party shall
have any further rights or obligations thereunder. The rights, limitations and
obligations of each of the Employee and the Company under any other agreement or
plan, including but not limited to any stock option plan, stock grant plan,
deferred compensation plan and related agreement(s), each as may have been
modified by the terms of this Agreement, shall remain in full force and effect.
B. Termination for Disability. Following a Change in Control,
if Employee's employment is terminated for Disability as defined in this
Agreement, the Company shall pay to Employee his/her full Base Salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given. The Company shall also pay to Employee any accrued but unused vacation
and personal days, and the Company shall also provide benefits to Employee
pursuant to the standard policy of the Company with respect to terminated
disabled employees. The Employment Agreement shall also be terminated as of the
Date of Termination, and neither party shall have any further rights or
obligations thereunder. The rights, limitations and obligations of each of the
Employee and the Company under any other agreement or plan, including but not
limited to any stock option plan, stock grant plan, deferred compensation plan
and related agreement(s), each as may have been modified by the terms of this
Agreement, shall remain in full force and effect.
C. Termination Without Cause or Termination by Employee For
Good Reason. If, (a) subsequent to or resulting from a Change in Control the
Company terminates Employee's employment hereunder other than for Cause or
Disability, or (b) subsequent to a Change in Control Employee terminates his/her
employment for Good Reason, the Company shall, in addition to paying Employee
his/her full Base Salary through the Date of Termination at the rate in effect
at the time the Notice of Termination is given and any accrued but unused
vacation and personal days (as required by law), pay to Employee within seven
(7) business days of the Date of Termination, and provide to Employee, the
following severance benefits:
(i) The Company shall pay to Employee an amount equal
to twelve (12) months of Employee's annual base salary at the
highest rate in effect during the twelve (12) months
immediately preceding the Date of Termination, less customary
payroll deductions, such payment to be made at Employee's
option either in a lump sum, or in semi-monthly installments
(starting on the first regularly scheduled payday following
the Date of Termination, and continuing on each regularly
scheduled payday thereafter until paid). In the event Employee
fails to notify the Company of his/her option, the amount
shall be paid in a lump sum;
(ii) Any and all options to purchase stock (common or
otherwise) in the Company granted to Employee following a
Change in Control pursuant to any plan or otherwise, and any
and all grants of stock in the Company granted to Employee
following a Change in Control pursuant to any plan or
otherwise, shall become immediately accelerated and fully
vested and any restrictions on such options, grants or
equivalent or similar rights shall, to the extent permissible
under applicable securities laws, fully lapse. The Company
shall endeavor to cause any restrictions on the options,
grants or equivalent or similar rights not lapsed by operation
of this Section 6(C)(ii) to so lapse. Employee shall have the
same rights in such accelerated and vested options and grants
as provided in Section 3(A)(ii) and the Company shall pay to
Employee the value of the options and/or grants upon receipt
of Employee's written notice of his/her election to "cash-out"
pursuant to Section 3(A)(ii); and
(iii) At the Employee's election by written notice to
the Company made within five (5) business days following the
Notice of Termination, the Company shall pay to Employee in a
lump sum the total amount of any Monthly Executive
Compensation Benefit payments that are payable under the
Executive Deferred Compensation Agreement, which amount shall
have been determined pursuant to the terms of Sections 5(a)
and 5(b) of the Executive Deferred Compensation Agreement
after taking into consideration the automatic acceleration of
vesting as provided in Section 10.1 (including Section 10.1(a)
and 10.1(b)) of the Executive Deferred Compensation Agreement.
In the event Employee is paid his executive deferred
compensation in a lump sum as provided in this Section
5(A)(ii), the Executive Deferred Compensation Agreement shall
be terminated and of no further force or effect. In the event
Employee does not elect to receive a lump sum payment of his
executive deferred compensation, then the Monthly Executive
Compensation Benefit payments that are payable under the
Executive Deferred Compensation Agreement shall be paid
pursuant to the terms of that agreement, which shall remain in
full force and effect; and
(iv) Employee shall continue to participate in all
life insurance, medical, health, dental and disability plans,
programs or arrangements ("Insurance Plans") in which Employee
participated immediately prior to the Date of Termination on
the same terms as Employee participated immediately prior to
the Date of Termination for the shorter period of (a) twelve
(12) months from the Date of Termination or (b) Employee's
commencement of full time employment with a new company that
provides Employee with benefits at least as favorable as those
provided by the Company; provided that Employee's continued
participation is possible under the general terms and
provisions of such plans and programs and Employee will
continue to be obligated to pay the same employee portion of
any premium and any deductible and/or co-payments associated
with such insurance Plans as was required immediately prior to
the Date of Termination. Employee's right to continued group
benefits after any period covered by the Company will be
determined in accordance with federal and state law.
(v) The payments and benefits provided for in this
Section 6(C) are in addition to, and shall not be deemed to be
in lieu of, any other payments and/or benefits to which
Employee is entitled, including without limitation any and all
payments and benefits under the PLM International, Inc. 401K
and Profit Sharing Plan and any other insurance and disability
plans.
D. Other Termination by Employee. If following a Change in
Control Employee terminates his/her employment for any reason other than Good
Reason, the Company shall pay to Employee his/her full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given and any accrued but unused vacation and personal days, and the Company
shall have no further obligations to Employee under this Agreement. The
Employment Agreement shall also be terminated as of the Date of Termination, and
neither party shall have any further rights or obligations thereunder. The
rights, limitations and obligations of each of the Employee and the Company
under any other agreement or plan, including but not limited to any stock option
plan, stock grant plan, deferred compensation plan and related agreement(s),
each as may have been modified by the terms of this Agreement, shall remain in
full force and effect.
E. Termination Prior to a Change in Control. This Agreement
does not provide for the payment or provision of severance benefits in
connection with a termination by Employee or the Company prior to and not in
connection with a Change in Control. Employee's rights to any such benefits
shall continue to be governed by law or other written agreement, if any exists
between Employee and the Company, and nothing in this Agreement is intended to
change, or shall be construed as changing, any of the legal or contractual
rights of either party to terminate Employee's employment (for Cause, at-will,
for Good Reason, or otherwise) prior to and not in connection with a Change in
Control.
F. Section 280G. Notwithstanding any other provisions of this
Agreement or any other agreement between the Company and the Employee, in the
event that any payment or benefit received or to be received by the Employee in
connection with a Change in Control or the termination of the Employee's
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company or any Person whose actions result in
a Change in Control or any Person affiliated with the Company or such Person)
(all such payments and benefits, including the severance benefits provided
hereunder, being hereinafter called "Total Payments") would not be deductible
(in whole or part), by the Company, an affiliate or Person making such payment
or providing such benefit as a result of section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), then, to the extent necessary to make
such portion of the Total Payments deductible (and after taking into account any
reduction in the Total Payments provided by reason of section 280G of the Code
in such other plan, arrangement or agreement), the benefits provided hereunder
shall be reduced (if necessary, to zero); provided, however, that,
notwithstanding the terms of any other plan or agreement, the Employee may elect
to have the benefits payable under any other plan or agreement reduced (or
eliminated) prior to any reduction of the benefits payable under this Agreement,
which may include, in the case of the Executive Deferred Compensation Agreement,
an election to reduce the Employee's Compensation Period under the Executive
Deferred Compensation Agreement (without increasing the amount determined under
Section 1.1 of the Executive Deferred Compensation Agreement as Employee's
Monthly Deferred Compensation Benefit).
(i) For purposes of this limitation in the event the
Company asserts that the limitation would apply, (a) no
portion of the Total Payments the receipt or enjoyment of
which the Employee shall have waived at such time and in such
manner as not to constitute a "payment" within the meaning of
section 280G(b) of the Code shall be taken into account, (b)
no portion of the Total Payments shall be taken into account
that, in the opinion of tax counsel ("Tax Counsel") selected
by the Employee and reasonably accepted by the Company, does
not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (c) the benefits payable under this
Agreement shall be reduced only to the extent necessary so
that the Total Payments (other than those referred to in
clauses (a) or (b)) in their entirety constitute reasonable
compensation for services actually rendered within the meaning
of section 280G(b)(4)(B) of the Code or are otherwise not
subject to disallowance as deductions by reason of section
280G of the Code, in the opinion of Tax Counsel, and (d) the
value of any noncash benefit or any deferred payment or
benefit included in the Total Payments shall be determined in
accordance with the principles of sections 280G(d)(3) and (4)
of the Code.
(ii) If it is established pursuant to a final
determination of a court or an Internal Revenue Service
proceeding that, notwithstanding the good faith of the
Employee and the Company in applying the terms of this Section
6(F), the Total Payments paid to or for the Employee's benefit
are in an amount that would result in any portion of such
Total Payments being subject to the Excise Tax, then, if such
repayment would result in (a) no portion of the remaining
Total Payments being subject to the Excise Tax and (b) a
dollar-for-dollar reduction in the Employee's taxable income
and wages for purposes of federal, state and local income and
employment taxes, the Employee shall have an obligation to pay
the Company upon demand an amount equal to the sum of (x) the
excess of the Total Payments paid to or for the Employee's
benefit over the Total Payments that could have been paid to
or for the Employee's benefit without any portion of such
Total Payments being subject to the Excise Tax; and (y)
interest on the amount set forth in clause (x) of this
sentence at the rate provided in section 1274(b)(2)(B) of the
Code from the date of the Employee's receipt of such excess
until the date of such payment.
(iii) By execution and delivery of this Agreement,
the provisions of Section 10.4 of the Executive Deferred
Compensation Agreement are hereby superseded and such section
is hereby declared null and void.
7. Mitigation. Employee shall not be required to mitigate the amount of
any payment or benefit provided for in this Agreement by seeking other
employment or otherwise and, except as otherwise provided in Section 6(C)(iv),
no payment or benefit provided for in this Agreement shall be reduced by any
compensation earned by Employee as the result of employment by another employer
after the termination of his/her employment with the Company.
8. Other Definitions. The following definitions shall apply for
purposes of this Agreement:
A. Notice of Termination. Any purported termination by the
Company or by Employee shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon. Any purported termination of Employee's
employment which is not effected pursuant to a Notice of Termination satisfying
the requirements of this paragraph shall not be effective.
B. Date of Termination. "Date of Termination" shall mean, as
applicable, (a) if Employee's employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that Employee shall not
have returned to the performance of his/her duties on a full-time basis during
such thirty (30) day period), (b) the date specified in the Notice of
Termination in compliance with the terms of this Agreement, or (c) if no date is
specified, the date on which a Notice of Termination is given.
9. Successors; Binding Agreement.
A. The Company shall require any successors or assigns
(whether direct or indirect by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent as if they were an original party hereto, and this Agreement shall inure
to the benefit of any such successor or assign.
B. This Agreement shall inure to the benefit of and be
enforceable by Employee's executors, administrators, successors, heirs,
distributes, devisees and legatees.
10. Other Agreements. Except as expressly set forth herein, nothing in
this Agreement is intended to alter the obligations of the Company and/or the
Employee in connection with any other written agreement between the Company and
the Employee.
11. Miscellaneous.
11.1 Written notices required by this Agreement shall be delivered to
the Company or Employee in person or sent by overnight courier or certified
mail, with a return receipt requested, to the Company's registered address and
to Employee's last shown address on the Company's records, respectively. Notice
sent by certified mail shall be deemed to be delivered two days after mailing,
and all other notices shall be deemed to be delivered when received.
11.2 This Agreement contains the full and complete understanding of the
parties regarding the subject matter contained herein and supersedes all prior
representations, promises, agreements and warranties, whether oral or written.
11.3 This Agreement shall be governed by and interpreted according to
the laws of the state of California.
11.4 The captions of the various sections of this Agreement are
inserted only for convenience and shall not be considered in construing this
Agreement.
11.5 This Agreement can be modified, amended or any of its terms waived
only by a writing signed by both parties.
11.6 If any provision of this Agreement shall be held invalid, illegal
or unenforceable, the remaining provisions of the Agreement shall remain in full
force and effect and the invalid, illegal or unenforceable provision shall be
limited or eliminated only to the extent necessary to remove such invalidity,
illegality or unenforceability in accordance with the applicable law at that
time.
11.7 If either party institutes an action to enforce the terms of this
Agreement, the prevailing party in such action shall be entitled to recover
reasonable attorneys' fee, costs and expenses.
11.8 No remedy made available to either party by any of the provisions
of this Agreement is intended to be exclusive of any other remedy. Each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder as well as those remedies existing at law, in equity, by statute
or otherwise.
IN WITNESS WHEREOF, the parties have executed this document as of the
date specified above.
PLM INTERNATIONAL, INC. EMPLOYEE
By: /s/Robert N. Tidball /s/Susan C. Santo
-------------------------- -----------------------------
Its: President Susan C. Santo
ATTEST: _______________________ ATTEST: _____________________
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on
this 1st day of January, 1999, by and between American Finance Group, Inc. (the
"Company") and Donald R. Dugan ("Employee").
WHEREAS, Employee currently holds the position(s) of President of the
Company; and
WHEREAS, the Company's sole shareholder, PLM International, Inc.
("PLMI") recently announced publicly that its Board of Directors has engaged
Legg Mason Wood Walker, Incorporated to explore strategic alternatives for the
Company; and
WHEREAS, such announcement has led to uncertainty regarding the future
path of the Company and the long-term prospects for executive employment with
the Company; and
WHEREAS, Employee is an "employee at will", and as such the Company is
not legally obligated to continue his/her employment for any fixed period of
time; and
WHEREAS, the Company's Board of Directors ("Board") believes it is
important to the enhancement of shareholder value that, notwithstanding such
uncertainty, Employee continue his/her employment with the Company in order that
the Company can benefit from the continued availability of Employee's services
for a period continuing until after PLMI has completed its evaluation of
strategic alternatives regarding the Company and, should PLMI engage in any form
of transaction involving the Company to increase shareholder value, continuing
for a period of time after such transaction has been consummated; and
consequently, the Board intends to provide the incentives set forth herein for
Employee to remain in the Company's employ during such period; and
WHEREAS, as an additional inducement for Employee to remain in the
employ of the Company both before and after a change in control transaction,
this Agreement provides that certain severance benefits will be paid to Employee
in the event Employee's employment is terminated by the Company without cause or
by Employee for good reason following the execution of this Agreement through
June 30, 2000;
NOW, THEREFORE, in consideration of the above premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Employee agree as follows:
1. Services. The Company hereby engages the exclusive services of
Employee as President with the powers and duties in that capacity consistent
with the powers and duties exercised by Employee as President as of the date
hereof, and as determined by the Board from time to time. Employee hereby agrees
to perform such services on the terms and conditions herein contained and to
abide by all rules and regulations for conduct that are now or may hereafter be
reasonably established by the Company. Employee shall be based at the principal
executive offices of the Company, except for required travel on the Company's
business to an extent substantially consistent with present business travel
obligations.
2. Agreement Term. The term of this Agreement shall be from January 1,
1999 through June 30, 2000. Employee's employment under this Agreement shall
continue during the term of this Agreement unless terminated sooner pursuant to
Sections 10 or 11 of this Agreement, and after the term of this Agreement,
Employee's employment shall continue at-will.
3. Compensation. The Company shall pay to Employee as full compensation
for all services performed for the Company, the sum of One Hundred Eighty Nine
Thousand Dollars ($189,000) per year, or such higher amount as may be agreed to
by the Company and Employee from time to time (the original amount or the
adjusted amount, if applicable, being the "Base Salary"), payable in equal
semi-monthly installments. Employee's compensation may be adjusted from time to
time, but it may not be reduced below the Base Salary without Employee's prior
written consent. The Company may deduct and withhold from all payments to be
made to Employee hereunder amounts required or, with Employee's written consent,
permitted to be deducted or withheld pursuant to any provisions of any
applicable law or regulation, together with the right and authority to pay any
such deductions or withholdings over to any party entitled to the same pursuant
to the provisions of any such law or regulation.
4. Bonus.
A. Incentive Bonus. Employee shall be eligible to participate
in any bonus or incentive compensation plan in effect from time to time for
senior executives of the Company generally (each, an "Incentive Compensation
Plan"). To the extent not otherwise determined pursuant to the terms of any
Incentive Compensation Plan, (a) the Board shall have the sole discretion to
determine the amount of bonus or incentive compensation ("Incentive Bonus")
payable under such Incentive Compensation Plan, if any, and (b) Employee shall
not be entitled to payment of any Incentive Bonus unless he/she is employed by
the Company on the date such bonus is paid. Notwithstanding the foregoing, the
Company shall within thirty (30) days following a Change in Control (as defined
in Section 12 hereof), pay to Employee the amount, if any, of any Incentive
Bonus which the Board determines in its sole discretion has been earned by
Employee during the performance period ending as of the date the Change in
Control occurs, so long as Employee is employed by the Company as of the date
the Change in Control occurs.
B. Retention Bonus. The Company agrees to pay to Employee a
retention bonus under either of the following circumstances:
(i) In the absence of a Change in Control, during
the period of one (1) year following the date
of this Agreement, Employee shall have
remained employed by the Company continuously
throughout such period; or
(ii) In the event a Change in Control does occur
within one (1) year following the date of
this Agreement, Employee shall have remained
employed by the Company or its successor
continuously throughout the period of six (6)
consecutive months from the date of the
Change of Control.
The amount of the retention bonus payable under this Section 4(B) shall
be Forty Seven Thousand Two Hundred Fifty Dollars ($47,250). The retention bonus
shall be paid to Employee in cash within thirty (30) days after the date on
which Employee satisfies the conditions of either Section 4(B)(i) or Section
4(B)(ii) above, whichever is applicable. No amount paid to Employee as a
retention bonus hereunder shall be deemed to be in lieu of a bonus or incentive
compensation, if any, payable to Employee pursuant to any Incentive Compensation
Plan.
5. Other Benefits. During the term of this Agreement, the Company shall
maintain, and Employee shall be entitled to continue to participate in, all of
the Company's employee benefit plans and arrangements in effect on the date
hereof in which Employee participates; or such other plans or arrangements that
would provide Employee with substantially equivalent benefits thereunder
(including without limitation each pension and retirement plan and arrangement,
life insurance plan and arrangement, health and accident plan and arrangement,
medical insurance plan and arrangement, disability plan and arrangement and
vacation plan) (the "Employee Benefit Plans"); provided, however, that this
Section 5 shall not apply to any of the Company's Incentive Compensation
Plan(s), the terms of which shall prevail. The Company shall not make any
changes in such plans or arrangements which would adversely affect Employee's
rights or benefits thereunder, unless such change occurs pursuant to a program
applicable to all employees or executives of the Company and does not result in
a proportionately greater reduction in the rights of or benefits to Employee as
compared with any other employee or executive of the Employer. Employee shall be
entitled to participate in and receive benefits under any Employee Benefit Plan
or arrangement made available by the Company in the future to its employees,
executives or key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such plans and
arrangements. Nothing paid to Employee under any plan or arrangement presently
in effect or made available in the future shall be deemed to be in lieu of the
Base Salary payable to Employee pursuant to Section 3 hereof or any amount
payable to Employee pursuant to an Incentive Compensation Plan or retention
bonus as provided in Section 4 hereof.
6. Other Interests. Employee shall devote his/her full business time
and attention solely to the business and interests of the Company, and the
Company shall be entitled to all the benefits arising from or incident to
Employee's services. During the term of Employee's employment hereunder,
Employee shall not, without the Company's written consent, have any interest in
any business which competes either directly or indirectly with the Company's or
PLMI's business, except that Employee may hold an interest not exceeding five
percent (5%) in any corporation whose stock is publicly traded.
7. Confidentiality. It is specifically understood and agreed that some
of the Company's business activities are secret in nature and constitute trade
secrets, including but not limited to the Company's, PLMI's or any of their
subsidiaries' (the "Subsidiaries") "know-how," methods of production and
manufacturing, ideas and results of research and development, specifications of
equipment and materials, profit margins, planning information, projections,
customer and supplier information, reports, analyses, agreements, as well as
financial data and reports (collectively, the "Confidential Information"). All
Confidential Information is and shall be the property of the Company and/or PLMI
for each of their own exclusive use and benefit, and Employee agrees that he/she
will hold the same in strictest confidence and will not at any time, either
during or after his/her employment by the Company, communicate or divulge any
such Confidential Information to anyone other than the Company and those
designated by it, or use or permit the use of the same for his/her own benefit
or for the benefit of others unless authorized to do so by the Company's prior
written consent or by a contract or agreement to which the Company is a party or
by which it is bound. Employee's undertakings set forth in this Section 7 are in
addition to, and not in substitution of, any other obligation the Employee have,
whether by other agreement or imposed by law, regarding confidentiality and
disclosure of information, knowledge or data relating to the Company, PLMI and
their Subsidiaries.
8. Services Furnished. During the term of Employee's employment with
the Company, the Company shall furnish Employee with office space, secretarial
assistance and such other facilities and service as have heretofore been
furnished to Employee.
9. Other Positions. Employee agrees to serve without additional
compensation if elected or appointed a director of the Company or any of its
subsidiaries, provided that Employee is indemnified for serving in any and all
such capacities on a basis no less favorable than is currently provided other
directors of the Company and its subsidiaries.
10. Termination by the Company. Employee's employment hereunder may be
terminated by the Company without any breach of this Agreement under the
following circumstances:
10.1 Death or Disability. The Company may terminate Employee's
employment hereunder either before or following a Change in Control under the
following circumstances:
A. Death. Employee's employment hereunder shall
automatically terminate upon his/her death.
B. Disability. If, as a result of Employee's incapacity due to
physical or mental illness, Employee shall have been absent or substantially
absent from his/her duties hereunder for a period of six (6) consecutive months,
and within thirty (30) days after a Notice of Termination (as hereinafter
defined) is given, which Notice of Termination may be given before or after the
end of such six month period, Employee shall not have returned to the
performance of his/her duties hereunder on a full-time basis, Employee's
employment shall terminate upon the expiration of such thirty (30) days.
Employee's absence or substantial absence from his/her duties will be treated as
resulting from incapacity due to physical or mental illness if Employee is
"totally disabled from his/her own occupation." Total disability from Employee's
own occupation will exist where (1) because of sickness or injury, Employee
cannot perform the important duties of his/her occupation, (2) Employee is
either receiving Doctor's Care or has furnished written proof acceptable to the
Company that further Doctor's Care would be of no benefit, and (3) Employee does
not work at all. Doctor's Care means regular and personal care of a Doctor
which, under prevailing medical standards, is appropriate for the condition
causing the disability.
10.2 Without Cause. The Company may terminate Employee's employment
during the term of this Agreement without cause, either before or following a
Change in Control, in the sole, absolute and unreviewable discretion of the
Company, by a Notice of Termination given by the Chairman of the Board stating
that the Board has determined that it is in the best interests of the Company or
its shareholders to terminate Employee's employment hereunder.
10.3 For Cause.
A. The Company may terminate Employee's employment during the
term of this Agreement for Cause, either before or following a Change in
Control, by a Notice of Termination given by the Chairman of the Board setting
forth one of the reasons specified in Section 10.3(B), below.
B. For purposes of this Agreement, "Cause" shall mean:
(i) The willful and continued failure by Employee
to perform his/her duties hereunder (other
than any failure resulting from Employee's
incapacity due to physical or mental
illness), which has not been cured within ten
(10) days after written demand for
substantial performance is delivered by the
Company to Employee, which demand
specifically identifies the manner in which
Employee has not substantially performed
his/her duties;
(ii) A willful and intentional act or omission by
Employee which is, in the reasonable
determination of the Company, materially
injurious to the Company, monetarily or
otherwise. For purposes of subsection (i)
above and this subsection (ii), no act or
omission on Employee's part shall be
considered willful and intentional unless
done, or omitted to be done, by him/her not
in good faith and without the reasonable
belief that his/her action(s) or omission(s)
was in the best interests of the Company;
(iii) The conviction of Employee of, or his/her
admission or plea of nolo contendere to, a
crime involving an act of moral turpitude
which is a felony or which results or is
intended to result, directly or indirectly,
in gain or personal enrichment of Employee,
relatives of Employee, or their affiliates at
the expense of the Company; or
(iv) The breach by Employee of any material
covenant of this Agreement which has not been
cured within ten (10) days after written
notice detailing such breach is given by the
Company to Employee;
provided, however, that, notwithstanding anything to the contrary contained in
clauses (i) and (ii) of this Section 10.3(B), "Cause" shall be deemed not to
include a refusal by Employee to execute any certificate or document that
Employee in good faith determines contains any untrue statement of a material
fact.
11. Termination by Employee.
A. Employee may terminate his/her employment during the term
of this Agreement upon thirty (30) days' Notice of Termination to the Company
for any reason. If Employee terminates his/her employment hereunder and such
termination is made for any of the reasons listed in Section 11(B) (such
reason(s) to be detailed in the Notice of Termination), such termination shall
be deemed to have been done for good reason ("(Good Reason").
B. Reasons constituting "Good Reason" shall be limited to:
(i) Any breach by the Company of any material
provision of this Agreement which has not
been cured within ten (10) days after written
notice detailing such non-compliance is given
by Employee to the Company;
(ii) Any demonstrable and material diminution of
the base compensation, duties,
responsibilities, authority or powers of
Employee as they relate to any positions or
offices held by Employee during the term of
this Agreement; provided that Employee
provides a reasonable description of any such
diminution(s) and a statement that Employee
finds, in good faith, such diminution to be a
material diminution and that, as such, he/she
elects to terminate his/her employment
hereunder for Good Reason;
(iii) The failure of the Company to include
Employee in any Employee Benefit Plan or
Incentive Compensation Plan for which
Employee is properly eligible, including the
failure to pay Employee the amount, if any,
due and owing Employee pursuant to any such
Employee Benefit Plan or Incentive
Compensation Plan;
(iv) Any requirement by the Company that Employee
relocate his/her primary business office to a
geographical area greater than fifty (50)
miles from the Company 's principal executive
offices as existing on January 1, 1999, or if
Employee is based in an office other than the
Company's principal executive offices, fifty
(50) miles from the Company's office where
Employee is based as of January 1, 1999.
12. Definitions. The following definitions shall apply for purposes of
this Agreement:
A. Notice of Termination. Any purported termination by the
Company or by Employee shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon. Any purported termination of Employee's
employment which is not effected pursuant to a Notice of Termination satisfying
the requirements of this paragraph shall not be effective.
B. Date of Termination. "Date of Termination" shall mean, as
applicable, (a) if Employee's employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that Employee shall not
have returned to the performance of his/her duties on a full-time basis during
such thirty (30) day period), (b) the date specified in the Notice of
Termination in compliance with the terms of this Agreement, or (c) if no date is
specified, the date on which a Notice of Termination is given.
C. Change in Control. The term "Change in Control" shall mean
the occurrence of any one of the following events:
(i) Any person or group (a "Person"), within the
meaning of Sections 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended
(the "Exchange Act"), acquiring "beneficial
ownership" ("Beneficial Ownership"), as
defined in Rule 13d-3 under the Exchange
Act, of securities of the Company
representing more than fifty percent (50%)
of the combined voting power of the
Company's then outstanding securities;
provided, however, in determining whether a
Change in Control has occurred, voting
securities which are acquired in a
"Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition
which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an
acquisition by (a) an employee benefit plan
(or trust forming a part thereof) maintained
by (1) PLMI, (2) the Company or (3) any
corporation or other Person of which a
majority of its voting power or its voting
equity securities or equity interests is
owned, directly or indirectly, by PLMI or
the Company (for purposes of this
definition, a "Subsidiary"), (b) the Company
or its Subsidiaries, or (c) any Person in
connection with a Non-Control Transaction"
(as hereinafter defined);
(ii) A merger, consolidation or reorganization
(collectively, a "Transaction") involving the
Company unless such Transaction is a
"Non-Control Transaction." A "Non-Control
Transaction" shall mean a Transaction
involving the Company where:
(a) The stockholders of the Company
immediately before such Transaction own,
directly or indirectly, immediately following
such Transaction, at least fifty percent
(50%) of the combined voting power of the
outstanding voting securities of the
corporation resulting from such Transaction
(the "Surviving Corporation") in
substantially the same proportion as their
ownership of the voting securities of the
Company immediately before such Transaction,
or
(b) No Person, other than (1) the Company,
(2) PLMI, (3) any Subsidiary, or (4) any
employee benefit plan (or any trust forming a
part thereof) maintained the Company, PLMI,
or any Subsidiary, has Beneficial Ownership
of more than fifty percent (50%) of the
combined voting power of the Surviving
Corporation's then outstanding voting
securities; or
(iii) The sale or other disposition of all or
substantially all of the assets of the
Company or PLMI to any Person or Persons
(other than a transfer to PLMI or a
Subsidiary of the Company or PLMI).
For purposes of this Agreement, an event constituting a Change in Control shall
be deemed to have occurred upon the closing or consummation of such event.
Notwithstanding the foregoing provisions of this Section 12(C), a Change in
Control will not be deemed to have occurred with respect to Employee as a result
of an event specified in this Section 12(C) if Employee has a financial interest
in the Change in Control transaction other than as an employee of any successor
to the Company or any Person who purchases all or substantially all of the
Company's assets.
13. Compensation Upon Termination.
13.1 Death. If Employee's employment is terminated by his/her death,
the Company shall pay to Employee's spouse or, if Employee leaves no spouse, to
his/her estate, Employee's full Base Salary through the date of death and,
commencing on the next succeeding day which is the last day of the month, and
monthly thereafter on the last day of each month until a total of three payments
have been made, an amount equal to one twelfth of the Base Salary in effect
immediately prior to Employee's death. The Company shall also pay to Employee's
spouse or, if Employee leaves no spouse, to his/her estate, any accrued but
unused vacation and personal days.
13.2 Termination for Disability. If Employee's employment is terminated
pursuant to Section 10.1(B), the Company shall pay to Employee his/her full Base
Salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given. The Company shall also pay to Employee any accrued but
unused vacation and personal days, and the Company shall also provide benefits
to Employee pursuant to the standard policy of the Company with respect to
terminated disabled employees.
13.3 Termination For Cause. If Employee's employment is terminated for
Cause, either before or after a Change in Control, the Company shall pay
Employee his/her full Base Salary (and any accrued but unused vacation and
personal days) through the Date of Termination at the rate in effect at the time
Notice of Termination is given, and the Company shall have no further
obligations to Employee under this Agreement.
13.4 Termination Without Cause or Termination by Employee For Good
Reason. If, during the term of this Agreement, the Company terminates Employee's
employment hereunder other than for Cause under Section 10.2, Death or
Disability, or (b) Employee terminates his/her employment for Good Reason, the
Company shall pay to Employee the severance benefits described below so long as,
upon the Company's request, Employee enters into a Release (the "Release")
substantially in the form attached hereto as Exhibit A, and such Release is not
revoked before the "Effective Date," as defined in the Release. If the Company
does not request the Release within fifteen (15) days of the Notice of
Termination, this condition shall be deemed waived by the Company.
The severance benefits payable to Employee under this Section
13.4 shall be as follows:
(i) The Company shall pay to Employee his/her full Base
Salary through the Date of Termination at the rate in
effect at the time the Notice of Termination is given
and shall pay any accrued but unused vacation and
personal days;
(ii) The Company shall also pay to Employee on the
Effective Date a lump sum amount equal to twenty four
(24) months of Employee's Base Salary at the highest
rate in effect during the twelve (12) months
immediately preceding the Date of Termination, less
customary payroll deductions;
(iii) The Company shall also pay to Employee on the
Effective Date the amount payable as a retention bonus
as set forth in Section 4(B), so long as the Company
has not yet paid such retention bonus to Employee; and
(iv) Employee shall continue to participate in all life
insurance, medical, health, dental and disability
plans, programs or arrangements ("Insurance Plans") in
which Employee participated immediately prior to the
Date of Termination on the same terms as Employee
participated immediately prior to the Date of
Termination for the shorter period of (a) twenty four
(24) months from the Date of Termination or (b)
Employee's commencement of full time employment with a
new company; provided that Employee's continued
participation is possible under the general terms and
provisions of such plans and programs and Employee will
continue to be obligated to pay the same employee
portion of any premium and any deductible and/or
co-payments associated with such insurance Plans as was
required immediately prior to the Date of Termination.
Employee's right to continued group benefits after any
period covered by the Company will be determined in
accordance with federal and state law.
13.5 Other Termination by Employee. If Employee terminates his/her
employment pursuant to Section 11 hereof for any reason other than Good Reason,
the Company shall pay to Employee his/her full Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given and
any accrued but unused vacation and personal days.
13.6 Mitigation. Employee shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise and, except as otherwise provided in Section 13.4(iv), no payment
provided for in this Agreement shall be reduced by any compensation earned by
Employee as the result of employment by another employer after the termination
of his/her employment with the Company.
14. Covenant Not to Compete. In consideration of the mutual terms and
agreements set forth herein, Employee hereby agrees that until the first
anniversary of Employee's Date of Termination, (i) Employee will not recruit any
employee of the Company or its subsidiaries or solicit or induce, or attempt to
solicit or induce, any employee of the Company or its subsidiaries, provided
that nothing herein shall preclude Employee from hiring any person who contacts
Employee for employment and who has not been employed by the Company or its
subsidiaries at any time during the preceding six months, and (ii) provided that
Employee has received (or the Company has committed in writing to pay to
Employee) the severance benefits described in Section 13.4 hereof, Employee will
not solicit, divert or take away, or attempt to solicit, divert or take away,
the business or patronage of any of existing clients, customers or accounts of
the Company or its Subsidiaries. For purposes of this Section 14, a client,
customer or account of the Company shall be deemed to be an existing client,
customer or account if such client, customer or account is a party to a Master
Lease with the Company or is being invoiced on a regular basis by the Company as
of the Date of Termination. Notwithstanding anything in this Section 14 to the
contrary, the confidentiality provisions of Section 7 hereof shall continue to
apply in all circumstances arising under this Section 14.
15. Remedies. If Employee violates Section 14 or the confidentiality
provisions of Section 7, and continues to do so after the Company has notified
Employee of such violation, the Company shall have the right to seek equitable
restraint of Employee from such activities in contravention of the provisions of
this Agreement, including seeking and obtaining a temporary restraining order
and/or injunction against Employee.
16. Arbitration. Except as provided in Section 15, if a dispute arises
between the Company and Employee concerning any of the terms of this Agreement,
the disputed matter shall be submitted to arbitration. Any disputed matter shall
be settled by arbitration in the City of Boston, Massachusetts in accordance
with the labor arbitration rules of the American Arbitration Association ("AAA
Rules"). Any judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. The arbitrators shall have the
authority to grant any equitable and legal remedies that would be available in
any judicial proceeding instituted to resolve the disputed matter. The
arbitrators shall apply the law of the Commonwealth of Massachusetts in making
any determination hereunder. Notwithstanding anything to the contrary which may
now or hereafter be contained in the AAA Rules, the parties agree any such
arbitration shall be conducted before a panel of three arbitrators who shall be
compensated for their services at a rate to be determined by the American
Arbitration Association in the event the parties are not able to agree upon
their rate of compensation. Each party shall have the right to appoint one
arbitrator (to be appointed within twenty days of the notice of a dispute to be
resolved by arbitration hereunder) and the two arbitrators so chosen shall
mutually agree upon the selection of the third impartial arbitrator. The
majority decision of the arbitrators will be final and conclusive upon the
parties hereto. Employee specifically consents to such arbitration and hereby
represents such consent is willfully and voluntarily given without influence by
coercion or threatening statements from the Company.
17. Taxes. Notwithstanding anything herein to the contrary, the Company
shall not be obligated to pay any portion of any amount otherwise payable to
Employee hereunder if the Company is not reasonably able to deduct such portion
(the "Excess Amount") solely by operation of Section 28OG (or such other
provision(s) as may from time to time be enacted governing the deductibility of
so-called "Golden Parachute Payments") of the Internal Revenue Code of 1986, as
amended (the "Code"). The Company shall be deemed able reasonably to deduct such
Excess Amount, and all amounts accruing hereunder, including the Excess Amount,
shall be paid to Employee, in the event Employee delivers to the Company an
opinion of an attorney that is reasonably acceptable to the Company stating such
Excess Amount is reasonably deductible by the Company by operation of Section
28OG (or such other provisions as may from time to time be enacted governing the
deductibility of so-called "Golden Parachute Payments") of the Code.
18. Review by Counsel. The Company and Employee do hereby acknowledge
and agree that they have each been represented by independent counsel of their
own choice throughout all negotiations which preceded the execution of this
Employment Agreement and that they fully understand and voluntarily accept this
Employment Agreement and have executed this Employment Agreement after seeking
the advice of said independent counsel.
19. Indemnification. During the period of his/her employment hereunder,
the Company agrees to indemnify Employee in his/her capacity as an officer of
the Company and, if applicable, as a member of the Board of Directors of the
Company or any Subsidiary, all to the maximum extent permitted by law.
20. Legal Fees. Each party to this Agreement shall bear its own
attorneys' fees, costs and expenses in connection with any action or proceeding
brought to enforce any term or provision of this Agreement.
21. Successors; Binding Agreement.
A. The Company shall require any successors or assigns
(whether direct or indirect by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place, and this Agreement shall inure to the benefit of any such
successor or assign. Failure of the Company to obtain such agreement upon the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle Employee to compensation from the Company in the same amount and
on the same terms as Employee would be entitled hereunder if Employee terminated
his/her employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination
B. This Agreement shall inure to the benefit of and be
enforceable by Employee's executors, administrators, successors, heirs,
distributees, devisees and legatees. If Employee should die after a Notice of
Termination has been delivered by Employee or while any amount would still be
payable to Employee hereunder if Employee had continued to live, all amounts due
to Employee under this Agreement, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Employee's devisee,
legatee or other designee or, if there be no such designee, to Employee's
estate.
22. Miscellaneous.
22.1 Written notices required by this Agreement shall be delivered to
the Company or Employee in person or sent by overnight courier or certified
mail, with a return receipt requested, to the Company's registered address and
to Employee's last shown address on the Company's records, respectively. Notice
sent by certified mail shall be deemed to be delivered two days after mailing,
and all other notices shall be deemed to be delivered when received.
22.2 This Agreement contains the full and complete understanding of the
parties regarding the subject matter contained herein and supersedes all prior
representations, promises, agreements and warranties, whether oral or written.
22.3 This Agreement shall be governed by and interpreted according to
the laws of the Commonwealth of Massachusetts.
22.4 The captions of the various sections of this Agreement are
inserted only for convenience and shall not be considered in construing this
Agreement.
22.5 This Agreement can be modified, amended or any of its terms waived
only by a writing signed by both parties.
22.6 If any provision of this Agreement shall be held invalid, illegal
or unenforceable, the remaining provisions of the Agreement shall remain in full
force and effect and the invalid, illegal or unenforceable provision shall be
limited or eliminated only to the extent necessary to remove such invalidity,
illegality or unenforceability in accordance with the applicable law at that
time. Notwithstanding the foregoing provision, in the event that a payment is
made pursuant to Section 13.4 and Employee has entered into a Release and such
Release is determined to be invalid, illegal or unenforceable, Employee and the
Company shall negotiate in good faith to enter into a new release covering the
released claims.
22.7 No remedy made available to either party by any of the provisions
of this Agreement is intended to be exclusive of any other remedy. Each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder as well as those remedies existing at law, in equity, by statute
or otherwise.
22.8 Notwithstanding the expiration or termination of this Agreement
for any reason whatsoever, the provisions of Sections 7, 14, 15, 16 and 19 shall
expressly survive expiration or termination of the Agreement.
IN WITNESS WHEREOF, the parties have executed this document under seal
as of the date specified above.
<PAGE>
THE COMPANY:
AMERICAN FINANCE GROUP, INC.
By: /s/ Robert N. Tidball
Its: Executive Vice President
ATTEST:
EMPLOYEE:
/s/Donald R. Dugan
Donald R. Dugan
ATTEST:
PLM INTERNATIONAL, INC.
DIRECTORS' 2000 NONQUALIFIED STOCK OPTION PLAN
1. Purpose
The purpose of this Directors' 2000 Nonqualified Stock Option Plan (the
"Plan") is to motivate and reward those directors of PLM International, Inc.
(the "Company") who are not employees of the Company or of any parent or
subsidiary of the Company eligible for participation in the PLM International,
Inc. 1998 Management Stock Compensation Plan, by granting each such director on
February 1, 2000, an option to purchase 8,000 shares of the Company's common
stock, and thereafter, each February 1, beginning February 1, 2001, an option to
purchase 10,000 shares of the Company's common stock, all such grants subject to
paragraph 5 below. This Plan is intended as an addition to and not as a
replacement of the Directors' 1995 Nonqualified Stock Option Plan.
2. Effective Date; Term of Plan; Prior Plan
(a) This Plan was adopted by the Company's Board of Directors
(the "Board") on February 1, 2000, effective as of February 1, 2000. No options
shall be granted after termination of the Plan, but termination shall not affect
rights and obligations under then-outstanding options.
(b) If applicable, the benefits under this Plan are intended
as an addition to, not as a replacement of, the Directors' 1995 Nonqualified
Stock Option Plan which plan and options remain in full force and effect
according to the terms therein.
3. Shares Subject to Plan
Subject to the other provisions of this Plan, the total number of
shares with respect to which options may be granted under this Plan shall be
70,000 shares of the Company's common stock, $.01 par value ("Common Shares");
provided, however, that such number and kind of shares shall be appropriately
adjusted in accordance with paragraph 11(b). Shares delivered to an optionee by
the Company upon exercise of options may be previously unissued shares or
repurchased shares. All shares issued upon the exercise of any option granted
under this Plan, whatever their source, shall be counted against the
70,000-share limit, provided, however, options which lapse or are surrendered
pursuant to the terms of this Plan shall be available for reissue under the
Plan.
4. Administration
(a) Board to Administer. This Plan shall be administered
by the Board.
<PAGE>
(b) Voting. A majority of the Board shall constitute a quorum
for the purposes of this Plan. Provided a quorum is present, the Board may take
action by consent of a majority of its disinterested members present at a
meeting. Meetings may be held telephonically as long as all parties are able to
hear one another, and a member of the Board shall be "present" for purposes of
the preceding sentence if he or she is in simultaneous communication by
telephone with the other members, provided, again, that all parties are able to
hear one another.
(c) Tasks of Board in Administering Plan. Without limiting the
generality of the foregoing, and unless stated elsewhere in this Plan, the Board
shall have full and final authority, in its discretion, but subject to the
express provisions of this Plan, to: (i) authorize any person to execute an
option agreement with respect to an option; (ii) interpret the Plan; and (iii)
make all other determinations deemed necessary or advisable for the
administration of the Plan.
(d) Reports. Unless otherwise decided by the Board, the Board
shall cause written summaries of stock option grants under this Plan to be
maintained as follows: (i) all grants shall be summarized into a single
schedule; (ii) annually within 60 days of the end of the calendar year, all
outstanding exercised options shall be summarized in a single schedule; and
(iii) at any additional time, within the Board's discretion, all stock option
grants and exercises shall be summarized.
(e) Delegation. The Board may delegate nondiscretionary
administrative duties to such employees of the Company as it deems proper. The
Board may also make whatever rules and regulations it deems useful to administer
the Plan. Any decision or action of the Board in connection with the Plan or any
options granted, or shares purchased, under the Plan, shall be final and
binding.
5. Eligibility
(a) Only Outside Directors May Receive Options. Stock options
shall be granted under this Plan only to persons who at the time of grant are
directors of the Company but not employees of the Company or of any parent or
subsidiary of the Company.
(b) All Such Directors to Receive Options on a
Non-discretionary Basis. Each director of the Company who is eligible under
paragraph 5(a) above shall be granted on February 1, 2000, an option to purchase
8,000 Common Shares. Thereafter, each February 1, beginning February 1, 2001,
each director of the Company who is eligible under paragraph 5(a) above shall be
granted an option to purchase 10,000 Common Shares. If on the grant date the
number of shares available for grant under this Plan is insufficient to provide
each eligible director an option to purchase 10,000 shares, options shall be
granted pro rata to each eligible director to the extent shares are available
under the Plan.
6. Grant of Options and Limitations
(a) General Rules. As soon as practical after the date of the
grant of each option, the optionee and the Company shall enter into a written
agreement (the "Option Agreement") that shall specify the date of the grant, the
number of shares are covered by the option, the option price, and the other
terms and conditions of the option grant.
(b) Not Incentive Stock Options. All of the options granted
under this Plan shall be nonqualified options not qualifying for the benefits,
and not subject to the requirements, of incentive stock options under Sections
422A, 421(a), and 425 of the Internal Revenue Code of 1986.
7. Terms and Conditions of Option.
Options granted under this Plan shall be subject to the
following terms and conditions, and to any other terms and conditions,
consistent with this Plan, that the Board imposes when the option is granted:
(a) Time of Exercise. Options shall be exercisable as follows:
If the optionee continues
to be a director of the
Company or of a parent or
subsidiary of the Company With respect to each
on such date, the option grant of shares as
shall become exercisable on shown below
first anniversary of grant date 1/3 of shares granted
second anniversary of grant date 1/3 of shares granted
third anniversary of grant date 1/3 of shares granted
(b) Price. The price to be paid by the option-holder for
shares issued pursuant to the exercise of any option granted under this Plan
(the "Exercise Price") shall be the closing price of the Common Stock on the
American Stock Exchange or other national stock exchange as of the date as of
which the option is granted, which price shall be specified in the Option
Agreement.
(c) Option Term. The term of any option granted under the Plan
shall be from the date of grant through a date no later than January 31, 2010.
(d) Method of Exercise. Pursuant to the terms of any Option
Agreement, options may be exercised, in whole or in part, from time to time, by
written notice from the optionee to the Company stating the number of shares
being purchased and accompanied by payment in full of the exercise price for the
shares. Payment may be in cash, by check, or by delivery to the Company of
Common Shares previously owned by the optionee (duly endorsed in favor of the
Company or accompanied by a duly endorsed stock power), or by a combination of
the above. (Any Common Share used by the optionee to exercise an option shall be
valued at fair market value as of the date of exercise of the option.)
Notwithstanding anything in this Plan to the contrary, in the event an optionee
seeks to exercise options under the Plan, the Company and optionee may agree
that 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 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.
(e) Nontransferability of Options. An option granted under
this Plan shall not be transferable other than by will or by the laws of descent
and distribution, and an option may be exercised, during the lifetime of the
holder of the option, only by such holder. More particularly, but without
limiting the generality of the foregoing, an option may not be assigned,
transferred (except as provided in the preceding sentence), pledged, or
hypothecated in any way (whether by operation of law or otherwise), and will not
be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation, or other disposition of any option
contrary to the provisions of this Plan, and any levy of any attachment or
similar process upon an option, will be null and void, and otherwise without
effect, and the Board may, in its sole discretion, upon the happening of any
such event, terminate such option forthwith.
(f) Optionee Not a Shareholder Until Exercise. An optionee
shall not have any of the rights of a shareholder with respect to the shares
covered by his or her option shall have been exercised and such shares shall
have been issued to him or her (as evidenced by the appropriate entry on the
books of a duly authorized transfer agent of the Company) pursuant to the
exercise of the option.
(g) Exercise After Ceasing to be a Director. If an optionee
ceases to be director of the Company, or of a parent or subsidiary of the
Company, for any reason other than death, options held by the optionee at the
date of such ceasing to be a director may, but only if they were exercisable
immediately before such ceasing to be a director, be exercised, in whole or in
part, within six months (12 months if the optionee ceases to be a director of
the Company or of any parent or subsidiary of the Company due to the optionee's
permanent and total disability) after the date of such ceasing to be a director;
provided, however, that in no case may an option be exercised after its
Expiration Date, if that occurs first. An optionee shall be considered
permanently and totally disabled if he or she is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expect to result in death, or that has lasted or
can be expected to last for a continuous period of not less than 12 months, but
in either case only as evidenced by the optionee's receipt of disability under
Social Security.
(h) Exercise Upon Death. If an optionee dies while a director
of the Company or of a parent or subsidiary of the Company, or within the period
that the option remains exercisable after ceasing to be a director, those
options held by the optionee at the date of his or her death that, at such date,
were immediately exercisable by him or her, may be exercised in whole or in part
by the optionee's personal representative or by the person to whom the option is
transferred by will or the laws of descent or distribution, at any time prior to
their Expiration Date or, if earlier, within one year after the death of the
optionee.
(i) Termination. Any options that cease to be exercisable
under paragraphs (g) or (h) of this paragraph 7 will terminate as of that date
that the options are no longer exercisable.
8. Compliance with Securities Laws
The Company shall not be obligated to offer or sell any shares upon
exercise of an option unless the shares are at that time effectively registered
or exempt from registration under the federal securities laws and the offer and
sale of the shares are otherwise in compliance with all applicable securities
laws, including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the General Rules and
Regulations promulgated thereunder. The offer or sale of any shares upon
exercise of an option shall further be subject to approval by the Company's
counsel with respect to such compliance. The Company shall have no obligation to
register under the federal securities laws any shares acquired upon exercise of
any option granted under this Plan, or to take any other steps necessary to
enable shares to be offered and sold under federal or other securities laws.
Prior to the transfer by the Company of any shares upon the exercise of all or
any portion of an option, an optionee may be required to furnish representations
or undertakings deemed appropriate by the Company to enable the offer and sale
of the option shares, or subsequent transfers of any interest in the shares, to
comply with applicable securities laws. Stock certificates evidencing shares
acquired under this Plan or upon exercise of options granted under this Plan
shall bear any legend required by, or useful for compliance with, applicable
securities laws, this Plan, or the Option Agreement.
9. Restrictions on Shares
(a) Financial Covenants. The Company may be precluded from
paying dividends on shares issued with respect to the exercise of any option
granted under this Plan by the terms of financial covenants with any person that
has purchased preferred equity or debt securities of, or loaned money to, the
Company or any parent or subsidiary of the Company.
(b) Legending Share Certificates. In order to enforce the
restrictions imposed upon shares hereunder, the Board may cause a legend or
legends to be placed on any certificates representing shares issued upon the
exercise of any reference to the restriction against sale of the shares for any
period of time as may be required by an applicable law or regulation. If any
restriction with respect to which a legend was placed on any certificate ceases
to apply to shares represented by such certificate, the owner of the shares
represented by such certificate may require the Company to cause the issuance of
a new certificate not bearing the legend.
(c) Additional Restrictions. Additionally, the Board may
impose restrictions under the Securities Act of 1933, as amended, under the
requirements of any stock exchange upon which the shares or shares of the same
class are then listed, and under any blue sky or other securities laws
applicable to such shares.
10. Use of Proceeds
Proceeds realized pursuant to the exercise of options granted under
this Plan shall constitute general funds of the Company.
11. Changes in Capital Structure
(a) No Impediment to Corporate Transactions. The existence of
outstanding shares subject to options granted under this Plan shall not affect
the Company's right to effect adjustments, recapitalizations, reorganizations,
or other changes in its or any other corporation's capital structure or
business, any merger or consolidation, any issuance of bonds, debentures,
preferred or prior preference stock ahead of or affecting Common Shares, the
dissolution or liquidation of the Company's or any other corporation's assets or
business, or any other corporate act, whether similar to the events described
above or otherwise.
(b) Adjustments. If the outstanding shares of Common Shares
are increased or decreased in number, or changed into, or exchanged for, a
different number or kind of securities of the Company or any other corporation
by reason of a recapitalization, reclassification, stock split, combination of
shares, stock dividend or other event, the number and kind of securities that
may be granted under this Plan or with respect to which options may be granted
under this Plan, the number and kind of securities as to which outstanding
options may be exercised, and/or the option price at which outstanding options
may be exercised, will be adjusted by the Board.
12. Definition of Parent and Subsidiary
For the purposes of this Plan, a corporation shall be a parent of the
Company only if (i) it is an unbroken chain or corporations ending with the
Company, and (ii) at the time of granting of the option, each of the
corporations in the chain other than the last corporation owns stock possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
13. No Representations
Neither the Company nor the Board shall make any representations to any
optionee or grantee concerning the specific legal or tax effects surrounding the
grant or exercise of options to such grantee or optionee, it being a condition
of each optionee's right to exercise any option that said optionee shall e
subject to all applicable federal and state laws and regulations.
14. Limitation on Right of Action
Any and all rights of action by the Company or any shareholder or
shareholders of the Company against any past, present, or future members of the
Board, or against any past or present employee, arising out of or in connection
with the Plan or any act or omission related thereto, shall be limited to acts
or omissions only that are the result of gross negligence or willful misconduct.
Any such right of action shall terminate and forever be barred unless action is
brought within one year of the time of the occurrence of the act or omission
upon which liability is claimed.
INDEPENDENT AUDITORS' REPORT AND CONSENT
The Board of Directors and Shareholders
PLM International, Inc.
Under date of March 15, 2000, we reported on the consolidated balance sheets of
PLM International, Inc. and subsidiaries (the "Company") as of December 31, 1999
and 1998, and the related consolidated statements of income, changes in
stockholders' equity and comprehensive income, and cash flows for each of the
years in the three-year period ended December 31, 1999, which are included in
Form 10K. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule, Valuation and Qualifying Accounts, in Form 10K. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
We consent to incorporation by reference in the registration statement (No.
33-379145) on Form S-8 of PLM International, Inc. of our reports dated March 15,
2000, relating to the consolidated balance sheets of PLM International, Inc. as
of December 31, 1999, and 1998, and the related consolidated statements of
income, changes in stockholders' equity and comprehensive income, and cash flows
for each of the years in the three-year period ended December 31, 1999, and
related schedule, which report appears in the December 31, 1999, annual report
on Form 10K of PLM International, Inc.
San Francisco, California
March 15, 2000
<PAGE>
<TABLE>
SCHEDULE II
PLM International, Inc.
Valuation and Qualifying Accounts
Year Ended December 31, 1999, 1998 and 1997
(in thousands of dollars)
<CAPTION>
Additions
Balance at Charged to Balance at
Beginning of Cost and Close of
Year Expense Deductions Year
---------------- ---------------- -------------- -------------
Year Ended December 31, 1999
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts $ 395 $ 815 $ (430) $ 780
======================================================================
Year Ended December 31, 1998
Allowance for Doubtful Accounts $ 649 $ 114 $ (368) $ 395
======================================================================
Year Ended December 31, 1997
Allowance for Doubtful Accounts $ 512 $ 431 $ (294) $ 649
======================================================================
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, and Richard Brock, jointly and severally, his true and
lawful attorneys-in-fact, each with power of substitution, for him in any and
all capacities, to do any and all acts and things and to execute any and all
instruments which said attorneys, or any of them, may deem necessary or
advisable to enable PLM International, Inc. to comply with the Securities
Exchange Act of 1934, as amended (the "Act"), and any rules and regulations
thereunder, in connection with the preparation and filing with the Securities
and Exchange Commission of annual reports on Form 10-K on behalf of PLM
International, Inc., including specifically, but without limiting the generality
of the foregoing, the power and authority to sign the name of the undersigned,
in any and all capacities, to such annual reports, to any and all amendments
thereto, and to any and all documents or instruments filed as a part of or in
connection therewith; and the undersigned hereby ratifies and confirms all that
each of the said attorneys, or his substitute or substitutes, shall do or cause
to be done by virtue hereof. This Power of Attorney is limited in duration until
May 1, 2000 and shall apply only to the annual reports and any amendments
thereto filed with respect to the fiscal year ended December 31, 1999.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 2000.
/s/ Robert N. Tidball
Robert N. Tidball
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, and Richard Brock, jointly and severally, his true and
lawful attorneys-in-fact, each with power of substitution, for him in any and
all capacities, to do any and all acts and things and to execute any and all
instruments which said attorneys, or any of them, may deem necessary or
advisable to enable PLM International, Inc. to comply with the Securities
Exchange Act of 1934, as amended (the "Act"), and any rules and regulations
thereunder, in connection with the preparation and filing with the Securities
and Exchange Commission of annual reports on Form 10-K on behalf of PLM
International, Inc., including specifically, but without limiting the generality
of the foregoing, the power and authority to sign the name of the undersigned,
in any and all capacities, to such annual reports, to any and all amendments
thereto, and to any and all documents or instruments filed as a part of or in
connection therewith; and the undersigned hereby ratifies and confirms all that
each of the said attorneys, or his substitute or substitutes, shall do or cause
to be done by virtue hereof. This Power of Attorney is limited in duration until
May 1, 2000 and shall apply only to the annual reports and any amendments
thereto filed with respect to the fiscal year ended December 31, 1999.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 2000.
/s/ Douglas P. Goodrich
Douglas P. Goodrich
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, and Richard Brock, jointly and severally, his true and
lawful attorneys-in-fact, each with power of substitution, for him in any and
all capacities, to do any and all acts and things and to execute any and all
instruments which said attorneys, or any of them, may deem necessary or
advisable to enable PLM International, Inc. to comply with the Securities
Exchange Act of 1934, as amended (the "Act"), and any rules and regulations
thereunder, in connection with the preparation and filing with the Securities
and Exchange Commission of annual reports on Form 10-K on behalf of PLM
International, Inc., including specifically, but without limiting the generality
of the foregoing, the power and authority to sign the name of the undersigned,
in any and all capacities, to such annual reports, to any and all amendments
thereto, and to any and all documents or instruments filed as a part of or in
connection therewith; and the undersigned hereby ratifies and confirms all that
each of the said attorneys, or his substitute or substitutes, shall do or cause
to be done by virtue hereof. This Power of Attorney is limited in duration until
May 1, 2000 and shall apply only to the annual reports and any amendments
thereto filed with respect to the fiscal year ended December 31, 1999.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 2000.
/s/ Randall L.-W. Caudill
Randall L.-W. Caudill
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, and Richard Brock, jointly and severally, his true and
lawful attorneys-in-fact, each with power of substitution, for him in any and
all capacities, to do any and all acts and things and to execute any and all
instruments which said attorneys, or any of them, may deem necessary or
advisable to enable PLM International, Inc. to comply with the Securities
Exchange Act of 1934, as amended (the "Act"), and any rules and regulations
thereunder, in connection with the preparation and filing with the Securities
and Exchange Commission of annual reports on Form 10-K on behalf of PLM
International, Inc., including specifically, but without limiting the generality
of the foregoing, the power and authority to sign the name of the undersigned,
in any and all capacities, to such annual reports, to any and all amendments
thereto, and to any and all documents or instruments filed as a part of or in
connection therewith; and the undersigned hereby ratifies and confirms all that
each of the said attorneys, or his substitute or substitutes, shall do or cause
to be done by virtue hereof. This Power of Attorney is limited in duration until
May 1, 2000 and shall apply only to the annual reports and any amendments
thereto filed with respect to the fiscal year ended December 31, 1999.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 2000.
/s/ Harold R. Somerset
Harold R. Somerset
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, and Richard Brock, jointly and severally, his true and
lawful attorneys-in-fact, each with power of substitution, for him in any and
all capacities, to do any and all acts and things and to execute any and all
instruments which said attorneys, or any of them, may deem necessary or
advisable to enable PLM International, Inc. to comply with the Securities
Exchange Act of 1934, as amended (the "Act"), and any rules and regulations
thereunder, in connection with the preparation and filing with the Securities
and Exchange Commission of annual reports on Form 10-K on behalf of PLM
International, Inc., including specifically, but without limiting the generality
of the foregoing, the power and authority to sign the name of the undersigned,
in any and all capacities, to such annual reports, to any and all amendments
thereto, and to any and all documents or instruments filed as a part of or in
connection therewith; and the undersigned hereby ratifies and confirms all that
each of the said attorneys, or his substitute or substitutes, shall do or cause
to be done by virtue hereof. This Power of Attorney is limited in duration until
May 1, 2000 and shall apply only to the annual reports and any amendments
thereto filed with respect to the fiscal year ended December 31, 1999.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 2000.
/s/Robert L. Witt
Robert L. Witt
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, and Richard Brock, jointly and severally, his true and
lawful attorneys-in-fact, each with power of substitution, for him in any and
all capacities, to do any and all acts and things and to execute any and all
instruments which said attorneys, or any of them, may deem necessary or
advisable to enable PLM International, Inc. to comply with the Securities
Exchange Act of 1934, as amended (the "Act"), and any rules and regulations
thereunder, in connection with the preparation and filing with the Securities
and Exchange Commission of annual reports on Form 10-K on behalf of PLM
International, Inc., including specifically, but without limiting the generality
of the foregoing, the power and authority to sign the name of the undersigned,
in any and all capacities, to such annual reports, to any and all amendments
thereto, and to any and all documents or instruments filed as a part of or in
connection therewith; and the undersigned hereby ratifies and confirms all that
each of the said attorneys, or his substitute or substitutes, shall do or cause
to be done by virtue hereof. This Power of Attorney is limited in duration until
May 1, 2000 and shall apply only to the annual reports and any amendments
thereto filed with respect to the fiscal year ended December 31, 1999.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 2000.
/s/ Howard M. Lorber
Howard M. Lorber
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, and Richard Brock, jointly and severally, his true and
lawful attorneys-in-fact, each with power of substitution, for him in any and
all capacities, to do any and all acts and things and to execute any and all
instruments which said attorneys, or any of them, may deem necessary or
advisable to enable PLM International, Inc. to comply with the Securities
Exchange Act of 1934, as amended (the "Act"), and any rules and regulations
thereunder, in connection with the preparation and filing with the Securities
and Exchange Commission of annual reports on Form 10-K on behalf of PLM
International, Inc., including specifically, but without limiting the generality
of the foregoing, the power and authority to sign the name of the undersigned,
in any and all capacities, to such annual reports, to any and all amendments
thereto, and to any and all documents or instruments filed as a part of or in
connection therewith; and the undersigned hereby ratifies and confirms all that
each of the said attorneys, or his substitute or substitutes, shall do or cause
to be done by virtue hereof. This Power of Attorney is limited in duration until
May 1, 2000 and shall apply only to the annual reports and any amendments
thereto filed with respect to the fiscal year ended December 31, 1999.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 2000.
/s/ Warren G. Lichtenstein
Warren G. Lichtenstein
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> DEC-31-1999
<CASH> 3,901
<SECURITIES> 0
<RECEIVABLES> 11,399
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 103,000
<DEPRECIATION> (21,093)
<TOTAL-ASSETS> 152,197
<CURRENT-LIABILITIES> 0
<BONDS> 80,200
0
0
<COMMON> 59,847
<OTHER-SE> (7,434)
<TOTAL-LIABILITY-AND-EQUITY> 152,197
<SALES> 0
<TOTAL-REVENUES> 37,265
<CGS> 0
<TOTAL-COSTS> 29,073
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,424
<INCOME-PRETAX> 3,832
<INCOME-TAX> 1,487
<INCOME-CONTINUING> 2,345
<DISCONTINUED> 811
<EXTRAORDINARY> 0
<CHANGES> 800
<NET-INCOME> 2,356
<EPS-BASIC> 0.29
<EPS-DILUTED> 0.29
</TABLE>
