UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[] 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 incorporation or (I.R.S. Employer
organization) Identification No.)
One Market, Steuart Street Tower,
Suite 800, San Francisco, CA 94105-1301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 974-1399
--------------------
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class Name of each exchange on which registered
Common Stock, $0.01 Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ______
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of January 19, 2000 was 45,210,503.
The number of shares outstanding of the issuer's classes of common
stock as of January 19, 2000: Common Stock, $0.01 Par Value -- 7,688,861.
shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant's 1999 Annual Meeting of
Stockholders are incorporated by reference in Part III.
<PAGE>
PLM INTERNATIONAL, INC.
1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
Part I
Item 1 Business 2
Item 2 Properties 10
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a Vote of Security Holders 13
Part II
Item 5 Market for the Company's Common Equity and Related
Stockholder Matters 13
Item 6 Selected Financial Data 14
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 7A Quantitative and Qualitative Disclosures about
Market Risk 27
Item 8 Financial Statements and Supplemental Data 28
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 28
Part III
Item 10 Directors and Executive Officers of the Company 28
Item 11 Executive Compensation 28
Item 12 Security Ownership of Certain Beneficial Owners
and Management 28
Item 13 Certain Relationships and Related Transactions 28
Part IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 28
<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 owns and manages
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 and manages 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 $1.2 billion. An
organizational chart for PLM International indicating the relationships of
significant active legal entities as of December 31, 1998 is shown in Table 1:
TABLE 1
ORGANIZATIONAL CHART
PLM International, Inc. (Delaware)
Subsidiaires 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:
Transportation Equipment Indemnity Company, Ltd. (Bermuda)
PLM Railcar Management Services Canada, Limited (Alberta, Canada)
Subsidiary of American Finance Group, Inc.
AFG Credit Corporation (Delaware)
<PAGE>
(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
$1.2 billion (refer to Table 2). The Company operates in three operating
segments: refrigerated and dry van (nonrefrigerated) over-the-road trailer
leasing, commercial and industrial equipment leasing and financing, and the
management of investment programs and other transportation equipment leasing.
TABLE 2
EQUIPMENT AND RELATED ASSETS
December 31, 1998
(original cost in millions of dollars)
<TABLE>
<CAPTION>
Professional
Lease Management Equipment Other
Income Fund I Growth Funds Investor
PLMI Programs Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial and industrial equipment $ 213 $ -- $ -- $ -- $ 213
Refrigerated and dry van over-the-road trailers 63 8 40 2 113
Intermodal trailers -- 7 24 -- 31
Aircraft, aircraft engines, and rotables -- 45 278 -- 323
Marine vessels -- 51 174 -- 225
Railcars -- 20 128 51 199
Marine containers -- -- 59 -- 59
Mobile offshore drilling units and drilling ship -- 12 8 -- 20
Other 8 4 20 3 35
----------------------------------------------------------------------
Total $ 284 $ 147 $ 731 $ 56 $ 1,218
======================================================================
</TABLE>
(C) Owned Equipment
(1) Refrigerated and Dry Van Over-the-Road 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) over-the-road
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, facilities are located in or near
Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; Detroit, Michigan;
Indianapolis, Indiana; Kansas City, Kansas; Miami, Florida; Orlando, Florida;
Tampa, Florida; Baltimore, Maryland; Boston, Massachusetts; Denver, Colorado;
Philadelphia, Pennsylvania; San Francisco, California; Los Angeles, California;
and Newark, New Jersey. As of December 31, 1998, the Company owned 2,780
refrigerated and dry van over-the-road trailers and managed 2,276 trailers for
its syndicated investment programs.
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 1998, the Company purchased $34.1 million of primarily
refrigerated trailers and opened six new rental yard facilities. The Company
intends to continue to expand its refrigerated trailer leasing and management
operations by opening additional rental yard facilities and by continuing to
purchase refrigerated trailers in the future.
<PAGE>
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 generally "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 generally
"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, particularly
for maintenance, but under a full-service contract, the lessor generally 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 generally 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 support staff, 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 in the general economy.
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 "over-the-road"
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 provide trailer rental and leasing to their
customers.
Demand: Demand conditions for the Company's major trailer types are discussed
below.
Foodservice Distribution Trailers: Food and drink sales to the restaurant
industry, institutions providing meal service, and specialty and prepared foods
for the grocery industry showed healthy gains in the 2% to 5% range in 1998.
Consumer demand is fueling double-digit growth in some of the foodservice
industry segments, reflecting the consumer trend toward eating fresher, more
convenient foods. Heightened fears about food safety and increased service
demands from customers have accelerated the development of new technology for
refrigerated trailers and caused foodservice distributors to upgrade their
fleets. Leasing has allowed these companies access to improved equipment. This
has helped PLM Rental expand and grow its specialized refrigerated fleet that
caters to the foodservice distribution industry. Overall, the Company's
utilization and fleet size increased dramatically in 1998 and both are expected
to continue in 1999. The Company will continue to expand its marketing to the
foodservice industry, based on the growth potential of this market and the
initial strong utilization of its specialized refrigerated trailer fleet.
Over-the-Road Refrigerated Trailers: The temperature-controlled over-the-road
trailer market remained strong in 1998 as usage levels improved and equipment
oversupply was reduced. Refrigerated equipment users have been actively retiring
their older trailers and consolidating their fleets in response to improved
refrigerated trailer technology. There is currently a backlog in 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 fleets. Such a trend should
benefit the Company, which usually leases its equipment on a short-term basis.
The Company's utilization of refrigerated trailers showed improvement in 1998, a
trend that should continue in 1999.
Over-the-Road Dry Trailers: The U.S. over-the-road dry trailer market continued
to recover in 1998 as the strong domestic economy resulted in heavy freight
volumes. With unemployment low, consumer confidence high, and industrial
production sound, the outlook continues to look good for leasing of this type of
trailer, particularly since the equipment surpluses of recent years are being
absorbed by a buoyant market. In addition to high freight volumes, declining
fuel prices have led to a stronger trucking industry and stronger equipment
demands. The Company's dry van fleet experienced strong utilization throughout
1998.
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 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, is a
Boston-based company that originates and manages lease and loan transactions for
commercial and industrial equipment for the Company's own account or for
institutional programs or other third-party investors. AFG serves the capital
equipment financing needs of predominantly investment-grade, Fortune 1,000
companies and creditworthy middle-market companies. AFG originates and manages
leases and loans for commercial and industrial equipment, utilizing its
transaction-structuring capabilities to tailor financing solutions that meet the
needs of its customers. AFG takes a security interest in the assets on which it
provides loans. Assets purchased and loans provided by AFG may be financed by
nonrecourse securitized debt. AFG uses 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 are accounted for as
operating or direct finance leases.
Leasing Markets: AFG leases commercial and industrial equipment primarily on
full payout and mid-term triple net leases to Fortune 1,000 and creditworthy
middle-market companies. Expenses such as insurance, taxes, and maintenance are
generally the responsibility of the lessees. The full payout leases AFG
originates are classified as finance leases and the mid-term triple net leases
are classified as operating leases. The terms of these leases and loans are
generally one to seven years, depending on the equipment type and the needs of
the lessee. Lessees enter into full payout leases or mid-term triple net leases
after a lease-versus-buy analysis is performed, which evaluates the utilization
of the depreciation tax benefits of ownership, liquidity, cost of capital,
financial reporting considerations, and capital budgeting constraints. AFG
leases have an average term of 53 months. These longer-term leases and loans
provide a predictable cash stream with lower risk. Although AFG leases a wide
range of commercial and industrial equipment, as of December 31, 1998, the lease
portfolio was concentrated primarily in point-of-sale, materials handling,
computer and peripheral, manufacturing, general purpose plant and warehouse,
communications, medical, and construction and mining equipment.
Lessees: Lessees of commercial and industrial equipment range from Fortune 1,000
to creditworthy middle-market companies. The Company has developed credit
underwriting policies and procedures that management believes have been
effective in selecting creditworthy lessees and in minimizing the risks of
delinquencies and credit losses. AFG's nonrecourse lenders, as well as the lease
portfolios owned by institutional programs and serviced by AFG, require a
dollar-weighted investment grade rating equivalent of Baa2. The lenders also
require that lessees accounting for at least 60% of the receivables in the
facility have a debt rating published by a credit rating agency.
In order to establish the creditworthiness of a prospective customer, the
Company first reviews the current ratings, if any, published by the credit
rating agencies. The Company subscribes to services from two major credit rating
agencies to ensure the availability of the most current data. The Company also
subscribes to additional sources of financial information for purposes of
reviewing the credit of existing and prospective customers. In the event a
prospective customer does not have a published credit rating, the Company
undertakes an analysis of the customer's credit, relying on a credit-rating
software package, financial statement ratios, and industry analyses. The
Company's credit-rating software package compares certain financial information
concerning the prospective customer with similar information about other
companies with the same industrial classification code to account for
industry-specific debt risk characteristics. The software package's database
maintains current information on over 2,000 companies and is updated quarterly.
All commercial and industrial equipment acquisitions and sales relating to
equipment having an original cost basis in excess of $0.1 million must be
approved by a credit committee. The credit committee consists of members of
senior management of PLMI and AFG. 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.
Competition: AFG competes for customers with a number of international,
national, and regional finance and leasing companies, as well as banks and
equipment manufacturers that finance the sale or lease of their products
themselves. Some of AFG's competitors include General Electric Capital,
Caterpillar Financial, IBM Credit, AT&T Capital, Fleet Credit Corp., Pitney
Bowes, Comdisco, Charter One Bank, Bank of Boston, ATEL, and Capital Associates.
Many of AFG's competitors and potential competitors have greater financial,
marketing, and operational resources than the Company. These companies all offer
a wide array of financial products to lessees, ranging from off-balance sheet
loans and synthetic leases to operating leases and vendor financing. AFG's
competitors, some of which are larger and more established than AFG, may have a
lower cost of funds than the Company and access to capital markets and other
funding sources that may not be available to AFG. AFG believes that the
principal competitive factors in the equipment leasing and secured financing
business, and the bases on which it competes, are (a) access to sufficient
capital with an efficient cost of funds, (b) the ability to provide flexible
lease and financing structures, (c) the ability to develop and maintain
"relationship" accounts, (d) repeat business generated on relationship accounts,
(e) customer service, including customized value-added services, (f) the skill
and expertise of a company's employees, (g) the image a company enjoys among
lessees in the marketplace, and (h) the ability to utilize tax benefits
generated by leasing equipment.
Demand: The Equipment Leasing Association (ELA) estimated that $593.0 billion in
business was invested in equipment for 1998. This represents a 1.9% growth over
the prior year. The market penetration rate of leasing has remained static over
the last two years at 30.9% or $183.4 billion in 1998. The ELA recently released
the results of its Performance Indicators Report, which tracks the performance
of prominent leasing organizations in several key areas. The results showed that
the average portfolio has grown approximately 4% each quarter since the first
quarter 1998. The new business volume has risen approximately 32% since the
first quarter of 1998. Average losses and the number of employees seemed to have
flattened out. Generally the domestic leasing market continues to be strong.
Government Regulations: The commercial and industrial equipment leasing industry
in which the Company operates is subject to substantial regulation by various
federal, state, and local government authorities. For tax purposes, the majority
of the Company's leases are treated as true leases, which generate considerable
depreciation allowances that provide the Company with substantial and ongoing
tax benefits. In recent years, there have been proposals and related activity to
revise the United States tax regulations applicable to international leasing
transactions and to conform accounting principles relating to leasing
transactions to an international standard. Any changes in government regulations
such as changes in tax laws could affect the performance of the Company. It is
not possible to predict the positive or negative effects of future regulatory
changes in the commercial and industrial equipment leasing industry.
(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 its 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), mobile
offshore drilling units, and a drilling ship. 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 and compliance with investor
program debt covenants and terms of the various investment program agreements.
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.
<PAGE>
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.
Transportation Equipment Indemnity Company, Ltd. (TEI), a wholly-owned
subsidiary of WMS, is a Bermuda-based insurance company licensed to underwrite a
full range of insurance products, including property and casualty risk. TEI's
primary objective is to minimize both the long-term and short-term cost of
insurance coverages for certain managed equipment. A substantial portion of the
risks underwritten by TEI is reinsured with unaffiliated underwriters. In 1998,
TEI provided limited insurance coverage to the investment programs. Insurance
previously provided by TEI was provided by unaffiliated third parties. The
Company intends to liquidate TEI in 1999.
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 generally 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, generally when binding commitment agreements are signed.
Management fees are earned for managing the equipment portfolios and
administering investor programs as provided for in the various agreements, and
are recognized as revenue as they are earned. 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.
As compensation for organizing a partnership investment program, FSI, as general
partner, is generally granted an interest (between 1% and 5%) in the earnings
and cash distributions of the program. FSI recognizes as a partnership interest
its equity interest in the earnings of a program, after adjusting such earnings
to reflect the use of straight-line depreciation and the effect of special
allocations of the program's gross income allowed under the respective
partnership agreements.
FSI also recognizes as income its interest in the estimated net residual value
of the assets of 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. 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 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. 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 organization and offering costs incurred during the
offering period, which was generally 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.
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 generally entitled to a 15%
interest in the cash distributions and earnings of Fund I, subject to certain
allocation provisions. FSI's interest in the cash distributions and earnings of
Fund I will increase to 25% after the investors have received distributions
equal to their invested capital. 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 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. 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 and mobile offshore drilling units are
generally 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 over-the-road
trailer and container rental operations, in addition to mid-term operating
leases. Railcar leases are generally 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 lessee 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. However, lower lease rates can
generally be offered for used equipment under operating leases than can be
offered on similar new equipment under full payout leases. 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.
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, Newcourt Capital U.S.A., Inc., Union Tank Car Company,
international banks, and certain limited partnerships, some of which lease the
same type of equipment.
<PAGE>
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 vessels, containers,
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. In the past, certain equipment, such as
marine containers and marine vessels, has been leased to utilization-type pools
that include equipment owned by unaffiliated parties. Revenues received by the
Company consisted of a specified percentage of the pro-rata share of lease
revenues generated by the pool operator from leasing the pooled equipment to its
customers, after deducting certain direct operating expenses of the pooled
equipment. The Company no longer owns equipment leased in utilization-type pools
that include equipment owned by unaffiliated parties.
(E) Employees
As of March 9, 1999, the Company and its subsidiaries had 156 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, 1998, the Company owned trailer equipment and related assets
and commercial and industrial equipment with an original cost of approximately
$284.0 million.
The Company's principal offices are located in leased office space at One
Market, Steuart Street Tower, Suite 800, San Francisco, California. The Company
or its subsidiaries also lease business offices in Boston, Massachusetts;
Chicago, Illinois; and Calgary, Alberta, Canada. In addition, the Company or its
subsidiaries lease trailer 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; and Newark, New
Jersey.
ITEM 3. LEGAL PROCEEDINGS
In November 1995, a former employee of PLM International filed and served a
first amended complaint (the complaint) in the United States District Court for
the Northern District of California (Case No. C-95-2957 MMC) against the
Company, the PLM International, Inc. Employee Stock Ownership Plan (ESOP), the
ESOP's trustee, and certain individual employees, officers, and directors of the
Company. The complaint contains claims for relief alleging breaches of fiduciary
duties and various violations of the Employee Retirement Income Security Act of
1974 (ERISA) arising principally from purported defects in the structure,
financing, and termination of the ESOP, and for defendants' allegedly engaging
in prohibited transactions and interfering with plaintiff's rights under ERISA.
Plaintiff seeks monetary damages, rescission of the preferred stock transactions
with the ESOP and/or restitution of ESOP assets, and attorneys' fees and costs
under ERISA. In January 1996, the Company and other defendants filed a motion to
dismiss the complaint for lack of subject matter jurisdiction, arguing the
plaintiff lacked standing under ERISA. The motion was granted and in May 1996,
the district court entered a judgment dismissing the complaint for lack of
subject matter jurisdiction. Plaintiff appealed to the U.S. Court of Appeals for
the Ninth Circuit seeking a reversal of the district court's dismissal of his
ERISA claims, and in an opinion filed in October 1997, the Ninth Circuit
reversed the decision of the district court and remanded the case to the
district court for further proceedings. The Company filed a petition for
rehearing, which was denied in November 1997. The Ninth Circuit mandate was
filed in the district court in December 1997.
In February 1998, plaintiff was permitted by the district court to file a second
amended complaint in order to bring the fourth, fifth, and sixth claims for
relief as a class action on behalf of himself and all similarly situated people.
These claims allege that the Company and the other defendants breached their
fiduciary duties and entered into prohibited transactions in connection with the
termination of the ESOP and by causing the ESOP to sell or exchange the
preferred shares held for the benefit of the ESOP participants for less than
their fair market value. Also in February 1998, the defendants filed a motion to
dismiss the fourth, fifth, and sixth claims relating to the termination of the
ESOP, and the seventh claim relating to defendants' alleged interference with
plaintiff's rights under ERISA, all for failure to state claims for relief. The
district court, in an order dated July 14, 1998, granted this motion and
dismissed the fourth through seventh claims for relief.
In June 1998, the defendants filed a motion for summary judgment seeking a
ruling that the first two claims for relief, which allege breaches arising out
of the purchase and sale of stock at the inception of the ESOP, are barred by
the applicable statute of limitations. In an order dated July 14, 1998, the
district court granted in part and denied in part this motion and ruled that
these claims for relief are barred by the statute of limitations to the extent
that they rely on a theory that the automatic conversion feature and other terms
and conditions of the purchase and sale of the preferred stock violated ERISA,
but are not so barred to the extent that they rely on a theory that the purchase
and sale of the preferred stock at the inception of the ESOP was for more than
adequate consideration.
On September 30, 1998, plaintiff filed a motion to certify as final, and enter
judgment on, the two July 14, 1998 orders. This motion was denied. Defendants
filed their answer to the second amended complaint on September 18, 1998,
denying the allegations contained in the first, second, and third claims for
relief. The trial regarding these remaining claims is set for September 27,
1999. The Company believes it has meritorious defenses to these claims and plans
to continue to defend this matter vigorously.
The Company and various of its affiliates are named as defendants in a lawsuit
filed as a purported class action on January 22, 1997 in the Circuit Court of
Mobile County, Mobile, Alabama, Case No. CV-97-251 (the Koch action).
Plaintiffs, who filed the complaint on their own and on behalf of all class
members similarly situated, are six individuals who invested in certain
California limited partnerships (the Partnerships) for which the Company's
wholly-owned subsidiary, PLM Financial Services, Inc. (FSI), acts as the general
partner, including PLM Equipment Growth Funds IV, V, and VI, and PLM Equipment
Growth & Income Fund VII (Fund VII). The state court ex parte certified the
action as a class action (i.e., solely upon plaintiffs' request and without the
Company being given the opportunity to file an opposition). The complaint
asserts eight causes of action against all defendants, as follows: fraud and
deceit, suppression, negligent misrepresentation and suppression, intentional
breach of fiduciary duty, negligent breach of fiduciary duty, unjust enrichment,
conversion, and conspiracy. Additionally, plaintiffs allege a cause of action
against PLM Securities Corp. for breach of third party beneficiary contracts in
violation of the National Association of Securities Dealers rules of fair
practice. Plaintiffs allege that each defendant owed plaintiffs and the class
certain duties due to their status as fiduciaries, financial advisors, agents,
and control persons. Based on these duties, plaintiffs assert liability against
defendants for improper sales and marketing practices, mismanagement of the
Partnerships, and concealing such mismanagement from investors in the
Partnerships. Plaintiffs seek unspecified compensatory and recissory damages, as
well as punitive damages, and have offered to tender their limited partnership
units back to the defendants.
In March 1997, the defendants removed the Koch action from the state court to
the United States District Court for the Southern District of Alabama, Southern
Division (Civil Action No. 97-0177-BH-C) based on the district court's diversity
jurisdiction, following which plaintiffs filed a motion to remand the action to
the state court. Removal of the action to federal court automatically nullified
the state court's ex parte certification of the class. In September 1997, the
district court denied plaintiffs' motion to remand the action to state court and
dismissed without prejudice the individual claims of the California plaintiff,
reasoning that he had been fraudulently joined as a plaintiff. In October 1997,
defendants filed a motion to compel arbitration of plaintiffs' claims, based on
an agreement to arbitrate contained in the limited partnership agreement of each
Partnership, and to stay further proceedings pending the outcome of such
arbitration. Notwithstanding plaintiffs' opposition, the district court granted
defendants' motion in December 1997.
Following various unsuccessful requests that the district court reverse, or
otherwise certify for appeal, its order denying plaintiffs' motion to remand the
case to state court and dismissing the California plaintiff's claims, plaintiffs
filed with the U.S. Court of Appeals for the Eleventh Circuit a petition for a
writ of mandamus seeking to reverse the district court's order. The Eleventh
Circuit denied plaintiffs' petition in November 1997, and further denied
plaintiffs subsequent motion in the Eleventh Circuit for a rehearing on this
issue. Plaintiffs also appealed the district court's order granting defendants'
motion to compel arbitration, but in June 1998 voluntarily dismissed their
appeal pending settlement of the Koch action, as discussed below.
On June 5, 1997, the Company and the affiliates who are also defendants in the
Koch action were named as defendants in another purported class action filed in
the San Francisco Superior Court, San Francisco, California, Case No. 987062
(the Romei action). The plaintiff is an investor in PLM Equipment Growth Fund V,
and filed the complaint on her own behalf and on behalf of all class members
similarly situated who invested in certain California limited partnerships for
which FSI acts as the general partner, including the Partnerships. The complaint
alleges the same facts and the same nine causes of action as in the Koch action,
plus five additional causes of action against all of the defendants, as follows:
violations of California Business and Professions Code Sections 17200, et seq.
for alleged unfair and deceptive practices, constructive fraud, unjust
enrichment, violations of California Corporations Code Section 1507, and a claim
for treble damages under California Civil Code Section 3345.
On July 31, 1997, defendants filed with the district court for the Northern
District of California (Case No. C-97-2847 WHO) a petition (the petition) under
the Federal Arbitration Act seeking to compel arbitration of plaintiff's claims
and for an order staying the state court proceedings pending the outcome of the
arbitration. In connection with this motion, plaintiff agreed to a stay of the
state court action pending the district court's decision on the petition to
compel arbitration. In October 1997, the district court denied the Company's
petition to compel arbitration, but in November 1997, agreed to hear the
Company's motion for reconsideration of this order. The hearing on this motion
has been taken off calendar and the district court has dismissed the petition
pending settlement of the Romei action, as discussed below. The state court
action continues to be stayed pending such resolution. In connection with her
opposition to the petition to compel arbitration, plaintiff filed an amended
complaint with the state court in August 1997, alleging two new causes of action
for violations of the California Securities Law of 1968 (California Corporations
Code Sections 25400 and 25500) and for violation of California Civil Code
Sections 1709 and 1710. Plaintiff also served certain discovery requests on
defendants. Because of the stay, no response to the amended complaint or to the
discovery is currently required.
In May 1998, all parties to the Koch and Romei actions entered into a memorandum
of understanding (MOU) related to the settlement of those actions (the monetary
settlement). The monetary settlement contemplated by the MOU provides for
stipulating to a class for settlement purposes, and a settlement and release of
all claims against defendants and third party brokers in exchange for payment
for the benefit of the class of up to $6.0 million. The final settlement amount
will depend on the number of claims filed by authorized claimants who are
members of the class, the amount of the administrative costs incurred in
connection with the settlement, and the amount of attorneys' fees awarded by the
Alabama district court. The Company will pay up to $0.3 million of the monetary
settlement, with the remainder being funded by an insurance policy.
The parties to the monetary settlement have also agreed in principal to an
equitable settlement (the equitable settlement), which provides, among other
things: (a) for the extension of the operating lives of Funds V, VI, and VII by
judicial amendment to each of their partnership agreements, such that FSI, the
general partner of each such partnership, will be permitted to reinvest cash
flow, surplus partnership funds, or retained proceeds in additional equipment
into the year 2004, and will liquidate the partnerships' equipment in 2006; (b)
that FSI is entitled to earn front-end fees (including acquisition and lease
negotiation fees) in excess of the compensatory limitations set forth in the
NASAA Statement of Policy by judicial amendment to the partnership agreements
for Funds V, VI, and VII; (c) for a one-time redemption of up to 10% of the
outstanding units of Funds V, VI, and VII at 80% of such partnership's net asset
value; and (d) for the deferral of a portion of FSI's management fees. The
equitable settlement also provides for payment of the equitable class attorneys'
fees from partnership funds in the event that distributions paid to investors in
Funds V, VI, and VII during the extension period reach a certain internal rate
of return.
Defendants will continue to deny each of the claims and contentions and admit no
liability in connection with the proposed settlements. The monetary settlement
remains subject to numerous conditions, including but not limited to: (a)
agreement and execution by the parties of a settlement agreement (the settlement
agreement), (b) notice to and certification of the monetary class for purposes
of the monetary settlement, and (c) preliminary and final approval of the
monetary settlement by the Alabama district court. The equitable settlement
remains subject to numerous conditions, including but not limited to: (a)
agreement and execution by the parties of the settlement agreement, (b) notice
to the current unitholders in Funds V, VI, and VII (the equitable class) and
certification of the equitable class for purposes of the equitable settlement,
(c) preparation, review by the Securities and Exchange Commission (SEC), and
dissemination to the members of the equitable class of solicitation statements
regarding the proposed extensions, (d) disapproval by less than 50% of the
limited partners in Funds V, VI, and VII of the proposed amendments to the
limited partnership agreements, (e) judicial approval of the proposed amendments
to the limited partnership agreements, and (f) preliminary and final approval of
the equitable settlement by the Alabama district court. The parties submitted
the settlement agreement to the Alabama district court on February 12, 1999, and
the preliminary class certification hearing is scheduled for March 24, 1999. If
the district court grants preliminary approval, notices to the monetary class
and equitable class will be sent following review by the SEC of the solicitation
statements to be prepared in connection with the equitable settlement. The
monetary settlement, if approved, will go forward regardless of whether the
equitable settlement is approved or not. The Company continues to believe that
the allegations of the Koch and Romei actions are completely without merit and
intends to continue to defend this matter vigorously if the monetary settlement
is not consummated.
The Company is involved as plaintiff or defendant in various other legal actions
incident to its business. Management does not believe that any of these actions
will be material to the financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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
8,161,504 common shares outstanding and approximately 3,285 shareholders of
record.
Table 3, below, sets forth the quarterly high and low prices of the Company's
common stock for 1998 and 1997, as reported by the AMEX: TABLE 3
Calendar Period High Low
------------------- --------- ---------
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
1997
1st Quarter $ 3.813 $ 3.000
2nd Quarter 6.375 3.500
3rd Quarter 6.000 5.500
4th Quarter 5.875 5.250
In November 1997, the Company's stockholders approved a proposal to amend
Article Fourth of the Company's Certificate of Incorporation to effect a
1-for-200 reverse stock split followed by a 200-for-1 forward stock split. As a
result of the stock splits, the number of shares outstanding was reduced by
561,544 shares. The Company is repurchasing these shares at $5.58 per share when
the stock certificates are tendered to the Company's transfer agent.
In March 1997, the Company announced that the Board of Directors had authorized
the repurchase of up to $5.0 million of the Company's common stock. During 1997,
766,200 shares were purchased under this plan for a total of $4.4 million.
During 1998, the Company repurchased 106,200 shares for $0.6 million, completing
the $5.0 million common stock repurchase 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.
Additional future repurchases may be made in the open market or through private
transactions.
ITEM 6. SELECTED FINANCIAL DATA
Years ended December 31,
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Results of operations:
Revenue $ 57,078 $ 49,665 $ 51,545 $ 60,073 $ 53,715
Income (loss) before income taxes 7,899 6,515 3,893 7,868 (5,579 )
Net income (loss) before cumulative
effect of accounting change 4,857 4,667 4,095 6,048 (1,511 )
Cumulative effect of accounting change -- -- -- -- (5,130 )
Net income (loss) to common shares 4,857 4,667 4,095 6,048 (9,071 )
Basic earnings (loss) per weighted-
average common share 0.58 0.51 0.41 0.52 (0.74 )
Financial position:
Total assets 292,069 236,283 198,749 126,213 140,372
Short-term secured debt 34,420 23,040 30,966 -- 6,404
Long-term recourse debt 56,047 44,844 43,618 47,853 60,119
Long-term nonrecourse debt 111,222 81,302 45,392 -- --
Shareholders' equity 50,197 46,548 46,320 48,620 45,695
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Trailer Leasing
The Company operates 16 trailer rental facilities that engage in short-term and
mid-term operating leases. Equipment operated in these facilities consists of
refrigerated trailers used to transport temperature-sensitive food products and
dry van (nonrefrigerated) trailers leased to a variety of customers. The Company
opened six of these rental yards in 1998 and intends to open additional rental
yard facilities in the future. The Company is selling certain of its older
trailers and is replacing them with new or late-model refrigerated trailers. The
new trailers will be placed in existing rental facilities or in new yards.
Commercial and Industrial Equipment Leasing and Financing
A major activity of the Company is the funding and management of long-term
direct finance leases, operating leases, and loans through its American Finance
Group, Inc. (AFG) subsidiary. Master lease agreements are entered into with
predominately investment-grade lessees and serve as the basis for marketing
efforts. The underlying assets represent a broad range of commercial and
industrial equipment, such as point-of-sale, materials handling, computer and
peripheral, manufacturing, general purpose plant and warehouse, communications,
medical, and construction and mining equipment. Through AFG, the Company is also
engaged in the management of institutional programs for which it originates
leases and receives acquisition and management fees. The Company also earns
syndication fees for arranging purchases and sales of equipment to other
unaffiliated third parties.
In March 1998, the Company announced that its Board of Directors had authorized
management to engage investment bankers for the purpose of undertaking an
initial public offering of common stock for AFG. On May 7, 1998, AFG filed a
registration statement with the U.S. Securities and Exchange Commission (SEC)
for the initial public offering. On October 15, 1998, AFG filed an amended
registration statement with the SEC for the initial public offering.
On January 11, 1999, the Company announced that its Board of Directors had
engaged an investment banking firm to explore strategic alternatives for AFG.
The Company does not intend to withdraw the current registration statement on
file with the SEC at the present time, pending the results of the review.
Management of Investment Programs
The Company has syndicated investment programs from which it earns various fees
and equity interests. Professional Lease Management Income Fund I, LLC (Fund I)
was structured as a limited liability company with a no front-end fee structure.
The previously syndicated limited partnership programs allow the Company to
receive fees for the acquisition and initial leasing of the equipment. The Fund
I program does not provide for acquisition and lease negotiation fees. The
Company invested the equity raised through syndication for these programs in
transportation equipment and related assets, which it then manages on behalf of
the investors. The equipment management activities for these types of programs
generate equipment management fees for the Company over the life of a program.
The limited partnership agreements generally entitle the Company to receive a 1%
or 5% interest in the cash distributions and earnings of a partnership, subject
to certain allocation provisions. The Fund I agreement entitles the Company to a
15% interest in the cash distributions and earnings of the program, subject to
certain allocation provisions. The Company's interest in the earnings of Fund I
will increase to 25% after the investors have received distributions equal to
their original invested capital.
In 1996, the Company announced the suspension of public syndication of
equipment leasing programs with the close of Fund I. As a result of this
decision, revenues earned from managed programs, which include management fees,
partnership interests and other fees, and acquisition and lease negotiation
fees, will be reduced in the future as the older programs begin liquidation and
the managed equipment portfolio for these programs becomes permanently reduced.
<PAGE>
Comparison of the Company's Operating Results for the Years Ended December 31,
1998 and 1997
The following analysis reviews the operating results of the Company:
Revenues
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operating lease income $ 19,947 $ 15,777
Finance lease income 12,529 8,685
Management fees 10,203 11,275
Partnership interests and other fees 917 1,306
Acquisition and lease negotiation fees 3,974 3,184
Aircraft brokerage and services 1,090 2,466
Gain on the sale or disposition of assets, net 4,693 3,720
Other 3,725 3,252
--------------------------------------
Total revenues $ 57,078 $ 49,665
</TABLE>
The fluctuations in revenues between 1998 and 1997 are summarized and explained
below.
Operating lease income by equipment type:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Refrigerated and dry van over-the-road trailers $ 9,743 $ 5,539
Commercial and industrial equipment 7,935 5,175
Intermodal trailers 1,706 3,083
Marine vessel 412 501
Aircraft and aircraft engine 74 655
Mobile offshore drilling units -- 603
Marine containers -- 188
Other 77 33
--------------------------------------
Total operating lease income $ 19,947 $ 15,777
</TABLE>
Operating lease income includes revenues generated from assets held for
operating leases and assets held for sale that are on lease. Operating lease
income increased $4.2 million during 1998, compared to 1997, due to the
following:
(a) A $4.2 million increase in operating lease income was generated from
refrigerated and dry van trailer equipment, due to an increase in the amount of
these types of equipment owned and on operating lease.
(b) A $2.8 million increase in operating lease income was generated from
commercial and industrial equipment, due to an increase in the amount of
these types of equipment owned and on operating lease.
These increases in operating lease income were partially offset by the
following:
(a) A $0.1 million decrease in operating lease income from marine vessels.
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 an
affiliated program 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.
(b) A $0.6 million decrease in operating lease income from mobile offshore
drilling units. 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. No similar asset was
owned by the Company during 1998.
<PAGE>
(c) A $2.1 million decrease in marine container, aircraft, and intermodal
trailer operating lease income was due to the Company's strategic decision
to dispose of certain transportation assets and exit certain equipment
markets. Intermodal trailer lease revenues also decreased due to lower
utilization, compared to the prior year.
Finance lease income:
The Company earns finance lease income for certain leases originated by its AFG
subsidiary that are either retained for long-term investment or sold to third
parties. Finance lease income increased $3.8 million during 1998, compared to
1997, due to an increase in commercial and industrial assets that were on
finance lease.
Management fees:
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. Management fees decreased $1.1 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. The Company also earns management fees from the institutional
programs managed by the Company's AFG subsidiary.
Partnership interests and other fees:
The Company records as revenues its equity interest in the earnings of the
Company's affiliated programs. The net earnings and distribution levels from the
affiliated programs were $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. Net decreases in the recorded residual values result
when partnership assets are sold and the proceeds are less than the original
investment in the sold equipment.
Acquisition and lease negotiation fees:
During 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.
Also during 1998, equipment purchased by AFG for the institutional programs was
$26.0 million, compared to $29.6 million for 1997, resulting in a $0.1 million
decrease in acquisition and lease negotiation fees for 1998, compared to 1997.
The Company does not expect to sell assets in the future to the institutional
programs. It will, however, continue to manage the existing portfolios for these
programs. Because of the Company's decision to halt syndication of equipment
leasing programs with the close of Fund I in 1996, because Fund I has a no
front-end fee structure, and because the Company does not expect to sell assets
in the future to the institutional programs, acquisition and lease negotiation
fees will be substantially reduced in the future.
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, due
to a decrease in spare parts sales and due to the sale of the Company's aircraft
leasing and spare parts brokerage subsidiary, located in Australia, in August
1998.
Gain on the sale or disposition of assets, net:
During 1998, the Company recorded $4.7 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, and $3.2 million related to the sale of commercial and industrial
equipment. 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 $3.7 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. 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 and earned $2.0
million from the sale of commercial and industrial equipment. These gains were
partially offset by a $0.2 million adjustment to reduce the estimated net
realizable value of certain trailers.
Other:
Other revenues increased $0.5 million during 1998, compared to 1997,
due mainly to increased revenue earned from financing income earned on loans
made by AFG.
Costs and Expenses
<TABLE>
<CAPTION>
1998 1997
-------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operations support $ 17,571 $ 16,633
Depreciation and amortization 11,833 8,447
General and administrative 7,086 9,472
-------------------------------------
Total costs and expenses $ 36,490 $ 34,552
Operations support:
</TABLE>
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 $0.9 million (6%) for 1998, compared to 1997. The increase
resulted from $1.6 million in additional costs due to the expansion of PLM
Rental, with the addition of six rental yards and new trailers to existing
yards; a $0.2 million loss related to the sale of the Company's aircraft leasing
and spare parts brokerage subsidiary, located in Australia, in August 1998; and
a $0.5 million write-down of its aircraft spare parts inventory. These increases
were partially offset by a $0.8 million decrease in the costs of goods sold,
which was associated with the decrease in the cost of sales of aircraft spare
parts because of reduced spare parts sales and the sale of the Company's spare
parts brokerage subsidiary, and a $0.6 million decrease in bad debt expense.
Depreciation and amortization:
Depreciation and amortization expenses increased $3.4 million (40%) for
1998, compared to 1997. An increase of $3.0 million was due to an increase in
commercial and industrial equipment owned and on operating lease, and an
increase of $1.7 million was due to an increase in refrigerated trailer
equipment owned and on operating lease. These increases were partially offset by
the reduction in aircraft, marine container, and intermodal trailer portfolios
(discussed in the operating lease income section).
General and administrative:
General and administrative expenses decreased $2.4 million (25%) during 1998,
compared to 1997, primarily due to a $0.6 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 $0.4 million decrease in rent expense,
a $0.3 million decrease in expenses related to the redemption of stock options,
and a $0.1 million decrease in professional service expenses.
Other Income and Expenses
<TABLE>
<CAPTION>
1998 1997
----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Interest expense $ (14,608 ) $ (9,891 )
Interest income 1,446 1,635
Other income (expenses), net 473 (342 )
</TABLE>
Interest expense:
Interest expense increased $4.7 million (48%) during 1998, compared to 1997, due
to an increase in borrowings of nonrecourse securitized debt, an increase in
borrowings on the warehouse credit facilities, and an increase in borrowings on
the senior secured notes. Interest expense on borrowings for AFG increased $5.5
million. The
<PAGE>
additional interest expense caused by these increased borrowings was partially
offset by lower interest expense resulting from reductions in the amounts
outstanding on the senior secured loan.
Interest income:
Interest income decreased $0.5 million during 1998, compared to 1997,
due to a decrease in average cash balances. This decrease was partially offset
by $0.3 million of interest income for a tax refund receivable that had not
previously been recognized, which was recorded in 1998.
Other income (expenses), net:
For 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
others, and recorded expense of $0.3 million related to a legal settlement for
the Koch and Romei actions (refer to Note 13 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 $3.0 million, representing an
effective rate of 39%. For 1997, the provision for income taxes was $1.8
million, representing an effective rate of 28%. 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 12 to the
consolidated financial statements).
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.
Comparison of the Company's Operating Results for the Years Ended December 31,
1997 and 1996
The following analysis reviews the operating results of the Company:
Revenues
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operating lease income $ 15,777 $ 18,180
Finance lease income 8,685 4,186
Management fees 11,275 10,971
Partnership interests and other fees 1,306 3,811
Acquisition and lease negotiation fees 3,184 6,610
Aircraft brokerage and services 2,466 2,903
Gain on the sale or disposition of assets, net 3,720 2,282
Other 3,252 2,602
--------------------------------------
Total revenues $ 49,665 $ 51,545
</TABLE>
<PAGE>
The fluctuations in revenues between 1997 and 1996 are summarized and explained
below.
Operating lease income by equipment type:
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Refrigerated and dry van over-the-road trailers $ 5,539 $ 5,584
Commercial and industrial equipment 5,175 4,042
Intermodal trailers 3,083 2,420
Aircraft and aircraft engine 655 4,444
Mobile offshore drilling units 603 123
Marine vessel 501 --
Marine containers 188 392
Railcars 29 99
Storage equipment 4 1,076
--------------------------------------
Total operating lease income $ 15,777 $ 18,180
</TABLE>
Operating lease income includes revenues generated from assets held for
operating leases and assets held for sale that are on lease. As of December 31,
1997, the Company owned transportation equipment held for operating lease with
an original cost of $50.3 million, which was $24.3 million less than the
original cost of transportation equipment owned and held for operating lease or
held for sale as of December 31, 1996. The reduction in equipment, on an
original cost basis, was a consequence of the Company's strategic decision to
dispose of certain underperforming transportation assets and exit certain
equipment markets, which resulted in a 91% net reduction in its aircraft
portfolio and a 100% net reduction in its marine container portfolio, compared
to 1996. The reduction in transportation equipment available for lease is the
primary reason aircraft and marine container operating lease income was reduced,
compared to the prior year. The $1.1 million decrease in storage equipment
operating lease income is due to an agreement the Company entered into in
January 1997 to lease all of its storage equipment assets to a third party on a
finance lease, as opposed to short-term operating leases.
Although operating lease income decreased as a result of the reduction in
transportation equipment available for lease and the storage equipment
agreement, this decrease was partially offset by a $1.1 million increase in
commercial and industrial operating lease income. Commercial and industrial
operating lease income increased as a result of an increase in commercial and
industrial equipment owned and on operating lease. Intermodal trailer operating
lease income increased $0.6 million as a result of higher utilization in the
intermodal trailer fleet. In addition, during 1997, the Company owned one mobile
offshore drilling unit as well as a 25.5% interest in another mobile offshore
drilling unit, which together generated $0.6 million in lease revenue, and owned
a 47.5% interest in a marine vessel, which generated $0.5 million in lease
revenue. Both of the drilling units and the marine vessel were sold at the
Company's cost to affiliated programs in 1997.
Finance lease income:
The Company earns finance lease income for certain leases originated by its AFG
subsidiary that are either retained for long-term investment or sold to third
parties. Finance lease income increased $4.5 million during 1997, compared to
1996, due to an increase in commercial and industrial assets that were on
finance lease. During 1997, the average investment in direct finance leases was
$76.2 million, compared to $30.5 million for 1996.
Management fees:
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. Management fees increased $0.3 million
during 1997, compared to 1996, due to an increase in management fees earned from
the institutional programs managed by the Company's AFG subsidiary. Although
management fees related to Fund I increased due to additional asset purchases,
net management fees from the remaining older programs declined due to a net
decrease in managed equipment and lower lease rates. With the termination of
syndication activities in 1996, management fees from the older programs are
expected to decrease in the future as they begin liquidation and the associated
equipment portfolio becomes permanently reduced. This decrease has been and is
expected to continue to be offset, in part, by management fees earned from the
institutional programs managed by AFG.
<PAGE>
Partnership interests and other fees:
The Company records as revenues its equity interest in the earnings of the
Company's affiliated programs. The net earnings and distribution levels from the
affiliated programs were $2.3 million and $2.7 million for 1997 and 1996,
respectively. In addition, a decrease of $1.0 million in the Company's residual
interests in the programs was recorded during 1997, compared to an $0.8 million
increase in the Company's residual interests in the programs during 1996. The
decrease in net earnings and distribution levels and residual interests in 1997,
compared to 1996, resulted mainly from the disposition of equipment in certain
of the PLM Equipment Growth Fund (EGF) programs. In addition, during 1996,
residual income of $1.8 million was recorded for Fund I purchases. Because Fund
I has fully invested the proceeds raised from syndication, the Company will not
record additional residual interest income from this program until it reaches
the liquidation phase. Residual income is based on the general partner's share
of the present value of the estimated disposition proceeds of the equipment
portfolio of an affiliated partnership when the equipment is purchased. Net
decreases in the recorded residual values result when partnership assets are
sold and the reinvestment proceeds are less than the original investment in the
sold equipment. In 1996, the Company also earned $0.3 million in liquidation
sales fees for the sales of managed equipment. There were no similar fees in
1997.
Acquisition and lease negotiation fees:
During 1997, the Company, on behalf of the EGF programs, purchased
transportation equipment and a beneficial interest in a marine vessel and
aircraft for $42.8 million, compared to $105.7 million of transportation
equipment purchased on behalf of the EGF programs during 1996, resulting in a
$3.4 million decrease in acquisition and lease negotiation fees. Acquisition
fees related to equipment purchased for the institutional programs managed by
AFG were $0.8 million for both 1997 and 1996. 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. (Aeromil), the Company's aircraft leasing,
spare parts sales, and brokerage subsidiary, decreased $0.4 million in 1997,
compared to 1996, due to a decrease in spare parts sales, the sale of the
subsidiary's ownership interest in Austin Aero FBO Ltd. to third parties in
January 1996, and unfavorable exchange rate fluctuations during 1997.
Gain on the sale or disposition of assets, net:
During 1997, the Company recorded $3.7 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. 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, and earned $2.0 million from the sale of commercial and industrial
equipment. These gains were partially offset by a $0.2 million adjustment to
reduce the estimated net realizable value of certain trailers. During 1996, the
Company recorded a $2.3 million net gain on the sale or disposition of assets.
Of this gain, $2.1 million resulted from the sale or disposition of trailers,
marine containers, railcars, storage equipment, and commuter and commercial
aircraft, and $0.9 million related to the sale of commercial and industrial
equipment. These gains were partially offset by a $0.7 million adjustment to
reduce the estimated net realizable value of certain commuter aircraft ($0.4
million) and certain trailers ($0.3 million).
Other:
Other revenues increased $0.7 million during 1997, compared to 1996,
due to increased revenue earned from financing income and brokerage fees.
Costs and Expenses
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operations support $ 16,633 $ 21,595
Depreciation and amortization 8,447 11,318
General and administrative 9,472 7,956
-------------------------------------
Total costs and expenses $ 34,552 $ 40,869
</TABLE>
<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, decreased $5.0 million (23%) for 1997, compared to 1996. The decrease
resulted from a $1.4 million charge recorded during 1996 related to the
termination of syndication activities, a $1.3 million decrease in compensation
and benefits expense due to staff reductions, a $0.7 million decrease in other
office-related expenses, a $0.6 million decrease in equipment operating costs
due to the sale of certain of the Company's transportation equipment, a $0.5
million decrease in administrative expenses, and a $0.5 million decrease in
professional services expenses.
Depreciation and amortization:
Depreciation and amortization expenses decreased $2.9 million (25%) for
1997, compared to 1996. The decrease resulted from the reduction in depreciable
transportation equipment (discussed in the operating lease revenue section), and
was partially offset by increased depreciation of commercial and industrial
equipment on operating lease.
General and administrative:
General and administrative expenses increased $1.5 million (19%) for 1997,
compared to 1996, due to a $0.6 million increase in expenses related to the
redemption of stock options, a $0.5 million increase in legal fees related to
the Koch and Romei actions (refer to Note 13 to the consolidated financial
statements), a $0.5 million increase in costs related to the Company's response
to shareholder-sponsored initiatives, and a $0.3 million credit recorded in the
second quarter of 1996 related to the Employee Stock Ownership Plan (ESOP).
These expenses were partially offset by a $0.4 million decrease in
office-related expenses due to a decrease in staffing and office space
requirements.
Other Income and Expenses
<TABLE>
<CAPTION>
1997 1996
----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Interest expense $ (9,891 ) $ (7,341 )
Interest income 1,635 1,228
Other expenses, net (342 ) (670 )
</TABLE>
Interest expense:
Interest expense increased $2.6 million (35%) for 1997, compared to
1996, due to an increase in borrowings of nonrecourse debt to fund lease
originations and the senior secured notes facility. The increase in interest
expense caused by these increased borrowings was partially offset by lower
interest expense resulting from the retirement of the subordinated debt in 1996,
a decrease in borrowings on the short-term secured debt facility, and the
reduction in the amount outstanding on the senior secured loan.
Interest income:
Interest income increased $0.4 million (33%) for 1997, compared to
1996, as a result of higher average cash balances in 1997, compared to 1996.
Other expenses, net:
Other expenses of $0.3 million in 1997 represent an accrual for a litigation
settlement that was paid in 1998. During 1996, the Company prepaid the $8.6
million balance of its subordinated debt and $10.0 million of its senior secured
loan, and wrote off the associated loan fees, incurring prepayment penalties of
$1.0 million. These expenses were partially offset by other income of $0.4
million resulting from the 1996 sale of 32 wind turbines that had previously
been written off.
<PAGE>
Provision for (Benefit from) Income Taxes
For 1997, the provision for income taxes was $1.8 million, representing an
effective rate of 28%. For 1996, the Company recognized a benefit for income
taxes of $0.2 million as a result of several items of a nonrecurring nature.
These included adjustments that reduced income tax expense arising from
differences between the amount recognized in the 1995 financial statements and
the 1995 tax return as filed and changes in state tax apportionment factors used
to record deferred taxes. In both 1997 and 1996, the Company's income tax rate
included the benefit of certain income earned from foreign activities that has
been permanently invested outside of the United States (refer to Note 12 to the
consolidated financial statements).
Net Income
As a result of the foregoing, 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. For 1996, net income was $4.1
million, resulting in basic and diluted earnings per weighted-average common
share outstanding of $0.41 and $0.40, respectively.
Liquidity and Capital Resources
Cash requirements have historically been satisfied through cash flow from
operations, borrowings, and the sale of equipment.
Liquidity in 1999 and beyond will depend, in part, on the continued remarketing
of the equipment portfolio at similar lease rates, the management of existing
sponsored programs, the effectiveness of cost control programs, the purchase and
sale of equipment, the volume of commercial and industrial and trailer equipment
leasing transactions, additional borrowings, and the potential proceeds from the
initial public offering or 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:
Nonrecourse Securitized Debt: The Company has available a nonrecourse debt
facility for up to $150.0 million, secured by direct finance leases, operating
leases, and loans on commercial and industrial equipment at AFG that generally
have terms of one to seven years. The facility is available for a one-year
period expiring October 12, 1999. Repayment of the facility matches the terms of
the underlying leases. The Company believes that it will be able to renew this
facility on substantially the same terms upon its expiration and increase its
borrowing capacity as needed. The securitized debt bears 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 (6.46% and
7.16% as of December 31, 1998 and 1997, respectively). As of December 31, 1998,
$103.6 million in borrowings was outstanding under this facility. As of March 9,
1999, $108.1 million in borrowings was outstanding under this facility.
In addition to the $150.0 million nonrecourse debt facility discussed above,
the Company also has $7.6 million in nonrecourse notes payable secured by direct
finance leases on commercial and industrial equipment at AFG that have terms
corresponding to the note repayment schedule that began November 1997 and ends
March 2001. The notes bear interest from 8.32% to 9.5% per annum.
FSI Warehouse Credit Facility: Assets acquired and held on an interim
basis by FSI for placement with affiliated programs or sale to third parties
have, from time to time, been partially funded by a warehouse credit facility.
This facility is also used to temporarily finance the purchase of trailers prior
to permanent financing. This facility was amended on December 15, 1998 to amend
FSI's borrowing capacity to $24.5 million until December 14, 1999. The Company
believes it will be able to renew this facility on substantially the same terms
upon its expiration.
This 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.
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. The Company retains the difference between
the net lease revenue earned and the interest expense during the interim holding
period, since its capital is at risk. As of December 31, 1998, the Company had
no outstanding borrowings under this facility and no other borrowings were
outstanding under this facility by any other eligible borrower. As of March 9,
1999, the Company and EGF VI had $8.3 million and $3.7 million in borrowings
outstanding under this facility, respectively.
AFG Warehouse Credit Facility: Assets acquired and held on an interim basis by
AFG for placement in the Company's securitization facility or for sale to
institutional programs or other unaffiliated third parties have, from time to
time, been partially funded by a $60.0 million warehouse credit facility. The
facility expires December 14, 1999; however, the Company believes it will be
able to renew this facility on substantially the same terms upon its expiration.
This facility provides for 100% of the present value of the lease
stream of commercial and industrial equipment for up to 90% of original
equipment cost of the assets held on this facility.
Borrowings secured by investment-grade lessees can be held under this facility
until the facility's expiration. Borrowings secured by noninvestment-grade
lessees may by outstanding for 120 days. Interest accrues at prime or LIBOR plus
137.5 basis points, at the option of the Company. The Company retains the
difference between the net lease revenue earned and the interest expense during
the interim holding period, since its capital is at risk. As of December 31,
1998, the Company had $34.4 million outstanding under this facility. As of March
9, 1999, the Company had $29.8 million in borrowings outstanding under this
facility.
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 1998, the Company
repaid $5.6 million on this facility. The facility bears interest at LIBOR plus
240 basis points. As of December 31, 1998, the Company had $28.2 million
outstanding under this agreement. As of March 9, 1999, the Company had $26.3
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 outstanding balance of $14.7 million as of December 31,
1998 and March 9, 1999, provides that equipment sale proceeds from pledged
equipment or cash deposits be placed into a collateral account or used to
purchase additional equipment to the extent required to meet certain debt
covenants. Pledged equipment for this loan consists of the storage equipment and
virtually all trailer equipment purchased prior to August 1998. As of December
31, 1998, the cash collateral balance for this loan was $0.1 million and is
included in restricted cash and cash equivalents on the Company's balance sheet.
During 1998, 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.
Other Secured Debt: As of December 31, 1998, the Company had $13.1 million in
other secured debt, bearing interest from 5.35% to 5.55%, with payments due
monthly in advance, beginning December 31, 1998 and ending November 30, 2005.
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. The Company intends to
use this type of debt for the purchase of new trailers in the future.
Interest-Rate Swap Contracts: The Company has entered into interest-rate swap
agreements in order to manage the interest-rate exposure associated with its
nonrecourse securitized debt. As of December 31, 1998, the swap agreements had a
weighted-average duration of 1.28 years, corresponding to the terms of the
related debt. As of December 31, 1998, a notional amount of $99.0 million of
interest-rate swap agreements effectively fixed interest rates at an average of
6.59% on such obligations. For 1998, interest expense increased by $0.4 million
due to these arrangements.
<PAGE>
Trailer leasing:
The Company operates 16 trailer rental facilities that engage in short-term and
mid-term operating leases. Equipment operated in these facilities consists of
refrigerated trailers used to transport temperature-sensitive food products and
dry van trailers leased to a variety of customers. The Company opened six of
these rental yards in 1998 and intends to open additional rental yard facilities
in the future. The Company is selling certain of its older trailers and is
replacing them with new or late-model refrigerated trailers. The new trailers
will be placed in existing rental facilities or in new yards. During 1998, the
Company purchased $34.1 million of primarily refrigerated trailers and sold
refrigerated and dry van trailers with a net book value of $2.1 million for
proceeds of $2.2 million.
Commercial and industrial equipment leasing and financing:
The Company earns finance lease or operating lease income for leases originated
and retained by its AFG subsidiary. The funding of leases requires the Company
to retain an equity interest in all leases financed through the nonrecourse
securitization facility. AFG also originates loans in which it takes a security
interest in the assets financed. During 1998, the Company funded lease and loan
transactions for commercial and industrial equipment with an original equipment
cost of $176.0 million. During 1998, the Company sold commercial and industrial
equipment with a net book value of $89.3 million for proceeds of $92.5 million.
The majority of these transactions was financed, on an interim basis, through
the Company's warehouse credit facility.
Some equipment subject to leases is sold to institutional programs for which the
Company is the servicer. Acquisition and management fees are received for the
sale and subsequent servicing of these leases. The Company does not believe it
will be selling assets in the future to the institutional programs. It will,
however, continue to manage the existing portfolios for these programs.
As of December 31, 1998, the Company had committed to purchase $40.5 million of
equipment for its commercial and industrial lease and finance receivables
portfolio, to be held by the Company or sold to the institutional programs or to
other third parties, of which $8.7 million had been received by lessees and
accrued for as of December 31, 1998.
From January 1, 1999 through March 9, 1999, the Company funded $8.1 million of
commitments outstanding as of December 31, 1998 for its commercial and
industrial lease and finance receivables portfolio.
As of March 9, 1999, the Company had committed to purchase $51.7 million of
equipment for its commercial and industrial lease and finance receivables
portfolio.
In March 1998, the Company announced that its Board of Directors had authorized
management to engage investment bankers for the purpose of undertaking an
initial public offering of common stock for AFG. On May 7, 1998, AFG filed a
registration statement with the SEC for the initial public offering. On October
15, 1998, AFG filed an amended registration statement with the SEC for the
initial public offering.
On January 11, 1999, the Company announced that its Board of Directors had
engaged an investment banking firm to explore strategic alternatives for AFG.
The Company does not intend to withdraw the current registration statement on
file with the SEC at the present time, pending the results of the review.
Other transportation equipment leasing and other:
During 1998, the Company generated proceeds of $6.4 million from the sale of an
aircraft engine, a 20% interest in a commuter aircraft, intermodal trailers, and
railcars sold to unaffiliated third parties. The net proceeds from the sale of
assets that were collateralized as part of the senior loan facility were placed
in a collateral account.
During 1998, the Company generated proceeds of $23.0 million from the sale of
assets sold to affiliated programs at cost, which approximated their fair market
value.
Management believes that, through debt and equity financing, possible sales of
equipment, proceeds from the initial public offering or sale of AFG, and cash
flows from operations, the Company will have sufficient liquidity and capital
resources to meet its projected future operating needs.
<PAGE>
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 9, 1999, 103,300 shares had been repurchased under this plan for a
total of $0.6 million.
Effects of the Year 2000
It is possible that the Company's currently installed computer systems, software
products, and other business systems, or those of the Company's vendors, service
providers, and customers, working either alone or in conjunction with other
software or systems, may not accept input of, store, manipulate, and output
dates on or after January 1, 2000 without error or interruption, a possibility
commonly known as the "Year 2000" or "Y2K" problem.
The Company has established a special Year 2000 oversight committee to review
the impact of Year 2000 issues on its software products and other business
systems in order to determine whether such systems will retain functionality
after December 31, 1999. The Company (a) is currently integrating Year
2000-compliant programming code into its existing internally customized and
internally developed transaction processing software systems and (b) the
Company's accounting and asset management software systems have either already
been made Year 2000 compliant or Year 2000-compliant upgrades of such systems
are planned to be implemented by PLMI before the end of fiscal 1999. The Company
believes that its Year 2000 compliance program can be completed by the end of
1999. As of December 31, 1998, the Company has spent approximately $0.1 million
to become Year 2000 compliant. The Company expects to spend an additional $0.1
million in order to become Year 2000-compliant.
It is possible that certain of the Company's equipment lease portfolio may not
be Year 2000 compliant. The Company is currently contacting equipment
manufacturers of the Company's leased equipment portfolio to assure Year 2000
compliance or to develop remediation strategies. The Company does not expect
that non-Year 2000 compliance of its leased equipment portfolio will have an
adverse material impact on its financial statements.
Some risks associated with the Year 2000 problem are beyond the ability of the
Company to control, including the extent to which third parties can address the
Year 2000 problem. The Company is communicating with vendors, services
providers, and customers in order to assess the Year 2000 compliance readiness
of such parties and the extent to which the Company is vulnerable to any
third-party Year 2000 issues. There can be no assurance that the software
systems of such parties will be converted or made Year 2000 compliant in a
timely manner. Any failure by such other parties to make their respective
systems Year 2000 compliant could have a material adverse effect on the
business, financial position, and results of operations of the Company. The
Company will make an ongoing effort to recognize and evaluate potential exposure
relating to third-party Year 2000 noncompliance, and will develop a contingency
plan if the Company determines that third-party noncompliance would have a
material adverse effect on the Company's business, financial position or results
of operation.
The Company is currently developing a contingency plan to address the possible
failure of any systems due to the Year 2000 problems. The Company anticipates
these plans will be completed by September 30, 1999.
Inflation
There was no material impact on the Company's operations as a result of
inflation during 1998, 1997, or 1996.
Geographic Information
For geographic information, refer to Note 19 to the consolidated financial
statements.
Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which standardizes the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, by requiring that an entity recognize those items as assets or
liabilities in the statement of financial position and measure them at fair
value. This statement is effective for all quarters of fiscal years beginning
after June 15, 1999. As of December 31, 1998, the Company is reviewing the
effect this standard will have on the Company's consolidated financial
statements.
<PAGE>
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. Upon adoption of this statement in
1999, the Company will take a pretax charge related to start-up costs of one of
its subsidiaries of $0.4 million. The Company is continuing to review this
statement for any other impact it may have on the Company's 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 continues to seek opportunities for new businesses, markets, and
acquisitions. Over the past few years, the Company has exited certain equipment
markets by selling or disposing of underperforming assets from its owned
transportation equipment portfolio. The Company's transportation equipment
currently consists mainly of refrigerated and dry van trailers. The Company does
not anticipate continued substantial reductions in its owned equipment portfolio
in 1999 and beyond. Rather, the Company intends to expand its current trailer
leasing and management operations by purchasing trailers and opening new rental
yards for its PLM Rental, Inc. subsidiary. PLM Rental is one of the largest
short-term, on-demand refrigerated trailer rental operations in North America,
and the Company believes there are new opportunities in the refrigerated trailer
leasing market.
On January 11, 1999, the Company announced that its Board of Directors had
engaged an investment banking firm to explore strategic alternatives for AFG.
The Company does not intend to withdraw the current registration statement on
file with the SEC at the present time, pending the results of the review.
During 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 programs begin liquidation and the
managed equipment portfolio becomes permanently reduced.
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 and
senior secured notes are variable rate debt. The Company estimates a one percent
increase or decrease in the Company's variable rate debt would result in an
increase or decrease, respectively, in interest expense of $0.4 million in 1999,
$0.2 million in 2000, $0.1 million in 2001, and $18,000 in 2002. The Company
estimates a two percent increase or decrease in the Company's variable rate debt
would result in an increase or decrease, respectively, in interest expense of
$0.8 million in 1999, $0.3 million in 2000, $0.2 million in 2001, and $35,000 in
2002.
The Company hedges borrowings under the nonrecourse securitization facility,
effectively fixing the rate of these borrowings. The Company is currently
required to hedge against the risk of interest rate increases for those leases
used as collateral for its nonrecourse securitization facility, but the Company
generally does not enter into hedges for leases designated for sale to
institutional programs, or for syndication, or for leases of transportation
equipment. Such hedging activities may limit the Company's ability to
participate in the benefits of any decrease in interest rates with respect to
the hedged portfolio of leases, but may also protect the Company from increases
in interest rates for the hedged portfolio. All of the Company's other financial
assets and liabilities are at fixed rates.
<PAGE>
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.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A definitive Company proxy statement will be filed not later than 120 days after
the end of the fiscal year with the Securities and Exchange Commission. The
information set forth under "Identification of Directors and Officers,"
"Compensation of Executive Officers," and "Security Ownership of Certain
Beneficial Owners and Management" in such proxy statement is incorporated herein
by reference for Items 10, 11, and 12, above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements
(1) The consolidated financial statements listed in the accompanying
index to financial statements are filed as part of this Annual
Report on Form 10-K.
(2) Exhibits are listed at Item (c), below.
(b) Reports on Form 8-K Filed in the Last Quarter of 1998
December 14, 1998 - Announcement regarding the election of Warren G.
Lichtenstein as a Class III director of the Board of Directors of the Company.
(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.
<PAGE>
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 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 $5.0 million Promissory Note, dated July 15, 1998, executed
by PLM International, Inc. in favor of First Union National
Bank, incorporated by reference to the Company's Form 10-Q
filed with the Securities and Exchange Commission on July 22,
1998.
<PAGE>
10.17 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.
10.18 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.
10.19 Commitment Letter from First Union National Bank extending
the $125.0 million nonrecourse securitization facility
through October 12, 1999, dated October 13, 1998,
incorporated by reference to the Company's Form 10-Q filed
with the Securities and Exchange Commission on October 27,
1998.
10.20 Third Amended and Restated Warehousing Credit Agreement among
TEC Acquisub, Inc., the Lenders, and First Union National
Bank, dated December 15, 1998.
10.21 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.
10.22 Master Lease Agreement among PLM International, Inc. and
Norwest Equipment Finance, Inc., dated December 28, 1998.
10.23 Master Lease Agreement among PLM International, Inc. and U.S.
Bancorp Leasing & Financial, dated December 11, 1998.
10.24 Warehousing Credit Agreement among American Finance Group,
Inc., the Lenders, and First Union National Bank, dated
December 15, 1998.
10.25 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.
10.26 Amendment No. 2 to Note Purchase Agreement among Variable
Funding Capital Corporation, First Union Capital Markets, and
AFG Credit Corporation, dated December 9, 1998.
10.27 $1,813,449 Note Payable and Security Agreement among American
Finance Group, Inc. and Transamerica Business Credit
Corporation, dated July 28, 1998.
10.28 $1,118,010 Promissory Note, Pledge, and Security Agreement
among American Finance Group, Inc. and General Electric
Capital Corporation, dated June 30, 1998.
10.29 $6,579,350 Term Notes and Loan and Security Agreements among
American Finance Group, Inc. and Varilease Corporation, dated
March 27, 1998.
10.30 Employment Agreement dated December 18, 1992 between PLM
International, Inc. and Robert N. Tidball.
10.31 Employment Agreement dated December 18, 1992 between PLM
International, Inc. and Douglas P. Goodrich.
10.32 Employment Agreement dated July 19, 1994 between PLM
International, Inc. and J. Michael Allgood.
10.33 Employment Agreement dated December 18, 1992 between PLM
International, Inc. and Stephen M. Bess.
10.34 Severance Agreement dated December 2, 1996 between PLM
Financial Services, Inc. and Stephen M. Bess.
10.35 Employment Agreement dated May 12, 1998 between PLM
International, Inc. and Richard K Brock.
<PAGE>
10.36 Amendment to Employment Agreement dated November 18, 1998
between PLM International, Inc. and Richard K Brock.
10.37 Employment Agreement dated November 19, 1997 between
PLM International, Inc. and Susan C. Santo
10.38 Amendment to Employment Agreement dated November 17, 1998
between PLM International, Inc.and Susan C. Santo
10.39 Executive Deferred Compensation Agreement dated December 18,
1992 between PLM International, Inc. and Robert N. Tidball.
10.40 Executive Deferred Compensation Agreement dated July 7, 1993
between PLM International, Inc. and Douglas P. Goodrich.
10.41 Executive Deferred Compensation Agreement dated September
30, 1994 between PLM International, Inc. and J. Michael
Allgood
10.42 Executive Deferred Compensation Agreement dated December 18,
1992 between PLM International, Inc. and Stephen M. Bess.
10.43 Executive Deferred Compensation Agreement dated January 18,
1999 between PLM International, Inc. and Richard K Brock.
10.44 Executive Deferred Compensation Agreement dated January 18,
1999 between PLM International, Inc. and Susan C. Santo.
24.1 Powers of Attorney.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: January 19, 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
Vice President, Acting Chief
Financial Officer and
Corporate Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company, in the
capacities and on the dates indicated.
* Director, Senior January 19, 2000
--------------------------------- Vice President
Douglas P. Goodrich
* Director January 19, 2000
---------------------------------
Robert L. Witt
* Director January 19, 2000
--------------------------------
Randall L.-W. Caudill
* Director January 19, 2000
---------------------------------
Harold R. Somerset
* Director January 19, 2000
---------------------------------
Howard M. Lorber
* Director January 19, 2000
---------------------------------
Warren G. Lichtenstein
* 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
<PAGE>
INDEX TO FINANCIAL STATEMENTS
(Item 14(a)(1)(2))
Description Page
Independent Auditors' Report 33
Consolidated Statements of Income for Years Ended
December 31, 1998, 1997, and 1996 34
Consolidated Balance Sheets as of December 31, 1998 and 1997 35
Consolidated Statements of Changes in Shareholders' Equity
and Comprehensive Income for Years Ended December 31,
1998, 1997, and 1996 36
Consolidated Statements of Cash Flows for Years
Ended December 31, 1998, 1997, and 1996 37-38
Notes to Consolidated Financial Statements 39-62
All schedules are omitted, since the required information is not pertinent or is
not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements and notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
PLM International, Inc.
We have audited the consolidated financial statements of PLM International, Inc.
and subsidiaries (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, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
/S/ KPMG LLP
- -----------------------
SAN FRANCISCO, CALIFORNIA
MARCH 9, 1999
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------
<S> <C> <C> <C>
Revenues
Operating lease income (Note 6) $ 19,947 $ 15,777 $ 18,180
Finance lease income (Note 2) 12,529 8,685 4,186
Management fees (Note 1) 10,203 11,275 10,971
Partnership interests and other fees (Note 1) 917 1,306 3,811
Acquisition and lease negotiation fees (Note 1) 3,974 3,184 6,610
Aircraft brokerage and services 1,090 2,466 2,903
Gain on the sale or disposition of assets, net 4,693 3,720 2,282
Other 3,725 3,252 2,602
----------------------------------------------
Total revenues 57,078 49,665 51,545
----------------------------------------------
Costs and expenses
Operations support (Notes 13 and 16) 17,571 16,633 21,595
Depreciation and amortization (Note 1) 11,833 8,447 11,318
General and administrative (Notes 13 and 16) 7,086 9,472 7,956
----------------------------------------------
Total costs and expenses 36,490 34,552 40,869
----------------------------------------------
Operating income 20,588 15,113 10,676
Interest expense (Notes 9, 10 and 11) (14,608 ) (9,891 ) (7,341 )
Interest income 1,446 1,635 1,228
Other income (expenses), net 473 (342 ) (670 )
----------------------------------------------
Income before income taxes 7,899 6,515 3,893
Provision for (benefit from) income taxes (Note 12) 3,042 1,848 (202 )
----------------------------------------------
Net income to common shares $ 4,857 $ 4,667 $ 4,095
==============================================
Basic earnings per weighted-average common share
outstanding $ 0.58 $ 0.51 $ 0.41
==============================================
Diluted earnings per weighted-average common
share outstanding $ 0.57 $ 0.50 $ 0.40
==============================================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31,
(in thousands of dollars, except share amounts)
ASSETS
<TABLE>
<CAPTION>
1998 1997
-------------------------------
<S> <C> <C>
Cash and cash equivalents $ 8,786 $ 5,224
Receivables (net of allowance for doubtful accounts of $0.4 million and
$0.6 million as of December 31, 1998 and 1997, respectively) 7,282 4,969
Receivables from affiliates (Note 4) 2,944 5,007
Investment in direct finance leases, net (Note 2) 145,088 119,613
Loans receivable (Note 3) 23,493 5,861
Equity interest in affiliates (Note 4) 22,588 26,442
Transportation equipment held for operating leases (Note 6) 63,044 50,252
Less accumulated depreciation (15,516 ) (26,981 )
------------------------------
47,528 23,271
Commercial and industrial equipment held for operating leases (Note 6) 24,520 23,268
Less accumulated depreciation (7,831 ) (4,816 )
------------------------------
16,689 18,452
Restricted cash and cash equivalents (Note 7) 10,349 18,278
Other, net (Note 8) 7,322 9,166
==============================
Total assets $ 292,069 $ 236,283
==============================
LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
Liabilities
Warehouse credit facilities (Note 9) $ 34,420 $ 23,040
Senior secured notes (Note 10) 28,199 23,843
Senior secured loan (Note 10) 14,706 20,588
Other secured debt (Note 10) 13,142 413
Nonrecourse securitized debt (Note 11) 111,222 81,302
Payables and other liabilities 21,768 25,366
Deferred income taxes (Note 18,415 14,860
12)
------------------------------
Total liabilities 241,872 189,412
Commitments and contingencies (Note 13)
Minority interest -- 323
Shareholders' equity (Note 14)
Common stock ($0.01 par value, 50.0 million shares
authorized, and 8,159,919 and 8,393,362 shares
issued and outstanding as of December 31, 1998
and 1997, respectively) 112 112
Paid-in capital, in excess of par 74,947 74,650
Treasury stock (3,875,836 and 3,641,485 shares at
respective dates) (15,072 ) (13,435 )
Accumulated deficit (9,790 ) (14,647 )
Accumulated other comprehensive loss -- (132 )
------------------------------
Total shareholders' equity 50,197 46,548
==============================
Total liabilities, minority interest, and shareholders' equity $ 292,069 $ 236,283
==============================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Years Ended December 31, 1998, 1997, and 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
Common Stock Accumulated
------------------------------------------ Deficit &
Paid-in Accumulated
Capital in Other Total
At Excess Treasury Comprehensive Comprehensive Shareholders'
Par of Par Stock Income Income Equity
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995 $ 117 $ 77,743 $ (5,931 ) $ (23,309 ) $ 48,620
Comprehensive income:
Net income 4,095 $ 4,095 4,095
Other comprehensive income:
Foreign currency translation
income 21 21 21
-------------
Total comprehensive income 4,116
=============
Common stock repurchases (6,451 ) (6,451 )
Exercise of stock options 35 35
- ---------------------------------------------------------------------------------------------------- ----------------
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 repurchases (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 repurchases (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
=========================================================== ================
</TABLE>
See accompanying notes to these consolidated financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in thousands of dollars)
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 4,857 $ 4,667 $ 4,095
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,833 8,447 11,318
Foreign currency translation (80) (123) 21
Deferred income tax expense (benefit) 3,464 (474) (141)
Gain on the sale or disposition of assets, net (4,693) (3,720) (2,282)
Loss on sale of investment in subsidiary 245 -- --
Undistributed residual value interests 1,057 1,052 (846)
Minority interest in net loss of subsidiaries (100) (39) (1)
(Decrease) increase in payables and other liabilities (1,435) 3,459 2,881
(Increase) decrease in receivables and receivables from
affiliates (32) 1,516 4,001
Amortization of organization and offering costs 2,839 2,913 2,977
(Increase) decrease in other assets (85) 474 151
------------------------------------------------
Net cash provided by operating activities 17,870 18,172 22,174
------------------------------------------------
Investing activities
Additional investments in affiliates -- -- (4,972)
Principal payments received on finance leases 32,202 17,705 5,746
Principal payments received on loans 5,272 2,020 --
Investment in direct finance leases (129,140) (103,592) (99,113)
Investment in loans receivable (22,904) (2,163) (5,718)
Purchase of property, plant, and equipment (339) (839) (573)
Purchase of transportation equipment and capital improvements (58,916) (33,725) (7,464)
Purchase of commercial and industrial equipment held
for operating lease (23,989) (18,915) (46,660)
Proceeds from the sale of transportation equipment held for lease 6,230 12,318 17,409
Proceeds from the sale of assets held for sale 25,328 25,857 2,052
Proceeds from the sale of commercial and industrial equipment 92,498 56,481 51,891
Sale of investment in subsidiary 176 -- 372
Decrease (increase) in restricted cash and cash equivalents 7,929 (450) (7,207)
------------------------------------------------
Net cash used in investing activities (65,653) (45,303) (94,237)
------------------------------------------------
</TABLE>
(continued)
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in thousands of dollars)
(continued)
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------
<S> <C> <C> <C>
Financing activities
Borrowings of warehouse credit facilities $ 151,726 $ 106,547 $ 109,254
Repayment of warehouse credit facilities (140,346 ) (114,473 ) (78,288 )
Borrowings of senior secured notes 10,000 9,000 18,000
Repayment of senior secured notes (5,644 ) (3,157 ) (10,000 )
Repayment of senior secured loan (5,882 ) (4,412 ) --
Borrowings of other secured debt 13,471 -- 90
Repayment of other secured debt (270 ) (205 ) (595 )
Borrowings of nonrecourse securitized debt 74,487 121,716 56,024
Repayment of nonrecourse securitized debt (44,567 ) (85,806 ) (10,632 )
Repayment of subordinated debt -- -- (11,500 )
Purchase of stock (2,059 ) (4,401 ) (6,451 )
Redemption of shareholder rights -- (92 ) --
Proceeds from exercise of stock options 429 -- 35
-------------------------------------------------
Net cash provided by financing activities 51,345 24,717 65,937
-------------------------------------------------
Net increase (decrease) in cash and cash equivalents 3,562 (2,414 ) (6,126 )
Cash and cash equivalents at beginning of year 5,224 7,638 13,764
=================================================
Cash and cash equivalents at end of year $ 8,786 $ 5,224 $ 7,638
=================================================
Supplemental information
Net cash paid for interest $ 14,054 $ 9,395 $ 6,516
=================================================
Net cash paid for income taxes $ 1,656 $ 1,119 $ 1,292
=================================================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<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 cash flows of PLM International, Inc. and its wholly- and
majority-owned subsidiaries (PLM International, the Company, or PLMI). PLM
International and its consolidated group began operations on February 1, 1988.
All intercompany transactions among the consolidated group have been eliminated.
PLM International is a diversified equipment leasing and management company
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 leasing operations generally consist of operating and direct
finance leases on a variety of equipment types, including trailers,
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, including principal and interest on the lease, 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. Because
the Company's portfolio of equipment on lease continues to grow, the resulting
initial direct lease origination costs have become material. Effective January
1, 1998, the Company now capitalizes these costs. During 1998, the Company
capitalized $0.6 million of these costs, of which $0.2 million had been
amortized as of December 31, 1998. Amounts capitalized related to direct finance
leases are included in the net investment in finance leases and are amortized
using the effective interest method. Amounts capitalized related to operating
leases are included in other assets and are amortized straight line over the
lease term.
Equipment
Transportation equipment held for operating lease is stated at the lower of
depreciated cost or estimated fair value less cost to sell. Depreciation is
computed on the straight-line method down to the equipment's estimated salvage
value, utilizing the following estimated useful lives in years: trailers,
primarily 10 to 12; commercial and industrial equipment, 1 to 7; aircraft, 8 to
20; marine containers, 10 to 15; and storage equipment, 15. Salvage values for
transportation equipment are generally 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 Accounts 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 quarterly in relation to expected
future market conditions for the purpose of assessing recoverability of the
recorded amounts. In addition, from time-to-time the Company utilizes
third-party appraisals to estimate the fair value of its residual values,
comparing the aggregate carrying value for each equipment type to the aggregate
appraisal value in order to assess potential impairment. If projected
undiscounted future
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equipment (continued)
lease revenues plus residual values are lower than the carrying value of the
equipment, the loss on revaluation is recorded as either a net reduction in the
gain on the sale or disposition of assets or as a reduction to finance lease
income (if the assets were on finance lease). Total reductions were $0.2 million
in 1998, $0.2 million in 1997, and $0.7 million in 1996.
The Company classifies assets as held for sale if the particular asset is
subject to a pending contract for sale or is held for sale to an affiliated
program. Equipment held for sale is valued at the lower of depreciated cost or
estimated fair value less cost to sell.
Except for trailers operating out of the Company's short-term rental yards,
maintenance costs are usually the obligation of the lessee. If not covered by
the lessee, they are charged against operations as incurred. Repair and
maintenance expenses were $2.7 million, $2.7 million, and $3.0 million for 1998,
1997, and 1996, 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 generally earned through the purchase and initial lease of
equipment, and are generally recognized as revenue when the Company completes
substantially all of the services required to earn the fees, generally when
binding commitment agreements are signed.
Management fees are earned for managing the equipment portfolios and
administering investor programs as provided for in various agreements, and are
recognized as revenue over time as they are earned.
As compensation for organizing a partnership investment program, the Company was
generally granted an interest (between 1% and 5%) in the earnings and cash
distributions of the program, 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 use of straight-line depreciation and 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. 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 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 generally 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.
<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.
In return for its investment, the Company is generally entitled to a 15%
interest in the cash distributions and earnings of Fund I, subject to certain
allocation provisions. The Company's interest in the cash distributions and
earnings of Fund I will increase to 25% after the investors have received
distributions equal to their invested capital. The Company is entitled to
monthly fees for equipment management services and reimbursement for 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. 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 earns revenues in connection with lease originations and servicing
equipment leases for institutional programs. Acquisition fees are generally
earned through the purchase and initial lease of equipment, and are generally
recognized as revenue when the Company completes substantially all of the
services required to earn the fees, generally when binding commitment agreements
are signed. Management fees are earned for servicing the equipment portfolios
and leases as provided for in various agreements, and are recognized as revenue
over time as they are earned.
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 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.
Transfer of Direct Finance Leases, Loans, and Operating Leases
On January 1, 1997, the Company adopted FASB SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
SFAS No. 125 provides guidelines for distinguishing between transfers of
financial assets that are sales and transfers that are secured borrowings. The
Company's transfers of direct finance leases and loans to the securitization
facility are accounted for as financings under SFAS No. 125.
Transfers of equipment to a securitization facility, subject to operating leases
in which the Company retains substantial risk of ownership, are not treated as
sales, in accordance with the provisions of FASB SFAS No. 13, "Accounting for
Leases," and are also accounted for as financings. Transfer of equipment to
institutional programs and third parties, subject to operating leases in which
the Company retains no risk of ownership, are treated as sales, with gain or
loss on sale recognized in the period title passes.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings Per Weighted-Average Common Share
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:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------
(in thousands of dollars, except per share data)
<S> <C> <C> <C>
Basic:
Net income $ 4,857 $ 4,667 $ 4,095
Shares:
Weighted-average number of common shares outstanding 8,325 9,081 10,032
Basic earnings per common share $ 0.58 $ 0.51 $ 0.41
===============================================
Diluted:
Net income $ 4,857 $ 4,667 $ 4,095
Shares:
Weighted-average number of common shares outstanding 8,325 9,081 10,032
Potentially dilutive common shares 155 196 168
-----------------------------------------------
Total shares 8,480 9,277 10,200
Diluted earnings per weighted-average common share $ 0.57 $ 0.50 $ 0.40
===============================================
</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 shown as the lower of net
amortized cost or fair value and are included on the balance sheet in other
assets, net. 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 the
related loan. Software is amortized over three 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
As of the first quarter of 1998, the Company adopted Financial Accounting
Standards Board SFAS No. 130, "Reporting Comprehensive Income," which requires
enterprises to report, by major component and in total, all changes in equity
from nonowner sources. The Company discloses the 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.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 differential to be paid
or received under a swap agreement is charged or credited to interest expense.
2. FINANCING TRANSACTION ACTIVITIES
American Finance Group, Inc. (AFG), a wholly-owned subsidiary of the Company,
originates and manages lease and loan transactions on primarily new commercial
and industrial equipment that is financed by nonrecourse securitized debt for
the Company's own account, or for sale to institutional programs or other
unaffiliated investors. The Company uses one of its warehouse credit facilities
to finance the acquisition of the assets, subject to leases, prior to sale or
permanent financing by nonrecourse securitized debt. The majority of these
transactions are accounted for as direct finance leases, while some transactions
qualify as operating leases or loans.
During 1998, the Company funded $129.1 million in equipment that was placed on
finance lease. Also during 1998, the Company sold equipment on finance lease
with an original cost of $56.0 million, resulting in net gains of $1.5 million.
During 1997, the Company funded $103.6 million in equipment that was placed on
finance lease. Also during 1997, the Company sold equipment on finance lease
with an original cost of $46.5 million, resulting in net gains of $1.8 million.
The table below shows the types of owned commercial and industrial equipment
subject to finance leases, the original cost, and the percentage each type
represents in the equipment portfolio, as of December 31 (in thousands of
dollars):
<TABLE>
<CAPTION>
1998 1997
------------------------------------------------
<S> <C> <C> <C> <C>
Computers and peripherals $ 61,954 33% $ 59,934 44%
Materials handling 45,282 24 29,410 21
Manufacturing 31,252 17 7,160 5
Point of sale 22,262 12 23,111 17
General purpose plant and warehouse 9,187 5 3,221 2
Communications 4,488 2 6,495 5
Construction and mining 4,491 2 3,329 2
Other 9,997 5 4,814 4
===============================================
Total $ 188,913 100% $ 137,474 100%
===============================================
</TABLE>
The following table lists the components of the investment in direct finance
leases, net, as of December 31 (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Minimum lease payments receivable $ 147,246 $ 122,508
Estimated unguaranteed residual values
of leased properties 24,782 20,328
Initial direct lease origination costs, net 435 --
------------- -------------
172,463 142,836
Less unearned income (27,375 ) (23,223 )
------------- =============
Investment in direct finance leases, net $ 145,088 $ 119,613
============= =============
</TABLE>
2. FINANCING TRANSACTION ACTIVITIES (continued)
The schedule of the minimum future lease revenues is projected as follows (in
thousands of dollars):
$ 46,516
1999
39,536
2000
27,151
2001
16,943
2002
12,697
2003
Thereafter 4,403
================
Total minimum lease payments receivable $ 147,246
================
3. LOANS RECEIVABLE
As of December 31, 1998, the Company had loans receivable outstanding with 12
customers, totaling $23.5 million and with interest rates ranging from 6.23% to
10.81%, all secured by commercial and industrial equipment. As of December 31,
1997, the Company had loans receivable outstanding with three customers,
totaling $5.9 million and with interest rates ranging from 8.7% to 10.81%, all
secured by commercial and industrial equipment. Future payments receivable on
the notes as of December 31, 1998 are as follows (in thousands of dollars):
1999 $ 7,179
2000 4,786
2001 4,123
2002 6,490
2003 848
Thereafter 67
=============
Total loans receivable $ 23,493
=============
4. EQUITY INTEREST IN AFFILIATES
FSI, a wholly-owned subsidiary of the Company, is the general partner in 10
limited partnerships. Net earnings and distributions of the partnerships are
generally allocated as follows: 99% to the limited partners and 1% to the
general partner in PLM Equipment Growth Fund (EGF I); 95% to the limited
partners and 5% to the general partner in EGFs II, III, IV, V, VI, and PLM
Equipment Growth & Income Fund VII (EGF VII); and 85% to the limited partners
and 15% to the general partner in Professional Lease Management Income Fund I
(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 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):
<TABLE>
<CAPTION>
1998 1997
-----------------------------
<S> <C> <C>
Financial position:
Cash and other assets $ 31,927 $ 87,205
Transportation equipment and other assets,
net of accumulated depreciation of $177,859
in 1998 and $186,295 in 1997 569,495 585,762
-----------------------------
Total assets 601,422 672,967
Less liabilities, primarily long-term financings 154,603 196,464
=============================
Partners' equity $ 446,819 $ 476,503
=============================
PLM International's share thereof, recorded as equity interest in affiliates:
Equity interest $ 11,781 $ 14,578
Estimated residual value interests in equipment 10,807 11,864
=============================
Equity interest in affiliates $ 22,588 $ 26,442
=============================
</TABLE>
<PAGE>
4. EQUITY INTEREST IN AFFILIATES (continued)
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
Operating results:
Revenue from equipment leases and other $ 142,705 $ 184,940 $ 198,226
Equipment depreciation (64,033 ) (54,634 ) (52,653 )
Other costs and expenses (47,513 ) (69,795 ) (60,768 )
Reduction in carrying value of certain assets (4,276 ) -- --
================================================
Net income before provision for income taxes $ 26,883 $ 60,511 $ 84,805
================================================
PLM International's share of partnership interests
and other fees (net of related expenses) $ 917 $ 1,306 $ 3,811
================================================
Distributions received $ 4,883 $ 5,818 $ 5,565
================================================
</TABLE>
Most of the limited partnership agreements contain provisions for special
allocations of the partnerships' gross income.
While none of the partners, including the general partner, are liable for
partnership borrowings, and while the general partner maintains insurance
against liability for bodily injury, death, and property damage for which a
partnership may be liable, the general partner may be contingently liable for
nondebt claims against the partnership that exceed asset values.
5. ASSETS HELD FOR SALE
As of December 31, 1998 and 1997, the Company had no assets held for sale.
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 affiliated programs at cost, which approximated fair market value. The
portable heaters and the entity that owns a marine vessel were sold to
affiliated programs at cost, which approximated fair market value. During 1997,
the Company purchased two commercial aircraft for $5.0 million, a mobile
offshore drilling unit for $10.5 million, and a 47.5% interest in an entity that
owns a marine vessel for $9.1 million. The two commercial aircraft were sold in
1997 to an unaffiliated third party for a net gain of $0.8 million. The mobile
offshore drilling unit and the 47.5% interest in an entity that owns a marine
vessel were sold to 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
generally 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. During 1996, the Company realized $0.7 million of gains
from the sale of 69 railcars to an unaffiliated third party. These railcars were
originally purchased by the Company in 1994 as part of a group of assets that
had been allocated to EGFs IV, VI, and VII, Fund I, and the Company.
6. EQUIPMENT HELD FOR OPERATING LEASES
As of December 31, 1998, transportation equipment held for operating leases
consisted of refrigerated and dry van trailers.
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. During 1997, the Company
purchased trailers for $9.1 million and sold trailers with a net book value of
$1.5 million for $1.5 million. As of December 31, 1998, the Company had
committed all of its trailer equipment to rental yard operations.
<PAGE>
6. EQUIPMENT HELD FOR OPERATING LEASES (continued)
The table below shows the types of owned commercial and industrial equipment
held for operating leases at original cost, and the percentages that each type
represents in the equipment portfolio as of December 31 (in thousands of
dollars):
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------
<S> <C> <C> <C> <C>
Materials handling $ 9,246 38% $ 6,350 27%
Point of sale 5,166 21 2,832 12
Communications 2,721 11 2,314 10
Construction and mining 2,365 10 701 3
Computers and peripherals 1,665 7 2,219 10
Medical 1,033 4 1,010 4
Manufacturing 254 1 6,735 29
Other 2,070 8 1,107 5
------------------------------------------------
24,520 100% 23,268 100%
Less accumulated depreciation (7,831) (4,816)
------------------------------------------------
Net commercial and industrial equipment
held for operating leases $ 16,689 $ 18,452
================================================
</TABLE>
During 1998, the Company funded $24.0 million in commercial and industrial
equipment, which was placed on operating lease. During 1998, the Company sold
commercial and industrial equipment that was on operating lease, for a net gain
of $1.7 million. During 1997, the Company funded $18.9 million in commercial and
industrial equipment, which was placed on operating lease. During 1997, the
Company sold commercial and industrial equipment that was on operating lease
with an original cost of $11.8 million, for a net gain of $0.2 million. Future
minimum rentals receivable for commercial and industrial equipment under
noncancelable leases as of December 31, 1998 are approximately $5.1 million in
1999, $3.7 million in 2000, $2.0 million in 2001, $0.8 million in 2002, $0.3
million in 2003, and $2,000 thereafter.
In 1998, the Company sold an aircraft engine and its 20% interest in a commuter
aircraft, with a combined net book value of $0.4 million, for $1.1 million.
Other transportation equipment was sold for net gains of $1.1 million during
1997.
Per diem and short-term rentals consisting of utilization rate lease payments
included in revenue amounted to approximately $10.1 million in 1998, $8.5
million in 1997, and $9.3 million in 1996.
7. RESTRICTED CASH
Restricted cash consists of bank accounts and short-term investments that are
primarily subject to withdrawal restrictions as 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 10). 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 10). Management fees can be withdrawn from the account monthly if the
collateral account amount is at certain defined levels. All of the cash is
released quarterly when the principal and interest payment is made. The
Company's nonrecourse debt facility requires all payments on pledged lease
receivables to be deposited into a restricted cash account. Principal, interest,
and related fees are paid monthly in arrears from this account. Cash remaining
after these payments may be released subject to certain debt covenant
limitations (refer to Note 11).
<PAGE>
8. OTHER ASSETS, NET
Other assets, net consists of the following as of December 31 (in thousands of
dollars):
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
Intangibles, net of accumulated amortization of $1,028 and $685
in 1998 and 1997, respectively $ 1,713 $ 2,055
Prepaid expenses, deposits, and other 1,372 742
Cash surrender value of officers' life insurance policies 1,369 1,075
Furniture, fixtures, and equipment, net of accumulated
depreciation of $2,819 and $4,316 in 1998 and 1997, respectively 1,038 1,992
Loan fees, net of accumulated amortization of $1,575 and $1,225
in 1998 and 1997, respectively 958 1,186
Software, net of accumulated amortization of $415 and $550 as of
1998 and 1997, respectively 533 650
Investments 339 371
Spare parts inventory -- 1,095
---------------------------
Total other assets, net $ 7,322 $ 9,166
===========================
</TABLE>
Prepaid expenses, deposits, and other as of December 31, 1998 included $0.7
million related to the proposed initial public offering (IPO) of the Company's
AFG subsidiary. If the Company does not proceed with the IPO, it will have to
expense all costs related to the IPO in the first quarter of 1999.
9. WAREHOUSE CREDIT FACILITIES
The Company had a warehouse credit facility that allowed the Company to borrow
up to $50.0 million to be used to acquire assets on an interim basis prior to
placement with affiliated programs, placement in the Company's nonrecourse
securitization facility, or sale to unaffiliated third parties. This facility
was shared with various investment programs managed by the Company. Interest
accrued at prime or LIBOR plus 162.5 basis points, at the option of the Company.
This facility expired on December 14, 1998.
On December 14, 1998, the Company entered into new warehouse credit facilities
for FSI and AFG. FSI now has a $24.5 million warehouse credit facility to be
used to acquire assets on an interim basis prior to placement with affiliated
programs or sale to unaffiliated third parties and to purchase trailers prior to
obtaining permanent financing. AFG now has a $60.0 million warehouse credit
facility to be used to acquire assets on an interim basis prior to placement in
the Company's nonrecourse securitization facility or sale to institutional
programs or other unaffiliated third parties.
FSI Warehouse Credit Facility: This facility allows FSI to borrow up to
$24.5 million until December 14, 1999. This 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. 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. The
weighted-average interest rates on the Company's warehouse credit facility were
7.25% and 7.61% for 1998 and 1997, respectively. The Company retains the
difference between the net lease revenue earned and the interest expense during
the interim holding period, since its capital is at risk. The Company believes
it will be able to renew this facility on substantially the same terms upon its
expiration. As of December 31, 1998, the Company had no borrowings outstanding
under this facility and there were no other borrowings outstanding under this
facility by any other eligible borrower. As of March 9, 1999, the Company and
EGF VI had $8.3 million and $3.7 million in borrowings outstanding under this
facility, respectively.
AFG Warehouse Credit Facility: This facility allows AFG to borrow up to $60.0
million until December 14, 1999. This facility provides for 100% of the present
value of the lease stream of commercial and industrial equipment for up to 90%
of the original equipment cost of the assets held on this facility.
<PAGE>
9. WAREHOUSE CREDIT FACILITIES (continued)
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 Company retains the
difference between the net lease revenue earned and the interest expense during
the interim holding period, since its capital is at risk. The weighted-average
interest rates on the Company's warehouse credit facility were 7.22% and 7.61%
for 1998 and 1997, respectively. Repayment of the borrowings for commercial and
industrial equipment matches the terms of the underlying leases. The Company
believes it will be able to renew this facility on substantially the same terms
upon its expiration. As of December 31, 1998, the Company had $34.4 million
outstanding under this facility. As of March 9, 1999, the Company had $29.8
million in borrowings outstanding under this facility.
10. LONG-TERM SECURED DEBT
Long-term secured debt consisted of the following as of December 31 (in
thousands of dollars):
<TABLE>
<CAPTION>
1998 1997
-------------------------------
<S> <C> <C>
Senior secured notes:
Institutional notes, bearing interest at LIBOR plus 2.40% per annum (7.80%
and 8.34% as of December 31, 1998 and 1997, 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 $ 28,199 $ 23,843
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 transportation-related equipment
assets and associated leases, and cash
in a cash collateral account 14,706 20,588
Other secured debt:
Debt agreements, bearing interest from 5.35% to 5.55%, payments due monthly
beginning December 31, 1998 through November 30, 2005, secured by certain
trailer equipment. In return for favorable financing terms, these
agreements give beneficial tax treatment in these secured trailers to the
lenders 13,142 --
Notes payable, with interest from 10.75% to 12.37%, due in varying monthly
principal and interest installments, secured by equipment with a net book
value
of approximately $438,000 as of December 31, 1997 -- 413
-------------------------------
Total secured debt $ 56,047 $ 44,844
===============================
</TABLE>
On September 22, 1998, the Company's senior secured notes agreement was amended,
allowing the Company to borrow an additional $10.0 million under the facility
during the period from September 22, 1998 through October 15, 1998. During 1998,
the Company borrowed $10.0 million and repaid $5.6 million on the senior secured
notes, in accordance with the debt repayment schedule. The institutional debt
agreements contain financial covenants related to net worth, ratios for
leverage, interest coverage ratios, and collateral coverage, all of which were
met as of December 31, 1998. 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.
10. LONG-TERM SECURED DEBT (continued)
During 1998, 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, all of which
were met as of December 31, 1998. As of December 31, 1998, the cash collateral
balance was $0.1 million.
In August 1998, the Company sold its aircraft leasing and spare parts brokerage
subsidiary located in Australia, and all associated other secured debt was
eliminated from the Company's books as a result of the transaction.
Scheduled principal payments on long-term secured debt are (in thousands of
dollars):
1999 $ 14,608
2000 14,674
2001 11,803
2002 7,056
2003 1,495
Thereafter 6,411
-----------
Total $ 56,047
===========
11. NONRECOURSE SECURITIZED DEBT
The Company has available a nonrecourse securitization facility to be used to
acquire assets by AFG secured by direct finance leases, operating leases, and
loans on commercial and industrial equipment that generally have terms from one
to seven years. The facility allows the Company to borrow up to $150.0 million
through October 12, 1999. Repayment of the facility matches the terms of the
underlying leases. The securitized debt bears 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 (6.46% and 7.16% as
of December 31, 1998 and 1997, respectively). As of December 31, 1998 and 1997,
there were $103.6 million and $71.3 million in borrowings under this facility,
respectively. The Company is 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, 1998, 94.8% of the ADLB
had been hedged.
During 1998, the Company assumed $12.4 million in additional nonrecourse notes
payable, and received principal payments of $4.6 million. Also during 1998, the
Company prepaid $10.2 million of the nonrecourse notes, based on the sale of
related assets, resulting in total nonrecourse notes payable of $7.6 million as
of December 31, 1998. Principal and interest on the notes are due monthly
beginning November 1997 through March 2001. The notes bear interest ranging from
8.32% to 9.5% per annum and are secured by direct finance leases for commercial
and industrial equipment that have terms corresponding to the repayment of the
notes.
Scheduled principal payments on long-term nonrecourse debt are (in thousands of
dollars):
1999 $ 42,901
2000 32,887
2001 19,411
2002 8,836
2003 3,950
Thereafter 3,237
===========
Total $ 111,222
===========
<PAGE>
12. INCOME TAXES
The provision for (benefit from) income taxes attributable to income from
operations consists of the following (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997
------------------------------------------- -----------------------------------------------------------
Federal State Total Federal State Foreign Total
------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current $ (575) $ 62 $ (513) $ 2,255 $ 64 $ 3 $ 2,322
Deferred 3,296 259 3,555 (349) (125) -- (474)
=========================================== ===========================================================
$ 2,721 $ 321 $ 3,042 $ 1,906 $ (61) $ 3 $ 1,848
=========================================== ===========================================================
</TABLE>
1996
----------------------------------------------------------
Federal State Foreign Total
----------------------------------------------------------
Current $ (262) $ 64 $ 155 $ (43)
Deferred 470 (629) -- (159)
==========================================================
$ 208 $ (565) $ 155 $ (202)
==========================================================
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.
The difference between the effective rate and the expected federal statutory
rate is reconciled below:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
Federal statutory tax expense rate 34 % 34 % 34 %
State income tax rate 3 -- 1
Effect of foreign operations at lower rate -- (2 ) (20 )
Reversal of excess accrual 1 -- (19 )
Tax adjustment related to termination of employee stock -- -- (6 )
ownership plan
Abandonment of identifiable intangibles -- (5 ) --
Other 1 1 5
------------------------------------------
Effective tax expense (benefit) rate 39 % 28 % (5 )%
==========================================
</TABLE>
Net operating loss carryforwards for federal income tax purposes amounted to
$4.0 million and $1.0 million as of December 31, 1998 and 1997, respectively.
Alternative minimum tax credit carryforwards are $5.2 million and $9.2 million
as of December 31, 1998 and 1997, respectively.
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):
<TABLE>
<CAPTION>
1998 1997
------------------------------
<S> <C> <C>
Deferred tax assets:
Tax credit carryforwards $ 5,228 $ 9,224
State net operating loss carryforwards 620 949
Federal net operating loss carryforwards 1,375 --
Federal benefit of state taxes 588 1,087
Other 744 --
----------------------------------
Total deferred tax assets 8,555 11,260
----------------------------------
Deferred tax liabilities:
Equipment, principally differences in depreciation 19,604 17,433
Partnership interests 4,195 5,343
Other 3,171 3,344
----------------------------------
Total deferred tax liabilities 26,970 26,120
----------------------------------
Net deferred tax liabilities $ 18,415 $ 14,860
==================================
</TABLE>
<PAGE>
12. INCOME TAXES (continued)
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. As of December 31,
1998, the deferred taxes not provided on cumulative earnings of consolidated
foreign subsidiaries that are designated as permanently invested were
approximately $2.1 million.
13. COMMITMENTS AND CONTINGENCIES
Litigation
In November 1995, a former employee of PLM International filed and served a
first amended complaint (the complaint) in the United States District Court for
the Northern District of California (Case No. C-95-2957 MMC) against the
Company, the PLM International, Inc. Employee Stock Ownership Plan (ESOP), the
ESOP's trustee, and certain individual employees, officers, and directors of the
Company. The complaint contains claims for relief alleging breaches of fiduciary
duties and various violations of the Employee Retirement Income Security Act of
1974 (ERISA) arising principally from purported defects in the structure,
financing, and termination of the ESOP, and for defendants' allegedly engaging
in prohibited transactions and interfering with plaintiff's rights under ERISA.
Plaintiff seeks monetary damages, rescission of the preferred stock transactions
with the ESOP and/or restitution of ESOP assets, and attorneys' fees and costs
under ERISA. In January 1996, the Company and other defendants filed a motion to
dismiss the complaint for lack of subject matter jurisdiction, arguing the
plaintiff lacked standing under ERISA. The motion was granted and in May 1996,
the district court entered a judgment dismissing the complaint for lack of
subject matter jurisdiction. Plaintiff appealed to the U.S. Court of Appeals for
the Ninth Circuit seeking a reversal of the district court's dismissal of his
ERISA claims, and in an opinion filed in October 1997, the Ninth Circuit
reversed the decision of the district court and remanded the case to the
district court for further proceedings. The Company filed a petition for
rehearing, which was denied in November 1997. The Ninth Circuit mandate was
filed in the district court in December 1997.
In February 1998, plaintiff was permitted by the district court to file a second
amended complaint in order to bring the fourth, fifth, and sixth claims for
relief as a class action on behalf of himself and all similarly situated people.
These claims allege that the Company and the other defendants breached their
fiduciary duties and entered into prohibited transactions in connection with the
termination of the ESOP and by causing the ESOP to sell or exchange the
preferred shares held for the benefit of the ESOP participants for less than
their fair market value. Also in February 1998, the defendants filed a motion to
dismiss the fourth, fifth, and sixth claims relating to the termination of the
ESOP, and the seventh claim relating to defendants' alleged interference with
plaintiff's rights under ERISA, all for failure to state claims for relief. The
district court, in an order dated July 14, 1998, granted this motion and
dismissed the fourth through seventh claims for relief.
In June 1998, the defendants filed a motion for summary judgment seeking a
ruling that the first two claims for relief, which allege breaches arising out
of the purchase and sale of stock at the inception of the ESOP, are barred by
the applicable statute of limitations. In an order dated July 14, 1998, the
district court granted in part and denied in part this motion and ruled that
these claims for relief are barred by the statute of limitations to the extent
that they rely on a theory that the automatic conversion feature and other terms
and conditions of the purchase and sale of the preferred stock violated ERISA,
but are not so barred to the extent that they rely on a theory that the purchase
and sale of the preferred stock at the inception of the ESOP was for more than
adequate consideration.
On September 30, 1998, plaintiff filed a motion to certify as final, and enter
judgment on, the two July 14, 1998 orders. This motion was denied. Defendants
filed their answer to the second amended complaint on September 18, 1998,
denying the allegations contained in the first, second, and third claims for
relief. The trial regarding these remaining claims is set for September 27,
1999. The Company believes it has meritorious defenses to these claims and plans
to continue to defend this matter vigorously.
The Company and various of its affiliates are named as defendants in a lawsuit
filed as a purported class action on January 22, 1997 in the Circuit Court of
Mobile County, Mobile, Alabama, Case No. CV-97-251 (the Koch action).
Plaintiffs, who filed the complaint on their own and on behalf of all class
members similarly situated, are six individuals who invested in certain
California limited partnerships (the Partnerships) for which the Company's
wholly-owned subsidiary, PLM Financial Services, Inc. (FSI), acts as the general
partner, including PLM Equipment Growth Funds IV, V, and VI, and PLM Equipment
Growth & Income Fund VII (Fund VII). The state court ex parte certified the
action as a class action (i.e., solely upon plaintiffs' request and without the
Company being given the opportunity to file an opposition). The complaint
asserts eight causes of action against all defendants, as follows: fraud and
deceit, suppression, negligent
<PAGE>
13. COMMITMENTS AND CONTINGENCIES (continued)
Litigation (continued)
misrepresentation and suppression, intentional breach of fiduciary duty,
negligent breach of fiduciary duty, unjust enrichment, conversion, and
conspiracy. Additionally, plaintiffs allege a cause of action against PLM
Securities Corp. for breach of third party beneficiary contracts in violation of
the National Association of Securities Dealers rules of fair practice.
Plaintiffs allege that each defendant owed plaintiffs and the class certain
duties due to their status as fiduciaries, financial advisors, agents, and
control persons. Based on these duties, plaintiffs assert liability against
defendants for improper sales and marketing practices, mismanagement of the
Partnerships, and concealing such mismanagement from investors in the
Partnerships. Plaintiffs seek unspecified compensatory and recissory damages, as
well as punitive damages, and have offered to tender their limited partnership
units back to the defendants.
In March 1997, the defendants removed the Koch action from the state court to
the United States District Court for the Southern District of Alabama, Southern
Division (Civil Action No. 97-0177-BH-C) based on the district court's diversity
jurisdiction, following which plaintiffs filed a motion to remand the action to
the state court. Removal of the action to federal court automatically nullified
the state court's ex parte certification of the class. In September 1997, the
district court denied plaintiffs' motion to remand the action to state court and
dismissed without prejudice the individual claims of the California plaintiff,
reasoning that he had been fraudulently joined as a plaintiff. In October 1997,
defendants filed a motion to compel arbitration of plaintiffs' claims, based on
an agreement to arbitrate contained in the limited partnership agreement of each
Partnership, and to stay further proceedings pending the outcome of such
arbitration. Notwithstanding plaintiffs' opposition, the district court granted
defendants' motion in December 1997.
Following various unsuccessful requests that the district court reverse, or
otherwise certify for appeal, its order denying plaintiffs' motion to remand the
case to state court and dismissing the California plaintiff's claims, plaintiffs
filed with the U.S. Court of Appeals for the Eleventh Circuit a petition for a
writ of mandamus seeking to reverse the district court's order. The Eleventh
Circuit denied plaintiffs' petition in November 1997, and further denied
plaintiffs subsequent motion in the Eleventh Circuit for a rehearing on this
issue. Plaintiffs also appealed the district court's order granting defendants'
motion to compel arbitration, but in June 1998 voluntarily dismissed their
appeal pending settlement of the Koch action, as discussed below.
On June 5, 1997, the Company and the affiliates who are also defendants in the
Koch action were named as defendants in another purported class action filed in
the San Francisco Superior Court, San Francisco, California, Case No. 987062
(the Romei action). The plaintiff is an investor in PLM Equipment Growth Fund V,
and filed the complaint on her own behalf and on behalf of all class members
similarly situated who invested in certain California limited partnerships for
which FSI acts as the general partner, including the Partnerships. The complaint
alleges the same facts and the same nine causes of action as in the Koch action,
plus five additional causes of action against all of the defendants, as follows:
violations of California Business and Professions Code Sections 17200, et seq.
for alleged unfair and deceptive practices, constructive fraud, unjust
enrichment, violations of California Corporations Code Section 1507, and a claim
for treble damages under California Civil Code Section 3345.
On July 31, 1997, defendants filed with the district court for the Northern
District of California (Case No. C-97-2847 WHO) a petition (the petition) under
the Federal Arbitration Act seeking to compel arbitration of plaintiff's claims
and for an order staying the state court proceedings pending the outcome of the
arbitration. In connection with this motion, plaintiff agreed to a stay of the
state court action pending the district court's decision on the petition to
compel arbitration. In October 1997, the district court denied the Company's
petition to compel arbitration, but in November 1997, agreed to hear the
Company's motion for reconsideration of this order. The hearing on this motion
has been taken off calendar and the district court has dismissed the petition
pending settlement of the Romei action, as discussed below. The state court
action continues to be stayed pending such resolution. In connection with her
opposition to the petition to compel arbitration, plaintiff filed an amended
complaint with the state court in August 1997, alleging two new causes of action
for violations of the California Securities Law of 1968 (California Corporations
Code Sections 25400 and 25500) and for violation of California Civil Code
Sections 1709 and 1710. Plaintiff also served certain discovery requests on
defendants. Because of the stay, no response to the amended complaint or to the
discovery is currently required.
In May 1998, all parties to the Koch and Romei actions entered into a memorandum
of understanding (MOU) related to the settlement of those actions (the monetary
settlement). The monetary settlement contemplated by the MOU provides for
stipulating to a class for settlement purposes, and a settlement and release of
all claims against defendants and third party brokers in exchange for payment
for the benefit of the class of up to $6.0 million. The final settlement amount
will
<PAGE>
13. COMMITMENTS AND CONTINGENCIES (continued)
Litigation (continued)
depend on the number of claims filed by authorized claimants who are members of
the class, the amount of the administrative costs incurred in connection with
the settlement, and the amount of attorneys' fees awarded by the Alabama
district court. The Company will pay up to $0.3 million of the monetary
settlement, with the remainder being funded by an insurance policy.
The parties to the monetary settlement have also agreed in principal to an
equitable settlement (the equitable settlement) which provides, among other
things: (a) for the extension of the operating lives of Funds V, VI, and VII by
judicial amendment to each of their partnership agreements, such that FSI, the
general partner of each such partnership, will be permitted to reinvest cash
flow, surplus partnership funds or retained proceeds in additional equipment
into the year 2004, and will liquidate the partnerships' equipment in 2006; (b)
that FSI is entitled to earn front-end fees (including acquisition and lease
negotiation fees) in excess of the compensatory limitations set forth in the
NASAA Statement of Policy by judicial amendment to the partnership agreements
for Funds V, VI, and VII; (c) for a one-time redemption of up to 10% of the
outstanding units of Funds V, VI, and VII at 80% of such partnership's net asset
value; and (d) for the deferral of a portion of FSI's management fees. The
equitable settlement also provides for payment of the equitable class attorneys'
fees from partnership funds in the event that distributions paid to investors in
Funds V, VI, and VII during the extension period reach a certain internal rate
of return.
Defendants will continue to deny each of the claims and contentions and admit no
liability in connection with the proposed settlements. The monetary settlement
remains subject to numerous conditions, including but not limited to: (a)
agreement and execution by the parties of a settlement agreement (the settlement
agreement), (b) notice to and certification of the monetary class for purposes
of the monetary settlement, and (c) preliminary and final approval of the
monetary settlement by the Alabama district court. The equitable settlement
remains subject to numerous conditions, including but not limited to: (a)
agreement and execution by the parties of the settlement agreement, (b) notice
to the current unitholders in Funds V, VI, and VII (the equitable class) and
certification of the equitable class for purposes of the equitable settlement,
(c) preparation, review by the Securities and Exchange Commission (SEC), and
dissemination to the members of the equitable class of solicitation statements
regarding the proposed extensions, (d) disapproval by less than 50% of the
limited partners in Funds V, VI, and VII of the proposed amendments to the
limited partnership agreements, (e) judicial approval of the proposed amendments
to the limited partnership agreements, and (f) preliminary and final approval of
the equitable settlement by the Alabama district court. The parties submitted
the settlement agreement to the Alabama district court on February 12, 1999, and
the preliminary class certification hearing is scheduled for March 24, 1999. If
the district court grants preliminary approval, notices to the monetary class
and equitable class will be sent following review by the SEC of the solicitation
statements to be prepared in connection with the equitable settlement. The
monetary settlement, if approved, will go forward regardless of whether the
equitable settlement is approved or not. The Company continues to believe that
the allegations of the Koch and Romei actions are completely without merit and
intends to continue to defend this matter vigorously if the monetary settlement
is not consummated.
The Company is involved as plaintiff or defendant in various other legal actions
incident to its business. Management does not believe that any of these actions
will be material to the financial condition of the Company.
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 $1.7
million, $2.1 million, and $2.4 million in 1998, 1997, and 1996, respectively.
The portion of rent expense related to its principal office, net of sublease
income of $0.8 million, $0.4 million, and $38,000 in 1998, 1997, and 1996,
respectively, was $0.5 million, $0.9 million, and $1.3 million in 1998, 1997,
and 1996, respectively. The remaining rent expense was related to other office
space and rental yard operations.
Annual lease commitments for all of the Company's locations total $2.8 million
in 1999, $2.5 million in 2000, $1.1 million in 2001, $0.3 million in 2002, and
$0.1 million in 2003.
13. COMMITMENTS AND CONTINGENCIES (continued)
Purchase Commitments
As of December 31, 1998, the Company had committed to purchase $40.5 million of
equipment for its commercial and industrial equipment lease and finance
receivable portfolio, of which $8.7 million had been received by lessees and
accrued for as of December 31, 1998. This includes equipment that will be held
by the Company and equipment that will be sold to third parties.
From January 1, 1999 through March 9, 1999, the Company funded $8.1 million of
commitments outstanding for its commercial and industrial equipment lease and
finance receivables portfolio as of December 31, 1998.
As of March 9, 1999, the Company had committed to purchase $51.7 million of
equipment for its commercial and industrial lease and finance receivables
portfolio.
Letter of Credit
As of December 31, 1998, the Company had a $0.3 million open letter of credit to
cover its guarantee of the payment of the outstanding debt of a Canadian railcar
repair facility, in which the Company has a 10% ownership interest. The Company
intends to renew this letter of credit in the first quarter of 1999.
Other
The Company provides employment contracts to certain officers that provide for
certain payments in the event of a change of control and termination of
employment. The Company has an agreement with one officer at AFG that requires
the Company to pay, under certain circumstances, an amount equal to two years'
salary plus insurance coverage if the Company terminates this employee's
employment. The Company may enter into similar agreements with other AFG
employees in the future.
The Company has agreed to provide supplemental retirement benefits to 11 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 1998, $0.4 million for 1997, and $0.2 million for 1996. As of December 1998,
the total estimated future obligation relating to the current participants is
$3.4 million, including vested benefits of $1.8 million. In connection with
these arrangements, whole-life insurance contracts were purchased on certain of
the participants. Insurance premiums of $0.3 million were paid during 1998,
1997, and 1996. The Company has recorded $1.4 million in cash surrender values
relating to these contracts as of December 31, 1998, which are included in other
assets.
14. SHAREHOLDERS' EQUITY
Common Stock
In March 1997, the Company announced that the Board of Directors had authorized
the repurchase of up to $5.0 million of the Company's common stock. During 1997,
766,200 shares had been repurchased under this plan, for a total of $4.4
million.
In November 1997, the Company's stockholders approved a proposal to amend
Article Fourth of the Company's Certificate of Incorporation to effect a
1-for-200 reverse stock split followed by a 200-for-1 forward stock split. As a
result of the stock splits, the number of shares outstanding was reduced by
561,544 shares. The Company is repurchasing these shares at $5.58 per share when
the stock certificates are tendered to the Company's transfer agent.
During 1998, the Company repurchased an additional 106,200 shares for $0.6
million, which completed the $5.0 million common stock repurchase 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, had been
repurchased under this plan.
<PAGE>
14. SHAREHOLDERS' EQUITY (continued)
Common Stock (continued)
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.
The following table summarizes changes in common stock during 1997 and 1998:
<TABLE>
<CAPTION>
Issued Outstanding
Common Treasury Common
Shares Shares Shares
--------------------------------------------------------
<S> <C> <C> <C>
Shares as of December 31, 1996 12,596,391 3,453,630 9,142,761
Reissuance of treasury stock, net -- (60,003 ) 60,003
Stock repurchased (561,544 ) 247,858 (809,402 )
------------------------------------------------------
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
======================================================
</TABLE>
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, 1998 or December
31, 1997.
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 generally occurs in three equal installments of 33.3%
per year, initiating from the date of the grant. As of December 31, 1998, grants
could no longer be made under the employee option plan and 60,000 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 generally occurs in
three equal installments of 33.3% per year, initiating from the date of the
grant.
<PAGE>
14. SHAREHOLDERS' EQUITY (continued)
Stock Option Plans (continued)
Stock option transactions during 1996, 1997, and 1998 are summarized as follows:
<TABLE>
<CAPTION>
Number of Average
Options/ Option Price
Shares Per Share
------------------------------------
<S> <C> <C>
Balance, December 31, 1995 603,800 $ 2.24
Granted 246,000 3.16
Canceled (153,000 ) 2.07
Exercised (10,000 ) 2.00
------------------------------------
Balance, December 31, 1996 686,800 $ 2.61
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
====================================
</TABLE>
As of December 31, 1998, 1997, and 1996, respectively, 337,500, 343,037, and
381,633 of these options were exercisable.
The following table summarizes information about fixed stock options outstanding
as of December 31, 1998:
Options outstanding:
Range of exercise prices $2.00-6.81
Number outstanding, December 31, 1998 929,500
Weighted-average exercise price $4.92
Options exercisable:
Number exercisable, December 31, 1998 337,500
Weighted-average exercise price $2.47
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 1998, 1997, and 1996, respectively: 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 5.16%,
5.58%, and 5.53%. The weighted-average fair market value per share of options
granted during 1998, 1997, and 1996 was $1.86, $1.38, and $1.10, respectively.
<PAGE>
14. SHAREHOLDERS' EQUITY (continued)
Stock Option Plans (continued)
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):
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Net income As reported $ 4,857 $ 4,667 $ 4,095
Pro forma 4,578 4,562 3,997
Basic earnings per share As reported 0.58 0.51 0.41
Pro forma 0.55 0.50 0.40
Diluted earnings per share As reported 0.57 0.50 0.40
Pro forma 0.54 0.49 0.39
</TABLE>
Shareholder Rights
On March 12, 1989, the Company distributed rights as a dividend on each
outstanding share of common stock. Upon the occurrence of certain events,
characterized as unsolicited or abusive attempts to acquire control of the
Company, the rights would have become exercisable. On June 10, 1997, the Company
announced the redemption of these rights for $0.01 per right. Shareholders of
record as of June 24, 1997 were paid a total of $0.1 million for the redemption
of these rights on July 24, 1997.
15. 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 1998, 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 1998, 1997, and 1996 to
vest in four equal installments over a four-year period. The Company's total
401(k) contributions were $0.3 million for 1998, 1997, and 1996, respectively.
During 1998, 1997, and 1996, 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, $0.2 million, and $0.2 million for 1998, 1997,
and 1996, respectively.
16. 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 $6.1 million,
$6.4 million, and $6.2 million in 1998, 1997, and 1996, respectively, have been
recorded as reductions of operations support or general and administrative
expenses. Outstanding amounts are paid under normal business terms.
17. 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
<PAGE>
17. RISK MANAGEMENT (continued)
Concentrations of Credit Risk (continued)
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.
As of December 31, 1998, the Company's five largest customers accounted for
approximately 37% of its commercial and industrial equipment lease and finance
receivables. No single lessee of the Company's equipment accounted for more than
10% of revenues for the years ended December 31, 1998, 1997, or 1996. As of
December 31, 1998 and 1997, 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.
Interest-Rate Risk Management
The Company is required to hedge at least 90% of the ADLB of those leases
designated for its nonrecourse securitization facility. As of December 31, 1998,
94.8% of the ADLB had been hedged. The Company has 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,
1998, the swap agreements had a weighted-average duration of 1.28 years,
corresponding to the terms of the remaining debt. As of December 31, 1998, a
notional amount of $99.0 million of interest-rate swap agreements effectively
fixed interest rates at an average of 6.59% on such obligations. Interest
expense was increased by $0.4 million, $0.3 million, and $0.1 million due to
these arrangements in 1998, 1997, and 1996, respectively.
18. OPERATING SEGMENTS
The Company operates in three operating segments: trailer leasing, commercial
and industrial equipment leasing and financing, and the management of investment
programs and other transportation equipment leasing. The trailer equipment
leasing segment includes 16 trailer rental facilities that engage in short-term
to mid-term operating leases of refrigerated and dry van trailers to a variety
of customers, and management of trailers for the investment programs. The
commercial and industrial equipment leasing and financing segment originates
finance and operating leases and loans on commercial and industrial equipment
that is financed through a securitization facility, brokers equipment, and
manages institutional programs. The management of investment programs and other
transportation equipment leasing segment manages its syndicated investment
programs, from which it earns fees and equity interests, and arranges short-term
to mid-term operating leases of other transportation equipment.
The Company evaluates the performance of each segment based on profit or loss
from operations before allocating general and administrative expenses and before
allocating income taxes. The segments are managed separately because each
operation requires different business strategies.
<PAGE>
18. OPERATING SEGMENTS (continued)
The following tables present a summary of the operating segments (in thousands
of dollars):
<TABLE>
<CAPTION>
Commercial Management
and of Investment
Industrial Programs
Equipment and Other
Leasing Transportation
Trailer and Equipment
For the year ended December 31, 1998 Leasing Financing Leasing Other<F1> Total
- ------------------------------------
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Lease revenue $9,743 $20,254 $2,479 $ -- $32,476
Fees earned 1,022 2,132 11,940 -- 15,094
Gain on sale or disposition of assets, net 94 3,204 1,395 -- 4,693
Other 4 1,217 3,594 -- 4,815
-------------------------------------------------------------------------
Total revenues 10,863 26,807 19,408 -- 57,078
-------------------------------------------------------------------------
Costs and expenses
Operations support 5,127 4,449 5,909 2,086 17,571
Depreciation and amortization 3,802 6,808 1,223 -- 11,833
General and administrative expenses -- -- -- 7,086 7,086
-------------------------------------------------------------------------
Total costs and expenses 8,929 11,257 7,132 9,172 36,490
-------------------------------------------------------------------------
Operating income (loss) 1,934 15,550 12,276 (9,172) 20,588
Interest expense, net (1,754) (10,277) (1,343) 212 (13,162)
Other income (expenses), net -- (1) 474 -- 473
-------------------------------------------------------------------------
Income (loss) before income taxes $ 180 $ 5,272 $11,407 $(8,960) $ 7,899
=========================================================================
Total assets as of December 31, 1998 $50,819 $197,454 $31,499 $ 12,297 $292,069
=========================================================================
<FN>
<F1> Includes costs not identifiable to a particular segment such as general and
administrative and certain operations support expenses.
</FN>
</TABLE>
<TABLE>
<CAPTION>
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<F1> Total
- ------------------------------------
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Lease revenue $5,544 $ 13,832 $5,086 $ -- $24,462
Fees earned 1,283 1,971 12,511 -- 15,765
Gain on sale or disposition of assets, net 313 1,975 1,432 -- 3,720
Other 2 718 4,998 -- 5,718
-------------------------------------------------------------------------
Total revenues 7,142 18,496 24,027 -- 49,665
-------------------------------------------------------------------------
Costs and expenses
Operations support 3,282 4,466 6,878 2,007 16,633
Depreciation and amortization 1,672 3,958 2,817 -- 8,447
General and administrative expenses -- -- -- 9,472 9,472
-------------------------------------------------------------------------
Total costs and expenses 4,954 8,424 9,695 11,479 34,552
-------------------------------------------------------------------------
Operating income (loss) 2,188 10,072 14,332 (11,479) 15,113
Interest expense, net (1,201) (5,476) (2,060) 481 (8,256)
Other expenses, net (2) -- (340) -- (342)
=========================================================================
Income (loss) before income taxes $ 985 $ 4,596 $11,932 $(10,998) $ 6,515
=========================================================================
Total assets as of December 31, 1997 $37,146 $150,681 $41,817 $ 6,639 $236,283
=========================================================================
<FN>
<F1> Includes costs not identifiable to a particular segment such as general and
administrative and certain operations support expenses.
</FN>
</TABLE>
18. OPERATING SEGMENTS (continued)
<TABLE>
<CAPTION>
Commercial Management
and of Investment
Industrial Programs
Equipment and Other
Leasing Transportation
Trailer and Equipment
For the year ended December 31, 1996 Leasing Financing Leasing Other<F2> Total
- ------------------------------------
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Lease revenue $5,671 $8,080 $8,615 $ -- $22,366
Fees earned 1,292 1,620 18,480 -- 21,392
Gain on sale or disposition of assets, net 207 894 1,181 -- 2,282
Other 3 93 5,409 -- 5,505
------------------------------------------------------------------------
Total revenues 7,173 10,687 33,685 -- 51,545
------------------------------------------------------------------------
Costs and expenses
Operations support 4,299 4,003 11,342 1,951 21,595
Depreciation and amortization 1,445 3,599 6,274 -- 11,318
General and administrative expenses -- -- -- 7,956 7,956
------------------------------------------------------------------------
Total costs and expenses 5,744 7,602 17,616 9,907 40,869
------------------------------------------------------------------------
Operating income (loss) 1,429 3,085 16,069 (9,907) 10,676
Interest expense, net (1,225) (2,448) (2,440) -- (6,113)
Other expenses, net (6) (19) (645) -- (670)
========================================================================
Income (loss) before income taxes $ 198 $ 618 $12,984 $ (9,907) $ 3,893
========================================================================
Total assets as of December 31, 1996 $32,197 $98,653 $58,541 $9,358 $198,749
========================================================================
<FN>
<F1> Includes costs not identifiable to a particular segment such as general and
administrative and certain operations support expenses.
</FN>
</TABLE>
19. GEOGRAPHIC INFORMATION
Financial information about the Company's foreign and domestic operations
follow:
Revenues for the years ended December 31, 1998, 1997, and 1996 are as follows
(in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Domestic (including corporate) $ 55,125 $ 45,802 $ 42,493
International 1,953 3,863 9,052
==============================================
Total revenues $ 57,078 $ 49,665 $ 51,545
==============================================
</TABLE>
Long-lived assets as of December 31, 1998, 1997, and 1996 are as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Domestic (including corporate) $ 261,036 $ 198,993 $ 151,251
International 633 1,938 3,085
==============================================
Total long-lived assets $ 261,669 $ 200,931 $ 154,336
==============================================
</TABLE>
International operations are comprised primarily of international leasing,
brokerage, and other activities conducted primarily through the Company's
subsidiaries in Bermuda, Canada, and Australia.
<PAGE>
20. ESTIMATED FAIR VALUE OF THE COMPANY'S FINANCIAL INSTRUMENTS
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):
<TABLE>
<CAPTION>
1998 1997
------------------------------ -------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Financial assets:
Restricted cash (Note 7) $10,349 $10,349 $18,278 $18,278
Loans receivable (Note 3) 23,493 23,548 5,861 5,921
Financial liabilities:
Warehouse credit facility (Note 9) 34,420 34,420 23,040 23,040
Senior secured notes (Note 10) 28,199 28,199 23,843 23,843
Senior loan (Note 10) 14,706 15,137 20,588 20,946
Other secured debt (Note 10) 13,142 13,142 -- --
Nonrecourse securitized debt (Note 11) 103,637 103,637 71,302 71,302
Nonrecourse notes (Note 11) 7,585 7,673 10,000 10,407
Unrecognized financial instruments -- 683 -- 113
</TABLE>
21. QUARTERLY RESULTS OF OPERATIONS (unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1998 and 1997 (in thousands of dollars, except per share
amounts):
<TABLE>
<CAPTION>
Basic Earnings Diluted Earnings
Per Per
Weighted-Average Weighted-Average
Common Common
Income Share Share
Revenue Before Taxes Net Income Outstanding Outstanding
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 quarters:
First $ 12,544 $ 1,590 $ 983 $ 0.12 $ 0.11
Second 15,308 2,061 1,201 0.14 0.14
Third 14,923 2,169 1,362 0.16 0.16
Fourth 14,303 2,079 1,311 0.16 0.16
==============================================================================================
Total $ 57,078 $ 7,899 $ 4,857 $ 0.58 $ 0.57
==============================================================================================
1997 quarters:
First $ 12,451 $ 1,889 $ 1,281 $ 0.14 $ 0.14
Second 11,890 978 648 0.07 0.07
Third 12,929 1,943 1,319 0.14 0.14
Fourth 12,395 1,705 1,419 0.16 0.16
=============================================================================================
Total $ 49,665 $ 6,515 $ 4,667 $ 0.51 $ 0.50
=============================================================================================
</TABLE>
In the first quarter of 1997, the Company purchased and subsequently sold a
commercial aircraft to an unaffiliated third party for a net gain of $0.4
million, and recorded $0.1 million in legal fees related to the Koch action
(refer to Note 13).
In the second quarter of 1997, the Company purchased and subsequently sold a
commercial aircraft to an unaffiliated third party for a net gain of $0.4
million. In addition, the Company recorded a $0.1 million increase in legal fees
related to the Koch action (refer to Note 13) and a $0.5 million increase in
costs related to the Company's response to shareholder-sponsored initiatives.
<PAGE>
21. QUARTERLY RESULTS OF OPERATIONS (unaudited) (continued)
In the third quarter of 1997, the Company recorded $0.3 million in legal fees
related to the Koch action (refer to Note 13).
In the fourth quarter of 1997, the Company accrued $0.3 million in expenses for
a litigation settlement that was paid in 1998.
In the first quarter of 1998, the Company purchased and subsequently sold
railcars to an unaffiliated third party for a net gain of $0.5 million.
In the second quarter of 1998, the Company recorded a $0.5 million write-down of
its spare parts aircraft inventory located in Australia. In addition, the
Company recorded income of $0.7 million related to the settlement of a lawsuit
against Tera Power Corporation and others, and recorded expense of $0.3 million
related to a legal settlement for the Koch and Romei actions (refer to Note 13).
In the third quarter of 1998, the Company recorded a $0.2 million loss related
to the August sale of the Company's aircraft leasing and spare parts brokerage
subsidiary located in Australia, and recorded interest income of $0.3 million
for a tax refund receivable that had not previously been recognized.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on
this 18th day of December, 1992, by and between PLM INTERNATIONAL, INC.
("Employer") and Douglas P. Goodrich ("Employee").
WHEREAS, the Executive Committee of the Board of Directors deems it in
the best interest of the shareholders of the Employer to maintain a continuity
of management, and retain an experienced, successful and proven management team;
and
WHEREAS, Douglas P. Goodrich has accepted the appointment of the Board
of Directors to the position(s) of President, PLM Railcar Management Services,
Inc.;
W I T N E S S E T H
That in consideration of the covenants, duties, terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Services. Employer hereby engages the exclusive services of Employee
as President, PLM Railcar Management Services, Inc., with his powers and duties
in that capacity to be determined by Employer's Board of Directors, and Employee
hereby agrees to perform such services on the terms and conditions herein
contained and to abide by all rules and regulations for the conduct of the
Employee that are now or may hereafter be established by Employer. In connection
with this Agreement, Employee shall be based at the principal executive offices
of Employer or at such location as may be designated from time to time by the
Board of Directors of Employer, except for required travel on Employer's
business to an extent substantially consistent with present business travel
obligations.
2. Employment Term. The term of this Agreement shall commence on the
date hereof (the "Commencement Date"), and shall continue for three (3) year(s)
(the "Original Term") unless terminated pursuant to Sections 10 or 11 of this
Agreement. One year from the Commencement Date and each anniversary thereafter,
the term of this Agreement shall be automatically extended one (1) additional
year unless prior to such anniversary of the Commencement Date, the Employer
shall have delivered to the Employee notice of a determination made pursuant to
Section 10.1(C) of this Agreement, or Employee shall have delivered to the
Employer written notice that the term of this Agreement shall not be extended.
3. Compensation.
3.1 Employer shall pay to Employee as full compensation for
all services performed, the sum of one hundred twenty-five thousand dollars
($125,000) per year (or such higher amount as may be agreed to by Employer and
Employee from time to time)(the original amount or the adjusted amount, if
applicable, being the "Base Salary") payable in equal semimonthly installments.
Employee's compensation may be adjusted from time to time, but it may not be
reduced below the Base Salary without the Employee's prior written consent.
3.2 Employer may deduct and withhold from all payments to be
made to Employee hereunder the amounts required or permitted to be deducted or
withheld pursuant to any provisions of any present or future 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. The Employee shall be eligible to participate in any bonus or
incentive compensation plan for which Employee or other senior executives of
Employer may reasonably expect to participate (the "Incentive Compensation
Plan"). 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.
5. Other Benefits. Employer shall maintain in full force and effect,
and Employee shall be entitled to continue to participate in, all of Employer'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, supplemental
pension and retirement plan and arrangement, stock option plan, life insurance
plan and arrangement, health-and-accident plan and arrangement, medical
insurance plan and arrangement, disability plan and arrangement, survivor income
plan and arrangement, relocation plan and vacation plan) (the "Employee Benefit
Plans"); provided, however, that this Section 5 shall not apply to any of
Employer's Incentive Compensation Plan(s). Employer 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 Employer and does 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 Employer. Employee shall
be entitled to participate in and receive benefits under any Employee Benefit
Plan or arrangement made available by Employer 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 the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to Section 3.1 hereof or
pursuant to an Incentive Compensation Plan as provided in Section 4 hereof. Any
payments or benefits payable to the Employee hereunder with respect to any
calendar year during which Employee is employed by Employer for less than the
entire such year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such calendar
year during which he is employed; provided, however, benefits or payments
payable to Employee under any life insurance plan or arrangement,
health-and-accident plan or arrangement or disability plan or arrangement shall
be payable on behalf of Employee by Employer for a period of six (6) months
after termination of employment hereunder.
6. Other Interests. Employee shall devote his time and attention solely
to the business and interest of Employer, and Employer shall be entitled to all
the benefits arising from or incident to Employee's services. During the
employment term, Employee shall not, without Employer's written consent, have
any interest in any business which conflicts either directly or indirectly with
Employer'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 Employer's business activities are secret in nature and constitute trade
secrets, including but not limited to Employer's "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. All Employer's trade secrets and
proprietary information are and shall be the property of Employer, for its own
exclusive use and benefit, and Employee agrees that he will hold the same in
strictest confidence and will not at any time, either during or after his
employment by the Employer, use or permit the use of the same for his own
benefit or for the benefit of others unless authorized to do so by the
Employer's written consent or by a contract or agreement to which the Employer
is a party or by which it is bound.
8. Services Furnished. During the term of Employee's employment with
Employer, Employer 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 (other than compensation accruing to any other person serving in
such capacity), if elected or appointed a director of the Employer 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.
10. Termination by Employer. Employee's employment hereunder may be
terminated by Employer without any breach of this Agreement only under the
following circumstances:
10.1 If occurring prior to a Change in Control (as herein-
after defined):
(A) Death. Employee's employment hereunder shall
terminate upon his 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
duties hereunder for the entire period of six (6) consecutive months, and within
thirty (30) days after written notice of termination is given (which may occur
before or after the end of such six month period) shall not have returned to the
performance of his duties hereunder on a full time basis, Employer may terminate
Employee's employment hereunder. Employee's absence or substantial absence from
his duties will be treated as resulting from incapacity due to physical or
mental illness if Employee is "totally disabled from his 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
occupation, (2) Employee is either receiving Doctor's Care or has furnished
written proof acceptable to Employer that further Doctor's Care would be of no
benefit, and (3) Employee does not work at all. Doctor's Care means the regular
and personal care of a Doctor which, under the prevailing medical standards, is
appropriate for the condition causing the disability.
(C) This Agreement may be terminated without cause,
in the sole, absolute and unreviewable discretion of Employer, by written notice
made by the President of Employer. Such notice shall state that the President of
Employer has determined that it is in the best interests of the Employer or its
shareholders to terminate this Agreement and the Employee's employment
hereunder.
10.2 If occurring subsequent to or resulting from a
Change in Control (as hereinafter defined):
(A) Death. Employee's employment hereunder shall
terminate upon his 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
duties hereunder for the entire period of six (6) consecutive months, and within
thirty (30) days after written notice of termination is given (which may occur
before or after the end of such six-month period) shall not have returned to the
performance of his duties hereunder on a full time basis, Employer may terminate
Employee's employment hereunder. Incapacity due to physical or mental illness
will be determined as provided in Section 10.1(B); or
(C) Cause. Employer may terminate Employee's
employment hereunder for Cause. For
purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure by
Employee to perform his duties hereunder (other than any failure resulting from
Employee's incapacity due to physical or mental illness) after demand for
substantial performance is delivered by Employer, which demand specifically
identifies the manner in which Employee has not substantially performed his
duties;
(ii) the willful and intentional act by the
Employee that is, in the reasonable determination of the Employer, materially
injurious to the Employer, monetarily or otherwise;
(iii) the breach by the Employee of any
material covenant of this Agreement; or
(iv) the conviction of the Employee of a
crime involving an act of moral turpitude or which is a felony resulting in or
intended to result, directly or indirectly, in gain or personal enrichment of
the Employee, relations of the Employee, or their affiliates at the expense of
the Employer.
For purposes of this Section 10, no act, or failure to act, on
Employee's part shall be considered willful unless done, or omitted to be done,
by him not in good faith and without the reasonable belief that his action(s) or
omission(s) was in the best interests of the Employer. Furthermore, no
termination of Employee's employment shall be effective until Notice of
Termination is given to Employee by Employer.
11. Termination by Employee. Employee may terminate his employment
hereunder upon thirty (30) days' written notice to Employer for any reason. If
Employee terminates his employment hereunder subsequent to a Change in Control
(as hereinafter defined) and such termination is made for any of the reasons
listed below, then such termination shall be deemed to have been done for good
reason ("Good Reason").
Reasons constituting Good Reason shall be limited to:
(A) any breach by Employer of any material provision
of this Agreement which has not been cured within ten (10) days after written
notice of such non-compliance is given by Employee to Employer;
(B) any demonstrable and material diminution of the
compensation, duties, responsibilities, authority or powers of Employee as such
relate to any positions or offices held by Employee immediately prior to such
Change in Control; provided that Employee provides a reasonable description of
any such diminution(s) and a statement that Employee finds, in good faith, that
the acts or omissions to act causing such diminution in duties,
responsibilities, authority or powers to be a material diminution and that, as
such, he elects to terminate his employment hereunder for Good Reason;
(C) the taking of, or failure to take, any action by
Employer which would deprive Employee of any material fringe benefit enjoyed at
the time of such Change in Control or the failure of Employer 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, determined in good faith to be due and owing Employee pursuant to any
such Employee Benefit Plan or Incentive Compensation Plan; or
(D) any requirement by the Employer that Employee
relocate his primary business office to a geographical area greater than twenty
(20) miles from Employer's principal executive offices as existing immediately
prior to the applicable Change in Control or, if Employee is based in an office
other than Employer's principal executive office, the office of Employer where
Employee is based immediately prior to the most recent Change in Control.
For purposes of this Agreement, a "Change in Control" shall
mean an event or series of events which would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), as amended; provided that
the following events shall be deemed a Change in Control whether or not
reportable as a Change in Control pursuant to Regulation 14A of the Exchange
Act:
(i) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date hereof
(a "Person")) acquiring "beneficial ownership" (as defined in Rule 13D-3 under
the Exchange Act, as in effect on the date hereof ("Beneficial Ownership")) of
securities of the Employer representing 36% or more of the combined voting power
of the Employer's then outstanding securities;
(ii) any Person, who does not have
Beneficial Ownership of securities of the Employer representing 5% or more of
the combined voting power of the outstanding securities of the Employer on the
date hereof, acquiring Beneficial Ownership of more than 15% of the combined
voting power of the securities of the Employer then outstanding; or
(iii) a change in the Board of
Directors, which change is the result of a proxy solicitation(s) or other
action(s) to influence voting at a shareholders' meeting of the Company (other
than by voting one's own stock) by a Person or group of Persons who has
Beneficial Ownership of 5% or more of the combined voting power of the
securities of the Employer and which causes the Continuing Directors to cease to
be a majority of the Board of Directors of the Employer; provided, however, that
none of the foregoing events shall be deemed to be a Change in Control if the
event(s) or election(s) causing such change shall have been approved
specifically for purposes of this Agreement by the affirmative vote of at least
a majority of the members of the Continuing Directors.
For purposes of this Agreement, "Continuing Directors" shall
mean a member of the Board of Directors who (i) is a member of the Board of
Directors on the date hereof, or (ii) who subsequently becomes a member of the
Board of Directors and who either (x) is appointed or recommended for election
with the affirmative vote of a majority of the Directors then in office who are
Directors on the date hereof, or (y) is appointed or recommended for election
with the affirmative vote of a majority of the Directors then in office who are
described in subsections (i) and (ii)(x) above, as applicable.
12. Compensation Upon Termination or During Disability.
12.1 During any period that Employee fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
Employee shall continue to receive his full Base Salary at the rate then in
effect for such period until his employment is terminated pursuant to Section 10
hereof.
12.2 If Employee's employment is terminated by his death,
Employer shall pay to Employee's spouse, or if Employee leaves no spouse, to his
estate, 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 such termination.
12.3 If Employee's employment shall be terminated for Cause,
the Employer shall pay Employee his full Base Salary through the date of such
termination at the rate in effect at the time Notice of Termination is given and
the Employer shall have no further obligations to the Employee under this
Agreement.
12.4 If (A) Employer shall terminate the Employee's employment
hereunder other than as permitted hereby or (B) the Employee shall terminate his
employment for Good Reason, then Employer shall pay Employee in cash or by
cashier's check within five (5) business days of such termination as Employee's
sole remedy for such termination the sum of (1) Employee's Base Salary or, if
greater, the base compensation rate in effect immediately prior to such
termination, multiplied by a number equal to the number of years in the Original
Term, (2) an amount equal to the greater of the amount paid and/or payable to
Employee or accrued by the Employer for Employee pursuant to all applicable
Incentive Compensation Plans (i) for the fiscal year of the Employer prior to
the fiscal year of any Change in Control or (ii) for the immediately preceding
fiscal year of the Employer (even though in either (i) or (ii) payable in the
next succeeding fiscal year(s) of Employer), multiplied by a number equal to the
number of years in the Original Term, and (3) all cash amounts due pursuant to
Section 5 hereof. The receipt of such payments shall constitute the sole remedy
of Employee for such termination and the making of such payments shall
constitute full performance by Employer under this Agreement. For purpose of
this Section 12.4 only, the Original Term, if greater than 2.99 years, shall be
2.99 years.
12.5 If the Employee shall terminate his employment pursuant
to Section 11 hereof for any reason other than Good Reason, Employer shall pay
Employee his full Base Salary through the date of such termination at the rate
in effect at the time Notice of Termination is given.
12.6 If Employee's employment shall be terminated pursuant to
Section 10.1 (C) then Employer shall pay Employee and provide benefits to
Employee pursuant to the standard policy of Employer.
12.7 The Employee shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise.
13. Stock Options. In the event Employee's employment with Employer is
terminated pursuant to Section 11 for Good Reason, any and all options to
purchase stock (common or otherwise) in the Employer granted pursuant to any
plan or otherwise, or any equivalent or similar rights which appreciate or tend
to appreciate as the value of the Employer's stock appreciates, shall become
immediately accelerated and fully vested and any restrictions on such options or
equivalent or similar rights shall, to the extent permissible under applicable
securities laws, fully lapse. Employer shall endeavor to cause any restrictions
on such options or equivalent or similar rights not lapsed by operation of this
Section 13 to so lapse.
14. Covenant not to Compete. Employee, in consideration of the
compensation and other benefits to be received by him pursuant to this
Agreement, expressly agrees that he will not, within a radius of fifty (50)
miles from any place of business of the Employer, engage directly or indirectly,
as employee, principal, agent, partner, director or independent contractor or
otherwise in any business which is competitive to that of the Employer for a
period equal to the Original Term after he ceases to be employed by the
Employer.
15. Non-solicitation. Except in the case of a termination pursuant to
Section 11 for Good Reason, for a period equal to the Original Term following
termination of this Agreement, Employee shall not directly or indirectly solicit
any of Employer's customers existing as of the date of termination. If Employee
violates this Section 15, Section 14 or the confidentiality provisions of
Section 7, and continues to do so after Employer has notified Employee of such
violation, Employer 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; provided that Employer demonstrates that Employee's
solicitations result in direct financial detriment to Employer.
16. Arbitration. Except as provided in Section 15, if a dispute arises
between Employer and Employee concerning termination of this Agreement under
Section 10 or 11 above or otherwise, the disputed matter shall be submitted to
arbitration.
Any disputed matter shall be settled by arbitration in the
City of San Francisco, California in accordance with the commercial 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 State of California 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.
17. Taxes. Notwithstanding anything herein to the contrary, Employer
shall not be obligated to pay any portion of any amount otherwise payable to
Employee hereunder if Employer is not reasonably able to deduct such portion
(the "Excess Amount") solely by operation of Section 280G (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"). Employer shall be deemed able to reasonably deduct such
Excess Amount; and all amounts accruing hereunder, including the Excess Amount,
shall be paid Employee in the event Employee delivers to Employer an opinion of
an attorney that is reasonably acceptable to Employer stating such Excess Amount
is reasonably deductible by Employer by operation of Section 280G (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. Miscellaneous.
18.1 Written notices required by this Agreement shall be sent
to Employer or Employee by certified mail, with a return receipt requested, to
Employer's registered address and to Employee's last shown address on Employer's
records, respectively. Such notice shall be deemed to be delivered two days
after mailing.
18.2 This Agreement contains the full and complete
understanding of the parties and supersedes all prior representations, promises,
agreements, and warranties, whether oral or written.
18.3 This Agreement shall be governed by and interpreted
according to the laws of the State of California.
18.4 With respect to Employer, this Agreement shall inure to
the benefit of and be binding upon any successors or assigns of Employer. With
respect to Employee, this Agreement shall not be assignable, but shall inure to
the benefit of and be binding upon the heirs, executors, administrators, and
successors of Employee.
18.5 The captions of the various sections of this Agreement
are inserted only for convenience and shall not be considered in construing this
Agreement.
18.6 This Agreement can be modified, amended or any of its
terms waived only by a writing signed by both parties.
18.7 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.
18.8 Without limiting the provisions of Section 16, if either
party institutes arbitration proceedings pursuant to Section 16 or an action to
enforce the terms of this Agreement, the prevailing party in such proceeding or
action shall be entitled to recover reasonable attorneys' fees, costs and
expenses.
18.9 No remedy made available to Employer 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.
18.10 This Agreement supercedes any prior Employment Agreement
which may be in effect between Employer and Employee, and any such prior
agreement is hereby terminated.
IN WITNESS WHEREOF, this Agreement has been executed on the
day and year specified above.
EMPLOYER:
PLM INTERNATIONAL, INC.
By: /s/ Robert N. Tidball
Its: President
ATTEST:
/s/ John J. Brogan
EMPLOYEE:
/s/ Douglas P. Goodrich
ATTEST:
/s/ John J. Brogan
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on
this 18th day of December, 1992, by and between PLM INTERNATIONAL, INC.
("Employer") and Douglas P. Goodrich ("Employee").
WHEREAS, the Executive Committee of the Board of Directors deems it in
the best interest of the shareholders of the Employer to maintain a continuity
of management, and retain an experienced, successful and proven management team;
and
WHEREAS, Douglas P. Goodrich has accepted the appointment of the Board
of Directors to the position(s) of President, PLM Railcar Management Services,
Inc.;
W I T N E S S E T H
That in consideration of the covenants, duties, terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Services. Employer hereby engages the exclusive services of Employee
as President, PLM Railcar Management Services, Inc., with his powers and duties
in that capacity to be determined by Employer's Board of Directors, and Employee
hereby agrees to perform such services on the terms and conditions herein
contained and to abide by all rules and regulations for the conduct of the
Employee that are now or may hereafter be established by Employer. In connection
with this Agreement, Employee shall be based at the principal executive offices
of Employer or at such location as may be designated from time to time by the
Board of Directors of Employer, except for required travel on Employer's
business to an extent substantially consistent with present business travel
obligations.
2. Employment Term. The term of this Agreement shall commence on the
date hereof (the "Commencement Date"), and shall continue for three (3) year(s)
(the "Original Term") unless terminated pursuant to Sections 10 or 11 of this
Agreement. One year from the Commencement Date and each anniversary thereafter,
the term of this Agreement shall be automatically extended one (1) additional
year unless prior to such anniversary of the Commencement Date, the Employer
shall have delivered to the Employee notice of a determination made pursuant to
Section 10.1(C) of this Agreement, or Employee shall have delivered to the
Employer written notice that the term of this Agreement shall not be extended.
3. Compensation.
3.1 Employer shall pay to Employee as full compensation for
all services performed, the sum of one hundred twenty-five thousand dollars
($125,000) per year (or such higher amount as may be agreed to by Employer and
Employee from time to time)(the original amount or the adjusted amount, if
applicable, being the "Base Salary") payable in equal semimonthly installments.
Employee's compensation may be adjusted from time to time, but it may not be
reduced below the Base Salary without the Employee's prior written consent.
3.2 Employer may deduct and withhold from all payments to be
made to Employee hereunder the amounts required or permitted to be deducted or
withheld pursuant to any provisions of any present or future 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. The Employee shall be eligible to participate in any bonus or
incentive compensation plan for which Employee or other senior executives of
Employer may reasonably expect to participate (the "Incentive Compensation
Plan"). 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.
5. Other Benefits. Employer shall maintain in full force and effect,
and Employee shall be entitled to continue to participate in, all of Employer'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, supplemental
pension and retirement plan and arrangement, stock option plan, life insurance
plan and arrangement, health-and-accident plan and arrangement, medical
insurance plan and arrangement, disability plan and arrangement, survivor income
plan and arrangement, relocation plan and vacation plan) (the "Employee Benefit
Plans"); provided, however, that this Section 5 shall not apply to any of
Employer's Incentive Compensation Plan(s). Employer 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 Employer and does 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 Employer. Employee shall
be entitled to participate in and receive benefits under any Employee Benefit
Plan or arrangement made available by Employer 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 the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to Section 3.1 hereof or
pursuant to an Incentive Compensation Plan as provided in Section 4 hereof. Any
payments or benefits payable to the Employee hereunder with respect to any
calendar year during which Employee is employed by Employer for less than the
entire such year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such calendar
year during which he is employed; provided, however, benefits or payments
payable to Employee under any life insurance plan or arrangement,
health-and-accident plan or arrangement or disability plan or arrangement shall
be payable on behalf of Employee by Employer for a period of six (6) months
after termination of employment hereunder.
6. Other Interests. Employee shall devote his time and attention solely
to the business and interest of Employer, and Employer shall be entitled to all
the benefits arising from or incident to Employee's services. During the
employment term, Employee shall not, without Employer's written consent, have
any interest in any business which conflicts either directly or indirectly with
Employer'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 Employer's business activities are secret in nature and constitute trade
secrets, including but not limited to Employer's "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. All Employer's trade secrets and
proprietary information are and shall be the property of Employer, for its own
exclusive use and benefit, and Employee agrees that he will hold the same in
strictest confidence and will not at any time, either during or after his
employment by the Employer, use or permit the use of the same for his own
benefit or for the benefit of others unless authorized to do so by the
Employer's written consent or by a contract or agreement to which the Employer
is a party or by which it is bound.
8. Services Furnished. During the term of Employee's employment with
Employer, Employer 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 (other than compensation accruing to any other person serving in
such capacity), if elected or appointed a director of the Employer 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.
10. Termination by Employer. Employee's employment hereunder may be
terminated by Employer without any breach of this Agreement only under the
following circumstances:
10.1 If occurring prior to a Change in Control (as
hereinafter defined):
(A) Death. Employee's employment hereunder shall
terminate upon his 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
duties hereunder for the entire period of six (6) consecutive months, and within
thirty (30) days after written notice of termination is given (which may occur
before or after the end of such six month period) shall not have returned to the
performance of his duties hereunder on a full time basis, Employer may terminate
Employee's employment hereunder. Employee's absence or substantial absence from
his duties will be treated as resulting from incapacity due to physical or
mental illness if Employee is "totally disabled from his 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
occupation, (2) Employee is either receiving Doctor's Care or has furnished
written proof acceptable to Employer that further Doctor's Care would be of no
benefit, and (3) Employee does not work at all. Doctor's Care means the regular
and personal care of a Doctor which, under the prevailing medical standards, is
appropriate for the condition causing the disability.
(C) This Agreement may be terminated without cause,
in the sole, absolute and unreviewable discretion of Employer, by written notice
made by the President of Employer. Such notice shall state that the President of
Employer has determined that it is in the best interests of the Employer or its
shareholders to terminate this Agreement and the Employee's employment
hereunder.
10.2 If occurring subsequent to or resulting from a Change in
Control (as hereinafter defined):
(A) Death. Employee's employment hereunder shall
terminate upon his 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
duties hereunder for the entire period of six (6) consecutive months, and within
thirty (30) days after written notice of termination is given (which may occur
before or after the end of such six-month period) shall not have returned to the
performance of his duties hereunder on a full time basis, Employer may terminate
Employee's employment hereunder. Incapacity due to physical or mental illness
will be determined as provided in Section 10.1(B); or
(C) Cause. Employer may terminate Employee's
employment hereunder for Cause. For
purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure by
Employee to perform his duties hereunder (other than any failure resulting from
Employee's incapacity due to physical or mental illness) after demand for
substantial performance is delivered by Employer, which demand specifically
identifies the manner in which Employee has not substantially performed his
duties;
(ii) the willful and intentional act by the
Employee that is, in the reasonable determination of the Employer, materially
injurious to the Employer, monetarily or otherwise;
(iii) the breach by the Employee of any
material covenant of this
Agreement; or
(iv) the conviction of the Employee of a
crime involving an act of moral turpitude or which is a felony resulting in or
intended to result, directly or indirectly, in gain or personal enrichment of
the Employee, relations of the Employee, or their affiliates at the expense of
the Employer.
For purposes of this Section 10, no act, or failure to act, on
Employee's part shall be considered willful unless done, or omitted to be done,
by him not in good faith and without the reasonable belief that his action(s) or
omission(s) was in the best interests of the Employer. Furthermore, no
termination of Employee's employment shall be effective until Notice of
Termination is given to Employee by Employer.
11. Termination by Employee. Employee may terminate his employment
hereunder upon thirty (30) days' written notice to Employer for any reason. If
Employee terminates his employment hereunder subsequent to a Change in Control
(as hereinafter defined) and such termination is made for any of the reasons
listed below, then such termination shall be deemed to have been done for good
reason ("Good Reason").
Reasons constituting Good Reason shall be limited to:
(A) any breach by Employer of any material provision
of this Agreement which has not been cured within ten (10) days after written
notice of such non-compliance is given by Employee to Employer;
(B) any demonstrable and material diminution of the
compensation, duties, responsibilities, authority or powers of Employee as such
relate to any positions or offices held by Employee immediately prior to such
Change in Control; provided that Employee provides a reasonable description of
any such diminution(s) and a statement that Employee finds, in good faith, that
the acts or omissions to act causing such diminution in duties,
responsibilities, authority or powers to be a material diminution and that, as
such, he elects to terminate his employment hereunder for Good Reason;
(C) the taking of, or failure to take, any action by
Employer which would deprive Employee of any material fringe benefit enjoyed at
the time of such Change in Control or the failure of Employer 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, determined in good faith to be due and owing Employee pursuant to any
such Employee Benefit Plan or Incentive Compensation Plan; or
(D) any requirement by the Employer that Employee
relocate his primary business office to a geographical area greater than twenty
(20) miles from Employer's principal executive offices as existing immediately
prior to the applicable Change in Control or, if Employee is based in an office
other than Employer's principal executive office, the office of Employer where
Employee is based immediately prior to the most recent Change in Control.
For purposes of this Agreement, a "Change in Control" shall
mean an event or series of events which would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), as amended; provided that
the following events shall be deemed a Change in Control whether or not
reportable as a Change in Control pursuant to Regulation 14A of the Exchange
Act:
(i) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date hereof
(a "Person")) acquiring "beneficial ownership" (as defined in Rule 13D-3 under
the Exchange Act, as in effect on the date hereof ("Beneficial Ownership")) of
securities of the Employer representing 36% or more of the combined voting power
of the Employer's then outstanding securities;
(ii) any Person, who does not have
Beneficial Ownership of securities of the Employer representing 5% or more of
the combined voting power of the outstanding securities of the Employer on the
date hereof, acquiring Beneficial Ownership of more than 15% of the combined
voting power of the securities of the Employer then outstanding; or
(iii) a change in the Board of
Directors, which change is the result of a proxy solicitation(s) or other
action(s) to influence voting at a shareholders' meeting of the Company (other
than by voting one's own stock) by a Person or group of Persons who has
Beneficial Ownership of 5% or more of the combined voting power of the
securities of the Employer and which causes the Continuing Directors to cease to
be a majority of the Board of Directors of the Employer; provided, however, that
none of the foregoing events shall be deemed to be a Change in Control if the
event(s) or election(s) causing such change shall have been approved
specifically for purposes of this Agreement by the affirmative vote of at least
a majority of the members of the Continuing Directors.
For purposes of this Agreement, "Continuing Directors" shall
mean a member of the Board of Directors who (i) is a member of the Board of
Directors on the date hereof, or (ii) who subsequently becomes a member of the
Board of Directors and who either (x) is appointed or recommended for election
with the affirmative vote of a majority of the Directors then in office who are
Directors on the date hereof, or (y) is appointed or recommended for election
with the affirmative vote of a majority of the Directors then in office who are
described in subsections (i) and (ii)(x) above, as applicable.
12. Compensation Upon Termination or During Disability.
12.1 During any period that Employee fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
Employee shall continue to receive his full Base Salary at the rate then in
effect for such period until his employment is terminated pursuant to Section 10
hereof.
12.2 If Employee's employment is terminated by his death,
Employer shall pay to Employee's spouse, or if Employee leaves no spouse, to his
estate, 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 such termination.
12.3 If Employee's employment shall be terminated for Cause,
the Employer shall pay Employee his full Base Salary through the date of such
termination at the rate in effect at the time Notice of Termination is given and
the Employer shall have no further obligations to the Employee under this
Agreement.
12.4 If (A) Employer shall terminate the Employee's employment
hereunder other than as permitted hereby or (B) the Employee shall terminate his
employment for Good Reason, then Employer shall pay Employee in cash or by
cashier's check within five (5) business days of such termination as Employee's
sole remedy for such termination the sum of (1) Employee's Base Salary or, if
greater, the base compensation rate in effect immediately prior to such
termination, multiplied by a number equal to the number of years in the Original
Term, (2) an amount equal to the greater of the amount paid and/or payable to
Employee or accrued by the Employer for Employee pursuant to all applicable
Incentive Compensation Plans (i) for the fiscal year of the Employer prior to
the fiscal year of any Change in Control or (ii) for the immediately preceding
fiscal year of the Employer (even though in either (i) or (ii) payable in the
next succeeding fiscal year(s) of Employer), multiplied by a number equal to the
number of years in the Original Term, and (3) all cash amounts due pursuant to
Section 5 hereof. The receipt of such payments shall constitute the sole remedy
of Employee for such termination and the making of such payments shall
constitute full performance by Employer under this Agreement. For purpose of
this Section 12.4 only, the Original Term, if greater than 2.99 years, shall be
2.99 years.
12.5 If the Employee shall terminate his employment pursuant
to Section 11 hereof for any reason other than Good Reason, Employer shall pay
Employee his full Base Salary through the date of such termination at the rate
in effect at the time Notice of Termination is given.
12.6 If Employee's employment shall be terminated pursuant to
Section 10.1 (C) then Employer shall pay Employee and provide benefits to
Employee pursuant to the standard policy of Employer.
12.7 The Employee shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise.
13. Stock Options. In the event Employee's employment with Employer is
terminated pursuant to Section 11 for Good Reason, any and all options to
purchase stock (common or otherwise) in the Employer granted pursuant to any
plan or otherwise, or any equivalent or similar rights which appreciate or tend
to appreciate as the value of the Employer's stock appreciates, shall become
immediately accelerated and fully vested and any restrictions on such options or
equivalent or similar rights shall, to the extent permissible under applicable
securities laws, fully lapse. Employer shall endeavor to cause any restrictions
on such options or equivalent or similar rights not lapsed by operation of this
Section 13 to so lapse.
14. Covenant not to Compete. Employee, in consideration of the
compensation and other benefits to be received by him pursuant to this
Agreement, expressly agrees that he will not, within a radius of fifty (50)
miles from any place of business of the Employer, engage directly or indirectly,
as employee, principal, agent, partner, director or independent contractor or
otherwise in any business which is competitive to that of the Employer for a
period equal to the Original Term after he ceases to be employed by the
Employer.
15. Non-solicitation. Except in the case of a termination pursuant to
Section 11 for Good Reason, for a period equal to the Original Term following
termination of this Agreement, Employee shall not directly or indirectly solicit
any of Employer's customers existing as of the date of termination. If Employee
violates this Section 15, Section 14 or the confidentiality provisions of
Section 7, and continues to do so after Employer has notified Employee of such
violation, Employer 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; provided that Employer demonstrates that Employee's
solicitations result in direct financial detriment to Employer.
16. Arbitration. Except as provided in Section 15, if a dispute arises
between Employer and Employee concerning termination of this Agreement under
Section 10 or 11 above or otherwise, the disputed matter shall be submitted to
arbitration.
Any disputed matter shall be settled by arbitration in the
City of San Francisco, California in accordance with the commercial 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 State of California 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.
17. Taxes. Notwithstanding anything herein to the contrary, Employer
shall not be obligated to pay any portion of any amount otherwise payable to
Employee hereunder if Employer is not reasonably able to deduct such portion
(the "Excess Amount") solely by operation of Section 280G (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"). Employer shall be deemed able to reasonably deduct such
Excess Amount; and all amounts accruing hereunder, including the Excess Amount,
shall be paid Employee in the event Employee delivers to Employer an opinion of
an attorney that is reasonably acceptable to Employer stating such Excess Amount
is reasonably deductible by Employer by operation of Section 280G (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. Miscellaneous.
18.1 Written notices required by this Agreement shall be sent
to Employer or Employee by certified mail, with a return receipt requested, to
Employer's registered address and to Employee's last shown address on Employer's
records, respectively. Such notice shall be deemed to be delivered two days
after mailing.
18.2 This Agreement contains the full and complete
understanding of the parties and supersedes all prior representations, promises,
agreements, and warranties, whether oral or written.
18.3 This Agreement shall be governed by and interpreted
according to the laws of the State of California.
18.4 With respect to Employer, this Agreement shall inure to
the benefit of and be binding upon any successors or assigns of Employer. With
respect to Employee, this Agreement shall not be assignable, but shall inure to
the benefit of and be binding upon the heirs, executors, administrators, and
successors of Employee.
18.5 The captions of the various sections of this Agreement
are inserted only for convenience and shall not be considered in construing this
Agreement.
18.6 This Agreement can be modified, amended or any of its
terms waived only by a writing signed by both parties.
18.7 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.
18.8 Without limiting the provisions of Section 16, if either
party institutes arbitration proceedings pursuant to Section 16 or an action to
enforce the terms of this Agreement, the prevailing party in such proceeding or
action shall be entitled to recover reasonable attorneys' fees, costs and
expenses.
18.9 No remedy made available to Employer 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.
18.10 This Agreement supercedes any prior Employment Agreement
which may be in effect between Employer and Employee, and any such prior
agreement is hereby terminated.
IN WITNESS WHEREOF, this Agreement has been executed on the
day and year specified above.
EMPLOYER:
PLM INTERNATIONAL, INC.
By: /s/ Robert N. Tidball
Its: President
ATTEST:
/s/ John J. Brogan
EMPLOYEE:
/s/ Douglas P. Goodrich
ATTEST:
/s/ John J. Brogan
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on
this 19th day of July, 1994, by and between PLM INTERNATIONAL, INC. ("Employer")
and J. MICHAEL ALLGOOD ("Employee").
WHEREAS, the Board of Directors deems it in the best interest of the
shareholders of the Employer to maintain a continuity of management, and retain
an experienced, successful and proven management team; and
WHEREAS, J. Michael Allgood has accepted the appointment of the Board
of Directors to the position(s) of Vice President of Finance and Chief Financial
Officer, PLM International, Inc.;
W I T N E S S E T H
That in consideration of the covenants, duties, terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Services. Employer hereby engages the exclusive services of Employee
as Vice President of Finance and Chief Financial Officer, PLM International,
Inc., with his powers and duties in that capacity to be determined by Employer's
Board of Directors, and Employee hereby agrees to perform such services on the
terms and conditions herein contained and to abide by all rules and regulations
for the conduct of the Employee that are now or may hereafter be established by
Employer. In connection with this Agreement, Employee shall be based at the
principal executive offices of Employer or at such location as may be designated
from time to time by the Board of Directors of Employer, except for required
travel on Employer's business to an extent substantially consistent with present
business travel obligations.
2. Employment Term. The term of this Agreement shall commence on the
date hereof (the "Commencement Date"), and shall continue for three (3) year(s)
(the "Original Term") unless terminated pursuant to Sections 10 or 11 of this
Agreement. One year from the Commencement Date and each anniversary thereafter,
the term of this Agreement shall be automatically extended one (1) additional
year unless prior to such anniversary of the Commencement Date, the Employer
shall have delivered to the Employee notice of a determination made pursuant to
Section 10.1(C) of this Agreement, or Employee shall have delivered to the
Employer written notice that the term of this Agreement shall not be extended.
3. Compensation.
3.1 Employer shall pay to Employee as full compensation for
all services performed, the sum of one hundred thirty-five thousand dollars
($135,000) per year (or such higher amount as may be agreed to by Employer and
Employee from time to time)(the original amount or the adjusted amount, if
applicable, being the "Base Salary") payable in equal semimonthly installments.
Employee's compensation may be adjusted from time to time, but it may not be
reduced below the Base Salary without the Employee's prior written consent.
3.2 Employer may deduct and withhold from all payments to be
made to Employee hereunder the amounts required or permitted to be deducted or
withheld pursuant to any provisions of any present or future 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. The Employee shall be eligible to participate in any bonus or
incentive compensation plan for which Employee or other senior executives of
Employer may reasonably expect to participate (the "Incentive Compensation
Plan"). 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.
5. Other Benefits. Employer shall maintain in full force and effect,
and Employee shall be entitled to continue to participate in, all of Employer'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, supplemental
pension and retirement plan and arrangement, stock option plan, life insurance
plan and arrangement, health-and-accident plan and arrangement, medical
insurance plan and arrangement, disability plan and arrangement, survivor income
plan and arrangement, relocation plan and vacation plan) (the "Employee Benefit
Plans"); provided, however, that this Section 5 shall not apply to any of
Employer's Incentive Compensation Plan(s). Employer 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 Employer and does 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 Employer. Employee shall
be entitled to participate in and receive benefits under any Employee Benefit
Plan or arrangement made available by Employer 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 the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to Section 3.1 hereof or
pursuant to an Incentive Compensation Plan as provided in Section 4 hereof. Any
payments or benefits payable to the Employee hereunder with respect to any
calendar year during which Employee is employed by Employer for less than the
entire such year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such calendar
year during which he is employed; provided, however, benefits or payments
payable to Employee under any life insurance plan or arrangement,
health-and-accident plan or arrangement or disability plan or arrangement shall
be payable on behalf of Employee by Employer for a period of six (6) months
after termination of employment hereunder.
6. Other Interests. Employee shall devote his time and attention solely
to the business and interest of Employer, and Employer shall be entitled to all
the benefits arising from or incident to Employee's services. During the
employment term, Employee shall not, without Employer's written consent, have
any interest in any business which conflicts either directly or indirectly with
Employer'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 Employer's business activities are secret in nature and constitute trade
secrets, including but not limited to Employer's "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. All Employer's trade secrets and
proprietary information are and shall be the property of Employer, for its own
exclusive use and benefit, and Employee agrees that he will hold the same in
strictest confidence and will not at any time, either during or after his
employment by the Employer, use or permit the use of the same for his own
benefit or for the benefit of others unless authorized to do so by the
Employer's written consent or by a contract or agreement to which the Employer
is a party or by which it is bound.
8. Services Furnished. During the term of Employee's employment with
Employer, Employer 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 (other than compensation accruing to any other person serving in
such capacity), if elected or appointed a director of the Employer 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.
10. Termination by Employer. Employee's employment hereunder may be
terminated by Employer without any breach of this Agreement only under the
following circumstances:
10.1 If occurring prior to a Change in Control (as
hereinafter defined):
(A) Death. Employee's employment hereunder shall
terminate upon his 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 duties hereunder for the entire period of six (6)
consecutive months, and within thirty (30) days after written notice of
termination is given (which may occur before or after the end of such six month
period) shall not have returned to the performance of his duties hereunder on a
full time basis, Employer may terminate Employee's employment hereunder.
Employee's absence or substantial absence from his duties will be treated as
resulting from incapacity due to physical or mental illness if Employee is
"totally disabled from his 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 occupation, (2) Employee is either receiving
Doctor's Care or has furnished written proof acceptable to Employer that further
Doctor's Care would be of no benefit, and (3) Employee does not work at all.
Doctor's Care means the regular and personal care of a Doctor which, under the
prevailing medical standards, is appropriate for the condition causing the
disability.
(C) This Agreement may be terminated without cause,
in the sole, absolute and unreviewable discretion of Employer, by written notice
made by the President of Employer. Such notice shall state that the President of
Employer has determined that it is in the best interests of the Employer or its
shareholders to terminate this Agreement and the Employee's employment
hereunder.
10.2 If occurring subsequent to or resulting from a
Change in Control (as hereinafter defined):
(A) Death. Employee's employment hereunder shall
terminate upon his 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 duties hereunder for the entire period of six (6)
consecutive months, and within thirty (30) days after written notice of
termination is given (which may occur before or after the end of such six-month
period) shall not have returned to the performance of his duties hereunder on a
full time basis, Employer may terminate Employee's employment hereunder.
Incapacity due to physical or mental illness will be determined as provided in
Section 10.1(B); or
(C) Cause. Employer may terminate Employee's
employment hereunder for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure by
Employee to perform his duties hereunder (other than any failure resulting from
Employee's incapacity due to physical or mental illness) after demand for
substantial performance is delivered by Employer, which demand specifically
identifies the manner in which Employee has not substantially performed his
duties;
(ii) the willful and intentional act by the
Employee that is, in the reasonable determination of the Employer, materially
injurious to the Employer, monetarily or otherwise;
(iii) the breach by the Employee of any
material covenant of this Agreement; or
(iv) the conviction of the Employee of a
crime involving an act of moral turpitude or which is a felony resulting in or
intended to result, directly or indirectly, in gain or personal enrichment of
the Employee, relations of the Employee, or their affiliates at the expense of
the Employer.
For purposes of this Section 10, no act, or failure to act, on
Employee's part shall be considered willful unless done, or omitted to be done,
by him not in good faith and without the reasonable belief that his action(s) or
omission(s) was in the best interests of the Employer. Furthermore, no
termination of Employee's employment shall be effective until Notice of
Termination is given to Employee by Employer.
11. Termination by Employee. Employee may terminate his employment
hereunder upon thirty (30) days' written notice to Employer for any reason. If
Employee terminates his employment hereunder subsequent to a Change in Control
(as hereinafter defined) and such termination is made for any of the reasons
listed below, then such termination shall be deemed to have been done for good
reason ("Good Reason").
Reasons constituting Good Reason shall be limited to:
(A) any breach by Employer of any material provision
of this Agreement which has not been cured within ten (10) days after written
notice of such non-compliance is given by Employee to Employer;
(B) any demonstrable and material diminution of the
compensation, duties, responsibilities, authority or powers of Employee as such
relate to any positions or offices held by Employee immediately prior to such
Change in Control; provided that Employee provides a reasonable description of
any such diminution(s) and a statement that Employee finds, in good faith, that
the acts or omissions to act causing such diminution in duties,
responsibilities, authority or powers to be a material diminution and that, as
such, he elects to terminate his employment hereunder for Good Reason;
(C) the taking of, or failure to take, any action by
Employer which would deprive Employee of any material fringe benefit enjoyed at
the time of such Change in Control or the failure of Employer 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, determined in good faith to be due and owing Employee pursuant to any
such Employee Benefit Plan or Incentive Compensation Plan; or
(D) any requirement by the Employer that Employee
relocate his primary business office to a geographical area greater than twenty
(20) miles from Employer's principal executive offices as existing immediately
prior to the applicable Change in Control or, if Employee is based in an office
other than Employer's principal executive office, the office of Employer where
Employee is based immediately prior to the most recent Change in Control.
For purposes of this Agreement, a "Change in Control" shall
mean an event or series of events which would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), as amended; provided that
the following events shall be deemed a Change in Control whether or not
reportable as a Change in Control pursuant to Regulation 14A of the Exchange
Act:
(i) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date hereof
(a "Person")) acquiring "beneficial ownership" (as defined in Rule 13D-3 under
the Exchange Act, as in effect on the date hereof ("Beneficial Ownership")) of
securities of the Employer representing 36% or more of the combined voting power
of the Employer's then outstanding securities;
(ii) any Person, who does not have
Beneficial Ownership of securities of the Employer representing 5% or more of
the combined voting power of the outstanding securities of the Employer on the
date hereof, acquiring Beneficial Ownership of more than 15% of the combined
voting power of the securities of the Employer then outstanding; or
(iii) a change in the Board of
Directors, which change is the result of a proxy solicitation(s) or other
action(s) to influence voting at a shareholders' meeting of the Company (other
than by voting one's own stock) by a Person or group of Persons who has
Beneficial Ownership of 5% or more of the combined voting power of the
securities of the Employer and which causes the Continuing Directors to cease to
be a majority of the Board of Directors of the Employer; provided, however, that
none of the foregoing events shall be deemed to be a Change in Control if the
event(s) or election(s) causing such change shall have been approved
specifically for purposes of this Agreement by the affirmative vote of at least
a majority of the members of the Continuing Directors.
For purposes of this Agreement, "Continuing Directors" shall
mean a member of the Board of Directors who (i) is a member of the Board of
Directors on the date hereof, or (ii) who subsequently becomes a member of the
Board of Directors and who either (x) is appointed or recommended for election
with the affirmative vote of a majority of the Directors then in office who are
Directors on the date hereof, or (y) is appointed or recommended for election
with the affirmative vote of a majority of the Directors then in office who are
described in subsections (i) and (ii)(x) above, as applicable.
12. Compensation Upon Termination or During Disability.
12.1 During any period that Employee fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
Employee shall continue to receive his full Base Salary at the rate then in
effect for such period until his employment is terminated pursuant to Section 10
hereof.
12.2 If Employee's employment is terminated by his death,
Employer shall pay to Employee's spouse, or if Employee leaves no spouse, to his
estate, 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 such termination.
12.3 If Employee's employment shall be terminated for Cause,
the Employer shall pay Employee his full Base Salary through the date of such
termination at the rate in effect at the time Notice of Termination is given and
the Employer shall have no further obligations to the Employee under this
Agreement.
12.4 If (A) Employer shall terminate the Employee's employment
hereunder other than as permitted hereby or (B) the Employee shall terminate his
employment for Good Reason, then Employer shall pay Employee in cash or by
cashier's check within five (5) business days of such termination as Employee's
sole remedy for such termination the sum of (1) Employee's Base Salary or, if
greater, the base compensation rate in effect immediately prior to such
termination, multiplied by a number equal to the number of years in the Original
Term, (2) an amount equal to the greater of the amount paid and/or payable to
Employee or accrued by the Employer for Employee pursuant to all applicable
Incentive Compensation Plans (i) for the fiscal year of the Employer prior to
the fiscal year of any Change in Control or (ii) for the immediately preceding
fiscal year of the Employer (even though in either (i) or (ii) payable in the
next succeeding fiscal year(s) of Employer), multiplied by a number equal to the
number of years in the Original Term, and (3) all cash amounts due pursuant to
Section 5 hereof. The receipt of such payments shall constitute the sole remedy
of Employee for such termination and the making of such payments shall
constitute full performance by Employer under this Agreement. For purpose of
this Section 12.4 only, the Original Term, if greater than 2.99 years, shall be
2.99 years.
12.5 If the Employee shall terminate his employment pursuant
to Section 11 hereof for any reason other than Good Reason, Employer shall pay
Employee his full Base Salary through the date of such termination at the rate
in effect at the time Notice of Termination is given.
12.6 If Employee's employment shall be terminated pursuant to
Section 10.1 (C) then Employer shall pay Employee and provide benefits to
Employee pursuant to the standard policy of Employer.
12.7 The Employee shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise.
13. Stock Options. In the event Employee's employment with Employer is
terminated pursuant to Section 11 for Good Reason, any and all options to
purchase stock (common or otherwise) in the Employer granted pursuant to any
plan or otherwise, or any equivalent or similar rights which appreciate or tend
to appreciate as the value of the Employer's stock appreciates, shall become
immediately accelerated and fully vested and any restrictions on such options or
equivalent or similar rights shall, to the extent permissible under applicable
securities laws, fully lapse. Employer shall endeavor to cause any restrictions
on such options or equivalent or similar rights not lapsed by operation of this
Section 13 to so lapse.
14. Covenant not to Compete. Employee, in consideration of the
compensation and other benefits to be received by him pursuant to this
Agreement, expressly agrees that he will not, within a radius of fifty (50)
miles from any place of business of the Employer, engage directly or indirectly,
as employee, principal, agent, partner, director or independent contractor or
otherwise in any business which is competitive to that of the Employer for a
period equal to the Original Term after he ceases to be employed by the
Employer.
15. Non-solicitation. Except in the case of a termination pursuant to
Section 11 for Good Reason, for a period equal to the Original Term following
termination of this Agreement, Employee shall not directly or indirectly solicit
any of Employer's customers existing as of the date of termination. If Employee
violates this Section 15, Section 14 or the confidentiality provisions of
Section 7, and continues to do so after Employer has notified Employee of such
violation, Employer 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; provided that Employer demonstrates that Employee's
solicitations result in direct financial detriment to Employer.
16. Arbitration. Except as provided in Section 15, if a dispute arises
between Employer and Employee concerning termination of this Agreement under
Section 10 or 11 above or otherwise, the disputed matter shall be submitted to
arbitration.
Any disputed matter shall be settled by arbitration in the
City of San Francisco, California in accordance with the commercial 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 State of California 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.
17. Taxes. Notwithstanding anything herein to the contrary, Employer
shall not be obligated to pay any portion of any amount otherwise payable to
Employee hereunder if Employer is not reasonably able to deduct such portion
(the "Excess Amount") solely by operation of Section 280G (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"). Employer shall be deemed able to reasonably deduct such
Excess Amount; and all amounts accruing hereunder, including the Excess Amount,
shall be paid Employee in the event Employee delivers to Employer an opinion of
an attorney that is reasonably acceptable to Employer stating such Excess Amount
is reasonably deductible by Employer by operation of Section 280G (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. Miscellaneous.
18.1 Written notices required by this Agreement shall be sent
to Employer or Employee by certified mail, with a return receipt requested, to
Employer's registered address and to Employee's last shown address on Employer's
records, respectively. Such notice shall be deemed to be delivered two days
after mailing.
18.2 This Agreement contains the full and complete
understanding of the parties and supersedes all prior representations, promises,
agreements, and warranties, whether oral or written.
18.3 This Agreement shall be governed by and interpreted
according to the laws of the State of California.
18.4 With respect to Employer, this Agreement shall inure to
the benefit of and be binding upon any successors or assigns of Employer. With
respect to Employee, this Agreement shall not be assignable, but shall inure to
the benefit of and be binding upon the heirs, executors, administrators, and
successors of Employee.
18.5 The captions of the various sections of this Agreement
are inserted only for convenience and shall not be considered in construing this
Agreement.
18.6 This Agreement can be modified, amended or any of its
terms waived only by a writing signed by both parties.
18.7 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.
18.8 Without limiting the provisions of Section 16, if either
party institutes arbitration proceedings pursuant to Section 16 or an action to
enforce the terms of this Agreement, the prevailing party in such proceeding or
action shall be entitled to recover reasonable attorneys' fees, costs and
expenses.
18.9 No remedy made available to Employer 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.
18.10 This Agreement supercedes any prior Employment Agreement
which may be in effect between Employer and Employee, and any such prior
agreement is hereby terminated.
IN WITNESS WHEREOF, this Agreement has been executed on the
day and year specified above.
EMPLOYER:
PLM INTERNATIONAL, INC.
By: /s/ Robert N. Tidball
Its: President
ATTEST:
/s/ Stephen M. Bess
EMPLOYEE:
/s/ J. Michael Allgood
ATTEST:
/s/ Stephen Peary
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on
this 18th day of December, 1992, by
and between PLM INTERNATIONAL, INC.("Employer") and Stephen M. Bess("Employee").
WHEREAS, the Executive Committee of the Board of Directors deems it in
the best interest of the shareholders of the Employer to maintain a continuity
of management, and retain an experienced, successful and proven management team;
and
WHEREAS, Stephen M. Bess has accepted the appointment of the Board of
Directors to the position(s) of President, PLM Investment Management, Inc.;
W I T N E S S E T H
That in consideration of the covenants, duties, terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Services. Employer hereby engages the exclusive services of Employee
as President, PLM Investment Management, Inc., with his powers and duties in
that capacity to be determined by Employer's Board of Directors, and Employee
hereby agrees to perform such services on the terms and conditions herein
contained and to abide by all rules and regulations for the conduct of the
Employee that are now or may hereafter be established by Employer. In connection
with this Agreement, Employee shall be based at the principal executive offices
of Employer or at such location as may be designated from time to time by the
Board of Directors of Employer, except for required travel on Employer's
business to an extent substantially consistent with present business travel
obligations.
2. Employment Term. The term of this Agreement shall commence on the
date hereof (the "Commencement Date"), and shall continue for three (3) year(s)
(the "Original Term") unless terminated pursuant to Sections 10 or 11 of this
Agreement. One year from the Commencement Date and each anniversary thereafter,
the term of this Agreement shall be automatically extended one (1) additional
year unless prior to such anniversary of the Commencement Date, the Employer
shall have delivered to the Employee notice of a determination made pursuant to
Section 10.1(C) of this Agreement, or Employee shall have delivered to the
Employer written notice that the term of this Agreement shall not be extended.
3. Compensation.
3.1 Employer shall pay to Employee as full compensation for
all services performed, the sum of one hundred twenty thousand dollars
($120,000) per year (or such higher amount as may be agreed to by Employer 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 the Employee's prior written consent.
3.2 Employer may deduct and withhold from all payments to be
made to Employee hereunder the amounts required or permitted to be deducted or
withheld pursuant to any provisions of any present or future 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. The Employee shall be eligible to participate in any bonus or
incentive compensation plan for which Employee or other senior executives of
Employer may reasonably expect to participate (the "Incentive Compensation
Plan"). 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.
5. Other Benefits. Employer shall maintain in full force and effect,
and Employee shall be entitled to continue to participate in, all of Employer'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, supplemental
pension and retirement plan and arrangement, stock option plan, life insurance
plan and arrangement, health-and-accident plan and arrangement, medical
insurance plan and arrangement, disability plan and arrangement, survivor income
plan and arrangement, relocation plan and vacation plan) (the "Employee Benefit
Plans"); provided, however, that this Section 5 shall not apply to any of
Employer's Incentive Compensation Plan(s). Employer 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 Employer and does 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 Employer. Employee shall
be entitled to participate in and receive benefits under any Employee Benefit
Plan or arrangement made available by Employer 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 the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to Section 3.1 hereof or
pursuant to an Incentive Compensation Plan as provided in Section 4 hereof. Any
payments or benefits payable to the Employee hereunder with respect to any
calendar year during which Employee is employed by Employer for less than the
entire such year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such calendar
year during which he is employed; provided, however, benefits or payments
payable to Employee under any life insurance plan or arrangement,
health-and-accident plan or arrangement or disability plan or arrangement shall
be payable on behalf of Employee by Employer for a period of six (6) months
after termination of employment hereunder.
6. Other Interests. Employee shall devote his time and attention solely
to the business and interest of Employer, and Employer shall be entitled to all
the benefits arising from or incident to Employee's services. During the
employment term, Employee shall not, without Employer's written consent, have
any interest in any business which conflicts either directly or indirectly with
Employer'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 Employer's business activities are secret in nature and constitute trade
secrets, including but not limited to Employer's "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. All Employer's trade secrets and
proprietary information are and shall be the property of Employer, for its own
exclusive use and benefit, and Employee agrees that he will hold the same in
strictest confidence and will not at any time, either during or after his
employment by the Employer, use or permit the use of the same for his own
benefit or for the benefit of others unless authorized to do so by the
Employer's written consent or by a contract or agreement to which the Employer
is a party or by which it is bound.
8. Services Furnished. During the term of Employee's employment with
Employer, Employer 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 (other than compensation accruing to any other person serving in
such capacity), if elected or appointed a director of the Employer 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.
10. Termination by Employer. Employee's employment hereunder may be
terminated by Employer without any breach of this Agreement only under the
following circumstances:
10.1 If occurring prior to a Change in Control (as
hereinafter defined):
(A) Death. Employee's employment hereunder shall
terminate upon his 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
duties hereunder for the entire period of six (6) consecutive months, and within
thirty (30) days after written notice of termination is given (which may occur
before or after the end of such six month period) shall not have returned to the
performance of his duties hereunder on a full time basis, Employer may terminate
Employee's employment hereunder. Employee's absence or substantial absence from
his duties will be treated as resulting from incapacity due to physical or
mental illness if Employee is "totally disabled from his 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
occupation, (2) Employee is either receiving Doctor's Care or has furnished
written proof acceptable to Employer that further Doctor's Care would be of no
benefit, and (3) Employee does not work at all. Doctor's Care means the regular
and personal care of a Doctor which, under the prevailing medical standards, is
appropriate for the condition causing the disability.
(C) This Agreement may be terminated without cause,
in the sole, absolute and unreviewable discretion of Employer, by written notice
made by the President of Employer. Such notice shall state that the President of
Employer has determined that it is in the best interests of the Employer or its
shareholders to terminate this Agreement and the Employee's employment
hereunder.
10.2 If occurring subsequent to or resulting from a Change in
Control (as hereinafter defined):
(A) Death. Employee's employment hereunder shall
terminate upon his 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 duties hereunder for the entire period of six (6)
consecutive months, and within thirty (30) days after written notice of
termination is given (which may occur before or after the end of such six-month
period) shall not have returned to the performance of his duties hereunder on a
full time basis, Employer may terminate Employee's employment hereunder.
Incapacity due to physical or mental illness will be determined as provided in
Section 10.1(B); or
(C) Cause. Employer may terminate Employee's
employment hereunder for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure by
Employee to perform his duties hereunder (other than any failure resulting from
Employee's incapacity due to physical or mental illness) after demand for
substantial performance is delivered by Employer, which demand specifically
identifies the manner in which Employee has not substantially performed his
duties;
(ii) the willful and intentional act by the
Employee that is, in the reasonable determination of the Employer, materially
injurious to the Employer, monetarily or otherwise;
(iii) the breach by the Employee of any
material covenant of this Agreement; or
(iv) the conviction of the Employee of a
crime involving an act of moral turpitude or which is a felony resulting in or
intended to result, directly or indirectly, in gain or personal enrichment of
the Employee, relations of the Employee, or their affiliates at the expense of
the Employer.
For purposes of this Section 10, no act, or failure to act, on
Employee's part shall be considered willful unless done, or omitted to be done,
by him not in good faith and without the reasonable belief that his action(s) or
omission(s) was in the best interests of the Employer. Furthermore, no
termination of Employee's employment shall be effective until Notice of
Termination is given to Employee by Employer.
11. Termination by Employee. Employee may terminate his employment
hereunder upon thirty (30) days' written notice to Employer for any reason. If
Employee terminates his employment hereunder subsequent to a Change in Control
(as hereinafter defined) and such termination is made for any of the reasons
listed below, then such termination shall be deemed to have been done for good
reason ("Good Reason").
Reasons constituting Good Reason shall be limited to:
(A) any breach by Employer of any material provision
of this Agreement which has not been cured within ten (10) days after written
notice of such non-compliance is given by Employee to Employer;
(B) any demonstrable and material diminution of the
compensation, duties, responsibilities, authority or powers of Employee as such
relate to any positions or offices held by Employee immediately prior to such
Change in Control; provided that Employee provides a reasonable description of
any such diminution(s) and a statement that Employee finds, in good faith, that
the acts or omissions to act causing such diminution in duties,
responsibilities, authority or powers to be a material diminution and that, as
such, he elects to terminate his employment hereunder for Good Reason;
(C) the taking of, or failure to take, any action by
Employer which would deprive Employee of any material fringe benefit enjoyed at
the time of such Change in Control or the failure of Employer 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, determined in good faith to be due and owing Employee pursuant to any
such Employee Benefit Plan or Incentive Compensation Plan; or
(D) any requirement by the Employer that Employee
relocate his primary business office to a geographical area greater than twenty
(20) miles from Employer's principal executive offices as existing immediately
prior to the applicable Change in Control or, if Employee is based in an office
other than Employer's principal executive office, the office of Employer where
Employee is based immediately prior to the most recent Change in Control.
For purposes of this Agreement, a "Change in Control" shall
mean an event or series of events which would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), as amended; provided that
the following events shall be deemed a Change in Control whether or not
reportable as a Change in Control pursuant to Regulation 14A of the Exchange
Act:
(i) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date hereof
(a "Person")) acquiring "beneficial ownership" (as defined in Rule 13D-3 under
the Exchange Act, as in effect on the date hereof ("Beneficial Ownership")) of
securities of the Employer representing 36% or more of the combined voting power
of the Employer's then outstanding securities;
(ii) any Person, who does not have
Beneficial Ownership of securities of the Employer representing 5% or more of
the combined voting power of the outstanding securities of the Employer on the
date hereof, acquiring Beneficial Ownership of more than 15% of the combined
voting power of the securities of the Employer then outstanding; or
(iii) a change in the Board of
Directors, which change is the result of a proxy solicitation(s) or other
action(s) to influence voting at a shareholders' meeting of the Company (other
than by voting one's own stock) by a Person or group of Persons who has
Beneficial Ownership of 5% or more of the combined voting power of the
securities of the Employer and which causes the Continuing Directors to cease to
be a majority of the Board of Directors of the Employer; provided, however, that
none of the foregoing events shall be deemed to be a Change in Control if the
event(s) or election(s) causing such change shall have been approved
specifically for purposes of this Agreement by the affirmative vote of at least
a majority of the members of the Continuing Directors.
For purposes of this Agreement, "Continuing Directors" shall
mean a member of the Board of Directors who (i) is a member of the Board of
Directors on the date hereof, or (ii) who subsequently becomes a member of the
Board of Directors and who either (x) is appointed or recommended for election
with the affirmative vote of a majority of the Directors then in office who are
Directors on the date hereof, or (y) is appointed or recommended for election
with the affirmative vote of a majority of the Directors then in office who are
described in subsections (i) and (ii)(x) above, as applicable.
12. Compensation Upon Termination or During Disability.
12.1 During any period that Employee fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
Employee shall continue to receive his full Base Salary at the rate then in
effect for such period until his employment is terminated pursuant to Section 10
hereof.
12.2 If Employee's employment is terminated by his death,
Employer shall pay to Employee's spouse, or if Employee leaves no spouse, to his
estate, 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 such termination.
12.3 If Employee's employment shall be terminated for Cause,
the Employer shall pay Employee his full Base Salary through the date of such
termination at the rate in effect at the time Notice of Termination is given and
the Employer shall have no further obligations to the Employee under this
Agreement.
12.4 If (A) Employer shall terminate the Employee's employment
hereunder other than as permitted hereby or (B) the Employee shall terminate his
employment for Good Reason, then Employer shall pay Employee in cash or by
cashier's check within five (5) business days of such termination as Employee's
sole remedy for such termination the sum of (1) Employee's Base Salary or, if
greater, the base compensation rate in effect immediately prior to such
termination, multiplied by a number equal to the number of years in the Original
Term, (2) an amount equal to the greater of the amount paid and/or payable to
Employee or accrued by the Employer for Employee pursuant to all applicable
Incentive Compensation Plans (i) for the fiscal year of the Employer prior to
the fiscal year of any Change in Control or (ii) for the immediately preceding
fiscal year of the Employer (even though in either (i) or (ii) payable in the
next succeeding fiscal year(s) of Employer), multiplied by a number equal to the
number of years in the Original Term, and (3) all cash amounts due pursuant to
Section 5 hereof. The receipt of such payments shall constitute the sole remedy
of Employee for such termination and the making of such payments shall
constitute full performance by Employer under this Agreement. For purpose of
this Section 12.4 only, the Original Term, if greater than 2.99 years, shall be
2.99 years.
12.5 If the Employee shall terminate his employment pursuant
to Section 11 hereof for any reason other than Good Reason, Employer shall pay
Employee his full Base Salary through the date of such termination at the rate
in effect at the time Notice of Termination is given.
12.6 If Employee's employment shall be terminated pursuant to
Section 10.1 (C) then Employer shall pay Employee and provide benefits to
Employee pursuant to the standard policy of Employer.
12.7 The Employee shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise.
13. Stock Options. In the event Employee's employment with Employer is
terminated pursuant to Section 11 for Good Reason, any and all options to
purchase stock (common or otherwise) in the Employer granted pursuant to any
plan or otherwise, or any equivalent or similar rights which appreciate or tend
to appreciate as the value of the Employer's stock appreciates, shall become
immediately accelerated and fully vested and any restrictions on such options or
equivalent or similar rights shall, to the extent permissible under applicable
securities laws, fully lapse. Employer shall endeavor to cause any restrictions
on such options or equivalent or similar rights not lapsed by operation of this
Section 13 to so lapse.
14. Covenant not to Compete. Employee, in consideration of the
compensation and other benefits to be received by him pursuant to this
Agreement, expressly agrees that he will not, within a radius of fifty (50)
miles from any place of business of the Employer, engage directly or indirectly,
as employee, principal, agent, partner, director or independent contractor or
otherwise in any business which is competitive to that of the Employer for a
period equal to the Original Term after he ceases to be employed by the
Employer.
15. Non-solicitation. Except in the case of a termination pursuant to
Section 11 for Good Reason, for a period equal to the Original Term following
termination of this Agreement, Employee shall not directly or indirectly solicit
any of Employer's customers existing as of the date of termination. If Employee
violates this Section 15, Section 14 or the confidentiality provisions of
Section 7, and continues to do so after Employer has notified Employee of such
violation, Employer 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; provided that Employer demonstrates that Employee's
solicitations result in direct financial detriment to Employer.
16. Arbitration. Except as provided in Section 15, if a dispute arises
between Employer and Employee concerning termination of this Agreement under
Section 10 or 11 above or otherwise, the disputed matter shall be submitted to
arbitration.
Any disputed matter shall be settled by arbitration in the
City of San Francisco, California in accordance with the commercial 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 State of California 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.
17. Taxes. Notwithstanding anything herein to the contrary, Employer
shall not be obligated to pay any portion of any amount otherwise payable to
Employee hereunder if Employer is not reasonably able to deduct such portion
(the "Excess Amount") solely by operation of Section 280G (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"). Employer shall be deemed able to reasonably deduct such
Excess Amount; and all amounts accruing hereunder, including the Excess Amount,
shall be paid Employee in the event Employee delivers to Employer an opinion of
an attorney that is reasonably acceptable to Employer stating such Excess Amount
is reasonably deductible by Employer by operation of Section 280G (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. Miscellaneous.
18.1 Written notices required by this Agreement shall be sent
to Employer or Employee by certified mail, with a return receipt requested, to
Employer's registered address and to Employee's last shown address on Employer's
records, respectively. Such notice shall be deemed to be delivered two days
after mailing.
18.2 This Agreement contains the full and complete
understanding of the parties and supersedes all prior representations, promises,
agreements, and warranties, whether oral or written.
18.3 This Agreement shall be governed by and interpreted
according to the laws of the State of California.
18.4 With respect to Employer, this Agreement shall inure to
the benefit of and be binding upon any successors or assigns of Employer. With
respect to Employee, this Agreement shall not be assignable, but shall inure to
the benefit of and be binding upon the heirs, executors, administrators, and
successors of Employee.
18.5 The captions of the various sections of this Agreement
are inserted only for convenience and shall not be considered in construing this
Agreement.
18.6 This Agreement can be modified, amended or any of its
terms waived only by a writing signed by both parties.
18.7 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.
18.8 Without limiting the provisions of Section 16, if either
party institutes arbitration proceedings pursuant to Section 16 or an action to
enforce the terms of this Agreement, the prevailing party in such proceeding or
action shall be entitled to recover reasonable attorneys' fees, costs and
expenses.
18.9 No remedy made available to Employer 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.
18.10 This Agreement supercedes any prior Employment Agreement
which may be in effect between Employer and Employee, and any such prior
agreement is hereby terminated.
IN WITNESS WHEREOF, this Agreement has been executed on the
day and year specified above.
EMPLOYER:
PLM INTERNATIONAL, INC.
By: /s/ Robert N. Tidball
Its: President
ATTEST:
/s/ Kim Rayfield
EMPLOYEE:
/s/ Stephen M. Bess
ATTEST:
/s/ Kim Rayfield
SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement"), dated as of December 2,
1996, is entered into by and between PLM Financial Services, Inc. ("PLM", the
"Employer" or the "Company") and Stephen M. Bess ("Employee"), who hereby state
as follows:
WHEREAS, Employee presently holds the position of President at PLM
Investment Management, Inc., a wholly-owned subsidiary of PLM;
WHEREAS, PLM deems it to be in the best interest of the Company to
provide incentives to keep Employee fully dedicated to Employee's position at
PLM; and
WHEREAS, PLM and Employee believe the best way of assuring Employee's
continued dedication to the Company is to provide Employee certain benefits in
the event his/her employment is terminated by the Company, which benefits are
greater than he/she would otherwise be entitled to, pursuant to the terms and
conditions described herein.
NOW, THEREFORE, IN CONSIDERATION OF THE PROVISIONS HEREINABOVE AND
HEREINAFTER SET FORTH, PLM AND EMPLOYEE DO HEREBY AGREE AS FOLLOWS:
1. The Company will pay to Employee Severance Pay (as defined below) if
the following conditions are met:
(A) Employee is terminated from employment with the Company for any
reason other than the reasons set forth in Section 3 below, and
(B) Employee enters into a Release (the "Release") substantially in
the form attached hereto as Exhibit A, with all blank lines
appropriately completed.
2. Severance Pay and Other Post Employment Benefits.
2.1 "Severance Pay" shall be defined as twenty-four (24) months of
Employee's base salary at his/her current rate per month at the time of his/her
termination, less customary payroll deductions. Severance Pay will be paid to
Employee or Employee's heirs, successors, or permitted assigns on a semi-monthly
basis, pursuant to the Company's normal payroll schedule, with the first payment
being made following the "Effective Date" as defined in the Release. The term
"Severance Pay" shall also include Employee's continued enrollment at the
Company's expense for twenty-four (24) months in the Company's group medical,
dental and vision insurance plans, disability insurance plan and life insurance
plan (together, the "Benefit Plans"), all at the same level as provided during
the period immediately preceding Employee's termination of employment, provided,
however, "Severance Pay" shall not include enrollment in any Company Benefit
Plan to the extent the insurer or underwriter of such Benefit Plan will not
cover Employee under or include same level benefit coverage for Employee after
termination of Employee's employment at a comparable premium. Employee's right
to continued group benefits after any period covered by the Company will be
determined in accordance with federal and state law. Employee will continue to
be obligated to pay the same employee's portion of any premium and any
deductible and/or co-payments associated with such benefits, as other similarly
situated employees of the Company.
2.2 In addition to the Severance Pay specified in Section 2.1, Employee
will be entitled to outplacement counseling at Employer's expense in accordance
with Employer's customary practice, if any, with respect to an employee having
Employee's base salary level.
3. Employee shall not be entitled to the Severance Pay if Employee is
separated from the Company for any of the following reasons:
(A) Resignation. Employee voluntarily quits his position for any
reason.
(B) Cause. The Company terminates Employee's employment for Cause. For
purposes of this Agreement "Cause" shall mean:
(i) the failure by Employee to perform his duties in a manner
consistent with Employee's historic performance levels after
demand for such performance is delivered by Employer which demand
identifies the manner in which Employee has not continued to
perform his duties in accordance with Employee's historic
performance levels;
(ii) the willful and intentional act by the Employee that is, in
the reasonable determination of the Employer, materially
injurious to the Company, monetarily or otherwise;
(iii)the failure, for any reason, of Employee to maintain all
professional licenses and memberships required by his position;
or
(iv) the conviction of the Employee of a crime involving an act
of moral turpitude or which is a felony.
(C) Death. Employee's employment is terminated due to his death.
(D) Family or Medical Leave. Employee shall have been absent from his
duties for any reason which is covered by the California Family Care
and Medical Leave Act ("FCML") or the Family and Medical Leave Act of
1993 ("FMLA") for longer than the period for which the Company is
required to provide to Employee unpaid leave pursuant to the FCML or
the FMLA. Nothing contained in this Agreement shall be deemed to waive
Employee's rights under the FCML or the FMLA.
4. The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise.
Employee acknowledges that the Severance Pay provided in this Agreement is in
excess of the amount that the Employee would have customarily received as a
terminated employee under Company policy and that these additional benefits are
expressly given as consideration for the execution of this Agreement and the
agreement to execute the Release attached hereto as Exhibit A.
5. Confidentiality.
5.1 Employee agrees that he/she shall keep and hold the contents, terms
and provisions of this Agreement in the strictest confidence and that he/she
shall not discuss, disclose, disseminate, produce, publish, comment upon,
reference or reveal the existence of this Agreement or any of the contents,
terms and provisions of this Agreement to any person or any entity without first
securing the prior written consent of the Company, except (1) to Employee's
personal representatives or as required in a judicial proceeding to enforce the
terms of this Agreement, or (2) as otherwise required by law (in which latter
instance, the Employee, upon becoming aware of any such legal duty, shall
promptly give notice thereof to the Company and shall, to the greatest extent
possible, cooperate with the request of the Company to keep this Agreement
confidential). This paragraph does not apply to the reporting, completing and
filing of state and federal income tax returns or any and all subsequent
proceedings relating thereto. The Employee agrees that any breach of this
paragraph will cause irreparable harm and loss to the Company and that the
Company shall be entitled to have and secure against the Employee injunctive
relief against any future or further violations of this paragraph.
5.2 Employee, in consideration of the Severance Pay and other benefits
to be received by him/her under this Agreement, shall not, directly or
indirectly, solicit any of PLM's customers or employees exisiting as of the date
of Employee's termination of employment. If Employee violates this Paragraph,
and continues to do so after the Company has notified Employee of such
violation, Company shall have the right to seek and secure equitable restraint
of Employee from such activities in contravention of the provisions of this
Agreement, including obtaining a temporary restraining order and/or injunction
against Employee.
5.3 It is specifically understood and agreed that some of the
Employer's (and Employer's affiliates) business activities are secret in nature
and constitute trade secrets, including but not limited to Employer's (and
Employer's affiliates) "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. All Employer's (and Employer's affiliates) trade secrets and
proprietary information are and shall be the property of Employer for its own
exclusive use and benefit, and Employee agrees that he will hold the same in
strictest confidence and will not at any time, either during or after his
employment by the Employer, use or permit the use of the same for his own
benefit or for the benefit of others unless authorized to do so by the
Employer's written consent, such information is in the public domain or
authorized by a contract or agreement to which the Employer is a party or by
which it is bound. Violation of this or any of the other covenants of this
Agreement will entitle the Employer to, among other remedies, terminate all
future Severance Pay.
6. This Agreement (including the attached Exhibit A) contains the
entire and exclusive understanding among the parties regarding the subject
matter hereof and supersedes and replaces all prior negotiations, proposed
agreements and agreements, written and oral, and may not be modified or amended
in any respect whatsoever, except by a writing signed by all parties hereto.
This Agreement is not intended to conflict with, or reduce or increase any right
Employee may have pursuant to the PLM International, Inc. 1988 Management Stock
Compensation Plan, the PLM International, Inc. Mandatory Management Stock Bonus
Plan, or the PLM International, Inc. Executive Deferred Compensation Plan.
7. This Agreement shall be governed and construed in accordance with
the laws of the State of California. Venue of any action to enforce the terms of
this Agreement shall lie in San Francisco County, California. Except for the
injunctive relief as set forth in Paragraph 5, any dispute, claim or controversy
arising out of or related to this Agreement shall be resolved by arbitration
under the Employment Dispute Resolution Arbitration Rules and auspices of the
American Arbitration Association, San Francisco, California Regional Office (the
"Association"). Any such arbitration shall be conducted by an arbitrator
selected by mutual agreement of the parties, and such arbitration decision shall
be final. The party prevailing in the arbitration shall be awarded its share of
the fees and expenses of the arbitration (including, but not limited to,
arbitrator's fees), in addition to attorneys' fees. Employee specifically
consents to such arbitration and hereby represents such consent is willfully and
voluntarily given without influence by coercion or threatening statements from
Employer.
8. Each signatory hereto represents that he, she or it is fully
authorized to execute this Agreement.
9. The parties agree that if any provision of this Agreement is held to
be invalid, void or unenforceable, the remaining provisions shall continue in
full force and effect.
10. With respect to the Company, this Agreement shall inure to the
benefit of and be binding upon any successors or assigns of PLM. With respect to
Employee, this Agreement shall not be assignable but shall inure to the benefit
of and be binding upon the heirs, executors, administrators, and successors of
Employee.
11. Nothing contained in this Agreement shall be deemed to change the
"at-will" nature of the employment relationship between the Company and
Employee. The Company and the Employee hereby acknowledge and agree that
Employee's employment may be terminated at will, with or without cause, for any
reason, subject to the obligations created by this Agreement. Nothing contained
in this Agreement shall be deemed to provide Employee any right to (i) regular,
irregular or special salary increases of any kind, (ii) participation in any
Company bonus plan or other benefit plan not otherwise available to all
employees of the Company or (iii) payment of any bonus compensation of any kind.
This Agreement shall not in any way bind or create any obligations for PLM
International, Inc. or any of its subsidiaries other than Employer.
IN WITNESS WHEREOF, this Agreement has been executed on the
day and year specified above.
PLM FINANCIAL SERVICES, INC. EMPLOYEE
By: /s/ Stephen Peary /s/ Stephen M. Bess
Its: Senior Vice President
<PAGE>
EXHIBIT A
SEPARATION AGREEMENT AND MUTUAL RELEASE
This Separation Agreement and Mutual Release (the "Separation
Agreement"), dated as of ____________________, 19__ is entered into by and
between PLM Financial Services, Inc., and _________________ ("Employee"), an
individual, who hereby state as follows:
WHEREAS, Employee has been employed by PLM Financial Services, Inc. and
its wholly-owned affiliates and parent, PLM International, Inc. (together,
"PLM") since ___________, and has most recently held the position of President,
PLM Investment Management, Inc.
WHEREAS, Employee's employment with PLM has been terminated effective
___________________________;
WHEREAS, PLM and Employee each desire to resolve any and all matters
arising out of Employee's employment with or termination from PLM.
NOW, THEREFORE, PLM AND EMPLOYEE DO HEREBY AGREE AS FOLLOWS:
1. In consideration of the provisions hereinabove and hereinafter set
forth, PLM and Employee and each of their affiliates, successors,
administrators, assigns, agents, attorneys, and any other persons acting on
their behalf (collectively "Releasors"), do hereby irrevocably and
unconditionally release, relieve, waive, relinquish and discharge one another,
and all heirs, predecessors, successors, representatives, assignees,
subsidiaries, affiliates, parents, spouses, partners, officers, directors,
stockholders, agents, employees, insurers, attorneys, and all persons acting by,
through, under or in concert with any of them (collectively, "Releasees"), of
and from any and all manner of liabilities, claims, demands, actions, causes of
action, damages, obligations, all theories of fault or wrongdoing (whether
statutory, common law, tort or otherwise), debts, expenses, costs, and
attorneys' fees, of every kind, known or unknown (hereinafter referred to as a
"Claim" or the "Claims"), arising out of, or in any way related to, Employee's
employment with or termination from PLM.
These Claims include, but are not limited to, Claims arising under
federal, state and local statutory or common law, such as the Age Discrimination
in Employment Act, Title VII of the Civil Rights Act, as amended, including the
amendments of the Civil Rights Act of 1991, and the Americans With Disabilities
Act, and the law of contract and tort.
2. PLM and Employee acknowledge and agree that they are aware of the
facts and intend that the execution of this Separation Agreement shall be
effective as full and final accord and satisfaction and settlement of and as a
bar to each and every Claim or Claims arising out of the above which PLM,
Employee or the Releasors has, may have in the future or has had against the
other party or the Releasees, whether such Claims are known or unknown, foreseen
or unforeseen.
3. PLM AND EMPLOYEE EACH CERTIFY THAT THEY HAVE READ SECTION 1542 OF
THE CIVIL CODE OF THE STATE OF CALIFORNIA, WHICH STATES AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
4. PLM AND EMPLOYEE HEREBY EXPRESSLY WAIVE APPLICATION OF SECTION 1542
OF THE CIVIL CODE OF THE STATE OF CALIFORNIA AND ANY AND ALL RIGHTS THEREUNDER,
AS WELL AS ANY OTHER FEDERAL OR STATE STATUTORY RIGHTS OR RULES OR PRINCIPLES OF
COMMON LAW OR EQUITY OR THOSE OF ANY JURISDICTION SIMILAR TO SECTION 1542
(HEREINAFTER REFERRED TO AS A "SIMILAR PROVISION"). THUS PLM, EMPLOYEE, OR THE
RELEASORS MAY NOT INVOKE THE BENEFITS OF SECTION 1542 OR ANY OTHER SIMILAR
PROVISION IN ORDER TO PROSECUTE OR ASSERT IN ANY MANNER ANY CLAIM OR CLAIMS
RELEASED HEREUNDER.
5. In addition to the amounts which have been paid to Employee for
earned salary and accrued vacation pay through , and although the employee is
not otherwise entitled to it, Employee will be paid __________________Thousand
Dollars ($_______), less customary payroll deductions, as separation pay, as
well as certain other post employment benefits specified in a Severance
Agreement dated as of ________. Such separation pay will be paid in semi-monthly
installments for a total of forty-eight (48) installments, starting on the first
regularly scheduled pay day following the Effective Date of this Separation
Agreement, as defined in Paragraph 15 below. Employee acknowledges that the
separation pay and other post employment benefits are conferred on Employee as
consideration for the execution of the Severance Agreement and this Separation
Agreement.
6. In executing this Separation Agreement, the parties hereby
acknowledge and agree that Employee is retaining all rights and interests which
have vested through [termination date] in PLM's stock option plan(s), its 401(k)
Plan (Employees Profit Sharing and Tax Advantaged Savings Plan) and any other
plan in which Employee holds a vested interest except as expressly identified as
being released under this Agreement, and it is expressly agreed that Employee is
not releasing or waiving his vested interest in said plans. In consideration of
the receipt of Severance Pay, Employee waives all rights and benefits to which
he may be entitled under the Employment Agreement entered between him and PLM
International, Inc.
7. Employee agrees to immediately return to PLM any information
regarding PLM's practices, procedures, trade secrets, customer lists, product
marketing and any other PLM documents in any form (the "Proprietary
Information") and Employee remains obligated to maintain the confidentiality of
such Proprietary Information at all times.
8. Nothing in this Separation Agreement shall be construed as an
admission by either party of any unlawful or actionable conduct by either party
and the parties hereto make no admission of liability of any kind whatsoever.
9. The provisions of this Separation Agreement shall be deemed to
obligate, extend to and inure to the benefit of, with respect to PLM, its
agents, servants, employees, officers, directors, parents, subsidiaries and
affiliates, successors and assigns, and, with respect to Employee, his
representatives, executors, heirs, administrators, successors and assigns.
10. Employee agrees that he/she shall keep and hold the contents, terms
and provisions of this Agreement in the strictest confidence and that he/she
shall not discuss, disclose, disseminate, produce, publish, comment upon,
reference or reveal the existence of this Agreement or any of the contents,
terms and provisions of this Agreement to any person or any entity without first
securing the prior written consent of the Company, except (1) to Employee's
personal representatives or as required in a judicial proceeding to enforce the
terms of this Agreement, or (2) as otherwise required by law (in which latter
instance, the Employee, upon becoming aware of any such legal duty, shall
promptly give notice thereof to the Company and shall, to the greatest extent
possible, cooperate with the request of the Company to keep this Agreement
confidential). This paragraph does not apply to the reporting, completing and
filing of state and federal income tax returns or any and all subsequent
proceedings relating thereto. The Employee agrees that any breach of this
paragraph will cause irreparable harm and loss to the Company and that the
Company shall be entitled to have and secure against the Employee injunctive
relief against any future or further violations of this paragraph.
11. This Separation Agreement contains the entire understanding among
the parties and supersedes and replaces all prior negotiations, proposed
agreements and agreements (other than the Severance Agreement), written and
oral, and may not be modified or amended in any respect whatsoever, except by a
writing signed by all parties hereto.
12. This Separation Agreement shall be governed and construed in
accordance with the laws of the State of California. Venue of any action to
enforce the terms of this Separation Agreement shall lie in San Francisco
County, California. Except as set forth in Paragraph 12, any dispute, claim or
controversy arising out of or related to Separation Agreement shall be resolved
by arbitration under the Employment Dispute Resolution Arbitration Rules and
auspices of the American Arbitration Association, San Francisco, California
Regional Office (the "Association"). Any such arbitration shall be conducted by
an arbitrator selected by mutual agreement of the parties, and such arbitration
decision shall be final. The party prevailing in the arbitration shall be
awarded its share of the fees and expenses of the arbitration (including, but
not limited to, arbitrator's fees), in addition to attorneys' fees. Employee
specifically consents to such arbitration and hereby represents such consent is
willfully and voluntarily given without influence by coercion or threatening
statements from PLM.
13. Each signatory hereto represents that he, she or it is fully
authorized to execute this Separation Agreement.
14. The Parties agree that if any provision of this Separation
Agreement is held by a court of competent jurisdiction or arbitrator to be
invalid, void or unenforceable, the remaining provisions shall continue in full
force and effect.
15. The following is required by the Older Workers Benefit Protection
Act of 1990: Employee has up to 21 days from the date of this Separation
Agreement to accept the terms of this Separation Agreement, although Employee
may accept it at any time within those 21 days.
Employee is advised to consult an attorney about this Separation
Agreement.
Once Employee accepts this Separation Agreement, by signing and dating
this Separation Agreement, Employee will have an additional seven days in which
to revoke his acceptance. To revoke, Employee must send to PLM's General Counsel
a written statement of revocation by facsimile and registered mail, return
receipt requested. If Employee does not revoke, the eighth day after the date of
his acceptance will be the "Effective Date" of the Separation Agreement.
16. PLM 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 Separation Agreement and that
they fully understand and voluntarily accept this Separation Agreement and have
executed this Separation Agreement after seeking the advice of said independent
counsel. Each party shall bear, and be solely responsible for, their own
respective costs and expenses related to the preparation and subject matter of
this Separation Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this document as of the
date set forth below, at San Francisco, California.
EMPLOYEE PLM FINANCIAL SERVICES, INC.
By:
Dated: Title:
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on
this 12th day of May, 1998, by and between PLM INTERNATIONAL, INC. ("Employer")
and Richard K Brock ("Employee").
WHEREAS, the Board of Directors deems it in the best interests of the
shareholders of the Employer to maintain a continuity of management, and retain
an experienced, successful and proven management team; and
WHEREAS, Richard K Brock has accepted the appointment of the Board of
Directors to the position(s) of Vice President and Corporate Controller;
W I T N E S S E T H
That in consideration of the covenants, duties, terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Services. Employer hereby engages the exclusive services of Employee
as Vice President and Corporate Controller, with his powers and duties in that
capacity to be determined by Employer's Board of Directors, and Employee hereby
agrees to perform such services on the terms and conditions herein contained and
to abide by all rules and regulations for the conduct of the Employee that are
now or may hereafter be established by Employer. In connection with this
Agreement, Employee shall be based at the principal executive offices of
Employer or at such location as may be designated from time to time by the Board
of Directors of Employer, except for required travel on Employer's business to
an extent substantially consistent with present business travel obligations.
2. Employment Term. The term of this Agreement shall commence on the
date hereof (the "Commencement Date"), and shall continue for 3 year(s) (the
"Original Term") unless terminated pursuant to Sections 10 or 11 of this
Agreement. One year from the Commencement Date and each anniversary thereafter,
the term of this Agreement shall be automatically extended one (1) additional
year unless prior to such anniversary of the Commencement Date, the Employer
shall have delivered to the Employee notice of a determination made pursuant to
Section 10.1(C) of this Agreement, or Employee shall have delivered to the
Employer written notice that the term of this Agreement shall not be extended.
3. Compensation.
3.1 Employer shall pay to Employee as full compensation for
all services performed, the sum of Ninety Three Thousand Six Hundred Dollars
($93,600) per year (or such higher amount as may be agreed to by Employer 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 the Employee's prior written consent.
3.2 Employer may deduct and withhold from all payments to be
made to Employee hereunder the amounts required or permitted to be deducted or
withheld pursuant to any provisions of any present or future 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. The Employee shall be eligible to participate in any bonus or
incentive compensation plan for which Employee or other senior executives of
Employer may reasonably expect to participate (the "Incentive Compensation
Plan"). 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.
5. Other Benefits. Employer shall maintain in full force and effect,
and Employee shall be entitled to continue to participate in, all of Employer'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, supplemental
pension and retirement plan and arrangement, stock option plan, life insurance
plan and arrangement, health and accident plan and arrangement, medical
insurance plan and arrangement, disability plan and arrangement, survivor income
plan and arrangement, relocation plan and vacation plan) (the "Employee Benefit
Plans"); provided, however, that this Section 5 shall not apply to any of
Employer's Incentive Compensation Plan(s). Employer 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 Employer and does 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 Employer. Employee shall
be entitled to participate in and receive benefits under any Employee Benefit
Plan or arrangement made available by Employer 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 the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to Section 3.1 hereof or
pursuant to an Incentive Compensation Plan as provided in Section 4 hereof. Any
payments or benefits payable to the Employee hereunder with respect to any
calendar year during which Employee is employed by Employer for less than the
entire such year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such calendar
year during which he is employed; provided, however, benefits or payments
payable to Employee under any life insurance plan or arrangement, health and
accident plan or arrangement or disability plan or arrangement shall be payable
on behalf of Employee by Employer for a period of six (6) months after
termination of employment hereunder.
6. Other Interests. Employee shall devote his time and attention solely
to the business and interest of Employer, and Employer shall be entitled to all
the benefits arising from or incident to Employee's services. During the
employment term, Employee shall not, without Employer's written consent, have
any interest in any business which conflicts either directly or indirectly with
Employer'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 Employer's business activities are secret in nature and constitute trade
secrets, including but not limited to Employer's "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. All Employer's trade secrets and
proprietary information are and shall be the property of Employer, for its own
exclusive use and benefit, and Employee agrees that he will hold the same in
strictest confidence and will not at any time, either during or after his
employment by the Employer, use or permit the use of the same for his own
benefit or for the benefit of others unless authorized to do so by the
Employer's written consent or by a contract or agreement to which the Employer
is a party or by which it is bound.
8. Services Furnished. During the term of Employee's employment with
Employer, Employer 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 (other than compensation accruing to any other person serving in
such capacity), if elected or appointed a director of the Employer 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.
10. Termination by Employer. Employee's employment hereunder may be
terminated by Employer without any breach of this Agreement only under the
following circumstances:
10.1 If occurring prior to a Change in Control (as hereinafter
defined In Section 11):
(A) Death. Employee's employment hereunder shall
terminate upon his 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
duties hereunder for the entire period of six (6) consecutive months, and within
thirty (30) days after written notice of termination is given (which may occur
before or after the end of such six month period) shall not have returned to the
performance of his duties hereunder on a full- time basis, Employer may
terminate Employee's employment hereunder; or
(C) Without Cause. This Agreement may be
terminated without cause, in the sole, absolute and unreviewable discretion of
Employer, by written notice made by the President of Employer. Such notice shall
state that the President of Employer has determined that it is in the best
interests of the Employer or its shareholders to terminate this Agreement and
the Employee's employment hereunder.
10.2 If occurring subsequent to or resulting from a Change in
Control (as hereinafter defined in Section 11):
(A) Death. Employee's employment hereunder shall
terminate upon his 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 duties hereunder for the entire period of six (6)
consecutive months, and within thirty (30) days after written notice of
termination is given (which may occur before or after the end of such six-month
period) shall not have returned to the performance of his duties hereunder on a
full time basis, Employer may terminate Employee's employment hereunder.
Incapacity due to physical or mental illness will be determined as provided in
Section 10.1(B); or
(C) Cause. Employer may terminate Employee's
employment hereunder for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure by
Employee to perform his duties hereunder (other than any failure resulting from
Employee's incapacity due to physical or mental illness) after demand for
substantial performance is delivered by Employer, which demand specifically
identifies the manner in which Employee has not substantially performed his
duties;
(ii) the willful and intentional act by the
Employee that is, in the reasonable determination of the Employer, materially
injurious to the Employer, monetarily or otherwise;
(iii) the breach by the Employee of any
material covenant of this Agreement; or
(iv) the conviction of the Employee of a
crime involving an act of moral turpitude or which is a felony resulting in or
intended to result, directly or indirectly, in gain or personal enrichment of
the Employee, relations of the Employee, or their affiliates at the expense of
the Employer.
For purposes of this Section 10, no act, or failure to act, on
Employee's part shall be considered willful unless done, or omitted to be done,
by him not in good faith and without the reasonable belief that his action(s) or
omission(s) was in the best interests of the Employer. Furthermore, no
termination of Employee's employment shall be effective until Notice of
Termination is given to Employee by Employer.
11. Termination by Employee. Employee may terminate his employment
hereunder upon thirty (30) days' written notice to Employer for any reason. If
Employee terminates his employment hereunder subsequent to a Change in Control
(as hereinafter defined) and such termination is made for any of the reasons
listed below, then such termination shall be deemed to have been done for good
reason ("Good Reason").
Reasons constituting Good Reason shall be limited to:
(A) any breach by Employer of any material provision
of this Agreement which has not been cured within ten (10) days after written
notice of such non-compliance is given by Employee to Employer;
(B) any demonstrable and material diminution of the
compensation, duties, responsibilities, authority or powers of Employee as such
relate to any positions or offices held by Employee immediately prior to such
Change in Control; provided that Employee provides a reasonable description of
any such diminution(s) and a statement that Employee finds, in good faith, that
the acts or omissions to act causing such diminution in duties,
responsibilities, authority or powers to be a material diminution and that, as
such, he elects to terminate his employment hereunder for Good Reason;
(C) the taking of, or failure to take, any action by
Employer which would deprive Employee of any material fringe benefit enjoyed at
the time of such Change in Control or the failure of Employer 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, determined in good faith to be due and owing Employee pursuant to any
such Employee Benefit Plan or Incentive Compensation Plan; or
(D) any requirement by the Employer that Employee
relocate his primary business office to a geographical area greater than twenty
(20) miles from Employer's principal executive offices as existing immediately
prior to the applicable Change in Control or, if Employee is based in an office
other than Employer's principal executive office, the office of Employer where
Employee is based immediately prior to the most recent Change in Control.
For purposes of this Agreement, a "Change in Control" shall
mean an event or series of events which would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), as amended; provided that
the following events shall be deemed a Change in Control whether or not
reportable as a Change in Control pursuant to Regulation 14A of the Exchange
Act:
(i) any "person" [as such term is used
in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date hereof
(a "Person")] acquiring "beneficial ownership" [as defined in Rule 13D-3 under
the Exchange Act, as in effect on the date hereof ("Beneficial Ownership")] of
securities of the Employer representing 36% or more of the combined voting power
of the Employer's then outstanding securities;
(ii) any Person, who does not have
Beneficial Ownership of securities of the Employer representing 5% or more of
the combined voting power of the outstanding securities of the Employer on the
date hereof, acquiring Beneficial Ownership of more than 15% of the combined
voting power of the securities of the Employer then outstanding; or
(iii) a change in the Board of
Directors, which change is the result of a proxy solicitation(s) or other
action(s) to influence voting at a shareholders' meeting of the Company (other
than by voting one's own stock) by a Person or group of Persons who has
Beneficial Ownership of 5% or more of the combined voting power of the
securities of the Employer and which causes the Continuing Directors to cease to
be a majority of the Board of Directors of the Employer; provided, however, that
none of the foregoing events shall be deemed to be a Change in Control if the
event(s) or election(s) causing such change shall have been approved
specifically for purposes of this Agreement by the affirmative vote of at least
a majority of the members of the Continuing Directors.
For purposes of this Agreement, "Continuing
Directors" shall mean a member of the Board of Directors who (i) is a member of
the Board of Directors on the date hereof, or (ii) who subsequently becomes a
member of the Board of Directors and who either (x) is appointed or recommended
for election with the affirmative vote of a majority of the Directors then in
office who are Directors on the date hereof, or (y) is appointed or recommended
for election with the affirmative vote of a majority of the Directors then in
office who are described in subsections (i) and (ii)(x) above, as applicable.
12. Compensation Upon Termination or During Disability.
12.1 During any period that Employee fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
Employee shall continue to receive his full Base Salary at the rate then in
effect for such period until his employment is terminated pursuant to Section 10
hereof.
12.2 If Employee's employment is terminated by his death,
Employer shall pay to Employee's spouse, or if Employee leaves no spouse, to his
estate, 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 such termination.
12.3 If Employee's employment shall be terminated for Cause,
the Employer shall pay Employee his full Base Salary through the date of such
termination at the rate in effect at the time Notice of Termination is given and
the Employer shall have no further obligations to the Employee under this
Agreement.
12.4 If (A) Employer shall terminate the Employee's employment
hereunder other than as permitted hereby or (B) the Employee shall terminate his
employment for Good Reason, then Employer shall pay Employee in cash or by
cashier's check within five (5) business days of such termination as Employee's
sole remedy for such termination the sum of (1) Employee's Base Salary or, if
greater, the base compensation rate in effect immediately prior to such
termination, multiplied by a number equal to the number of years in the Original
Term, (2) an amount equal to the greater of the amount paid and/or payable to
Employee or accrued by the Employer for Employee pursuant to all applicable
Incentive Compensation Plans (i) for the fiscal year of the Employer prior to
the fiscal year of any Change in Control or (ii) for the immediately preceding
fiscal year of the Employer (even though in either (i) or (ii) payable in the
next succeeding fiscal year(s) of Employer), multiplied by a number equal to the
number of years in the Original Term, and (3) all cash amounts due pursuant to
Section 5 hereof. The receipt of such payments shall constitute the sole remedy
of Employee for such termination and the making of such payments shall
constitute full performance by Employer under this Agreement. For purpose of
this Section 12.4 only, the Original Term, if greater than 2.99 years, shall be
2.99 years.
12.5 If the Employee shall terminate his employment pursuant
to Section 11 hereof for any reason other than Good Reason, Employer shall pay
Employee his full Base Salary through the date of such termination at the rate
in effect at the time Notice of Termination is given.
12.6 If Employee's employment shall be terminated pursuant to
Section 10.1 (C) then Employer shall pay Employee and provide benefits to
Employee pursuant to the standard policy of Employer.
12.7 The Employee shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise.
13. Stock Options. In the event Employee's employment with Employer is
terminated pursuant to Section 11 for Good Reason, any and all options to
purchase stock (common or otherwise) in the Employer granted pursuant to any
plan or otherwise, or any equivalent or similar rights which appreciate or tend
to appreciate as the value of the Employer's stock appreciates, shall become
immediately accelerated and fully vested and any restrictions on such options or
equivalent or similar rights shall, to the extent permissible under applicable
securities laws, fully lapse. Employer shall endeavor to cause any restrictions
on such options or equivalent or similar rights not lapsed by operation of this
Section 13 to so lapse.
14. Covenant not to Compete. Employee, in consideration of the
compensation and other benefits to be received by him pursuant to this
Agreement, expressly agrees that he will not, within a radius of fifty (50)
miles from any place of business of the Employer, engage directly or indirectly,
as employee, principal, agent, partner, director or independent contractor or
otherwise in any business which is competitive to that of the Employer for a
period equal to the Original Term after he ceases to be employed by the
Employer.
15. Non-solicitation. Except in the case of a termination pursuant to
Section 11 for Good Reason, for a period equal to the Original Term following
termination of this Agreement, Employee shall not directly or indirectly solicit
any of Employer's customers existing as of the date of termination. If Employee
violates this Section 15, Section 14 or the confidentiality provisions of
Section 7, and continues to do so after Employer has notified Employee of such
violation, Employer 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; provided that Employer demonstrates that Employee's
solicitations result in direct financial detriment to Employer.
16. Arbitration. Except as provided in Section 15, if a dispute arises
between Employer and Employee concerning termination of this Agreement under
Section 10 or 11 above or otherwise, the disputed matter shall be submitted to
arbitration.
Any disputed matter shall be settled by arbitration in the
City of San Francisco, California 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 State of California 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.
17. Taxes. Notwithstanding anything herein to the contrary, Employer
shall not be obligated to pay any portion of any amount otherwise payable to
Employee hereunder if Employer is not reasonably able to deduct such portion
(the "Excess Amount") solely by operation of Section 280G (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"). Employer shall be deemed able to reasonably deduct such
Excess Amount; and all amounts accruing hereunder, including the Excess Amount,
shall be paid Employee in the event Employee delivers to Employer an opinion of
an attorney that is reasonably acceptable to Employer stating such Excess Amount
is reasonably deductible by Employer by operation of Section 280G (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. Miscellaneous.
18.1 Written notices required by this Agreement shall be sent
to Employer or Employee by certified mail, with a return receipt requested, to
Employer's registered address and to Employee's last shown address on Employer's
records, respectively. Such notice shall be deemed to be delivered two days
after mailing.
18.2 This Agreement contains the full and complete
understanding of the parties and supersedes all prior representations, promises,
agreements, and warranties, whether oral or written.
18.3 This Agreement shall be governed by and interpreted
according to the laws of the State of California.
18.4 With respect to Employer, this Agreement shall inure to
the benefit of and be binding upon any successors or assigns of Employer. With
respect to Employee, this Agreement shall not be assignable, but shall inure to
the benefit of and be binding upon the heirs, executors, administrators, and
successors of Employee.
18.5 The captions of the various sections of this Agreement
are inserted only for convenience and shall not be considered in construing this
Agreement.
18.6 This Agreement can be modified, amended or any of its
terms waived only by a writing signed by both parties.
18.7 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.
18.8 Without limiting the provisions of Section 16, if either
party institutes arbitration proceedings pursuant to Section 16 or an action to
enforce the terms of this Agreement, the prevailing party in such proceeding or
action shall be entitled to recover reasonable attorneys' fees, costs and
expenses.
(This space intentionally left blank.)
<PAGE>
18.9 No remedy made available to Employer 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, this Agreement has been executed on the
day and year specified above.
EMPLOYER:
PLM INTERNATIONAL, INC.
By:/s/ Robert N. Tidball
Its: President and Chief Executive Officer
ATTEST:
/s/ Susan Santo
Susan Santo
EMPLOYEE:
/s/Richard K. Brock
RICHARD K BROCK
ATTEST:
/s/Enid Faber
Enid Faber
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") is
made as of November 18, 1998, by and between PLM International, Inc., a Delaware
corporation ("Employer"), and Richard K Brock ("Employee").
WHEREAS, Employer and Employee are parties to an Employment
Agreement ("Agreement") dated as of May 12, 1998, as authorized by the Board of
Directors of Employer on May 12, 1998;
WHEREAS, the Board of Directors of Employer has determined
that Employee will not be protected by the Change in Control provisions of the
Agreement in the event that Steel Partners, L.L. C. acquires greater than 15% of
the combined voting power of the securities of the Employer because Steel
Partners, L.L.C. owned greater than 5% of the securities of the Employer at the
time the Agreement was entered into;
WHEREAS, the Board of Directors of Employer intended, at the
time it authorized the Agreement, for Employee to have such protection;
WHEREAS, the Board of Directors of Employer deems it to be in
the best interests of the shareholders of the Employer to amend the Agreement in
order to provide the protection that was intended and in order to maintain a
continuity of management, and retain an experienced, successful and proven
management team;
NOW, THEREFORE, for and in consideration of the premises and
mutual covenants herein contained, Employer and Employee hereby agree as
follows:
1. Change In Control. The definition of "Change in Control" is
hereby amended by deleting and replacing in its entirety Paragraph (ii) of
Section 11 as follows:
"(ii) any Person, who does not have Beneficial Ownership of
securities of the Employer representing 15% or more of the combined voting power
of the outstanding securities of the Employer on the date hereof, acquiring
Beneficial Ownership of more than 15% of the combined voting power of the
securities of the Employer then outstanding; or"
2. Express Amendment. Except as specifically amended herein, all other
terms and conditions of the Agreement, including the other portions of the
definition of "Change in Control", shall remain in full force and effect. No
provision of this Amendment shall be construed to limit any right or obligation
of either party under the Agreement.
3. Counterparts. This Amendment may be signed in any number of
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.
EMPLOYER: EMPLOYEE:
PLM INTERNATIONAL, INC.
By:/s/ Robert N. Tidball /s/ Richard K Brock
Robert N. Tidball Richard K Brock
Its: President and Chief Executive Officer
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on
this 19th day of November, 1997, by and between PLM INTERNATIONAL, INC.
("Employer") and Susan C. Santo ("Employee").
WHEREAS, the Board of Directors deems it in the best interest of the
shareholders of the Employer to maintain a continuity of management, and to
retain an experienced, successful and proven management team; and
WHEREAS, Susan C. Santo has accepted the appointment of the Board of
Directors to the position(s)of Vice President, Secretary and General Counsel:
W I T N E S S E T H
That in consideration of the covenants, duties, terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Services. Employer hereby engages the exclusive services of Employee
as Vice President, Secretary and General Counsel, with her powers and duties in
that capacity to be determined by Employer's Board of Directors, and Employee
hereby agrees to perform such services on the terms and conditions herein
contained and to abide by all rules and regulations for the conduct of the
Employee that are now or may hereafter be established by Employer. In connection
with this Agreement, Employee shall be based at the principal executive offices
of Employer or at such location as may be designated from time to time by the
Board of Directors of Employer, except for required travel on Employer's
business to an extent substantially consistent with present business travel
obligations.
2. Employment Term. The term of this Agreement shall commence on the
date hereof (the "Commencement Date"), and shall continue for 3 year(s) (the
"Original Term") unless terminated pursuant to Sections 10 or 11 of this
Agreement. One year from the Commencement Date and each anniversary thereafter,
the term of this Agreement shall be automatically extended one (1) additional
year unless prior to such anniversary of the Commencement Date, the Employer
shall have delivered to the Employee notice of a determination made pursuant to
Section 10.1(C) of this Agreement, or Employee shall have delivered to the
Employer written notice that the term of this Agreement shall not be extended.
3. Compensation.
3.1 Employer shall pay to Employee as full compensation for all
services performed, the sum of One Hundred Seventy Thousand Dollars ($170,000)
per year (or such higher amount as may be agreed to by Employer 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 the Employee's prior written consent.
3.2 Employer may deduct and withhold from all payments to be made to
Employee hereunder the amounts required or permitted to be deducted or withheld
pursuant to any provisions of any present or future 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. The Employee shall be eligible to participate in any bonus or
incentive compensation plan for which Employee or other senior executives of
Employer may reasonably expect to participate (the "Incentive Compensation
Plan"). 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.
5. Other Benefits. Employer shall maintain in full force and effect,
and Employee shall be entitled to continue to participate in, all of Employer'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, supplemental
pension and retirement plan and arrangement, stock option plan, life insurance
plan and arrangement, health and accident plan and arrangement, medical
insurance plan and arrangement, disability plan and arrangement, survivor income
plan and arrangement, relocation plan and vacation plan)(the "Employee Benefit
Plans"); provided, however, that this Section 5 shall not apply to any of
Employer's Incentive Compensation Plan(s). Employer 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 Employer and does 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 Employer. Employee shall
be entitled to participate in and receive benefits under any Employee Benefit
Plan or arrangement made available by Employer 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 the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to Section 3.1 hereof or
pursuant to an Incentive Compensation Plan as provided in Section 4 hereof. Any
payments or benefits payable to the Employee hereunder with respect to any
calendar year during which Employee is employed by Employer for less than the
entire such year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such calendar
year during which she is employed; provided, however, benefits or payments
payable to Employee under any life insurance plan or arrangement, health and
accident plan or arrangement or disability plan or arrangement shall be payable
on behalf of Employee by Employer for a period of six months after termination
of employment hereunder.
6. Other Interests. Employee shall devote her time and attention solely
to the business and interest of Employer, and Employer shall be entitled to all
the benefits arising from or incident to Employee's services. During the
employment term, Employee shall not, without Employer's written consent, have
any interest in any business which conflicts either directly or indirectly with
Employer'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 Employer's business activities are secret in nature and constitute trade
secrets, including but not limited to Employer's "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. All Employer's trade secrets and
proprietary information are and shall be the property of Employer, for its own
exclusive use and benefit, and Employee agrees that she will hold the same in
strictest confidence and will not at any time, either during or after her
employment by the Employer, use or permit the use of the same for her own
benefit or for the benefit of others unless authorized to do so by the
Employer's written consent or by a contract or agreement to which the Employer
is a party or by which it is bound.
<PAGE>
8. Services Furnished. During the term of Employee's employment with
Employer, Employer 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 (other than compensation accruing to any other person serving in
such capacity), if elected or appointed a director of the Employer 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.
10. Termination by Employer. Employee's employment hereunder may be
terminated by Employer without any breach of this Agreement only under the
following circumstances:
10.1 If occurring prior to a Change in Control (as hereinafter defined
in Section 11):
(A) Death. Employee's employment hereunder shall terminate
upon 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 her duties hereunder for the entire period of six (6) consecutive
months, and within thirty (30) days after written notice of termination is given
(which may occur before or after the end of such six month period) shall not
have returned to the performance of her duties hereunder on a full- time basis,
Employer may terminate Employee's employment hereunder. Employee's absence or
substantial absence from her duties will be treated as resulting from incapacity
due to physical or mental illness if Employee is "totally disabled from 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 her occupation, (2) Employee is either receiving Doctor's Care or has
furnished written proof acceptable to Employer 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.
(C) Without Cause. This Agreement may be terminated without
cause, in the sole, absolute and unreviewable discretion of Employer, by written
notice made by the President of Employer. Such notice shall state that the
President of Employer has determined that it is in the best interests of the
Employer or its shareholders to terminate this Agreement and the Employee's
employment hereunder.
10.2 If occurring subsequent to or resulting from a Change in Control
(as hereinafter defined in Section 11):
(A) Death. Employee's employment hereunder shall terminate
upon 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 her duties hereunder for the entire period of six (6) consecutive
months, and within thirty (30) days after written notice of termination is given
(which may occur before or after the end of such six-month period) shall not
have returned to the performance of her duties hereunder on a full time basis,
Employer may terminate Employee's employment hereunder. Incapacity due to
physical or mental illness will be determined as provided in Section 10.1(B); or
(C) Cause. Employer may terminate Employee's employment
hereunder for Cause. For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure by Employee to
perform her duties hereunder (other than any failure resulting from Employee's
incapacity due to physical or mental illness) after demand for substantial
performance is delivered by Employer, which demand specifically identifies the
manner in which Employee has not substantially performed her duties;
(ii) the willful and intentional act by the Employee
that is, in the reasonable determination of the Employer, materially injurious
to the Employer, monetarily or otherwise;
(iii) the breach by the Employee of any material
covenant of this Agreement; or
(iv) the conviction of the Employee of a crime
involving an act of moral turpitude or which is a felony resulting in or
intended to result, directly or indirectly, in gain or personal enrichment of
the Employee, relations of the Employee, or their affiliates at the expense of
the Employer.
For purposes of this Section 10, no act, or failure to act, on
Employee's part shall be considered willful unless done, or omitted to be done,
by her not in good faith and without the reasonable belief that her action(s) or
omission(s) was in the best interests of the Employer. Furthermore, no
termination of Employee's employment shall be effective until Notice of
Termination is given to Employee by Employer.
11. Termination by Employee. Employee may terminate her employment
hereunder upon thirty (30) days' written notice to Employer for any reason. If
Employee terminates her employment hereunder subsequent to a Change in Control
(as hereinafter defined) and such termination is made for any of the reasons
listed below, then such termination shall be deemed to have been done for good
reason ("Good Reason").
Reasons constituting Good Reason shall be limited to:
(A) any breach by Employer of any material provision of this
Agreement which has not been cured within ten (10) days after written notice of
such non-compliance is given by Employee to Employer;
(B) any demonstrable and material diminution of the
compensation, duties, responsibilities, authority or powers of Employee as such
relate to any positions or offices held by Employee immediately prior to such
Change in Control; provided that Employee provides a reasonable description of
any such diminution(s) and a statement that Employee finds, in good faith, that
the acts or omissions to act causing such diminution in duties,
responsibilities, authority or powers to be a material diminution and that, as
such, she elects to terminate her employment hereunder for Good Reason;
(C) the taking of, or failure to take, any action by Employer
which would deprive Employee of any material fringe benefit enjoyed at the time
of such Change in Control or the failure of Employer 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,
determined in good faith to be due and owing Employee pursuant to any such
Employee Benefit Plan or Incentive Compensation Plan; or
(D) any requirement by the Employer that Employee relocate her
primary business office to a geographical area greater than twenty (20) miles
from Employer's principal executive offices as existing immediately prior to the
applicable Change in Control or, if Employee is based in an office other than
Employer's principal executive office, the office of Employer where Employee is
based immediately prior to the most recent Change in Control.
For purposes of this Agreement, a "Change in Control" shall
mean an event or series of events which would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), as amended; provided that
the following events shall be deemed a Change in Control whether or not
reportable as a Change in Control pursuant to Regulation 14A of the Exchange
Act:
(i) any "person" [as such term is used in Sections 13(d) and
14(d) of the Exchange Act, as in effect on the date hereof (a "Person")]
acquiring "beneficial ownership" [as defined in Rule 13D-3 under the Exchange
Act, as in effect on the date hereof ("Beneficial Ownership")] of securities of
the Employer representing 36% or more of the combined voting power of the
Employer's then outstanding securities;
(ii) any Person, who does not have Beneficial Ownership of
securities of the Employer representing 5% or more of the combined voting power
of the outstanding securities of the Employer on the date hereof, acquiring
Beneficial Ownership of more than 15% of the combined voting power of the
securities of the Employer then outstanding; or
(iii) a change in the Board of Directors, which change is the
result of a proxy solicitation(s) or other action(s) to influence voting at a
shareholders' meeting of the Company (other than by voting one's own stock) by a
Person or group of Persons who has Beneficial Ownership of 5% or more of the
combined voting power of the securities of the Employer and which causes the
Continuing Directors to cease to be a majority of the Board of Directors of the
Employer; provided, however, that none of the foregoing events shall be deemed
to be a Change in Control if the event(s) or election(s) causing such change
shall have been approved specifically for purposes of this Agreement by the
affirmative vote of at least a majority of the members of the Continuing
Directors.
For purposes of this Agreement, "Continuing Directors" shall
mean a member of the Board of Directors who (i) is a member of the Board of
Directors on the date hereof, or (ii) who subsequently becomes a member of the
Board of Directors and who either (x) is appointed or recommended for election
with the affirmative vote of a majority of the Directors then in office who are
Directors on the date hereof, or (y) is appointed or recommended for election
with the affirmative vote of a majority of the Directors then in office who are
described in subsections (i) and (ii)(x) above, as applicable.
12. Compensation Upon Termination or During Disability.
12.1 During any period that Employee fails to perform her duties
hereunder as a result of incapacity due to physical or mental illness, Employee
shall continue to receive her full Base Salary at the rate then in effect for
such period until her employment is terminated pursuant to Section 10 hereof.
12.2 If Employee's employment is terminated by her death, Employer
shall pay to Employee's spouse, or if Employee leaves no spouse, to her estate,
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 such termination.
12.3 If Employee's employment shall be terminated for Cause, the
Employer shall pay Employee her full Base Salary through the date of such
termination at the rate in effect at the time Notice of Termination is given and
the Employer shall have no further obligations to the Employee under this
Agreement.
12.4 If (A) Employer shall terminate the Employee's employment
hereunder other than as permitted hereby or (B) the Employee shall terminate her
employment for Good Reason, then Employer shall pay Employee in cash or by
cashier's check within five (5) business days of such termination as Employee's
sole remedy for such termination the sum of (1) Employee's Base Salary or, if
greater, the base compensation rate in effect immediately prior to such
termination, multiplied by a number equal to the number of years in the Original
Term, (2) an amount equal to the greater of the amount paid and/or payable to
Employee or accrued by the Employer for Employee pursuant to all applicable
Incentive Compensation Plans (i) for the fiscal year of the Employer prior to
the fiscal year of any Change in Control or (ii) for the immediately preceding
fiscal year of the Employer (even though in either (i) or (ii) payable in the
next succeeding fiscal year(s) of Employer), multiplied by a number equal to the
number of years in the Original Term, and (3) all cash amounts due pursuant to
Section 5 hereof. The receipt of such payments shall constitute the sole remedy
of Employee for such termination and the making of such payments shall
constitute full performance by Employer under this Agreement. For purpose of
this Section 12.4 only, the Original Term, if greater than 2.99 years, shall be
2.99 years.
12.5 If the Employee shall terminate her employment pursuant to Section
11 hereof for any reason other than Good Reason, Employer shall pay Employee her
full Base Salary through the date of such termination at the rate in effect at
the time Notice of Termination is given.
12.6 If Employee's employment shall be terminated pursuant to Section
10.1 (C) then Employer shall pay Employee and provide benefits to Employee
pursuant to the standard policy of Employer.
12.7 The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise.
13. Stock Options. In the event Employee's employment with Employer is
terminated pursuant to Section 11 for Good Reason, any and all options to
purchase stock (common or otherwise) in the Employer granted pursuant to any
plan or otherwise, or any equivalent or similar rights which appreciate or tend
to appreciate as the value of the Employer's stock appreciates, shall become
immediately accelerated and fully vested and any restrictions on such options or
equivalent or similar rights shall, to the extent permissible under applicable
securities laws, fully lapse. Employer shall endeavor to cause any restrictions
on such options or equivalent or similar rights not lapsed by operation of this
Section 13 to so lapse.
14. Covenant not to Compete. Employee, in consideration of the
compensation and other benefits to be received by her pursuant to this
Agreement, expressly agrees that she will not, within a radius of fifty (50)
miles from any place of business of the Employer, engage directly or indirectly,
as employee, principal, agent, partner, director or independent contractor or
otherwise in any business which is competitive to that of the Employer for a
period equal to the Original Term after she ceases to be employed by the
Employer.
15. Non-solicitation. Except in the case of a termination pursuant to
Section 11 for Good Reason, for a period equal to the Original Term following
termination of this Agreement, Employee shall not directly or indirectly solicit
any of Employer's customers existing as of the date of termination. If Employee
violates this Section 15, Section 14 or the confidentiality provisions of
Section 7, and continues to do so after Employer has notified Employee of such
violation, Employer 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; provided that Employer demonstrates that Employee's
solicitations result in direct financial detriment to Employer.
16. Arbitration. Except as provided in Section 15, if a dispute arises
between Employer and Employee concerning termination of this Agreement under
Section 10 or 11 above or otherwise, the disputed matter shall be submitted to
arbitration. Any disputed matter shall be settled by arbitration in the City of
San Francisco, California 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 State of
California 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.
17. Taxes. Notwithstanding anything herein to the contrary, Employer
shall not be obligated to pay any portion of any amount otherwise payable to
Employee hereunder if Employer is not reasonably able to deduct such portion
(the "Excess Amount") solely by operation of Section 280G (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"). Employer shall be deemed able to reasonably deduct such
Excess Amount; and all amounts accruing hereunder, including the Excess Amount,
shall be paid Employee in the event Employee delivers to Employer an opinion of
an attorney that is reasonably acceptable to Employer stating such Excess Amount
is reasonably deductible by Employer by operation of Section 280G (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. Miscellaneous.
18.1 Written notices required by this Agreement shall be sent
to Employer or Employee by certified mail, with a return receipt requested, to
Employer's registered address and to Employee's last shown address on Employer's
records, respectively. Such notice shall be deemed to be delivered two days
after mailing.
18.2 This Agreement contains the full and complete
understanding of the parties and supersedes all prior representations, promises,
agreements, and warranties, whether oral or written.
18.3 This Agreement shall be governed by and interpreted
according to the laws of the State of California.
18.4 With respect to Employer, this Agreement shall inure to
the benefit of and be binding upon any successors or assigns of Employer. With
respect to Employee, this Agreement shall not be assignable, but shall inure to
the benefit of and be binding upon the heirs, executors, administrators, and
successors of Employee.
18.5 The captions of the various sections of this Agreement
are inserted only for convenience and shall not be considered in construing this
Agreement.
18.6 This Agreement can be modified, amended or any of its
terms waived only by a writing signed by both parties.
18.7 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.
18.8 Without limiting the provisions of Section 16, if either
party institutes arbitration proceedings pursuant to Section 16 or an action to
enforce the terms of this Agreement, the prevailing party in such proceeding or
action shall be entitled to recover reasonable attorneys' fees, costs and
expenses.
18.9 No remedy made available to Employer 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, this Agreement has been executed on the
day and year specified above.
EMPLOYER:
PLM INTERNATIONAL, INC.
By: /s/Robert N. Tidball
Its: President and Chief Executive
Officer
ATTEST:
/s/ Christopher Delyani
EMPLOYEE:
/s/Susan C. Santo
Susan C. Santo
ATTEST:
/s/Lorraine Schwerin
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") is
made as of November 17, 1998, by and between PLM International, Inc., a Delaware
corporation ("Employer"), and Susan C. Santo ("Employee").
WHEREAS, Employer and Employee are parties to an Employment
Agreement ("Agreement") dated as of November 19, 1997, as authorized and
ratified by the Board of Directors of Employer on May 12, 1998;
WHEREAS, the Board of Directors of Employer has determined
that Employee will not be protected by the Change in Control provisions of the
Agreement in the event that Steel Partners, L.L. C. acquires greater than 15% of
the combined voting power of the securities of the Employer because Steel
Partners, L.L.C. owned greater than 5% of the securities of the Employer at the
time the Agreement was entered into;
WHEREAS, the Board of Directors of Employer intended, at the
time the Agreement was entered into, for Employee to have such protection;
WHEREAS, the Board of Directors of Employer deems it to be in
the best interests of the shareholders of the Employer to amend the Agreement in
order to provide the protection that was intended and in order to maintain a
continuity of management, and retain an experienced, successful and proven
management team;
NOW, THEREFORE, for and in consideration of the premises and
mutual covenants herein contained, Employer and Employee hereby agree as
follows:
1. Change In Control. The definition of "Change in Control" is hereby
amended by deleting and replacing in its entirety Paragraph (ii) of Section 11
as follows:
"(ii) any Person, who does not have Beneficial Ownership of
securities of the Employer representing 15% or more of the combined voting power
of the outstanding securities of the Employer on the date hereof, acquiring
Beneficial Ownership of more than 15% of the combined voting power of the
securities of the Employer then outstanding; or"
2. Express Amendment. Except as specifically amended herein, all other
terms and conditions of the Agreement, including the other portions of the
definition of "Change in Control", shall remain in full force and effect. No
provision of this Amendment shall be construed to limit any right or obligation
of either party under the Agreement.
3. Counterparts. This Amendment may be signed in any number of
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.
EMPLOYER: EMPLOYEE:
PLM INTERNATIONAL, INC.
By: /s/Robert N. Tidball /s/Susan C. Santo
Robert N. Tidball Susan C. Santo
Its: President and Chief Executive Officer
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
This EXECUTIVE DEFERRED COMPENSATION AGREEMENT (this "Agreement") is made
this 18th day of December, 1992, by and between PLM International, Inc., a
Delaware corporation, its affiliates and subsidiaries (collectively, the
"Company"), and ROBERT N. TIDBALL ("Executive").
RECITALS:
A. Executive is a management employee of the Company, serving the Company
in such capacity as the Company's board of directors or officers may designate
from time to time.
B. The Company and Executive have, prior to the date of this Agreement,
agreed, and shall in the future, apart from this Agreement, agree, from time to
time, on the amount(s) that the Company is to pay Executive as Executive's basic
current cash compensation (that is, Executive's salary, hereinafter referred to
as Executive's "Salary"), as well as on other amounts of compensation for
personal services (including, but not by way of limitation, bonuses, consultancy
fees, and commissions).
C. In consideration of the personal services required to be performed by
Executive in order for Executive or Executive's Beneficiary to receive any of
the benefits provided under this Agreement, and in recognition of the importance
that certain of the Company's management employees, now and in the future, may
place upon its actions to secure adequate retirement and death benefits for its
management employees -- but specifically disavowing any intention of setting any
policy or precedent, binding or otherwise, with respect to the retirement or
death benefits, if any, that the Company may at any time, now or in the future,
decide to provide to any of its employees, management or otherwise, other than
Executive -- the Company desires to make provision for pension and death
benefits for Executive, as specified in the provisions of this Agreement.
WHEREFORE THE PARTIES AGREE AS FOLLOWS:
1. Deferred Compensation Benefits
1.1 Commencing on the first Business Day of any Compensation
Period, and continuing on the first Business Day of each of the following months
until the end of such Compensation Period, the Company shall pay Executive a
Monthly Executive Deferred Compensation Benefit under this Agreement. The
Monthly Executive Deferred Compensation Benefit shall be computed according to
the following formula:
Monthly Executive Deferred Compensation Benefit = VF (AF (S/M))
where "S" equals the sum of all of the amounts paid to Executive as Salary
during Executive's last 60 months of employment with the Company (or, if
Executive was an employee of the Company for less than 60 months, during all of
Executive's months of employment with the Company), "M" is the number of months
in the period of consecutive months used in the computation of S, "AF" is
Executive's Accrual Factor, and "VF" is Executive's Vesting Factor.
1.2 For the purposes of paragraph 1.1, a month of employment shall
be any calendar month during which Executive has been a full-time employee of
the Company at all times. In computing the number of months during which
Executive was employed by the Company preceding a Compensation Period, periods
of normal paid vacation or of paid leave, of whatever type, shall be treated as
periods during which Executive was a full-time employee of the Company. Any
unpaid leave of absence taken by Executive with the Company's consent shall be
treated (a) as beginning on the first day of the calendar month in which it
actually began and ending on the last day of the calendar month in which it
actually ended, and (b) as a period during which Executive was not a full-time
employee of the Company.
1.3 Except as otherwise provided in this Agreement, Executive's
"Accrual Factor" shall be determined under the following table:
Years of Service Accrual Factor
-------------------------------------------------------
1 5%
2 10%
3 15%
4 20%
5 25%
6 30%
7 35%
8 40%
9 45%
10 50%
11 55%
12 60%
13 65%
14 70%
15 or more 75%
For the purpose of determining Executive's Accrual Factor under the above table,
a "Year of Service" shall be any calendar year during which Executive is or was
actually employed by the Company as a full-time employee for at least 40 weeks.
For the purpose of the preceding sentence, any calendar week shall be treated as
a week of full-time employment if Executive was a full-time employee of the
Company on any day during such week.
1.4 Except as provided in paragraph l.5, or Section 6 or 12,
Executive's "Vesting Factor" shall be determined under the following table:
Years of Service
Occurring After
Calendar Year 1985 Vesting Factor
1 0%
2 0%
3 0%
4 0%
5 or more 100%
For the purpose of determining Executive's Vesting Factor under the above table,
a Year of Service shall be computed in the same manner as a Year of Service for
the purpose of computing Executive's Accrual Factor under paragraph l.3, except
that calendar years preceding the calendar year in which this Agreement was
entered into by and between the Company and Executive (or, if earlier, the
calendar year of any prior Agreement which this Agreement supersedes) shall not
be counted.
1.5 Notwithstanding anything that might otherwise be to the
contrary in paragraph 1.4, if Executive terminates employment with the Company
on account of a Layoff, or on account of his or her death or a period of illness
ending in death, Executive's Vesting Factor shall be determined under the
following table:
Years of Service
Occurring After
Calendar Year 1985 Vesting Factor
1 20%
2 40%
3 60%
4 80%
5 or more 100%
For the purposes of this paragraph l.5, a "Layoff" shall mean a
termination of employment initiated by the Company as part of a general
reduction in the size of the Company's work force or management in response to a
reduction in the volume, or a structural change in the nature of, the Company's
business, or its manner of conducting business, where the circumstances of the
termination indicate that the Executive's job performance has not generally been
unsatisfactory and that, but for the reduction in the volume, or change in the
structural nature of the Company's business, or its manner of conducting
business, the Company would probably not have terminated Executive's employment.
l.6 The "Compensation Period" shall be the period of consecutive
calendar months commencing with the first Business Day of the second calendar
month following the later of (a) the calendar month in which Executive attains
age 60, or (b) the calendar month in which Executive terminates employment with
the Company, and ending with the last day of the earlier of (x) the calendar
month following the calendar month in which Executive again becomes an employee
of the Company, or (y) the last day of the 59th month following the first month
of the Compensation Period.
l.7 For the purposes of this Agreement, a "Business Day" shall be
any day other than Saturday, Sunday, or a Holiday. A "Holiday" shall be any day
on which the Company's Executive offices are not open for general business, and
on which the Company's nonmanagement employees are not required to report for
work other than by special arrangement.
l.8 For the purpose of this Agreement, the terms "employee" and
"employment" shall have their common law meanings, and shall not include,
respectively, an independent contractor or the work relationship between the
Company and an independent contractor.
l.9 (a) For the purpose of computing Executive's Accrual Factor,
any period of time during which Executive was employed by any of the following
employers shall be treated as a period of time during which Executive was
employed by the Company, so that if Executive has been employed by any such
employer he shall be in the same position with respect to the computation of his
Accrual Factor as he would be had his service (Years of Service and any portion
of any Year of Service) for such employer been service with the Company:
PLM Companies, Inc.
Transcisco Industries, Inc.
PLM International, Inc.
l.9 (b) For the purposes of computing Executive's Vesting Factor,
any period of time during which Executive was employed by any of the following
employers shall be treated as a period of time during which Executive was
employed by the Company, so that if Executive has been employed by any such
employer he shall be in the same position with respect to the computation of his
Vesting Factor as he would be had his service (Years of Service and any portion
of any Year of Service) for such employer been service with the Company:
PLM Companies, Inc.
Transcisco Industries, Inc.
PLM International, Inc.
2. Reduction for Prior Payments
If Monthly Executive Deferred Compensation Benefit payments become
payable under Section l of this Agreement, and with respect to any previous
Compensation Period(s) Executive has previously received Monthly Executive
Deferred Compensation Benefit payments, then, notwithstanding anything in
Section l of this Agreement that might otherwise be to the contrary, the rules
provided in Section l of this Agreement, which generally provide that a
Compensation Period ends no later than the last day of the 59th calendar month
after the first calendar month of the Compensation Period, shall be applied by
substituting "the Nth calendar month" for "the 59th calendar month" each place
"the 59th calendar month" appears, where "N" is the number obtained by
subtracting from 59 the total number of Monthly Executive Deferred Compensation
Benefit payments previously received by Executive with respect to any previous
Compensation Period(s).
3. Death Benefits
3.1 If Executive dies during a Compensation Period the Company
shall continue to make Monthly Executive Deferred Compensation Benefit payments,
until the end of the Compensation Period, exactly as if Executive had not died,
except that, commencing with the first Monthly Executive Compensation Benefit
payment payable after the l0th Business Day following the Company's actual
receipt of notice of Executive's death, all remaining Monthly Executive Deferred
Compensation Benefit payments shall be paid to Executive's Beneficiary.
3.2 If Executive dies other than during a Compensation Period,
then Executive shall be assumed for all purposes of this Agreement to have (a)
terminated employment with the Company (i) if the Executive is not employed by
the Company at the time of his death, on the day Executive actually last
terminated employment with the Company or (ii) if the Executive is employed by
the Company at the time of his death, on the first day of the calendar year
following the calendar year in which Executive actually died (in which case
Executive shall be assumed to have provided his or her services to the Company
until such date on a full-time basis), (b) survived until the attainment of age
60, and (c) died on the second day of the second calendar month following his or
her attainment of age 60. The provisions of paragraph 3.l shall then be applied
using the assumed facts set forth in the previous sentence.
3.3 Executive's Beneficiary shall be:
(a) such person as Executive may have instructed in an unrevoked
writing delivered to the Company's General Counsel, and accepted by the
Company's General Counsel for the purpose of designating a Beneficiary under
this Agreement; otherwise,
(b) such person as Executive may have designated in Executive's
last will and testament duly admitted to probate; otherwise,
(c) Executive's estate.
3.4 Notwithstanding anything contained in this Agreement that
might otherwise be to the contrary, no amount constituting property of a
surviving or former spouse of Executive due to the application of any community
or other marital property law shall be paid to any person other than such
surviving or former spouse, or such surviving or former spouse's estate, without
the written consent of such surviving or former spouse, or of the executor or
administrator of such surviving or former spouse's estate. Prior to making any
payment under this Agreement the Company may require the potential recipient of
such payment to supply the Company with such proof as the Company shall
reasonably require to ensure that the payment in question complies with the
provisions of this paragraph 3.4.
4. Source of Payments
The Deferred Compensation Benefits payable under this Agreement
are non-transferable and subject to substantial risks of forfeiture within the
meaning of section 83 of the Internal Revenue Code of 1986. The Company may, but
is not required to, establish a trust or other fund separate and beyond the
reach of the creditors of the Company to secure the Deferred Compensation
Benefits payable under this Agreement. In the event that such a trust or other
fund is established by the Company, the Company may, but is not required to
contribute any specified amounts or assets to such trust or other fund. It is
the intent that the Deferred Compensation Benefits be paid from any amounts
available in such trust or other fund, however, in any event the Company remains
obligated as provided under this Agreement to the extent that Deferred
Compensation Benefits are not paid by such trust or other fund.
5. Acceleration of Payments
Notwithstanding anything contained in Sections l or 3 of this
Agreement that might otherwise be to the contrary, the Company's Board of
Directors shall have the power in its discretion to pay the total amount of any
Monthly Executive Compensation Benefit payments that may become payable under
this Agreement either in a single sum or in a lesser number of installments than
if payments were made monthly as would otherwise be provided in Sections l or 3.
If the Company's Board of Directors decides to pay Executive's Monthly Executive
Compensation Benefit as a single sum, or in such lesser number of installments,
then the dollar amount(s)) owed by the Company to Executive or Executive's
Beneficiary under this Agreement shall be less than the sum of the nominal
dollar amounts that would otherwise be owed under Sections l or 3 in order to
take into account the time value of money. The dollar amounts that shall be owed
by the Company under this Agreement in the case of a single sum payment or
payment in a lesser number of installments than would otherwise be made in
Sections l or 3 shall be the amount determined by:
(a) discounting to present value, using generally accepted
accounting principles, the stream of payments that would otherwise be payable
under Sections l or 3 assuming that Executive's Compensation Period lasted for
as long as necessary to exhaust the Company's payment obligation under Sections
l or 3 (taking into account any reduction of such obligation provided for by
Section 2 of this Agreement), and assuming an interest rate reasonably
approximate to the interest rate that the Company would pay a commercial lender
in connection with a loan to the Company, made at the time the payment is made,
of an amount approximately equal to the amount(s)) to be paid to Executive under
Sections l or 3 of this Agreement, and for a term reasonably approximate to the
period over which such payments would be made; and,
(b) increasing, if appropriate, to future value, using the same
principles used in subparagraph (a) above, the payment(s) actually to be made,
taking into account the time(s) when such payment(s)) is/are actually to be
made.
6. Form of Payments
6.1 Except as provided in Section 6.2 below, all payments to
Executive under this Agreement shall be made in cash.
6.2 If the Company makes one or more payment(s) to Executive under
Section 5, such payment(s) may, at Executive's option be wholly or partially in
the form of one or more immediate or deferred annuity contracts on the sole life
of the Executive or jointly on the lives of Executive and Executive's
Beneficiary, with any term certain or refund feature elected by Executive.
7. Forfeitures of Otherwise Vested Amounts
Notwithstanding anything contained in this Agreement that might
otherwise be to the contrary, Executive's Vesting Factor for the purposes of
paragraphs l.4 and l.5 of this Agreement shall, if it is not already zero
percent, be reduced to zero percent and shall, forever thereafter, remain, zero
percent if:
(a) Executive resigns from the Company's employment against the
wishes of the Company;
(b) Executive materially breaches any trade secrets or other
confidentiality agreement between the Company and Executive;
(c) Executive's employment terminates within the 48-consecutive
month period consisting of the 24 months immediately preceding and the 24 months
immediately following the Company's discovery of any misconduct in connection
with Executive's employment, including fraud or embezzlement;
(d) After counseling with respect to the importance of such an
examination to the financial interests of the Company, and after a reasonable
period for deliberation, Executive refuses to undergo any medical or other
examination in connection with the acquisition or potential acquisition of any
life insurance policy, annuity, or other investment whose price may reflect a
mortality risk factor, that the Company may desire to acquire.
8. Service During Retirement or Disability
8.1 Executive may continue to be involved in the Company's affairs
during a Compensation Period provided, however, that Executive's involvement in
such affairs shall in no way be required as a condition of receiving any payment
under this Agreement, and provided that during any Compensation Period the
Company shall have no right under this Agreement to require Executive to perform
any services for, or otherwise be involved in the affairs of, the Company.
8.2 If Executive provides services to the Company during a
Compensation Period, the compensation, if any, that Executive shall receive from
the Company for such services shall be the subject of an agreement or
understanding between Executive and the Company other than this Agreement. In
particular, this Agreement shall not preclude or otherwise affect Executive's
receipt of compensation from the Company for services performed during a
Compensation Period, nor shall any payments due under this Agreement be reduced
or offset by any such compensation.
9. Taxes
9.1 If and to the extent that the Company determines in good faith
that any amount otherwise payable to Executive or Executive's Beneficiary under
this Agreement is subject to Federal Insurance Contributions Act ("FICA") taxes,
California State Disability Insurance ("SDI") taxes, or any other payroll taxes
(including, but not by way of limitation, federal or state income tax
withholding on wages, deferred compensation, disability benefits, death
benefits, or similar amounts, or any federal or state withholding tax on
employee wages, deferred compensation, disability benefits, death benefits, or
similar amounts that may be enacted after the date of this Agreement
(collectively "Employee Payroll Taxes"), then the Company (or the trust, as the
case may be) shall deduct from such amount the sum, if any, of:
(a) Executive's portion as an employee or former employee of the
Company, or Executive's Beneficiary portion or a beneficiary of a former
employee of the Company -- but not the Company's portion -- of FICA taxes under
Sections 3102 of the Internal Revenue Code of l986, as amended (the "Code"), or
under any related or successor provision(s) of federal law;
(b) SDI taxes under Sections 2901, 984, and 986 of the California
Unemployment Insurance Code, or under any related or successor provisions of
state law; and
(c) the amount of any other applicable Employee Payroll Taxes due
with respect to such gross amounts, to the extent that, as a matter of federal
or state tax law, they are imposed on Executive or Executive's Beneficiary.
9.2 The amount of any reduction(s) under Section 9.l above shall
for the purposes of this Agreement and for federal and state tax purposes --
including federal and state payroll tax deposit and reporting purposes -- be
treated by the Company, Executive, or/and Executive's Beneficiary, as employee
FICA, SDI, or/and other Employee Payroll Taxes withheld from Executive's wages
or benefits as an employee or former employee of the Company, or from other
appropriate amounts.
9.3 Except as otherwise provided in this Section 9 of this
Agreement, the gross amounts otherwise payable to Executive or Executive's
Beneficiary under this Agreement shall not be reduced on account of any other
taxes that may be imposed on the Company on account of or in connection with the
Company's payments to Executive or Executive's Beneficiary under this Agreement.
10. Automatic Acceleration of Vesting and Optional Acceleration of
Payment in the Case of A Change in Control; Section 280G Cutback
10.1 Notwithstanding anything contained in this Agreement that
might otherwise appear to the contrary other than Section 10.4 automatically, as
a consequence of the operation of this Agreement, and without any requirement
for any approval on the part of the Company's board of directors or any officer
or group of officers of the Company, in the event of any Change in Control of
the Company, if Executive is an employee of the Company at the time of such
Change in Control of the Company, then effective with the occurrence of such
Change in Control of the Company:
(a) Executive shall be treated for all purposes of this Agreement
as if Executive 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
(b) Executive's Vesting Factor under Section l.4 of this Agreement
shall, except as it may be affected by Section 7 of this Agreement prior to the
date of the Change in Control of the Company, become and forever thereafter
remain 1.
10.2 Moreover, notwithstanding anything contained in this
Agreement that might otherwise appear to the contrary, in the case of any Change
in Control of the Company, the Company's board of directors may at any time
direct that, in addition to the provision of Section 10.1 above, this Agreement
shall be applied (a) if Executive had already terminated employment with the
Company prior to the Change in Control of the Company, as if Executive 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 occurred, or (b) if
Executive was an employee of the Company on the date on which the Change in
Control of the Company occurred, as if Executive had terminated employment with
the Company, and had done so on the day following the day on which Executive
shall be deemed to have attained age 60 under Section 10.1.
10.3 Except than as provided in Section 11 below, for purposes of
this Agreement, "Change in Control of the Company" shall mean a change in the
ownership of the Company's stock that would be required to be reported in
response to Item 6(e) of Schedule l4A of Regulation l4A promulgated under the
Securities Exchange Act of l934 as in effect on the date of this Agreement or,
if such Item 6(e) is no longer in effect, a change in ownership that would be
required to be reported under any regulation issued by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of l934 that serves
similar purposes as such Item 6(e); provided however, that in any event a Change
in Control of the Company shall be deemed to have occurred if and when (a) any
"person" (as such term is used in Sections l3 (d) and l4 ((d)(2)) of the
Securities Exchange Act of l934) is or becomes a beneficial owner, directly or
indirectly, of securities of the Company representing more than 15% of the
combined voting power of the Company's then outstanding securities, or (b) there
is a change in the Board of Directors which change is the result of a proxy
solicitation(s) or other action(s) to influence voting at a shareholders'
meeting of the Company (other than by voting one's own stock) by a Person or
group of Persons who has Beneficial Ownership of 5% or more of the combined
voting power of the securities of the Employer and which causes the Continuing
Directors to cease to be a majority of the Board of Directors of the Employer.
For purposes of the preceding sentence, "Continuing Directors" shall mean a
member of the Board of Directors who (i) is a member of the Board of Directors
on the date hereof, or (ii) who subsequently becomes a member of the Board of
Directors and who either (x) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are Directors
on the date hereof, or (y) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are described
in subsections (i) and (ii)(x) above, as applicable.
10.4 (a) Notwithstanding anything that might otherwise be to the
contrary in this Agreement, if as a result of the application of Sections 10.1
or/and 10.2 of this Agreement Executive's Vesting Factor or/and the timing of
any payments to Executive under this Agreement is/are accelerated upon the
occurrence of a Change in Control of the Company, then the Executive shall
engage outside counsel ("280G Counsel") to render an opinion as to whether the
payment of any amount or portion of any amount that would be paid by the Company
to Executive under this Agreement but for this Section 10.4 would, more probably
than not, be deductible for federal income tax purposes notwithstanding Section
280G of the Code, or any successor provision. If 280G Counsel is unable to
render its opinion that the entire amount consisting of the aggregate of all
payments due Executive under this Agreement (disregarding this Section 10.4
would, more probably than not, be deductible, then 280G Counsel shall determine
the maximum present value of payments (using the present value rules applicable
under Section 280G) that, in its opinion, Executive may receive under this
Agreement without any portion of any payment of such present value being, more
probably than not, nondeductible for federal income tax purposes as the result
of the application of Section 280G of the Code (Executive's "280G Limit"). 280G
Counsel shall then determine the number of months by which the period that would
otherwise be Executive's Compensation Period under this Agreement would be
required to be shortened (without increasing the amount determined under Section
l.l as Executive's Monthly Deferred Compensation Benefit) so that the present
value of the amounts that Executive will receive under this Agreement would not
exceed Executive's 280G Limit. The number of months that would otherwise be
included in Executive's Compensation Period shall then be shortened,
notwithstanding any other provision of this Agreement that would otherwise
appear to be to the contrary, to the number of months so determined by 280G
Counsel.
(b) The selection of 280G Counsel shall be within the Executive's
discretion, but the competence of 280G Counsel in such tax matters must be
demonstrable.
(c) If 280G Counsel determines that, in connection with an event
that constitutes a Change in Control under this Agreement, other amounts may be
payable to Executive by the Company or any affiliate of the Company (including,
but not by way of limitation, a member of an affiliated group as determined
under Section 280G(d)(5) of the Code) under any other agreements or arrangements
that would, in 280G Counsel's opinion, more likely than not be required under
Section 280G of the Code to be aggregated with payments under this Agreement in
determining whether amounts that would otherwise be paid under this Agreement
would exceed the 280G Limit, or in determining whether such other amounts
themselves might be nondeductible to the payor under Section 280G, then 280G
Counsel shall assume, in making its determinations under Section 10.4(a), that
the maximum amount payable under such other agreements or arrangement shall in
fact be paid to Executive, notwithstanding that such other agreements or
arrangements may contain their own ordering rule with respect to cutbacks
similar in principle to the cutback provided for in this Section 10.4 except to
the extent that any such agreement or arrangement, or the ordering rule provided
for in it, has been entered into as of a date following the date as of which
this Agreement is entered into and specifically refers to this Agreement.
11. Automatic Acceleration of Both Vesting and Payment in the Case
of Liquidation or Dissolution
The Company's liquidation or/and dissolution shall also constitute
a Change in Control of the Company for the purposes of Section 10 of this
Agreement, except that, in the case of the Company's liquidation or dissolution,
Section 10.2 shall be applied without the requirement for action by the
Company's board of directors, so that (a) if Executive actually terminated
employment with the Company prior to the Change in Control of the Company,
Executive shall automatically be treated as having 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 occurred or (b) if Executive was an employee of
the Company on the date on which the Change in Control of the Company occurred,
then Executive shall automatically be treated as having terminated employment
with the Company on the day after Executive is treated as having attained age 60
under Section 10.1.
12. Limited Effect
12.1 Other than as specifically provided in this Agreement, this
Agreement shall have no effect on the nature, duration, or terms of Executive's
employment relationship with the Company, or on the amount of, or the Company's
liability to pay, any Salary or other compensation to Executive.
12.2 No amount(s) that may become payable to Executive under this
Agreement shall be deemed to be salary or other compensation of Executive for
the purpose of computing benefits to which Executive may be or become entitled,
or contributions that Executive may be or become entitled to make, under any
compensation, profit sharing, or salary deferral plan -- whether qualified under
the Code or not -- of the Company, nor is anything in this Agreement intended to
affect any right or obligation that Executive may have, now or in the future,
under any such plans or arrangements.
13. Procedure for Review of Denial of Benefits
13.1 The Company's board of directors shall be the administrator
(the "Administrator") of this Agreement. The Administrator shall determine the
rights under this Agreement of Executive, of any Beneficiary of Executive, of
any surviving or former spouse of executive, or of any legatees or heirs of
Executives (the potential "Claimants"). If a Claimant disputes the
Administrator's determination of benefits under this Agreement, he, she, or it
may file a written claim for benefits with the Administrator, provided that, in
the case of any Claimant to whom the Administrator has directed a written
notification of the administrator's determination, the claim is filed within 60
days of the date the Claimant receives such notification.
13.2 If a claim for benefits under this Agreement is wholly or
partially denied, the Administrator shall provide the Claimant with a notice of
denial, written in a manner calculated to be understood by the Claimant and
setting forth:
(a) the specific reason(s) for the denial;
(b) specific references to the provisions of this Agreement on
which the denial is based;
(c) a description of any additional material or information needed
by the Claimant in order to perfect the claim, with an explanation of why the
material or information is necessary; and
(d) appropriate information as to steps to be taken if the
Claimant wishes to appeal the Administrator's denial of the claim. The notice of
denial shall be given within a reasonable time but not later than 90 days after
the claim is filed, unless special circumstances require an extension of time
for processing the claim. If an extension of time is required, written notice
shall be furnished to the Claimant within 90 days of the date the claim was
filed stating the special circumstances requiring the extension, and the date by
which a decision on the claim can be expected, which date shall be no more than
l80 days from the date the claim was filed. If no notice of denial is provided,
the Claimant may appeal the claim as though the claim had been denied.
13.3 The Claimant and/or his or her representative may appeal the
denied claim to the Administrator, and, in connection with the appeal, may:
(a) request a review on written application to the Administrator;
(b) review pertinent documents; and
(c) submit issues and comments in writing to the Administrator.
The appeal must be made within 60 days of the date the Claimant received
notification of the denied claim.
13.4 On receipt of a request for review, the Administrator shall,
within a reasonable time, but not later than 60 days after receiving the
request, provide written notification of its decision to the Claimant stating
the specific reasons and referencing the specific provisions of this Agreement
on which its decision is based, unless special circumstances require an
extension of time for processing the review. If an extension is required, the
Administrator shall notify the claimant of the special circumstances and of a
date no later than l20 days after the date the review was requested on which the
Administrator will notify the Claimant of its decision.
13.5 Nothing in this Section 13 of this Agreement shall be
interpreted as limiting in any way the Company's right to interplead any
Claimants in any court of competent jurisdiction.
14. Agreement Binding; Successors and Assigns
14.1 This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto, their permitted assigns, if any, and, but only by
operation of law, their respective next of kin, legatees, administrators,
executors, legal representatives, and successors (including remote, as well as
immediate, successors to such parties, but only by operations of law). In
applying any provision of this Agreement with respect to any successor or assign
of the Company, such provision shall be applied by treating such successor or
assign as the "Company" referred to in this Agreement, unless such treatment
would be clearly inappropriate. The principle of the preceding sentence shall
not, except as otherwise specifically provided in other provisions of this
Agreement, apply to any successor or assign of Executive or Executive's
Beneficiary.
14.2 Except by operation of law, as provided in Section l4.1
above, this Agreement may not be assigned by Executive. This Agreement may be
assigned by the Company, but only with Executive's prior written consent.
14.3 Neither Executive, Executive's estate, or Executive's
surviving spouse, if any, shall have any right to commute, encumber, or dispose
of the right to receive payments under this Agreement, and such payments and the
right to receive them, shall, to the maximum extent permissible under the law,
be nonassignable, nontransferable, and not subject to garnishment or other
attachment.
14.4 The Company shall have the right under this Agreement to
offset against its obligation to make any payment to any person under this
Agreement (including Executive, Executive's Beneficiary, or any other person)
any claims that the Company may have against such person in connection with any
transaction or occurrence between the Company and such person, or affecting the
Company and in which such person was involved, whether or not such transaction
or occurrence is otherwise connected with this Agreement in any other way.
14.5 Any defense, whether arising under this Agreement or in
connection with any other transaction or occurrence, that the Company may have
against any obligation, including the obligation to make any payment, that the
Company might otherwise have under this Agreement, shall, to the extent good
against Executive, also be good against Executive's Beneficiary or any other
Claimant.
15. Arbitration
15.1 Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration to take place in
San Francisco, California, in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, and judgment upon the award by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitrator(s) shall award attorneys' fees to the prevailing party, if any, in
the arbitration, and any court entering judgment upon such award shall award
attorneys' fees and costs to the party causing such judgment to be entered.
16. Notices
All notices, consents, requests, demands, or other communications
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given when delivered, or when mailed by United States certified mail,
postage prepaid, as follows:
If to the Company: PLM International, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, California 94l05
If to Executive: 6178 Estates Drive
Oakland, CA 94611
or to such other address as the Company or Executive shall have last designated
by notice to the other. Any item shall be effective upon delivery, and any item
mailed by United States certified mail, postage prepaid, shall be deemed to have
been delivered on the third business day following the date deposited in the
mail.
17. Waiver
No failure on the part of either the Company or Executive to
exercise, no delay in exercising, or course of dealing with respect to, any
right, power, or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power, or privilege preclude
any other or further exercise of such right, power, or privilege, or of any
other right, power, or privilege. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law.
18. Invalid Provision
Invalidity or unenforceability of any particular provision of this
Agreement shall not affect the provisions of this Agreement, and this Agreement
shall be construed in all aspects as if the invalid or unenforceable provision
were omitted.
19. Enumeration and Headings
The enumeration and headings of this Agreement are merely for
convenience of reference; they shall not be construed to constitute
representations or warranties, or to have any substantive significance.
20. Entire Agreement
This writing constitutes the entire understanding between the
parties with respect to the matters it deals with, and such understanding may be
modified, altered, or amended only by the written agreement of the parties
hereto. The Company and the Executive expressly agree that this agreement
supersedes and replaces any prior agreement that may already be in effect with
respect to the matters covered herein, and, except as provided in paragraph 1.4
of this agreement, any such prior agreement will become null and void upon the
execution and delivery of this agreement.
21. Governing Law
This agreement shall be construed in accordance with and governed
by California law.
22. Counterparts
This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Agreement by signing any such counterpart.
THE COMPANY
By: /s/ Allen V. Hirsch
Its: Executive Vice President
Date:12/18/92
EXECUTIVE
/s/ Robert N. Tidball
Date: 12/18/92
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
This EXECUTIVE DEFERRED COMPENSATION AGREEMENT (this "Agreement") is made
this 7th day of July, 1993, by and between PLM International, Inc., a Delaware
corporation, its affiliates and subsidiaries (collectively, the "Company"), and
DOUGLAS P. GOODRICH ("Executive").
RECITALS:
A. Executive is a management employee of the Company, serving the Company
in such capacity as the Company's board of directors or officers may designate
from time to time.
B. The Company and Executive have, prior to the date of this Agreement,
agreed, and shall in the future, apart from this Agreement, agree, from time to
time, on the amount(s) that the Company is to pay Executive as Executive's basic
current cash compensation (that is, Executive's salary, hereinafter referred to
as Executive's "Salary"), as well as on other amounts of compensation for
personal services (including, but not by way of limitation, bonuses, consultancy
fees, and commissions).
C. In consideration of the personal services required to be performed by
Executive in order for Executive or Executive's Beneficiary to receive any of
the benefits provided under this Agreement, and in recognition of the importance
that certain of the Company's management employees, now and in the future, may
place upon its actions to secure adequate retirement and death benefits for its
management employees -- but specifically disavowing any intention of setting any
policy or precedent, binding or otherwise, with respect to the retirement or
death benefits, if any, that the Company may at any time, now or in the future,
decide to provide to any of its employees, management or otherwise, other than
Executive -- the Company desires to make provision for pension and death
benefits for Executive, as specified in the provisions of this Agreement.
WHEREFORE THE PARTIES AGREE AS FOLLOWS:
1. Deferred Compensation Benefits
1.1 Commencing on the first Business Day of any Compensation
Period, and continuing on the first Business Day of each of the following months
until the end of such Compensation Period, the Company shall pay Executive a
Monthly Executive Deferred Compensation Benefit under this Agreement. The
Monthly Executive Deferred Compensation Benefit shall be computed according to
the following formula:
Monthly Executive Deferred Compensation Benefit = VF (AF (S/M))
where "S" equals the sum of all of the amounts paid to Executive as Salary
during Executive's last 60 months of employment with the Company (or, if
Executive was an employee of the Company for less than 60 months, during all of
Executive's months of employment with the Company), "M" is the number of months
in the period of consecutive months used in the computation of S, "AF" is
Executive's Accrual Factor, and "VF" is Executive's Vesting Factor.
1.2 For the purposes of paragraph 1.1, a month of employment shall
be any calendar month during which Executive has been a full-time employee of
the Company at all times. In computing the number of months during which
Executive was employed by the Company preceding a Compensation Period, periods
of normal paid vacation or of paid leave, of whatever type, shall be treated as
periods during which Executive was a full-time employee of the Company. Any
unpaid leave of absence taken by Executive with the Company's consent shall be
treated (a) as beginning on the first day of the calendar month in which it
actually began and ending on the last day of the calendar month in which it
actually ended, and (b) as a period during which Executive was not a full-time
employee of the Company.
1.3 Except as otherwise provided in this Agreement, Executive's
"Accrual Factor" shall be determined under the following table:
Years of Service Accrual Factor
-------------------------------------------------------
1 5%
2 10%
3 15%
4 20%
5 25%
6 30%
7 35%
8 40%
9 45%
10 50%
11 55%
12 60%
13 65%
14 70%
15 or more 75%
For the purpose of determining Executive's Accrual Factor under the above table,
a "Year of Service" shall be any calendar year during which Executive is or was
actually employed by the Company as a full-time employee for at least 40 weeks.
For the purpose of the preceding sentence, any calendar week shall be treated as
a week of full-time employment if Executive was a full-time employee of the
Company on any day during such week.
1.4 Except as provided in paragraph l.5, or Section 6 or 12,
Executive's "Vesting Factor" shall be determined under the following table:
Years of Service
Occurring After
Calendar Year 1985 Vesting Factor
1 0%
2 0%
3 0%
4 0%
5 or more 100%
Fr the purpose of determining Executive's Vesting Factor under the above table,
aYear of Service shall be computed in the same manner as a Year of Service for
the purpose of computing Executive's Accrual Factor under paragraph l.3, except
that calendar years preceding the calendar year in which this Agreement was
entered into by and between the Company and Executive (or, if earlier, the
calendar year of any prior Agreement which this Agreement supersedes) shall not
be counted.
1.5 Notwithstanding anything that might otherwise be to the
contrary in paragraph 1.4, if Executive terminates employment with the Company
on account of a Layoff, or on account of his or her death or a period of illness
ending in death, Executive's Vesting Factor shall be determined under the
following table:
Years of Service
Occurring After
Calendar Year 1985 Vesting Factor
1 20%
2 40%
3 60%
4 80%
5 or more 100%
For the purposes of this paragraph l.5, a "Layoff" shall mean a
termination of employment initiated by the Company as part of a general
reduction in the size of the Company's work force or management in response to a
reduction in the volume, or a structural change in the nature of, the Company's
business, or its manner of conducting business, where the circumstances of the
termination indicate that the Executive's job performance has not generally been
unsatisfactory and that, but for the reduction in the volume, or change in the
structural nature of the Company's business, or its manner of conducting
business, the Company would probably not have terminated Executive's employment.
l.6 The "Compensation Period" shall be the period of consecutive
calendar months commencing with the first Business Day of the second calendar
month following the later of (a) the calendar month in which Executive attains
age 60, or (b) the calendar month in which Executive terminates employment with
the Company, and ending with the last day of the earlier of (x) the calendar
month following the calendar month in which Executive again becomes an employee
of the Company, or (y) the last day of the 59th month following the first month
of the Compensation Period.
l.7 For the purposes of this Agreement, a "Business Day" shall be
any day other than Saturday, Sunday, or a Holiday. A "Holiday" shall be any day
on which the Company's Executive offices are not open for general business, and
on which the Company's nonmanagement employees are not required to report for
work other than by special arrangement.
l.8 For the purpose of this Agreement, the terms "employee" and
"employment" shall have their common law meanings, and shall not include,
respectively, an independent contractor or the work relationship between the
Company and an independent contractor.
l.9 (a) For the purpose of computing Executive's Accrual Factor,
any period of time during which Executive was employed by any of the following
employers shall be treated as a period of time during which Executive was
employed by the Company, so that if Executive has been employed by any such
employer he shall be in the same position with respect to the computation of his
Accrual Factor as he would be had his service (Years of Service and any portion
of any Year of Service) for such employer been service with the Company:
PLM Companies, Inc.
Transcisco Industries, Inc.
PLM International, Inc.
l.9 (b) For the purposes of computing Executive's Vesting Factor,
any period of time during which Executive was employed by any of the following
employers shall be treated as a period of time during which Executive was
employed by the Company, so that if Executive has been employed by any such
employer he shall be in the same position with respect to the computation of his
Vesting Factor as he would be had his service (Years of Service and any portion
of any Year of Service) for such employer been service with the Company:
PLM Companies, Inc.
Transcisco Industries, Inc.
PLM International, Inc.
2. Reduction for Prior Payments
If Monthly Executive Deferred Compensation Benefit payments become
payable under Section l of this Agreement, and with respect to any previous
Compensation Period(s) Executive has previously received Monthly Executive
Deferred Compensation Benefit payments, then, notwithstanding anything in
Section l of this Agreement that might otherwise be to the contrary, the rules
provided in Section l of this Agreement, which generally provide that a
Compensation Period ends no later than the last day of the 59th calendar month
after the first calendar month of the Compensation Period, shall be applied by
substituting "the Nth calendar month" for "the 59th calendar month" each place
"the 59th calendar month" appears, where "N" is the number obtained by
subtracting from 59 the total number of Monthly Executive Deferred Compensation
Benefit payments previously received by Executive with respect to any previous
Compensation Period(s).
3. Death Benefits
3.1 If Executive dies during a Compensation Period the Company
shall continue to make Monthly Executive Deferred Compensation Benefit payments,
until the end of the Compensation Period, exactly as if Executive had not died,
except that, commencing with the first Monthly Executive Compensation Benefit
payment payable after the l0th Business Day following the Company's actual
receipt of notice of Executive's death, all remaining Monthly Executive Deferred
Compensation Benefit payments shall be paid to Executive's Beneficiary.
3.2 If Executive dies other than during a Compensation Period,
then Executive shall be assumed for all purposes of this Agreement to have (a)
terminated employment with the Company (i) if the Executive is not employed by
the Company at the time of his death, on the day Executive actually last
terminated employment with the Company or (ii) if the Executive is employed by
the Company at the time of his death, on the first day of the calendar year
following the calendar year in which Executive actually died (in which case
Executive shall be assumed to have provided his or her services to the Company
until such date on a full-time basis), (b) survived until the attainment of age
60, and (c) died on the second day of the second calendar month following his or
her attainment of age 60. The provisions of paragraph 3.l shall then be applied
using the assumed facts set forth in the previous sentence.
3.3 Executive's Beneficiary shall be:
(a) such person as Executive may have instructed in an unrevoked
writing delivered to the Company's General Counsel, and accepted by the
Company's General Counsel for the purpose of designating a Beneficiary under
this Agreement; otherwise,
(b) such person as Executive may have designated in Executive's
last will and testament duly admitted to probate; otherwise,
(c) Executive's estate.
3.4 Notwithstanding anything contained in this Agreement that
might otherwise be to the contrary, no amount constituting property of a
surviving or former spouse of Executive due to the application of any community
or other marital property law shall be paid to any person other than such
surviving or former spouse, or such surviving or former spouse's estate, without
the written consent of such surviving or former spouse, or of the executor or
administrator of such surviving or former spouse's estate. Prior to making any
payment under this Agreement the Company may require the potential recipient of
such payment to supply the Company with such proof as the Company shall
reasonably require to ensure that the payment in question complies with the
provisions of this paragraph 3.4.
4. Source of Payments
The Deferred Compensation Benefits payable under this Agreement
are non-transferable and subject to substantial risks of forfeiture within the
meaning of section 83 of the Internal Revenue Code of 1986. The Company may, but
is not required to, establish a trust or other fund separate and beyond the
reach of the creditors of the Company to secure the Deferred Compensation
Benefits payable under this Agreement. In the event that such a trust or other
fund is established by the Company, the Company may, but is not required to
contribute any specified amounts or assets to such trust or other fund. It is
the intent that the Deferred Compensation Benefits be paid from any amounts
available in such trust or other fund, however, in any event the Company remains
obligated as provided under this Agreement to the extent that Deferred
Compensation Benefits are not paid by such trust or other fund.
5. Acceleration of Payments
Notwithstanding anything contained in Sections l or 3 of this
Agreement that might otherwise be to the contrary, the Company's Board of
Directors shall have the power in its discretion to pay the total amount of any
Monthly Executive Compensation Benefit payments that may become payable under
this Agreement either in a single sum or in a lesser number of installments than
if payments were made monthly as would otherwise be provided in Sections l or 3.
If the Company's Board of Directors decides to pay Executive's Monthly Executive
Compensation Benefit as a single sum, or in such lesser number of installments,
then the dollar amount(s)) owed by the Company to Executive or Executive's
Beneficiary under this Agreement shall be less than the sum of the nominal
dollar amounts that would otherwise be owed under Sections l or 3 in order to
take into account the time value of money. The dollar amounts that shall be owed
by the Company under this Agreement in the case of a single sum payment or
payment in a lesser number of installments than would otherwise be made in
Sections l or 3 shall be the amount determined by:
(a) discounting to present value, using generally accepted
accounting principles, the stream of payments that would otherwise be payable
under Sections l or 3 assuming that Executive's Compensation Period lasted for
as long as necessary to exhaust the Company's payment obligation under Sections
l or 3 (taking into account any reduction of such obligation provided for by
Section 2 of this Agreement), and assuming an interest rate reasonably
approximate to the interest rate that the Company would pay a commercial lender
in connection with a loan to the Company, made at the time the payment is made,
of an amount approximately equal to the amount(s)) to be paid to Executive under
Sections l or 3 of this Agreement, and for a term reasonably approximate to the
period over which such payments would be made; and,
(b) increasing, if appropriate, to future value, using the same
principles used in subparagraph (a) above, the payment(s) actually to be made,
taking into account the time(s) when such payment(s)) is/are actually to be
made.
6. Form of Payments
6.1 Except as provided in Section 6.2 below, all payments to
Executive under this Agreement shall be made in cash.
6.2 If the Company makes one or more payment(s) to Executive under
Section 5, such payment(s) may, at Executive's option be wholly or partially in
the form of one or more immediate or deferred annuity contracts on the sole life
of the Executive or jointly on the lives of Executive and Executive's
Beneficiary, with any term certain or refund feature elected by Executive.
7. Forfeitures of Otherwise Vested Amounts
Notwithstanding anything contained in this Agreement that might
otherwise be to the contrary, Executive's Vesting Factor for the purposes of
paragraphs l.4 and l.5 of this Agreement shall, if it is not already zero
percent, be reduced to zero percent and shall, forever thereafter, remain, zero
percent if:
(a) Executive resigns from the Company's employment against the
wishes of the Company;
(b) Executive materially breaches any trade secrets or other
confidentiality agreement between the Company and Executive;
(c) Executive's employment terminates within the 48-consecutive
month period consisting of the 24 months immediately preceding and the 24 months
immediately following the Company's discovery of any misconduct in connection
with Executive's employment, including fraud or embezzlement;
(d) After counseling with respect to the importance of such an
examination to the financial interests of the Company, and after a reasonable
period for deliberation, Executive refuses to undergo any medical or other
examination in connection with the acquisition or potential acquisition of any
life insurance policy, annuity, or other investment whose price may reflect a
mortality risk factor, that the Company may desire to acquire.
8. Service During Retirement or Disability
8.1 Executive may continue to be involved in the Company's affairs
during a Compensation Period provided, however, that Executive's involvement in
such affairs shall in no way be required as a condition of receiving any payment
under this Agreement, and provided that during any Compensation Period the
Company shall have no right under this Agreement to require Executive to perform
any services for, or otherwise be involved in the affairs of, the Company.
8.2 If Executive provides services to the Company during a
Compensation Period, the compensation, if any, that Executive shall receive from
the Company for such services shall be the subject of an agreement or
understanding between Executive and the Company other than this Agreement. In
particular, this Agreement shall not preclude or otherwise affect Executive's
receipt of compensation from the Company for services performed during a
Compensation Period, nor shall any payments due under this Agreement be reduced
or offset by any such compensation.
9. Taxes
9.1 If and to the extent that the Company determines in good faith
that any amount otherwise payable to Executive or Executive's Beneficiary under
this Agreement is subject to Federal Insurance Contributions Act ("FICA") taxes,
California State Disability Insurance ("SDI") taxes, or any other payroll taxes
(including, but not by way of limitation, federal or state income tax
withholding on wages, deferred compensation, disability benefits, death
benefits, or similar amounts, or any federal or state withholding tax on
employee wages, deferred compensation, disability benefits, death benefits, or
similar amounts that may be enacted after the date of this Agreement
(collectively "Employee Payroll Taxes"), then the Company (or the trust, as the
case may be) shall deduct from such amount the sum, if any, of:
(a) Executive's portion as an employee or former employee of the
Company, or Executive's Beneficiary portion or a beneficiary of a former
employee of the Company -- but not the Company's portion -- of FICA taxes under
Sections 3102 of the Internal Revenue Code of l986, as amended (the "Code"), or
under any related or successor provision(s) of federal law;
(b) SDI taxes under Sections 2901, 984, and 986 of the California
Unemployment Insurance Code, or under any related or successor provisions of
state law; and
(c) the amount of any other applicable Employee Payroll Taxes due
with respect to such gross amounts, to the extent that, as a matter of federal
or state tax law, they are imposed on Executive or Executive's Beneficiary.
9.2 The amount of any reduction(s) under Section 9.l above shall
for the purposes of this Agreement and for federal and state tax purposes --
including federal and state payroll tax deposit and reporting purposes -- be
treated by the Company, Executive, or/and Executive's Beneficiary, as employee
FICA, SDI, or/and other Employee Payroll Taxes withheld from Executive's wages
or benefits as an employee or former employee of the Company, or from other
appropriate amounts.
9.3 Except as otherwise provided in this Section 9 of this
Agreement, the gross amounts otherwise payable to Executive or Executive's
Beneficiary under this Agreement shall not be reduced on account of any other
taxes that may be imposed on the Company on account of or in connection with the
Company's payments to Executive or Executive's Beneficiary under this Agreement.
10. Automatic Acceleration of Vesting and Optional Acceleration of
Payment in the Case of A Change in Control; Section 280G Cutback
10.1 Notwithstanding anything contained in this Agreement that
might otherwise appear to the contrary other than Section 10.4 automatically, as
a consequence of the operation of this Agreement, and without any requirement
for any approval on the part of the Company's board of directors or any officer
or group of officers of the Company, in the event of any Change in Control of
the Company, if Executive is an employee of the Company at the time of such
Change in Control of the Company, then effective with the occurrence of such
Change in Control of the Company:
(a) Executive shall be treated for all purposes of this Agreement
as if Executive 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
(b) Executive's Vesting Factor under Section l.4 of this Agreement
shall, except as it may be affected by Section 7 of this Agreement prior to the
date of the Change in Control of the Company, become and forever thereafter
remain 1.
10.2 Moreover, notwithstanding anything contained in this
Agreement that might otherwise appear to the contrary, in the case of any Change
in Control of the Company, the Company's board of directors may at any time
direct that, in addition to the provision of Section 10.1 above, this Agreement
shall be applied (a) if Executive had already terminated employment with the
Company prior to the Change in Control of the Company, as if Executive 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 occurred, or (b) if
Executive was an employee of the Company on the date on which the Change in
Control of the Company occurred, as if Executive had terminated employment with
the Company, and had done so on the day following the day on which Executive
shall be deemed to have attained age 60 under Section 10.1.
10.3 Except than as provided in Section 11 below, for purposes of
this Agreement, "Change in Control of the Company" shall mean a change in the
ownership of the Company's stock that would be required to be reported in
response to Item 6(e) of Schedule l4A of Regulation l4A promulgated under the
Securities Exchange Act of l934 as in effect on the date of this Agreement or,
if such Item 6(e) is no longer in effect, a change in ownership that would be
required to be reported under any regulation issued by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of l934 that serves
similar purposes as such Item 6(e); provided however, that in any event a Change
in Control of the Company shall be deemed to have occurred if and when (a) any
"person" (as such term is used in Sections l3 (d) and l4 ((d)(2)) of the
Securities Exchange Act of l934) is or becomes a beneficial owner, directly or
indirectly, of securities of the Company representing more than 15% of the
combined voting power of the Company's then outstanding securities, or (b) there
is a change in the Board of Directors which change is the result of a proxy
solicitation(s) or other action(s) to influence voting at a shareholders'
meeting of the Company (other than by voting one's own stock) by a Person or
group of Persons who has Beneficial Ownership of 5% or more of the combined
voting power of the securities of the Employer and which causes the Continuing
Directors to cease to be a majority of the Board of Directors of the Employer.
For purposes of the preceding sentence, "Continuing Directors" shall mean a
member of the Board of Directors who (i) is a member of the Board of Directors
on the date hereof, or (ii) who subsequently becomes a member of the Board of
Directors and who either (x) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are Directors
on the date hereof, or (y) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are described
in subsections (i) and (ii)(x) above, as applicable.
10.4 (a) Notwithstanding anything that might otherwise be to the
contrary in this Agreement, if as a result of the application of Sections 10.1
or/and 10.2 of this Agreement Executive's Vesting Factor or/and the timing of
any payments to Executive under this Agreement is/are accelerated upon the
occurrence of a Change in Control of the Company, then the Executive shall
engage outside counsel ("280G Counsel") to render an opinion as to whether the
payment of any amount or portion of any amount that would be paid by the Company
to Executive under this Agreement but for this Section 10.4 would, more probably
than not, be deductible for federal income tax purposes notwithstanding Section
280G of the Code, or any successor provision. If 280G Counsel is unable to
render its opinion that the entire amount consisting of the aggregate of all
payments due Executive under this Agreement (disregarding this Section 10.4
would, more probably than not, be deductible, then 280G Counsel shall determine
the maximum present value of payments (using the present value rules applicable
under Section 280G) that, in its opinion, Executive may receive under this
Agreement without any portion of any payment of such present value being, more
probably than not, nondeductible for federal income tax purposes as the result
of the application of Section 280G of the Code (Executive's "280G Limit"). 280G
Counsel shall then determine the number of months by which the period that would
otherwise be Executive's Compensation Period under this Agreement would be
required to be shortened (without increasing the amount determined under Section
l.l as Executive's Monthly Deferred Compensation Benefit) so that the present
value of the amounts that Executive will receive under this Agreement would not
exceed Executive's 280G Limit. The number of months that would otherwise be
included in Executive's Compensation Period shall then be shortened,
notwithstanding any other provision of this Agreement that would otherwise
appear to be to the contrary, to the number of months so determined by 280G
Counsel.
(b) The selection of 280G Counsel shall be within the Executive's
discretion, but the competence of 280G Counsel in such tax matters must be
demonstrable.
(c) If 280G Counsel determines that, in connection with an event
that constitutes a Change in Control under this Agreement, other amounts may be
payable to Executive by the Company or any affiliate of the Company (including,
but not by way of limitation, a member of an affiliated group as determined
under Section 280G(d)(5) of the Code) under any other agreements or arrangements
that would, in 280G Counsel's opinion, more likely than not be required under
Section 280G of the Code to be aggregated with payments under this Agreement in
determining whether amounts that would otherwise be paid under this Agreement
would exceed the 280G Limit, or in determining whether such other amounts
themselves might be nondeductible to the payor under Section 280G, then 280G
Counsel shall assume, in making its determinations under Section 10.4(a), that
the maximum amount payable under such other agreements or arrangement shall in
fact be paid to Executive, notwithstanding that such other agreements or
arrangements may contain their own ordering rule with respect to cutbacks
similar in principle to the cutback provided for in this Section 10.4 except to
the extent that any such agreement or arrangement, or the ordering rule provided
for in it, has been entered into as of a date following the date as of which
this Agreement is entered into and specifically refers to this Agreement.
11. Automatic Acceleration of Both Vesting and Payment in the Case of
Liquidation or Dissolution
The Company's liquidation or/and dissolution shall also constitute
a Change in Control of the Company for the purposes of Section 10 of this
Agreement, except that, in the case of the Company's liquidation or dissolution,
Section 10.2 shall be applied without the requirement for action by the
Company's board of directors, so that (a) if Executive actually terminated
employment with the Company prior to the Change in Control of the Company,
Executive shall automatically be treated as having 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 occurred or (b) if Executive was an employee of
the Company on the date on which the Change in Control of the Company occurred,
then Executive shall automatically be treated as having terminated employment
with the Company on the day after Executive is treated as having attained age 60
under Section 10.1.
12. Limited Effect
12.1 Other than as specifically provided in this Agreement, this
Agreement shall have no effect on the nature, duration, or terms of Executive's
employment relationship with the Company, or on the amount of, or the Company's
liability to pay, any Salary or other compensation to Executive.
12.2 No amount(s) that may become payable to Executive under this
Agreement shall be deemed to be salary or other compensation of Executive for
the purpose of computing benefits to which Executive may be or become entitled,
or contributions that Executive may be or become entitled to make, under any
compensation, profit sharing, or salary deferral plan -- whether qualified under
the Code or not -- of the Company, nor is anything in this Agreement intended to
affect any right or obligation that Executive may have, now or in the future,
under any such plans or arrangements.
13. Procedure for Review of Denial of Benefits
13.1 The Company's board of directors shall be the administrator
(the "Administrator") of this Agreement. The Administrator shall determine the
rights under this Agreement of Executive, of any Beneficiary of Executive, of
any surviving or former spouse of executive, or of any legatees or heirs of
Executives (the potential "Claimants"). If a Claimant disputes the
Administrator's determination of benefits under this Agreement, he, she, or it
may file a written claim for benefits with the Administrator, provided that, in
the case of any Claimant to whom the Administrator has directed a written
notification of the administrator's determination, the claim is filed within 60
days of the date the Claimant receives such notification.
13.2 If a claim for benefits under this Agreement is wholly or
partially denied, the Administrator shall provide the Claimant with a notice of
denial, written in a manner calculated to be understood by the Claimant and
setting forth:
(a) the specific reason(s) for the denial;
(b) specific references to the provisions of this Agreement on
which the denial is based;
(c) a description of any additional material or information needed
by the Claimant in order to perfect the claim, with an explanation of why the
material or information is necessary; and
(d) appropriate information as to steps to be taken if the
Claimant wishes to appeal the Administrator's denial of the claim. The notice of
denial shall be given within a reasonable time but not later than 90 days after
the claim is filed, unless special circumstances require an extension of time
for processing the claim. If an extension of time is required, written notice
shall be furnished to the Claimant within 90 days of the date the claim was
filed stating the special circumstances requiring the extension, and the date by
which a decision on the claim can be expected, which date shall be no more than
l80 days from the date the claim was filed. If no notice of denial is provided,
the Claimant may appeal the claim as though the claim had been denied.
13.3 The Claimant and/or his or her representative may appeal the
denied claim to the Administrator, and, in connection with the appeal, may:
(a) request a review on written application to the Administrator;
(b) review pertinent documents; and
(c) submit issues and comments in writing to the Administrator.
The appeal must be made within 60 days of the date the Claimant received
notification of the denied claim.
13.4 On receipt of a request for review, the Administrator shall,
within a reasonable time, but not later than 60 days after receiving the
request, provide written notification of its decision to the Claimant stating
the specific reasons and referencing the specific provisions of this Agreement
on which its decision is based, unless special circumstances require an
extension of time for processing the review. If an extension is required, the
Administrator shall notify the claimant of the special circumstances and of a
date no later than l20 days after the date the review was requested on which the
Administrator will notify the Claimant of its decision.
13.5 Nothing in this Section 13 of this Agreement shall be
interpreted as limiting in any way the Company's right to interplead any
Claimants in any court of competent jurisdiction.
14. Agreement Binding; Successors and Assigns
14.1 This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto, their permitted assigns, if any, and, but only by
operation of law, their respective next of kin, legatees, administrators,
executors, legal representatives, and successors (including remote, as well as
immediate, successors to such parties, but only by operations of law). In
applying any provision of this Agreement with respect to any successor or assign
of the Company, such provision shall be applied by treating such successor or
assign as the "Company" referred to in this Agreement, unless such treatment
would be clearly inappropriate. The principle of the preceding sentence shall
not, except as otherwise specifically provided in other provisions of this
Agreement, apply to any successor or assign of Executive or Executive's
Beneficiary.
14.2 Except by operation of law, as provided in Section l4.1
above, this Agreement may not be assigned by Executive. This Agreement may be
assigned by the Company, but only with Executive's prior written consent.
14.3 Neither Executive, Executive's estate, or Executive's
surviving spouse, if any, shall have any right to commute, encumber, or dispose
of the right to receive payments under this Agreement, and such payments and the
right to receive them, shall, to the maximum extent permissible under the law,
be nonassignable, nontransferable, and not subject to garnishment or other
attachment.
14.4 The Company shall have the right under this Agreement to
offset against its obligation to make any payment to any person under this
Agreement (including Executive, Executive's Beneficiary, or any other person)
any claims that the Company may have against such person in connection with any
transaction or occurrence between the Company and such person, or affecting the
Company and in which such person was involved, whether or not such transaction
or occurrence is otherwise connected with this Agreement in any other way.
14.5 Any defense, whether arising under this Agreement or in
connection with any other transaction or occurrence, that the Company may have
against any obligation, including the obligation to make any payment, that the
Company might otherwise have under this Agreement, shall, to the extent good
against Executive, also be good against Executive's Beneficiary or any other
Claimant.
15. Arbitration
15.1 Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration to take place in
San Francisco, California, in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, and judgment upon the award by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitrator(s) shall award attorneys' fees to the prevailing party, if any, in
the arbitration, and any court entering judgment upon such award shall award
attorneys' fees and costs to the party causing such judgment to be entered.
16. Notices
All notices, consents, requests, demands, or other communications
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given when delivered, or when mailed by United States certified mail,
postage prepaid, as follows:
If to the Company: PLM International, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, California 94l05
If to Executive: 246 Florence
Barrington, IL 60010
or to such other address as the Company or Executive shall have last designated
by notice to the other. Any item shall be effective upon delivery, and any item
mailed by United States certified mail, postage prepaid, shall be deemed to have
been delivered on the third business day following the date deposited in the
mail.
17. Waiver
No failure on the part of either the Company or Executive to
exercise, no delay in exercising, or course of dealing with respect to, any
right, power, or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power, or privilege preclude
any other or further exercise of such right, power, or privilege, or of any
other right, power, or privilege. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law.
18. Invalid Provision
Invalidity or unenforceability of any particular provision of this
Agreement shall not affect the provisions of this Agreement, and this Agreement
shall be construed in all aspects as if the invalid or unenforceable provision
were omitted.
19. Enumeration and Headings
The enumeration and headings of this Agreement are merely for
convenience of reference; they shall not be construed to constitute
representations or warranties, or to have any substantive significance.
20. Entire Agreement
This writing constitutes the entire understanding between the
parties with respect to the matters it deals with, and such understanding may be
modified, altered, or amended only by the written agreement of the parties
hereto. The Company and the Executive expressly agree that this agreement
supersedes and replaces any prior agreement that may already be in effect with
respect to the matters covered herein, and, except as provided in paragraph 1.4
of this agreement, any such prior agreement will become null and void upon the
execution and delivery of this agreement.
21. Governing Law
This agreement shall be construed in accordance with and governed
by California law.
22. Counterparts
This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Agreement by signing any such counterpart.
THE COMPANY
By /s/ Robert N.Tidball
President and Chief Executive Officer
Date 7/23/93
EXECUTIVE
By /s/ Douglas P. Goodrich
VICE PRESIDENT AND GENERAL
MANAGER, RAIL DIVISION,
PLM TRANSPORTATION
EQUIPMENT CORPORATION
Date July 7, 1993
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
This EXECUTIVE DEFERRED COMPENSATION AGREEMENT (this "Agreement") is made
this 30th day of September, 1994, by and between PLM International, Inc., a
Delaware corporation, its affiliates and subsidiaries (collectively, the
"Company"), and J. MICHAEL ALLGOOD ("Executive").
RECITALS:
A. Executive is a management employee of the Company, serving the Company
in such capacity as the Company's board of directors or officers may designate
from time to time.
B. The Company and Executive have, prior to the date of this Agreement,
agreed, and shall in the future, apart from this Agreement, agree, from time to
time, on the amount(s) that the Company is to pay Executive as Executive's basic
current cash compensation (that is, Executive's salary, hereinafter referred to
as Executive's "Salary"), as well as on other amounts of compensation for
personal services (including, but not by way of limitation, bonuses, consultancy
fees, and commissions).
C. In consideration of the personal services required to be performed by
Executive in order for Executive or Executive's Beneficiary to receive any of
the benefits provided under this Agreement, and in recognition of the importance
that certain of the Company's management employees, now and in the future, may
place upon its actions to secure adequate retirement and death benefits for its
management employees -- but specifically disavowing any intention of setting any
policy or precedent, binding or otherwise, with respect to the retirement or
death benefits, if any, that the Company may at any time, now or in the future,
decide to provide to any of its employees, management or otherwise, other than
Executive -- the Company desires to make provision for pension and death
benefits for Executive, as specified in the provisions of this Agreement.
WHEREFORE THE PARTIES AGREE AS FOLLOWS:
1. Deferred Compensation Benefits
1.1 Commencing on the first Business Day of any Compensation
Period, and continuing on the first Business Day of each of the following months
until the end of such Compensation Period, the Company shall pay Executive a
Monthly Executive Deferred Compensation Benefit under this Agreement. The
Monthly Executive Deferred Compensation Benefit shall be computed according to
the following formula:
Monthly Executive Deferred Compensation Benefit = VF (AF (S/M))
where "S" equals the sum of all of the amounts paid to Executive as Salary
during Executive's last 60 months of employment with the Company (or, if
Executive was an employee of the Company for less than 60 months, during all of
Executive's months of employment with the Company), "M" is the number of months
in the period of consecutive months used in the computation of S, "AF" is
Executive's Accrual Factor, and "VF" is Executive's Vesting Factor.
1.2 For the purposes of paragraph 1.1, a month of employment shall
be any calendar month during which Executive has been a full-time employee of
the Company at all times. In computing the number of months during which
Executive was employed by the Company preceding a Compensation Period, periods
of normal paid vacation or of paid leave, of whatever type, shall be treated as
periods during which Executive was a full-time employee of the Company. Any
unpaid leave of absence taken by Executive with the Company's consent shall be
treated (a) as beginning on the first day of the calendar month in which it
actually began and ending on the last day of the calendar month in which it
actually ended, and (b) as a period during which Executive was not a full-time
employee of the Company.
1.3 Except as otherwise provided in this Agreement, Executive's
"Accrual Factor" shall be determined under the following table:
Years of Service Accrual Factor
-------------------------------------------------------
1 5%
2 10%
3 15%
4 20%
5 25%
6 30%
7 35%
8 40%
9 45%
10 50%
11 55%
12 60%
13 65%
14 70%
15 or more 75%
For the purpose of determining Executive's Accrual Factor under the above table,
a "Year of Service" shall be any calendar year during which Executive is or was
actually employed by the Company as a full-time employee for at least 40 weeks.
For the purpose of the preceding sentence, any calendar week shall be treated as
a week of full-time employment if Executive was a full-time employee of the
Company on any day during such week.
1.4 Except as provided in paragraph l.5, or Section 6 or 12,
Executive's "Vesting Factor" shall be determined under the following table:
Years of Service
Occurring After
Calendar Year 1985 Vesting Factor
1 0%
2 0%
3 0%
4 0%
5 or more 100%
For the purpose of determining Executive's Vesting Factor under the above table,
a Year of Service shall be computed in the same manner as a Year of Service for
the purpose of computing Executive's Accrual Factor under paragraph l.3, except
that calendar years preceding the calendar year in which this Agreement was
entered into by and between the Company and Executive (or, if earlier, the
calendar year of any prior Agreement which this Agreement supersedes) shall not
be counted.
1.5 Notwithstanding anything that might otherwise be to the
contrary in paragraph 1.4, if Executive terminates employment with the Company
on account of a Layoff, or on account of his or her death or a period of illness
ending in death, Executive's Vesting Factor shall be determined under the
following table:
Years of Service
Occurring After
Calendar Year 1985 Vesting Factor
1 20%
2 40%
3 60%
4 80%
5 or more 100%
For the purposes of this paragraph l.5, a "Layoff" shall mean a
termination of employment initiated by the Company as part of a general
reduction in the size of the Company's work force or management in response to a
reduction in the volume, or a structural change in the nature of, the Company's
business, or its manner of conducting business, where the circumstances of the
termination indicate that the Executive's job performance has not generally been
unsatisfactory and that, but for the reduction in the volume, or change in the
structural nature of the Company's business, or its manner of conducting
business, the Company would probably not have terminated Executive's employment.
l.6 The "Compensation Period" shall be the period of consecutive
calendar months commencing with the first Business Day of the second calendar
month following the later of (a) the calendar month in which Executive attains
age 60, or (b) the calendar month in which Executive terminates employment with
the Company, and ending with the last day of the earlier of (x) the calendar
month following the calendar month in which Executive again becomes an employee
of the Company, or (y) the last day of the 59th month following the first month
of the Compensation Period.
l.7 For the purposes of this Agreement, a "Business Day" shall be
any day other than Saturday, Sunday, or a Holiday. A "Holiday" shall be any day
on which the Company's Executive offices are not open for general business, and
on which the Company's nonmanagement employees are not required to report for
work other than by special arrangement.
l.8 For the purpose of this Agreement, the terms "employee" and
"employment" shall have their common law meanings, and shall not include,
respectively, an independent contractor or the work relationship between the
Company and an independent contractor.
l.9 (a) For the purpose of computing Executive's Accrual Factor,
any period of time during which Executive was employed by any of the following
employers shall be treated as a period of time during which Executive was
employed by the Company, so that if Executive has been employed by any such
employer he shall be in the same position with respect to the computation of his
Accrual Factor as he would be had his service (Years of Service and any portion
of any Year of Service) for such employer been service with the Company:
PLM Companies, Inc.
Transcisco Industries, Inc.
PLM International, Inc.
l.9 (b) For the purposes of computing Executive's Vesting Factor,
any period of time during which Executive was employed by any of the following
employers shall be treated as a period of time during which Executive was
employed by the Company, so that if Executive has been employed by any such
employer he shall be in the same position with respect to the computation of his
Vesting Factor as he would be had his service (Years of Service and any portion
of any Year of Service) for such employer been service with the Company:
PLM Companies, Inc.
Transcisco Industries, Inc.
PLM International, Inc.
2. Reduction for Prior Payments
If Monthly Executive Deferred Compensation Benefit payments become
payable under Section l of this Agreement, and with respect to any previous
Compensation Period(s) Executive has previously received Monthly Executive
Deferred Compensation Benefit payments, then, notwithstanding anything in
Section l of this Agreement that might otherwise be to the contrary, the rules
provided in Section l of this Agreement, which generally provide that a
Compensation Period ends no later than the last day of the 59th calendar month
after the first calendar month of the Compensation Period, shall be applied by
substituting "the Nth calendar month" for "the 59th calendar month" each place
"the 59th calendar month" appears, where "N" is the number obtained by
subtracting from 59 the total number of Monthly Executive Deferred Compensation
Benefit payments previously received by Executive with respect to any previous
Compensation Period(s).
3. Death Benefits
3.1 If Executive dies during a Compensation Period the Company
shall continue to make Monthly Executive Deferred Compensation Benefit payments,
until the end of the Compensation Period, exactly as if Executive had not died,
except that, commencing with the first Monthly Executive Compensation Benefit
payment payable after the l0th Business Day following the Company's actual
receipt of notice of Executive's death, all remaining Monthly Executive Deferred
Compensation Benefit payments shall be paid to Executive's Beneficiary.
3.2 If Executive dies other than during a Compensation Period,
then Executive shall be assumed for all purposes of this Agreement to have (a)
terminated employment with the Company (i) if the Executive is not employed by
the Company at the time of his death, on the day Executive actually last
terminated employment with the Company or (ii) if the Executive is employed by
the Company at the time of his death, on the first day of the calendar year
following the calendar year in which Executive actually died (in which case
Executive shall be assumed to have provided his or her services to the Company
until such date on a full-time basis), (b) survived until the attainment of age
60, and (c) died on the second day of the second calendar month following his or
her attainment of age 60. The provisions of paragraph 3.l shall then be applied
using the assumed facts set forth in the previous sentence.
3.3 Executive's Beneficiary shall be:
(a) such person as Executive may have instructed in an unrevoked
writing delivered to the Company's General Counsel, and accepted by the
Company's General Counsel for the purpose of designating a Beneficiary under
this Agreement; otherwise,
(b) such person as Executive may have designated in Executive's
last will and testament duly admitted to probate; otherwise,
(c) Executive's estate.
3.4 Notwithstanding anything contained in this Agreement that
might otherwise be to the contrary, no amount constituting property of a
surviving or former spouse of Executive due to the application of any community
or other marital property law shall be paid to any person other than such
surviving or former spouse, or such surviving or former spouse's estate, without
the written consent of such surviving or former spouse, or of the executor or
administrator of such surviving or former spouse's estate. Prior to making any
payment under this Agreement the Company may require the potential recipient of
such payment to supply the Company with such proof as the Company shall
reasonably require to ensure that the payment in question complies with the
provisions of this paragraph 3.4.
4. Source of Payments
The Deferred Compensation Benefits payable under this Agreement
are non-transferable and subject to substantial risks of forfeiture within the
meaning of section 83 of the Internal Revenue Code of 1986. The Company may, but
is not required to, establish a trust or other fund separate and beyond the
reach of the creditors of the Company to secure the Deferred Compensation
Benefits payable under this Agreement. In the event that such a trust or other
fund is established by the Company, the Company may, but is not required to
contribute any specified amounts or assets to such trust or other fund. It is
the intent that the Deferred Compensation Benefits be paid from any amounts
available in such trust or other fund, however, in any event the Company remains
obligated as provided under this Agreement to the extent that Deferred
Compensation Benefits are not paid by such trust or other fund.
5. Acceleration of Payments
Notwithstanding anything contained in Sections l or 3 of this
Agreement that might otherwise be to the contrary, the Company's Board of
Directors shall have the power in its discretion to pay the total amount of any
Monthly Executive Compensation Benefit payments that may become payable under
this Agreement either in a single sum or in a lesser number of installments than
if payments were made monthly as would otherwise be provided in Sections l or 3.
If the Company's Board of Directors decides to pay Executive's Monthly Executive
Compensation Benefit as a single sum, or in such lesser number of installments,
then the dollar amount(s)) owed by the Company to Executive or Executive's
Beneficiary under this Agreement shall be less than the sum of the nominal
dollar amounts that would otherwise be owed under Sections l or 3 in order to
take into account the time value of money. The dollar amounts that shall be owed
by the Company under this Agreement in the case of a single sum payment or
payment in a lesser number of installments than would otherwise be made in
Sections l or 3 shall be the amount determined by:
(a) discounting to present value, using generally accepted
accounting principles, the stream of payments that would otherwise be payable
under Sections l or 3 assuming that Executive's Compensation Period lasted for
as long as necessary to exhaust the Company's payment obligation under Sections
l or 3 (taking into account any reduction of such obligation provided for by
Section 2 of this Agreement), and assuming an interest rate reasonably
approximate to the interest rate that the Company would pay a commercial lender
in connection with a loan to the Company, made at the time the payment is made,
of an amount approximately equal to the amount(s)) to be paid to Executive under
Sections l or 3 of this Agreement, and for a term reasonably approximate to the
period over which such payments would be made; and,
(b) increasing, if appropriate, to future value, using the same
principles used in subparagraph (a) above, the payment(s) actually to be made,
taking into account the time(s) when such payment(s)) is/are actually to be
made.
6. Form of Payments
6.1 Except as provided in Section 6.2 below, all payments to
Executive under this Agreement shall be made in cash.
6.2 If the Company makes one or more payment(s) to Executive under
Section 5, such payment(s) may, at Executive's option be wholly or partially in
the form of one or more immediate or deferred annuity contracts on the sole life
of the Executive or jointly on the lives of Executive and Executive's
Beneficiary, with any term certain or refund feature elected by Executive.
7. Forfeitures of Otherwise Vested Amounts
Notwithstanding anything contained in this Agreement that might
otherwise be to the contrary, Executive's Vesting Factor for the purposes of
paragraphs l.4 and l.5 of this Agreement shall, if it is not already zero
percent, be reduced to zero percent and shall, forever thereafter, remain, zero
percent if:
(a) Executive resigns from the Company's employment against the
wishes of the Company;
(b) Executive materially breaches any trade secrets or other
confidentiality agreement between the Company and Executive;
(c) Executive's employment terminates within the 48-consecutive
month period consisting of the 24 months immediately preceding and the 24 months
immediately following the Company's discovery of any misconduct in connection
with Executive's employment, including fraud or embezzlement;
(d) After counseling with respect to the importance of such an
examination to the financial interests of the Company, and after a reasonable
period for deliberation, Executive refuses to undergo any medical or other
examination in connection with the acquisition or potential acquisition of any
life insurance policy, annuity, or other investment whose price may reflect a
mortality risk factor, that the Company may desire to acquire.
8. Service During Retirement or Disability
8.1 Executive may continue to be involved in the Company's affairs
during a Compensation Period provided, however, that Executive's involvement in
such affairs shall in no way be required as a condition of receiving any payment
under this Agreement, and provided that during any Compensation Period the
Company shall have no right under this Agreement to require Executive to perform
any services for, or otherwise be involved in the affairs of, the Company.
8.2 If Executive provides services to the Company during a
Compensation Period, the compensation, if any, that Executive shall receive from
the Company for such services shall be the subject of an agreement or
understanding between Executive and the Company other than this Agreement. In
particular, this Agreement shall not preclude or otherwise affect Executive's
receipt of compensation from the Company for services performed during a
Compensation Period, nor shall any payments due under this Agreement be reduced
or offset by any such compensation.
9. Taxes
9.1 If and to the extent that the Company determines in good faith
that any amount otherwise payable to Executive or Executive's Beneficiary under
this Agreement is subject to Federal Insurance Contributions Act ("FICA") taxes,
California State Disability Insurance ("SDI") taxes, or any other payroll taxes
(including, but not by way of limitation, federal or state income tax
withholding on wages, deferred compensation, disability benefits, death
benefits, or similar amounts, or any federal or state withholding tax on
employee wages, deferred compensation, disability benefits, death benefits, or
similar amounts that may be enacted after the date of this Agreement
(collectively "Employee Payroll Taxes"), then the Company (or the trust, as the
case may be) shall deduct from such amount the sum, if any, of:
(a) Executive's portion as an employee or former employee of the
Company, or Executive's Beneficiary portion or a beneficiary of a former
employee of the Company -- but not the Company's portion -- of FICA taxes under
Sections 3102 of the Internal Revenue Code of l986, as amended (the "Code"), or
under any related or successor provision(s) of federal law;
(b) SDI taxes under Sections 2901, 984, and 986 of the California
Unemployment Insurance Code, or under any related or successor provisions of
state law; and
(c) the amount of any other applicable Employee Payroll Taxes due
with respect to such gross amounts, to the extent that, as a matter of federal
or state tax law, they are imposed on Executive or Executive's Beneficiary.
9.2 The amount of any reduction(s) under Section 9.l above shall
for the purposes of this Agreement and for federal and state tax purposes --
including federal and state payroll tax deposit and reporting purposes -- be
treated by the Company, Executive, or/and Executive's Beneficiary, as employee
FICA, SDI, or/and other Employee Payroll Taxes withheld from Executive's wages
or benefits as an employee or former employee of the Company, or from other
appropriate amounts.
9.3 Except as otherwise provided in this Section 9 of this
Agreement, the gross amounts otherwise payable to Executive or Executive's
Beneficiary under this Agreement shall not be reduced on account of any other
taxes that may be imposed on the Company on account of or in connection with the
Company's payments to Executive or Executive's Beneficiary under this Agreement.
10. Automatic Acceleration of Vesting and Optional Acceleration of
Payment in the Case of A Change in Control; Section 280G Cutback
10.1 Notwithstanding anything contained in this Agreement that
might otherwise appear to the contrary other than Section 10.4 automatically, as
a consequence of the operation of this Agreement, and without any requirement
for any approval on the part of the Company's board of directors or any officer
or group of officers of the Company, in the event of any Change in Control of
the Company, if Executive is an employee of the Company at the time of such
Change in Control of the Company, then effective with the occurrence of such
Change in Control of the Company:
(a) Executive shall be treated for all purposes of this Agreement
as if Executive 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
(b) Executive's Vesting Factor under Section l.4 of this Agreement
shall, except as it may be affected by Section 7 of this Agreement prior to the
date of the Change in Control of the Company, become and forever thereafter
remain 1.
10.2 Moreover, notwithstanding anything contained in this
Agreement that might otherwise appear to the contrary, in the case of any Change
in Control of the Company, the Company's board of directors may at any time
direct that, in addition to the provision of Section 10.1 above, this Agreement
shall be applied (a) if Executive had already terminated employment with the
Company prior to the Change in Control of the Company, as if Executive 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 occurred, or (b) if
Executive was an employee of the Company on the date on which the Change in
Control of the Company occurred, as if Executive had terminated employment with
the Company, and had done so on the day following the day on which Executive
shall be deemed to have attained age 60 under Section 10.1.
10.3 Except than as provided in Section 11 below, for purposes of
this Agreement, "Change in Control of the Company" shall mean a change in the
ownership of the Company's stock that would be required to be reported in
response to Item 6(e) of Schedule l4A of Regulation l4A promulgated under the
Securities Exchange Act of l934 as in effect on the date of this Agreement or,
if such Item 6(e) is no longer in effect, a change in ownership that would be
required to be reported under any regulation issued by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of l934 that serves
similar purposes as such Item 6(e); provided however, that in any event a Change
in Control of the Company shall be deemed to have occurred if and when (a) any
"person" (as such term is used in Sections l3 (d) and l4 ((d)(2)) of the
Securities Exchange Act of l934) is or becomes a beneficial owner, directly or
indirectly, of securities of the Company representing more than 15% of the
combined voting power of the Company's then outstanding securities, or (b) there
is a change in the Board of Directors which change is the result of a proxy
solicitation(s) or other action(s) to influence voting at a shareholders'
meeting of the Company (other than by voting one's own stock) by a Person or
group of Persons who has Beneficial Ownership of 5% or more of the combined
voting power of the securities of the Employer and which causes the Continuing
Directors to cease to be a majority of the Board of Directors of the Employer.
For purposes of the preceding sentence, "Continuing Directors" shall mean a
member of the Board of Directors who (i) is a member of the Board of Directors
on the date hereof, or (ii) who subsequently becomes a member of the Board of
Directors and who either (x) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are Directors
on the date hereof, or (y) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are described
in subsections (i) and (ii)(x) above, as applicable.
10.4 (a) Notwithstanding anything that might otherwise be to the
contrary in this Agreement, if as a result of the application of Sections 10.1
or/and 10.2 of this Agreement Executive's Vesting Factor or/and the timing of
any payments to Executive under this Agreement is/are accelerated upon the
occurrence of a Change in Control of the Company, then the Executive shall
engage outside counsel ("280G Counsel") to render an opinion as to whether the
payment of any amount or portion of any amount that would be paid by the Company
to Executive under this Agreement but for this Section 10.4 would, more probably
than not, be deductible for federal income tax purposes notwithstanding Section
280G of the Code, or any successor provision. If 280G Counsel is unable to
render its opinion that the entire amount consisting of the aggregate of all
payments due Executive under this Agreement (disregarding this Section 10.4
would, more probably than not, be deductible, then 280G Counsel shall determine
the maximum present value of payments (using the present value rules applicable
under Section 280G) that, in its opinion, Executive may receive under this
Agreement without any portion of any payment of such present value being, more
probably than not, nondeductible for federal income tax purposes as the result
of the application of Section 280G of the Code (Executive's "280G Limit"). 280G
Counsel shall then determine the number of months by which the period that would
otherwise be Executive's Compensation Period under this Agreement would be
required to be shortened (without increasing the amount determined under Section
l.l as Executive's Monthly Deferred Compensation Benefit) so that the present
value of the amounts that Executive will receive under this Agreement would not
exceed Executive's 280G Limit. The number of months that would otherwise be
included in Executive's Compensation Period shall then be shortened,
notwithstanding any other provision of this Agreement that would otherwise
appear to be to the contrary, to the number of months so determined by 280G
Counsel.
(b) The selection of 280G Counsel shall be within the Executive's
discretion, but the competence of 280G Counsel in such tax matters must be
demonstrable.
(c) If 280G Counsel determines that, in connection with an event
that constitutes a Change in Control under this Agreement, other amounts may be
payable to Executive by the Company or any affiliate of the Company (including,
but not by way of limitation, a member of an affiliated group as determined
under Section 280G(d)(5) of the Code) under any other agreements or arrangements
that would, in 280G Counsel's opinion, more likely than not be required under
Section 280G of the Code to be aggregated with payments under this Agreement in
determining whether amounts that would otherwise be paid under this Agreement
would exceed the 280G Limit, or in determining whether such other amounts
themselves might be nondeductible to the payor under Section 280G, then 280G
Counsel shall assume, in making its determinations under Section 10.4(a), that
the maximum amount payable under such other agreements or arrangement shall in
fact be paid to Executive, notwithstanding that such other agreements or
arrangements may contain their own ordering rule with respect to cutbacks
similar in principle to the cutback provided for in this Section 10.4 except to
the extent that any such agreement or arrangement, or the ordering rule provided
for in it, has been entered into as of a date following the date as of which
this Agreement is entered into and specifically refers to this Agreement.
11. Automatic Acceleration of Both Vesting and Payment in the Case of
Liquidation or Dissolution
The Company's liquidation or/and dissolution shall also constitute
a Change in Control of the Company for the purposes of Section 10 of this
Agreement, except that, in the case of the Company's liquidation or dissolution,
Section 10.2 shall be applied without the requirement for action by the
Company's board of directors, so that (a) if Executive actually terminated
employment with the Company prior to the Change in Control of the Company,
Executive shall automatically be treated as having 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 occurred or (b) if Executive was an employee of
the Company on the date on which the Change in Control of the Company occurred,
then Executive shall automatically be treated as having terminated employment
with the Company on the day after Executive is treated as having attained age 60
under Section 10.1.
12. Limited Effect
12.1 Other than as specifically provided in this Agreement, this
Agreement shall have no effect on the nature, duration, or terms of Executive's
employment relationship with the Company, or on the amount of, or the Company's
liability to pay, any Salary or other compensation to Executive.
12.2 No amount(s) that may become payable to Executive under this
Agreement shall be deemed to be salary or other compensation of Executive for
the purpose of computing benefits to which Executive may be or become entitled,
or contributions that Executive may be or become entitled to make, under any
compensation, profit sharing, or salary deferral plan -- whether qualified under
the Code or not -- of the Company, nor is anything in this Agreement intended to
affect any right or obligation that Executive may have, now or in the future,
under any such plans or arrangements.
13. Procedure for Review of Denial of Benefits
13.1 The Company's board of directors shall be the administrator
(the "Administrator") of this Agreement. The Administrator shall determine the
rights under this Agreement of Executive, of any Beneficiary of Executive, of
any surviving or former spouse of executive, or of any legatees or heirs of
Executives (the potential "Claimants"). If a Claimant disputes the
Administrator's determination of benefits under this Agreement, he, she, or it
may file a written claim for benefits with the Administrator, provided that, in
the case of any Claimant to whom the Administrator has directed a written
notification of the administrator's determination, the claim is filed within 60
days of the date the Claimant receives such notification.
13.2 If a claim for benefits under this Agreement is wholly or
partially denied, the Administrator shall provide the Claimant with a notice of
denial, written in a manner calculated to be understood by the Claimant and
setting forth:
(a) the specific reason(s) for the denial;
(b) specific references to the provisions of this Agreement on
which the denial is based;
(c) a description of any additional material or information needed
by the Claimant in order to perfect the claim, with an explanation of why the
material or information is necessary; and
(d) appropriate information as to steps to be taken if the
Claimant wishes to appeal the Administrator's denial of the claim. The notice of
denial shall be given within a reasonable time but not later than 90 days after
the claim is filed, unless special circumstances require an extension of time
for processing the claim. If an extension of time is required, written notice
shall be furnished to the Claimant within 90 days of the date the claim was
filed stating the special circumstances requiring the extension, and the date by
which a decision on the claim can be expected, which date shall be no more than
l80 days from the date the claim was filed. If no notice of denial is provided,
the Claimant may appeal the claim as though the claim had been denied.
13.3 The Claimant and/or his or her representative may appeal the
denied claim to the Administrator, and, in connection with the appeal, may:
(a) request a review on written application to the Administrator;
(b) review pertinent documents; and
(c) submit issues and comments in writing to the Administrator.
The appeal must be made within 60 days of the date the Claimant received
notification of the denied claim.
13.4 On receipt of a request for review, the Administrator shall,
within a reasonable time, but not later than 60 days after receiving the
request, provide written notification of its decision to the Claimant stating
the specific reasons and referencing the specific provisions of this Agreement
on which its decision is based, unless special circumstances require an
extension of time for processing the review. If an extension is required, the
Administrator shall notify the claimant of the special circumstances and of a
date no later than l20 days after the date the review was requested on which the
Administrator will notify the Claimant of its decision.
13.5 Nothing in this Section 13 of this Agreement shall be
interpreted as limiting in any way the Company's right to interplead any
Claimants in any court of competent jurisdiction.
14. Agreement Binding; Successors and Assigns
14.1 This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto, their permitted assigns, if any, and, but only by
operation of law, their respective next of kin, legatees, administrators,
executors, legal representatives, and successors (including remote, as well as
immediate, successors to such parties, but only by operations of law). In
applying any provision of this Agreement with respect to any successor or assign
of the Company, such provision shall be applied by treating such successor or
assign as the "Company" referred to in this Agreement, unless such treatment
would be clearly inappropriate. The principle of the preceding sentence shall
not, except as otherwise specifically provided in other provisions of this
Agreement, apply to any successor or assign of Executive or Executive's
Beneficiary.
14.2 Except by operation of law, as provided in Section l4.1
above, this Agreement may not be assigned by Executive. This Agreement may be
assigned by the Company, but only with Executive's prior written consent.
14.3 Neither Executive, Executive's estate, or Executive's
surviving spouse, if any, shall have any right to commute, encumber, or dispose
of the right to receive payments under this Agreement, and such payments and the
right to receive them, shall, to the maximum extent permissible under the law,
be nonassignable, nontransferable, and not subject to garnishment or other
attachment.
14.4 The Company shall have the right under this Agreement to
offset against its obligation to make any payment to any person under this
Agreement (including Executive, Executive's Beneficiary, or any other person)
any claims that the Company may have against such person in connection with any
transaction or occurrence between the Company and such person, or affecting the
Company and in which such person was involved, whether or not such transaction
or occurrence is otherwise connected with this Agreement in any other way.
14.5 Any defense, whether arising under this Agreement or in
connection with any other transaction or occurrence, that the Company may have
against any obligation, including the obligation to make any payment, that the
Company might otherwise have under this Agreement, shall, to the extent good
against Executive, also be good against Executive's Beneficiary or any other
Claimant.
15. Arbitration
15.1 Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration to take place in
San Francisco, California, in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, and judgment upon the award by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitrator(s) shall award attorneys' fees to the prevailing party, if any, in
the arbitration, and any court entering judgment upon such award shall award
attorneys' fees and costs to the party causing such judgment to be entered.
16. Notices
All notices, consents, requests, demands, or other communications
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given when delivered, or when mailed by United States certified mail,
postage prepaid, as follows:
If to the Company: PLM International, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, California 94l05
If to Executive: J. Michael Allgood
1153 Camino Vallecito
Lafayette, California 94549
or to such other address as the Company or Executive shall have last designated
by notice to the other. Any item shall be effective upon delivery, and any item
mailed by United States certified mail, postage prepaid, shall be deemed to have
been delivered on the third business day following the date deposited in the
mail.
17. Waiver
No failure on the part of either the Company or Executive to
exercise, no delay in exercising, or course of dealing with respect to, any
right, power, or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power, or privilege preclude
any other or further exercise of such right, power, or privilege, or of any
other right, power, or privilege. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law.
18. Invalid Provision
Invalidity or unenforceability of any particular provision of this
Agreement shall not affect the provisions of this Agreement, and this Agreement
shall be construed in all aspects as if the invalid or unenforceable provision
were omitted.
19. Enumeration and Headings
The enumeration and headings of this Agreement are merely for
convenience of reference; they shall not be construed to constitute
representations or warranties, or to have any substantive significance.
20. Entire Agreement
This writing constitutes the entire understanding between the
parties with respect to the matters it deals with, and such understanding may be
modified, altered, or amended only by the written agreement of the parties
hereto. The Company and the Executive expressly agree that this agreement
supersedes and replaces any prior agreement that may already be in effect with
respect to the matters covered herein, and, except as provided in paragraph 1.4
of this agreement, any such prior agreement will become null and void upon the
execution and delivery of this agreement.
21. Governing Law
This agreement shall be construed in accordance with and governed
by California law.
22. Counterparts
This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Agreement by signing any such counterpart.
PLM INTERNATIONAL, INC.
By: /s/ Robert N.Tidball
Robert N. Tidball
Its President and Chief Executive Officer
Date 9/30/94
EXECUTIVE
/s/ J. Michael Allgood
J. Michael Allgood
Date 10/6/94
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
This EXECUTIVE DEFERRED COMPENSATION AGREEMENT (this "Agreement") is made
this 18th day of December, 1992, by and between PLM International, Inc., a
Delaware corporation, its affiliates and subsidiaries (collectively, the
"Company"), and Stephen M.
Bess ("Executive").
RECITALS:
A. Executive is a management employee of the Company, serving the Company
in such capacity as the Company's board of directors or officers may designate
from time to time.
B. The Company and Executive have, prior to the date of this Agreement,
agreed, and shall in the future, apart from this Agreement, agree, from time to
time, on the amount(s) that the Company is to pay Executive as Executive's basic
current cash compensation (that is, Executive's salary, hereinafter referred to
as Executive's "Salary"), as well as on other amounts of compensation for
personal services (including, but not by way of limitation, bonuses, consultancy
fees, and commissions).
C. In consideration of the personal services required to be performed by
Executive in order for Executive or Executive's Beneficiary to receive any of
the benefits provided under this Agreement, and in recognition of the importance
that certain of the Company's management employees, now and in the future, may
place upon its actions to secure adequate retirement and death benefits for its
management employees -- but specifically disavowing any intention of setting any
policy or precedent, binding or otherwise, with respect to the retirement or
death benefits, if any, that the Company may at any time, now or in the future,
decide to provide to any of its employees, management or otherwise, other than
Executive -- the Company desires to make provision for pension and death
benefits for Executive, as specified in the provisions of this Agreement.
WHEREFORE THE PARTIES AGREE AS FOLLOWS:
1. Deferred Compensation Benefits
1.1 Commencing on the first Business Day of any Compensation
Period, and continuing on the first Business Day of each of the following months
until the end of such Compensation Period, the Company shall pay Executive a
Monthly Executive Deferred Compensation Benefit under this Agreement. The
Monthly Executive Deferred Compensation Benefit shall be computed according to
the following formula:
Monthly Executive Deferred Compensation Benefit = VF (AF (S/M))
where "S" equals the sum of all of the amounts paid to Executive as Salary
during Executive's last 60 months of employment with the Company (or, if
Executive was an employee of the Company for less than 60 months, during all of
Executive's months of employment with the Company), "M" is the number of months
in the period of consecutive months used in the computation of S, "AF" is
Executive's Accrual Factor, and "VF" is Executive's Vesting Factor.
1.2 For the purposes of paragraph 1.1, a month of employment shall
be any calendar month during which Executive has been a full-time employee of
the Company at all times. In computing the number of months during which
Executive was employed by the Company preceding a Compensation Period, periods
of normal paid vacation or of paid leave, of whatever type, shall be treated as
periods during which Executive was a full-time employee of the Company. Any
unpaid leave of absence taken by Executive with the Company's consent shall be
treated (a) as beginning on the first day of the calendar month in which it
actually began and ending on the last day of the calendar month in which it
actually ended, and (b) as a period during which Executive was not a full-time
employee of the Company.
1.3 Except as otherwise provided in this Agreement, Executive's
"Accrual Factor" shall be determined under the following table:
Years of Service Accrual Factor
-------------------------------------------------------
1 5%
2 10%
3 15%
4 20%
5 25%
6 30%
7 35%
8 40%
9 45%
10 50%
11 55%
12 60%
13 65%
14 70%
15 or more 75%
For the purpose of determining Executive's Accrual Factor under the above table,
a "Year of Service" shall be any calendar year during which Executive is or was
actually employed by the Company as a full-time employee for at least 40 weeks.
For the purpose of the preceding sentence, any calendar week shall be treated as
a week of full-time employment if Executive was a full-time employee of the
Company on any day during such week.
1.4 Except as provided in paragraph l.5, or Section 6 or 12,
Executive's "Vesting Factor" shall be determined nder the following table:
Years of Service
Occurring After
Calendar Year 1985 Vesting Factor
1 0%
2 0%
3 0%
4 0%
5 or more 100%
For the purpose of determining Executive's Vesting Factor under the above table,
a Year of Service shall be computed in the same manner as a Year of Service for
the purpose of computing Executive's Accrual Factor under paragraph l.3, except
that calendar years preceding the calendar year in which this Agreement was
entered into by and between the Company and Executive (or, if earlier, the
calendar year of any prior Agreement which this Agreement supersedes) shall not
be counted.
1.5 Notwithstanding anything that might otherwise be to the
contrary in paragraph 1.4, if Executive terminates employment with the Company
on account of a Layoff, or on account of his or her death or a period of illness
ending in death, Executive's Vesting Factor shall be determined under the
following table:
Years of Service
Occurring After
Calendar Year 1985 Vesting Factor
1 20%
2 40%
3 60%
4 80%
5 or more 100%
For the purposes of this paragraph l.5, a "Layoff" shall mean a
termination of employment initiated by the Company as part of a general
reduction in the size of the Company's work force or management in response to a
reduction in the volume, or a structural change in the nature of, the Company's
business, or its manner of conducting business, where the circumstances of the
termination indicate that the Executive's job performance has not generally been
unsatisfactory and that, but for the reduction in the volume, or change in the
structural nature of the Company's business, or its manner of conducting
business, the Company would probably not have terminated Executive's employment.
l.6 The "Compensation Period" shall be the period of consecutive
calendar months commencing with the first Business Day of the second calendar
month following the later of (a) the calendar month in which Executive attains
age 60, or (b) the calendar month in which Executive terminates employment with
the Company, and ending with the last day of the earlier of (x) the calendar
month following the calendar month in which Executive again becomes an employee
of the Company, or (y) the last day of the 59th month following the first month
of the Compensation Period.
l.7 For the purposes of this Agreement, a "Business Day" shall be
any day other than Saturday, Sunday, or a Holiday. A "Holiday" shall be any day
on which the Company's Executive offices are not open for general business, and
on which the Company's nonmanagement employees are not required to report for
work other than by special arrangement.
l.8 For the purpose of this Agreement, the terms "employee" and
"employment" shall have their common law meanings, and shall not include,
respectively, an independent contractor or the work relationship between the
Company and an independent contractor.
l.9 (a) For the purpose of computing Executive's Accrual Factor,
any period of time during which Executive was employed by any of the following
employers shall be treated as a period of time during which Executive was
employed by the Company, so that if Executive has been employed by any such
employer he shall be in the same position with respect to the computation of his
Accrual Factor as he would be had his service (Years of Service and any portion
of any Year of Service) for such employer been service with the Company:
PLM Companies, Inc.
Transcisco Industries, Inc.
PLM International, Inc.
l.9 (b) For the purposes of computing Executive's Vesting Factor,
any period of time during which Executive was employed by any of the following
employers shall be treated as a period of time during which Executive was
employed by the Company, so that if Executive has been employed by any such
employer he shall be in the same position with respect to the computation of his
Vesting Factor as he would be had his service (Years of Service and any portion
of any Year of Service) for such employer been service with the Company:
PLM Companies, Inc.
Transcisco Industries, Inc.
PLM International, Inc.
2. Reduction for Prior Payments
If Monthly Executive Deferred Compensation Benefit payments become
payable under Section l of this Agreement, and with respect to any previous
Compensation Period(s) Executive has previously received Monthly Executive
Deferred Compensation Benefit payments, then, notwithstanding anything in
Section l of this Agreement that might otherwise be to the contrary, the rules
provided in Section l of this Agreement, which generally provide that a
Compensation Period ends no later than the last day of the 59th calendar month
after the first calendar month of the Compensation Period, shall be applied by
substituting "the Nth calendar month" for "the 59th calendar month" each place
"the 59th calendar month" appears, where "N" is the number obtained by
subtracting from 59 the total number of Monthly Executive Deferred Compensation
Benefit payments previously received by Executive with respect to any previous
Compensation Period(s).
3. Death Benefits
3.1 If Executive dies during a Compensation Period the Company
shall continue to make Monthly Executive Deferred Compensation Benefit payments,
until the end of the Compensation Period, exactly as if Executive had not died,
except that, commencing with the first Monthly Executive Compensation Benefit
payment payable after the l0th Business Day following the Company's actual
receipt of notice of Executive's death, all remaining Monthly Executive Deferred
Compensation Benefit payments shall be paid to Executive's Beneficiary.
3.2 If Executive dies other than during a Compensation Period,
then Executive shall be assumed for all purposes of this Agreement to have (a)
terminated employment with the Company (i) if the Executive is not employed by
the Company at the time of his death, on the day Executive actually last
terminated employment with the Company or (ii) if the Executive is employed by
the Company at the time of his death, on the first day of the calendar year
following the calendar year in which Executive actually died (in which case
Executive shall be assumed to have provided his or her services to the Company
until such date on a full-time basis), (b) survived until the attainment of age
60, and (c) died on the second day of the second calendar month following his or
her attainment of age 60. The provisions of paragraph 3.l shall then be applied
using the assumed facts set forth in the previous sentence.
3.3 Executive's Beneficiary shall be:
(a) such person as Executive may have instructed in an unrevoked
writing delivered to the Company's General Counsel, and accepted by the
Company's General Counsel for the purpose of designating a Beneficiary under
this Agreement; otherwise,
(b) such person as Executive may have designated in Executive's
last will and testament duly admitted to probate; otherwise,
(c) Executive's estate.
3.4 Notwithstanding anything contained in this Agreement that
might otherwise be to the contrary, no amount constituting property of a
surviving or former spouse of Executive due to the application of any community
or other marital property law shall be paid to any person other than such
surviving or former spouse, or such surviving or former spouse's estate, without
the written consent of such surviving or former spouse, or of the executor or
administrator of such surviving or former spouse's estate. Prior to making any
payment under this Agreement the Company may require the potential recipient of
such payment to supply the Company with such proof as the Company shall
reasonably require to ensure that the payment in question complies with the
provisions of this paragraph 3.4.
4. Source of Payments
The Deferred Compensation Benefits payable under this Agreement
are non-transferable and subject to substantial risks of forfeiture within the
meaning of section 83 of the Internal Revenue Code of 1986. The Company may, but
is not required to, establish a trust or other fund separate and beyond the
reach of the creditors of the Company to secure the Deferred Compensation
Benefits payable under this Agreement. In the event that such a trust or other
fund is established by the Company, the Company may, but is not required to
contribute any specified amounts or assets to such trust or other fund. It is
the intent that the Deferred Compensation Benefits be paid from any amounts
available in such trust or other fund, however, in any event the Company remains
obligated as provided under this Agreement to the extent that Deferred
Compensation Benefits are not paid by such trust or other fund.
5. Acceleration of Payments
Notwithstanding anything contained in Sections l or 3 of this
Agreement that might otherwise be to the contrary, the Company's Board of
Directors shall have the power in its discretion to pay the total amount of any
Monthly Executive Compensation Benefit payments that may become payable under
this Agreement either in a single sum or in a lesser number of installments than
if payments were made monthly as would otherwise be provided in Sections l or 3.
If the Company's Board of Directors decides to pay Executive's Monthly Executive
Compensation Benefit as a single sum, or in such lesser number of installments,
then the dollar amount(s)) owed by the Company to Executive or Executive's
Beneficiary under this Agreement shall be less than the sum of the nominal
dollar amounts that would otherwise be owed under Sections l or 3 in order to
take into account the time value of money. The dollar amounts that shall be owed
by the Company under this Agreement in the case of a single sum payment or
payment in a lesser number of installments than would otherwise be made in
Sections l or 3 shall be the amount determined by:
(a) discounting to present value, using generally accepted
accounting principles, the stream of payments that would otherwise be payable
under Sections l or 3 assuming that Executive's Compensation Period lasted for
as long as necessary to exhaust the Company's payment obligation under Sections
l or 3 (taking into account any reduction of such obligation provided for by
Section 2 of this Agreement), and assuming an interest rate reasonably
approximate to the interest rate that the Company would pay a commercial lender
in connection with a loan to the Company, made at the time the payment is made,
of an amount approximately equal to the amount(s)) to be paid to Executive under
Sections l or 3 of this Agreement, and for a term reasonably approximate to the
period over which such payments would be made; and,
(b) increasing, if appropriate, to future value, using the same
principles used in subparagraph (a) above, the payment(s) actually to be made,
taking into account the time(s) when such payment(s)) is/are actually to be
made.
6. Form of Payments
6.1 Except as provided in Section 6.2 below, all payments to
Executive under this Agreement shall be made in cash.
6.2 If the Company makes one or more payment(s) to Executive under
Section 5, such payment(s) may, at Executive's option be wholly or partially in
the form of one or more immediate or deferred annuity contracts on the sole life
of the Executive or jointly on the lives of Executive and Executive's
Beneficiary, with any term certain or refund feature elected by Executive.
7. Forfeitures of Otherwise Vested Amounts
Notwithstanding anything contained in this Agreement that might
otherwise be to the contrary, Executive's Vesting Factor for the purposes of
paragraphs l.4 and l.5 of this Agreement shall, if it is not already zero
percent, be reduced to zero percent and shall, forever thereafter, remain, zero
percent if:
(a) Executive resigns from the Company's employment against the
wishes of the Company;
(b) Executive materially breaches any trade secrets or other
confidentiality agreement between the Company and Executive;
(c) Executive's employment terminates within the 48-consecutive
month period consisting of the 24 months immediately preceding and the 24 months
immediately following the Company's discovery of any misconduct in connection
with Executive's employment, including fraud or embezzlement;
(d) After counseling with respect to the importance of such an
examination to the financial interests of the Company, and after a reasonable
period for deliberation, Executive refuses to undergo any medical or other
examination in connection with the acquisition or potential acquisition of any
life insurance policy, annuity, or other investment whose price may reflect a
mortality risk factor, that the Company may desire to acquire.
8. Service During Retirement or Disability
8.1 Executive may continue to be involved in the Company's affairs
during a Compensation Period provided, however, that Executive's involvement in
such affairs shall in no way be required as a condition of receiving any payment
under this Agreement, and provided that during any Compensation Period the
Company shall have no right under this Agreement to require Executive to perform
any services for, or otherwise be involved in the affairs of, the Company.
8.2 If Executive provides services to the Company during a
Compensation Period, the compensation, if any, that Executive shall receive from
the Company for such services shall be the subject of an agreement or
understanding between Executive and the Company other than this Agreement. In
particular, this Agreement shall not preclude or otherwise affect Executive's
receipt of compensation from the Company for services performed during a
Compensation Period, nor shall any payments due under this Agreement be reduced
or offset by any such compensation.
9. Taxes
9.1 If and to the extent that the Company determines in good faith
that any amount otherwise payable to Executive or Executive's Beneficiary under
this Agreement is subject to Federal Insurance Contributions Act ("FICA") taxes,
California State Disability Insurance ("SDI") taxes, or any other payroll taxes
(including, but not by way of limitation, federal or state income tax
withholding on wages, deferred compensation, disability benefits, death
benefits, or similar amounts, or any federal or state withholding tax on
employee wages, deferred compensation, disability benefits, death benefits, or
similar amounts that may be enacted after the date of this Agreement
(collectively "Employee Payroll Taxes"), then the Company (or the trust, as the
case may be) shall deduct from such amount the sum, if any, of:
(a) Executive's portion as an employee or former employee of the
Company, or Executive's Beneficiary portion or a beneficiary of a former
employee of the Company -- but not the Company's portion -- of FICA taxes under
Sections 3102 of the Internal Revenue Code of l986, as amended (the "Code"), or
under any related or successor provision(s) of federal law;
(b) SDI taxes under Sections 2901, 984, and 986 of the California
Unemployment Insurance Code, or under any related or successor provisions of
state law; and
(c) the amount of any other applicable Employee Payroll Taxes due
with respect to such gross amounts, to the extent that, as a matter of federal
or state tax law, they are imposed on Executive or Executive's Beneficiary.
9.2 The amount of any reduction(s) under Section 9.l above shall
for the purposes of this Agreement and for federal and state tax purposes --
including federal and state payroll tax deposit and reporting purposes -- be
treated by the Company, Executive, or/and Executive's Beneficiary, as employee
FICA, SDI, or/and other Employee Payroll Taxes withheld from Executive's wages
or benefits as an employee or former employee of the Company, or from other
appropriate amounts.
9.3 Except as otherwise provided in this Section 9 of this
Agreement, the gross amounts otherwise payable to Executive or Executive's
Beneficiary under this Agreement shall not be reduced on account of any other
taxes that may be imposed on the Company on account of or in connection with the
Company's payments to Executive or Executive's Beneficiary under this Agreement.
10. Automatic Acceleration of Vesting and Optional Acceleration of
Payment in the Case of A Change in Control; Section 280G Cutback
10.1 Notwithstanding anything contained in this Agreement that
might otherwise appear to the contrary other than Section 10.4 automatically, as
a consequence of the operation of this Agreement, and without any requirement
for any approval on the part of the Company's board of directors or any officer
or group of officers of the Company, in the event of any Change in Control of
the Company, if Executive is an employee of the Company at the time of such
Change in Control of the Company, then effective with the occurrence of such
Change in Control of the Company:
(a) Executive shall be treated for all purposes of this Agreement
as if Executive 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
(b) Executive's Vesting Factor under Section l.4 of this Agreement
shall, except as it may be affected by Section 7 of this Agreement prior to the
date of the Change in Control of the Company, become and forever thereafter
remain 1.
10.2 Moreover, notwithstanding anything contained in this
Agreement that might otherwise appear to the contrary, in the case of any Change
in Control of the Company, the Company's board of directors may at any time
direct that, in addition to the provision of Section 10.1 above, this Agreement
shall be applied (a) if Executive had already terminated employment with the
Company prior to the Change in Control of the Company, as if Executive 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 occurred, or (b) if
Executive was an employee of the Company on the date on which the Change in
Control of the Company occurred, as if Executive had terminated employment with
the Company, and had done so on the day following the day on which Executive
shall be deemed to have attained age 60 under Section 10.1.
10.3 Except than as provided in Section 11 below, for purposes of
this Agreement, "Change in Control of the Company" shall mean a change in the
ownership of the Company's stock that would be required to be reported in
response to Item 6(e) of Schedule l4A of Regulation l4A promulgated under the
Securities Exchange Act of l934 as in effect on the date of this Agreement or,
if such Item 6(e) is no longer in effect, a change in ownership that would be
required to be reported under any regulation issued by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of l934 that serves
similar purposes as such Item 6(e); provided however, that in any event a Change
in Control of the Company shall be deemed to have occurred if and when (a) any
"person" (as such term is used in Sections l3 (d) and l4 ((d)(2)) of the
Securities Exchange Act of l934) is or becomes a beneficial owner, directly or
indirectly, of securities of the Company representing more than 15% of the
combined voting power of the Company's then outstanding securities, or (b) there
is a change in the Board of Directors which change is the result of a proxy
solicitation(s) or other action(s) to influence voting at a shareholders'
meeting of the Company (other than by voting one's own stock) by a Person or
group of Persons who has Beneficial Ownership of 5% or more of the combined
voting power of the securities of the Employer and which causes the Continuing
Directors to cease to be a majority of the Board of Directors of the Employer.
For purposes of the preceding sentence, "Continuing Directors" shall mean a
member of the Board of Directors who (i) is a member of the Board of Directors
on the date hereof, or (ii) who subsequently becomes a member of the Board of
Directors and who either (x) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are Directors
on the date hereof, or (y) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are described
in subsections (i) and (ii)(x) above, as applicable.
10.4 (a) Notwithstanding anything that might otherwise be to the
contrary in this Agreement, if as a result of the application of Sections 10.1
or/and 10.2 of this Agreement Executive's Vesting Factor or/and the timing of
any payments to Executive under this Agreement is/are accelerated upon the
occurrence of a Change in Control of the Company, then the Executive shall
engage outside counsel ("280G Counsel") to render an opinion as to whether the
payment of any amount or portion of any amount that would be paid by the Company
to Executive under this Agreement but for this Section 10.4 would, more probably
than not, be deductible for federal income tax purposes notwithstanding Section
280G of the Code, or any successor provision. If 280G Counsel is unable to
render its opinion that the entire amount consisting of the aggregate of all
payments due Executive under this Agreement (disregarding this Section 10.4
would, more probably than not, be deductible, then 280G Counsel shall determine
the maximum present value of payments (using the present value rules applicable
under Section 280G) that, in its opinion, Executive may receive under this
Agreement without any portion of any payment of such present value being, more
probably than not, nondeductible for federal income tax purposes as the result
of the application of Section 280G of the Code (Executive's "280G Limit"). 280G
Counsel shall then determine the number of months by which the period that would
otherwise be Executive's Compensation Period under this Agreement would be
required to be shortened (without increasing the amount determined under Section
l.l as Executive's Monthly Deferred Compensation Benefit) so that the present
value of the amounts that Executive will receive under this Agreement would not
exceed Executive's 280G Limit. The number of months that would otherwise be
included in Executive's Compensation Period shall then be shortened,
notwithstanding any other provision of this Agreement that would otherwise
appear to be to the contrary, to the number of months so determined by 280G
Counsel.
(b) The selection of 280G Counsel shall be within the Executive's
discretion, but the competence of 280G Counsel in such tax matters must be
demonstrable.
(c) If 280G Counsel determines that, in connection with an event
that constitutes a Change in Control under this Agreement, other amounts may be
payable to Executive by the Company or any affiliate of the Company (including,
but not by way of limitation, a member of an affiliated group as determined
under Section 280G(d)(5) of the Code) under any other agreements or arrangements
that would, in 280G Counsel's opinion, more likely than not be required under
Section 280G of the Code to be aggregated with payments under this Agreement in
determining whether amounts that would otherwise be paid under this Agreement
would exceed the 280G Limit, or in determining whether such other amounts
themselves might be nondeductible to the payor under Section 280G, then 280G
Counsel shall assume, in making its determinations under Section 10.4(a), that
the maximum amount payable under such other agreements or arrangement shall in
fact be paid to Executive, notwithstanding that such other agreements or
arrangements may contain their own ordering rule with respect to cutbacks
similar in principle to the cutback provided for in this Section 10.4 except to
the extent that any such agreement or arrangement, or the ordering rule provided
for in it, has been entered into as of a date following the date as of which
this Agreement is entered into and specifically refers to this Agreement.
11. Automatic Acceleration of Both Vesting and Payment in the Case of
Liquidation or Dissolution
The Company's liquidation or/and dissolution shall also constitute
a Change in Control of the Company for the purposes of Section 10 of this
Agreement, except that, in the case of the Company's liquidation or dissolution,
Section 10.2 shall be applied without the requirement for action by the
Company's board of directors, so that (a) if Executive actually terminated
employment with the Company prior to the Change in Control of the Company,
Executive shall automatically be treated as having 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 occurred or (b) if Executive was an employee of
the Company on the date on which the Change in Control of the Company occurred,
then Executive shall automatically be treated as having terminated employment
with the Company on the day after Executive is treated as having attained age 60
under Section 10.1.
12. Limited Effect
12.1 Other than as specifically provided in this Agreement, this
Agreement shall have no effect on the nature, duration, or terms of Executive's
employment relationship with the Company, or on the amount of, or the Company's
liability to pay, any Salary or other compensation to Executive.
12.2 No amount(s) that may become payable to Executive under this
Agreement shall be deemed to be salary or other compensation of Executive for
the purpose of computing benefits to which Executive may be or become entitled,
or contributions that Executive may be or become entitled to make, under any
compensation, profit sharing, or salary deferral plan -- whether qualified under
the Code or not -- of the Company, nor is anything in this Agreement intended to
affect any right or obligation that Executive may have, now or in the future,
under any such plans or arrangements.
13. Procedure for Review of Denial of Benefits
13.1 The Company's board of directors shall be the administrator
(the "Administrator") of this Agreement. The Administrator shall determine the
rights under this Agreement of Executive, of any Beneficiary of Executive, of
any surviving or former spouse of executive, or of any legatees or heirs of
Executives (the potential "Claimants"). If a Claimant disputes the
Administrator's determination of benefits under this Agreement, he, she, or it
may file a written claim for benefits with the Administrator, provided that, in
the case of any Claimant to whom the Administrator has directed a written
notification of the administrator's determination, the claim is filed within 60
days of the date the Claimant receives such notification.
13.2 If a claim for benefits under this Agreement is wholly or
partially denied, the Administrator shall provide the Claimant with a notice of
denial, written in a manner calculated to be understood by the Claimant and
setting forth:
(a) the specific reason(s) for the denial;
(b) specific references to the provisions of this Agreement on
which the denial is based;
(c) a description of any additional material or information needed
by the Claimant in order to perfect the claim, with an explanation of why the
material or information is necessary; and
(d) appropriate information as to steps to be taken if the
Claimant wishes to appeal the Administrator's denial of the claim. The notice of
denial shall be given within a reasonable time but not later than 90 days after
the claim is filed, unless special circumstances require an extension of time
for processing the claim. If an extension of time is required, written notice
shall be furnished to the Claimant within 90 days of the date the claim was
filed stating the special circumstances requiring the extension, and the date by
which a decision on the claim can be expected, which date shall be no more than
l80 days from the date the claim was filed. If no notice of denial is provided,
the Claimant may appeal the claim as though the claim had been denied.
13.3 The Claimant and/or his or her representative may appeal the
denied claim to the Administrator, and, in connection with the appeal, may:
(a) request a review on written application to the Administrator;
(b) review pertinent documents; and
(c) submit issues and comments in writing to the Administrator.
The appeal must be made within 60 days of the date the Claimant received
notification of the denied claim.
13.4 On receipt of a request for review, the Administrator shall,
within a reasonable time, but not later than 60 days after receiving the
request, provide written notification of its decision to the Claimant stating
the specific reasons and referencing the specific provisions of this Agreement
on which its decision is based, unless special circumstances require an
extension of time for processing the review. If an extension is required, the
Administrator shall notify the claimant of the special circumstances and of a
date no later than l20 days after the date the review was requested on which the
Administrator will notify the Claimant of its decision.
13.5 Nothing in this Section 13 of this Agreement shall be
interpreted as limiting in any way the Company's right to interplead any
Claimants in any court of competent jurisdiction.
14. Agreement Binding; Successors and Assigns
14.1 This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto, their permitted assigns, if any, and, but only by
operation of law, their respective next of kin, legatees, administrators,
executors, legal representatives, and successors (including remote, as well as
immediate, successors to such parties, but only by operations of law). In
applying any provision of this Agreement with respect to any successor or assign
of the Company, such provision shall be applied by treating such successor or
assign as the "Company" referred to in this Agreement, unless such treatment
would be clearly inappropriate. The principle of the preceding sentence shall
not, except as otherwise specifically provided in other provisions of this
Agreement, apply to any successor or assign of Executive or Executive's
Beneficiary.
14.2 Except by operation of law, as provided in Section l4.1
above, this Agreement may not be assigned by Executive. This Agreement may be
assigned by the Company, but only with Executive's prior written consent.
14.3 Neither Executive, Executive's estate, or Executive's
surviving spouse, if any, shall have any right to commute, encumber, or dispose
of the right to receive payments under this Agreement, and such payments and the
right to receive them, shall, to the maximum extent permissible under the law,
be nonassignable, nontransferable, and not subject to garnishment or other
attachment.
14.4 The Company shall have the right under this Agreement to
offset against its obligation to make any payment to any person under this
Agreement (including Executive, Executive's Beneficiary, or any other person)
any claims that the Company may have against such person in connection with any
transaction or occurrence between the Company and such person, or affecting the
Company and in which such person was involved, whether or not such transaction
or occurrence is otherwise connected with this Agreement in any other way.
14.5 Any defense, whether arising under this Agreement or in
connection with any other transaction or occurrence, that the Company may have
against any obligation, including the obligation to make any payment, that the
Company might otherwise have under this Agreement, shall, to the extent good
against Executive, also be good against Executive's Beneficiary or any other
Claimant.
15. Arbitration
15.1 Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration to take place in
San Francisco, California, in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, and judgment upon the award by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitrator(s) shall award attorneys' fees to the prevailing party, if any, in
the arbitration, and any court entering judgment upon such award shall award
attorneys' fees and costs to the party causing such judgment to be entered.
16. Notices
All notices, consents, requests, demands, or other communications
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given when delivered, or when mailed by United States certified mail,
postage prepaid, as follows:
If to the Company: PLM International, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, California 94l05
If to Executive: Stephen M. Bess
233 Eaton Road
San Mateo, California 94022
or to such other address as the Company or Executive shall have last designated
by notice to the other. Any item shall be effective upon delivery, and any item
mailed by United States certified mail, postage prepaid, shall be deemed to have
been delivered on the third business day following the date deposited in the
mail.
17. Waiver
No failure on the part of either the Company or Executive to
exercise, no delay in exercising, or course of dealing with respect to, any
right, power, or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power, or privilege preclude
any other or further exercise of such right, power, or privilege, or of any
other right, power, or privilege. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law.
18. Invalid Provision
Invalidity or unenforceability of any particular provision of this
Agreement shall not affect the provisions of this Agreement, and this Agreement
shall be construed in all aspects as if the invalid or unenforceable provision
were omitted.
19. Enumeration and Headings
The enumeration and headings of this Agreement are merely for
convenience of reference; they shall not be construed to constitute
representations or warranties, or to have any substantive significance.
20. Entire Agreement
This writing constitutes the entire understanding between the
parties with respect to the matters it deals with, and such understanding may be
modified, altered, or amended only by the written agreement of the parties
hereto. The Company and the Executive expressly agree that this agreement
supersedes and replaces any prior agreement that may already be in effect with
respect to the matters covered herein, and, except as provided in paragraph 1.4
of this agreement, any such prior agreement will become null and void upon the
execution and delivery of this agreement.
21. Governing Law
This agreement shall be construed in accordance with and governed
by California law.
22. Counterparts
This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Agreement by signing any such counterpart.
THE COMPANY
By /s/ Robert N.Tidball
President and Chief Executive Officer
Date 12/18/92
EXECUTIVE
/s/ Stephen M. Bess
Date 3/11/93
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
This EXECUTIVE DEFERRED COMPENSATION AGREEMENT (this "Agreement") is made
this 18th day of January, 1999, by and between PLM International, Inc., a
Delaware corporation, its affiliates and subsidiaries (collectively, the
"Company"), and Richard K Brock ("Executive").
RECITALS:
A. Executive is a management employee of the Company, serving the Company
in such capacity as the Company's board of directors or officers may designate
from time to time.
B. The Company and Executive have, prior to the date of this Agreement,
agreed, and shall in the future, apart from this Agreement, agree, from time to
time, on the amount(s) that the Company is to pay Executive as Executive's basic
current cash compensation (that is, Executive's salary, hereinafter referred to
as Executive's "Salary"), as well as on other amounts of compensation for
personal services (including, but not by way of limitation, bonuses, consultancy
fees, and commissions).
C. In consideration of the personal services required to be performed by
Executive in order for Executive or Executive's Beneficiary to receive any of
the benefits provided under this Agreement, and in recognition of the importance
that certain of the Company's management employees, now and in the future, may
place upon its actions to secure adequate retirement and death benefits for its
management employees -- but specifically disavowing any intention of setting any
policy or precedent, binding or otherwise, with respect to the retirement or
death benefits, if any, that the Company may at any time, now or in the future,
decide to provide to any of its employees, management or otherwise, other than
Executive -- the Company desires to make provision for pension and death
benefits for Executive, as specified in the provisions of this Agreement.
WHEREFORE THE PARTIES AGREE AS FOLLOWS:
1. Deferred Compensation Benefits
1.1 Commencing on the first Business Day of any Compensation
Period, and continuing on the first Business Day of each of the following months
until the end of such Compensation Period, the Company shall pay Executive a
Monthly Executive Deferred Compensation Benefit under this Agreement. The
Monthly Executive Deferred Compensation Benefit shall be computed according to
the following formula:
Monthly Executive Deferred Compensation Benefit = VF (AF (S/M))
where "S" equals the sum of all of the amounts paid to Executive as Salary
during Executive's last 60 months of employment with the Company (or, if
Executive was an employee of the Company for less than 60 months, during all of
Executive's months of employment with the Company), "M" is the number of months
in the period of consecutive months used in the computation of S, "AF" is
Executive's Accrual Factor, and "VF" is Executive's Vesting Factor.
1.2 For the purposes of paragraph 1.1, a month of employment shall
be any calendar month during which Executive has been a full-time employee of
the Company at all times. In computing the number of months during which
Executive was employed by the Company preceding a Compensation Period, periods
of normal paid vacation or of paid leave, of whatever type, shall be treated as
periods during which Executive was a full-time employee of the Company. Any
unpaid leave of absence taken by Executive with the Company's consent shall be
treated (a) as beginning on the first day of the calendar month in which it
actually began and ending on the last day of the calendar month in which it
actually ended, and (b) as a period during which Executive was not a full-time
employee of the Company.
1.3 Except as otherwise provided in this Agreement, Executive's
"Accrual Factor" shall be determined under the following table:
Years of Service Accrual Factor
-------------------------------------------------------
1 5%
2 10%
3 15%
4 20%
5 25%
6 30%
7 35%
8 40%
9 45%
10 50%
11 55%
12 60%
13 65%
14 70%
15 or more 75%
For the purpose of determining Executive's Accrual Factor under the above table,
a "Year of Service" shall be any calendar year during which Executive is or was
actually employed by the Company as a full-time employee for at least 40 weeks.
For the purpose of the preceding sentence, any calendar week shall be treated as
a week of full-time employment if Executive was a full-time employee of the
Company on any day during such week.
1.4 Except as provided in paragraph l.5, or Section 6 or 12,
Executive's "Vesting Factor" shall be determined under the following table:
Years of Service
Occurring After
Calendar Year 1985 Vesting Factor
1 0%
2 0%
3 0%
4 0%
5 or more 100%
For the purpose of determining Executive's Vesting Factor under the above table,
a Year of Service shall be computed in the same manner as a Year of Service for
the purpose of computing Executive's Accrual Factor under paragraph l.3, except
that calendar years preceding the calendar year in which this Agreement was
entered into by and between the Company and Executive (or, if earlier, the
calendar year of any prior Agreement which this Agreement supersedes) shall not
be counted.
1.5 Notwithstanding anything that might otherwise be to the
contrary in paragraph 1.4, if Executive terminates employment with the Company
on account of a Layoff, or on account of his or her death or a period of illness
ending in death, Executive's Vesting Factor shall be determined under the
following table:
Years of Service
Occurring After
Calendar Year 1985 Vesting Factor
1 20%
2 40%
3 60%
4 80%
5 or more 100%
For the purposes of this paragraph l.5, a "Layoff" shall mean a
termination of employment initiated by the Company as part of a general
reduction in the size of the Company's work force or management in response to a
reduction in the volume, or a structural change in the nature of, the Company's
business, or its manner of conducting business, where the circumstances of the
termination indicate that the Executive's job performance has not generally been
unsatisfactory and that, but for the reduction in the volume, or change in the
structural nature of the Company's business, or its manner of conducting
business, the Company would probably not have terminated Executive's employment.
l.6 The "Compensation Period" shall be the period of consecutive
calendar months commencing with the first Business Day of the second calendar
month following the later of (a) the calendar month in which Executive attains
age 60, or (b) the calendar month in which Executive terminates employment with
the Company, and ending with the last day of the earlier of (x) the calendar
month following the calendar month in which Executive again becomes an employee
of the Company, or (y) the last day of the 59th month following the first month
of the Compensation Period.
l.7 For the purposes of this Agreement, a "Business Day" shall be
any day other than Saturday, Sunday, or a Holiday. A "Holiday" shall be any day
on which the Company's Executive offices are not open for general business, and
on which the Company's nonmanagement employees are not required to report for
work other than by special arrangement.
l.8 For the purpose of this Agreement, the terms "employee" and
"employment" shall have their common law meanings, and shall not include,
respectively, an independent contractor or the work relationship between the
Company and an independent contractor.
l.9 (a) For the purpose of computing Executive's Accrual Factor,
any period of time during which Executive was employed by any of the following
employers shall be treated as a period of time during which Executive was
employed by the Company, so that if Executive has been employed by any such
employer he shall be in the same position with respect to the computation of his
Accrual Factor as he would be had his service (Years of Service and any portion
of any Year of Service) for such employer been service with the Company:
PLM Companies, Inc.
Transcisco Industries, Inc.
PLM International, Inc.
l.9 (b) For the purposes of computing Executive's Vesting Factor,
any period of time during which Executive was employed by any of the following
employers shall be treated as a period of time during which Executive was
employed by the Company, so that if Executive has been employed by any such
employer he shall be in the same position with respect to the computation of his
Vesting Factor as he would be had his service (Years of Service and any portion
of any Year of Service) for such employer been service with the Company:
PLM Companies, Inc.
Transcisco Industries, Inc.
PLM International, Inc.
<PAGE>
2. Reduction for Prior Payments
If Monthly Executive Deferred Compensation Benefit payments become
payable under Section l of this Agreement, and with respect to any previous
Compensation Period(s) Executive has previously received Monthly Executive
Deferred Compensation Benefit payments, then, notwithstanding anything in
Section l of this Agreement that might otherwise be to the contrary, the rules
provided in Section l of this Agreement, which generally provide that a
Compensation Period ends no later than the last day of the 59th calendar month
after the first calendar month of the Compensation Period, shall be applied by
substituting "the Nth calendar month" for "the 59th calendar month" each place
"the 59th calendar month" appears, where "N" is the number obtained by
subtracting from 59 the total number of Monthly Executive Deferred Compensation
Benefit payments previously received by Executive with respect to any previous
Compensation Period(s).
3. Death Benefits
3.1 If Executive dies during a Compensation Period the Company
shall continue to make Monthly Executive Deferred Compensation Benefit payments,
until the end of the Compensation Period, exactly as if Executive had not died,
except that, commencing with the first Monthly Executive Compensation Benefit
payment payable after the l0th Business Day following the Company's actual
receipt of notice of Executive's death, all remaining Monthly Executive Deferred
Compensation Benefit payments shall be paid to Executive's Beneficiary.
3.2 If Executive dies other than during a Compensation Period,
then Executive shall be assumed for all purposes of this Agreement to have (a)
terminated employment with the Company (i) if the Executive is not employed by
the Company at the time of his death, on the day Executive actually last
terminated employment with the Company or (ii) if the Executive is employed by
the Company at the time of his death, on the first day of the calendar year
following the calendar year in which Executive actually died (in which case
Executive shall be assumed to have provided his or her services to the Company
until such date on a full-time basis), (b) survived until the attainment of age
60, and (c) died on the second day of the second calendar month following his or
her attainment of age 60. The provisions of paragraph 3.l shall then be applied
using the assumed facts set forth in the previous sentence.
3.3 Executive's Beneficiary shall be:
(a) such person as Executive may have instructed in an unrevoked
writing delivered to the Company's General Counsel, and accepted by the
Company's General Counsel for the purpose of designating a Beneficiary under
this Agreement; otherwise,
(b) such person as Executive may have designated in Executive's
last will and testament duly admitted to probate; otherwise,
(c) Executive's estate.
3.4 Notwithstanding anything contained in this Agreement that
might otherwise be to the contrary, no amount constituting property of a
surviving or former spouse of Executive due to the application of any community
or other marital property law shall be paid to any person other than such
surviving or former spouse, or such surviving or former spouse's estate, without
the written consent of such surviving or former spouse, or of the executor or
administrator of such surviving or former spouse's estate. Prior to making any
payment under this Agreement the Company may require the potential recipient of
such payment to supply the Company with such proof as the Company shall
reasonably require to ensure that the payment in question complies with the
provisions of this paragraph 3.4.
4. Source of Payments
The Deferred Compensation Benefits payable under this Agreement
are non-transferable and subject to substantial risks of forfeiture within the
meaning of section 83 of the Internal Revenue Code of 1986. The Company may, but
is not required to, establish a trust or other fund separate and beyond the
reach of the creditors of the Company to secure the Deferred Compensation
Benefits payable under this Agreement. In the event that such a trust or other
fund is established by the Company, the Company may, but is not required to
contribute any specified amounts or assets to such trust or other fund. It is
the intent that the Deferred Compensation Benefits be paid from any amounts
available in such trust or other fund, however, in any event the Company remains
obligated as provided under this Agreement to the extent that Deferred
Compensation Benefits are not paid by such trust or other fund.
5. Acceleration of Payments
Notwithstanding anything contained in Sections l or 3 of this
Agreement that might otherwise be to the contrary, the Company's Board of
Directors shall have the power in its discretion to pay the total amount of any
Monthly Executive Compensation Benefit payments that may become payable under
this Agreement either in a single sum or in a lesser number of installments than
if payments were made monthly as would otherwise be provided in Sections l or 3.
If the Company's Board of Directors decides to pay Executive's Monthly Executive
Compensation Benefit as a single sum, or in such lesser number of installments,
then the dollar amount(s)) owed by the Company to Executive or Executive's
Beneficiary under this Agreement shall be less than the sum of the nominal
dollar amounts that would otherwise be owed under Sections l or 3 in order to
take into account the time value of money. The dollar amounts that shall be owed
by the Company under this Agreement in the case of a single sum payment or
payment in a lesser number of installments than would otherwise be made in
Sections l or 3 shall be the amount determined by:
(a) discounting to present value, using generally accepted
accounting principles, the stream of payments that would otherwise be payable
under Sections l or 3 assuming that Executive's Compensation Period lasted for
as long as necessary to exhaust the Company's payment obligation under Sections
l or 3 (taking into account any reduction of such obligation provided for by
Section 2 of this Agreement), and assuming an interest rate reasonably
approximate to the interest rate that the Company would pay a commercial lender
in connection with a loan to the Company, made at the time the payment is made,
of an amount approximately equal to the amount(s)) to be paid to Executive under
Sections l or 3 of this Agreement, and for a term reasonably approximate to the
period over which such payments would be made; and,
(b) increasing, if appropriate, to future value, using the same
principles used in subparagraph (a) above, the payment(s) actually to be made,
taking into account the time(s) when such payment(s)) is/are actually to be
made.
6. Form of Payments
6.1 Except as provided in Section 6.2 below, all payments to
Executive under this Agreement shall be made in cash.
6.2 If the Company makes one or more payment(s) to Executive under
Section 5, such payment(s) may, at Executive's option be wholly or partially in
the form of one or more immediate or deferred annuity contracts on the sole life
of the Executive or jointly on the lives of Executive and Executive's
Beneficiary, with any term certain or refund feature elected by Executive.
7. Forfeitures of Otherwise Vested Amounts
Notwithstanding anything contained in this Agreement that might
otherwise be to the contrary, Executive's Vesting Factor for the purposes of
paragraphs l.4 and l.5 of this Agreement shall, if it is not already zero
percent, be reduced to zero percent and shall, forever thereafter, remain, zero
percent if:
(a) Executive resigns from the Company's employment against the
wishes of the Company;
(b) Executive materially breaches any trade secrets or other
confidentiality agreement between the Company and Executive;
(c) Executive's employment terminates within the 48-consecutive
month period consisting of the 24 months immediately preceding and the 24 months
immediately following the Company's discovery of any misconduct in connection
with Executive's employment, including fraud or embezzlement;
(d) After counseling with respect to the importance of such an
examination to the financial interests of the Company, and after a reasonable
period for deliberation, Executive refuses to undergo any medical or other
examination in connection with the acquisition or potential acquisition of any
life insurance policy, annuity, or other investment whose price may reflect a
mortality risk factor, that the Company may desire to acquire.
8. Service During Retirement or Disability
8.1 Executive may continue to be involved in the Company's affairs
during a Compensation Period provided, however, that Executive's involvement in
such affairs shall in no way be required as a condition of receiving any payment
under this Agreement, and provided that during any Compensation Period the
Company shall have no right under this Agreement to require Executive to perform
any services for, or otherwise be involved in the affairs of, the Company.
8.2 If Executive provides services to the Company during a
Compensation Period, the compensation, if any, that Executive shall receive from
the Company for such services shall be the subject of an agreement or
understanding between Executive and the Company other than this Agreement. In
particular, this Agreement shall not preclude or otherwise affect Executive's
receipt of compensation from the Company for services performed during a
Compensation Period, nor shall any payments due under this Agreement be reduced
or offset by any such compensation.
9. Taxes
9.1 If and to the extent that the Company determines in good faith
that any amount otherwise payable to Executive or Executive's Beneficiary under
this Agreement is subject to Federal Insurance Contributions Act ("FICA") taxes,
California State Disability Insurance ("SDI") taxes, or any other payroll taxes
(including, but not by way of limitation, federal or state income tax
withholding on wages, deferred compensation, disability benefits, death
benefits, or similar amounts, or any federal or state withholding tax on
employee wages, deferred compensation, disability benefits, death benefits, or
similar amounts that may be enacted after the date of this Agreement
(collectively "Employee Payroll Taxes"), then the Company (or the trust, as the
case may be) shall deduct from such amount the sum, if any, of:
(a) Executive's portion as an employee or former employee of the
Company, or Executive's Beneficiary portion or a beneficiary of a former
employee of the Company -- but not the Company's portion -- of FICA taxes under
Sections 3102 of the Internal Revenue Code of l986, as amended (the "Code"), or
under any related or successor provision(s) of federal law;
(b) SDI taxes under Sections 2901, 984, and 986 of the California
Unemployment Insurance Code, or under any related or successor provisions of
state law; and
(c) the amount of any other applicable Employee Payroll Taxes due
with respect to such gross amounts, to the extent that, as a matter of federal
or state tax law, they are imposed on Executive or Executive's Beneficiary.
9.2 The amount of any reduction(s) under Section 9.l above shall
for the purposes of this Agreement and for federal and state tax purposes --
including federal and state payroll tax deposit and reporting purposes -- be
treated by the Company, Executive, or/and Executive's Beneficiary, as employee
FICA, SDI, or/and other Employee Payroll Taxes withheld from Executive's wages
or benefits as an employee or former employee of the Company, or from other
appropriate amounts.
9.3 Except as otherwise provided in this Section 9 of this
Agreement, the gross amounts otherwise payable to Executive or Executive's
Beneficiary under this Agreement shall not be reduced on account of any other
taxes that may be imposed on the Company on account of or in connection with the
Company's payments to Executive or Executive's Beneficiary under this Agreement.
10. Automatic Acceleration of Vesting and Optional Acceleration of
Payment in the Case of A Change in Control; Section 280G Cutback
10.1 Notwithstanding anything contained in this Agreement that
might otherwise appear to the contrary other than Section 10.4 automatically, as
a consequence of the operation of this Agreement, and without any requirement
for any approval on the part of the Company's board of directors or any officer
or group of officers of the Company, in the event of any Change in Control of
the Company, if Executive is an employee of the Company at the time of such
Change in Control of the Company, then effective with the occurrence of such
Change in Control of the Company:
(a) Executive shall be treated for all purposes of this Agreement
as if Executive 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
(b) Executive's Vesting Factor under Section l.4 of this Agreement
shall, except as it may be affected by Section 7 of this Agreement prior to the
date of the Change in Control of the Company, become and forever thereafter
remain 1.
10.2 Moreover, notwithstanding anything contained in this
Agreement that might otherwise appear to the contrary, in the case of any Change
in Control of the Company, the Company's board of directors may at any time
direct that, in addition to the provision of Section 10.1 above, this Agreement
shall be applied (a) if Executive had already terminated employment with the
Company prior to the Change in Control of the Company, as if Executive 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 occurred, or (b) if
Executive was an employee of the Company on the date on which the Change in
Control of the Company occurred, as if Executive had terminated employment with
the Company, and had done so on the day following the day on which Executive
shall be deemed to have attained age 60 under Section 10.1.
10.3 Except than as provided in Section 11 below, for purposes of
this Agreement, "Change in Control of the Company" shall mean a change in the
ownership of the Company's stock that would be required to be reported in
response to Item 6(e) of Schedule l4A of Regulation l4A promulgated under the
Securities Exchange Act of l934 as in effect on the date of this Agreement or,
if such Item 6(e) is no longer in effect, a change in ownership that would be
required to be reported under any regulation issued by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of l934 that serves
similar purposes as such Item 6(e); provided however, that in any event a Change
in Control of the Company shall be deemed to have occurred if and when (a) any
"person" (as such term is used in Sections l3 (d) and l4 ((d)(2)) of the
Securities Exchange Act of l934) is or becomes a beneficial owner, directly or
indirectly, of securities of the Company representing more than 15% of the
combined voting power of the Company's then outstanding securities, or (b) there
is a change in the Board of Directors which change is the result of a proxy
solicitation(s) or other action(s) to influence voting at a shareholders'
meeting of the Company (other than by voting one's own stock) by a Person or
group of Persons who has Beneficial Ownership of 5% or more of the combined
voting power of the securities of the Employer and which causes the Continuing
Directors to cease to be a majority of the Board of Directors of the Employer.
For purposes of the preceding sentence, "Continuing Directors" shall mean a
member of the Board of Directors who (i) is a member of the Board of Directors
on the date hereof, or (ii) who subsequently becomes a member of the Board of
Directors and who either (x) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are Directors
on the date hereof, or (y) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are described
in subsections (i) and (ii)(x) above, as applicable.
10.4 (a) Notwithstanding anything that might otherwise be to the
contrary in this Agreement, if as a result of the application of Sections 10.1
or/and 10.2 of this Agreement Executive's Vesting Factor or/and the timing of
any payments to Executive under this Agreement is/are accelerated upon the
occurrence of a Change in Control of the Company, then the Executive shall
engage outside counsel ("280G Counsel") to render an opinion as to whether the
payment of any amount or portion of any amount that would be paid by the Company
to Executive under this Agreement but for this Section 10.4 would, more probably
than not, be deductible for federal income tax purposes notwithstanding Section
280G of the Code, or any successor provision. If 280G Counsel is unable to
render its opinion that the entire amount consisting of the aggregate of all
payments due Executive under this Agreement (disregarding this Section 10.4
would, more probably than not, be deductible, then 280G Counsel shall determine
the maximum present value of payments (using the present value rules applicable
under Section 280G) that, in its opinion, Executive may receive under this
Agreement without any portion of any payment of such present value being, more
probably than not, nondeductible for federal income tax purposes as the result
of the application of Section 280G of the Code (Executive's "280G Limit"). 280G
Counsel shall then determine the number of months by which the period that would
otherwise be Executive's Compensation Period under this Agreement would be
required to be shortened (without increasing the amount determined under Section
l.l as Executive's Monthly Deferred Compensation Benefit) so that the present
value of the amounts that Executive will receive under this Agreement would not
exceed Executive's 280G Limit. The number of months that would otherwise be
included in Executive's Compensation Period shall then be shortened,
notwithstanding any other provision of this Agreement that would otherwise
appear to be to the contrary, to the number of months so determined by 280G
Counsel.
(b) The selection of 280G Counsel shall be within the Executive's
discretion, but the competence of 280G Counsel in such tax matters must be
demonstrable.
(c) If 280G Counsel determines that, in connection with an event
that constitutes a Change in Control under this Agreement, other amounts may be
payable to Executive by the Company or any affiliate of the Company (including,
but not by way of limitation, a member of an affiliated group as determined
under Section 280G(d)(5) of the Code) under any other agreements or arrangements
that would, in 280G Counsel's opinion, more likely than not be required under
Section 280G of the Code to be aggregated with payments under this Agreement in
determining whether amounts that would otherwise be paid under this Agreement
would exceed the 280G Limit, or in determining whether such other amounts
themselves might be nondeductible to the payor under Section 280G, then 280G
Counsel shall assume, in making its determinations under Section 10.4(a), that
the maximum amount payable under such other agreements or arrangement shall in
fact be paid to Executive, notwithstanding that such other agreements or
arrangements may contain their own ordering rule with respect to cutbacks
similar in principle to the cutback provided for in this Section 10.4 except to
the extent that any such agreement or arrangement, or the ordering rule provided
for in it, has been entered into as of a date following the date as of which
this Agreement is entered into and specifically refers to this Agreement.
11. Automatic Acceleration of Both Vesting and Payment in the Case of
Liquidation or Dissolution
The Company's liquidation or/and dissolution shall also constitute
a Change in Control of the Company for the purposes of Section 10 of this
Agreement, except that, in the case of the Company's liquidation or dissolution,
Section 10.2 shall be applied without the requirement for action by the
Company's board of directors, so that (a) if Executive actually terminated
employment with the Company prior to the Change in Control of the Company,
Executive shall automatically be treated as having 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 occurred or (b) if Executive was an employee of
the Company on the date on which the Change in Control of the Company occurred,
then Executive shall automatically be treated as having terminated employment
with the Company on the day after Executive is treated as having attained age 60
under Section 10.1.
12. Limited Effect
12.1 Other than as specifically provided in this Agreement, this
Agreement shall have no effect on the nature, duration, or terms of Executive's
employment relationship with the Company, or on the amount of, or the Company's
liability to pay, any Salary or other compensation to Executive.
12.2 No amount(s) that may become payable to Executive under this
Agreement shall be deemed to be salary or other compensation of Executive for
the purpose of computing benefits to which Executive may be or become entitled,
or contributions that Executive may be or become entitled to make, under any
compensation, profit sharing, or salary deferral plan -- whether qualified under
the Code or not -- of the Company, nor is anything in this Agreement intended to
affect any right or obligation that Executive may have, now or in the future,
under any such plans or arrangements.
13. Procedure for Review of Denial of Benefits
13.1 The Company's board of directors shall be the administrator
(the "Administrator") of this Agreement. The Administrator shall determine the
rights under this Agreement of Executive, of any Beneficiary of Executive, of
any surviving or former spouse of executive, or of any legatees or heirs of
Executives (the potential "Claimants"). If a Claimant disputes the
Administrator's determination of benefits under this Agreement, he, she, or it
may file a written claim for benefits with the Administrator, provided that, in
the case of any Claimant to whom the Administrator has directed a written
notification of the administrator's determination, the claim is filed within 60
days of the date the Claimant receives such notification.
13.2 If a claim for benefits under this Agreement is wholly or
partially denied, the Administrator shall provide the Claimant with a notice of
denial, written in a manner calculated to be understood by the Claimant and
setting forth:
(a) the specific reason(s) for the denial;
(b) specific references to the provisions of this Agreement on
which the denial is based;
(c) a description of any additional material or information needed
by the Claimant in order to perfect the claim, with an explanation of why the
material or information is necessary; and
(d) appropriate information as to steps to be taken if the
Claimant wishes to appeal the Administrator's denial of the claim. The notice of
denial shall be given within a reasonable time but not later than 90 days after
the claim is filed, unless special circumstances require an extension of time
for processing the claim. If an extension of time is required, written notice
shall be furnished to the Claimant within 90 days of the date the claim was
filed stating the special circumstances requiring the extension, and the date by
which a decision on the claim can be expected, which date shall be no more than
l80 days from the date the claim was filed. If no notice of denial is provided,
the Claimant may appeal the claim as though the claim had been denied.
13.3 The Claimant and/or his or her representative may appeal the
denied claim to the Administrator, and, in connection with the appeal, may:
(a) request a review on written application to the Administrator;
(b) review pertinent documents; and
(c) submit issues and comments in writing to the Administrator.
The appeal must be made within 60 days of the date the Claimant received
notification of the denied claim.
13.4 On receipt of a request for review, the Administrator shall,
within a reasonable time, but not later than 60 days after receiving the
request, provide written notification of its decision to the Claimant stating
the specific reasons and referencing the specific provisions of this Agreement
on which its decision is based, unless special circumstances require an
extension of time for processing the review. If an extension is required, the
Administrator shall notify the claimant of the special circumstances and of a
date no later than l20 days after the date the review was requested on which the
Administrator will notify the Claimant of its decision.
13.5 Nothing in this Section 13 of this Agreement shall be
interpreted as limiting in any way the Company's right to interplead any
Claimants in any court of competent jurisdiction.
14. Agreement Binding; Successors and Assigns
14.1 This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto, their permitted assigns, if any, and, but only by
operation of law, their respective next of kin, legatees, administrators,
executors, legal representatives, and successors (including remote, as well as
immediate, successors to such parties, but only by operations of law). In
applying any provision of this Agreement with respect to any successor or assign
of the Company, such provision shall be applied by treating such successor or
assign as the "Company" referred to in this Agreement, unless such treatment
would be clearly inappropriate. The principle of the preceding sentence shall
not, except as otherwise specifically provided in other provisions of this
Agreement, apply to any successor or assign of Executive or Executive's
Beneficiary.
14.2 Except by operation of law, as provided in Section l4.1
above, this Agreement may not be assigned by Executive. This Agreement may be
assigned by the Company, but only with Executive's prior written consent.
14.3 Neither Executive, Executive's estate, or Executive's
surviving spouse, if any, shall have any right to commute, encumber, or dispose
of the right to receive payments under this Agreement, and such payments and the
right to receive them, shall, to the maximum extent permissible under the law,
be nonassignable, nontransferable, and not subject to garnishment or other
attachment.
14.4 The Company shall have the right under this Agreement to
offset against its obligation to make any payment to any person under this
Agreement (including Executive, Executive's Beneficiary, or any other person)
any claims that the Company may have against such person in connection with any
transaction or occurrence between the Company and such person, or affecting the
Company and in which such person was involved, whether or not such transaction
or occurrence is otherwise connected with this Agreement in any other way.
14.5 Any defense, whether arising under this Agreement or in
connection with any other transaction or occurrence, that the Company may have
against any obligation, including the obligation to make any payment, that the
Company might otherwise have under this Agreement, shall, to the extent good
against Executive, also be good against Executive's Beneficiary or any other
Claimant.
15. Arbitration
15.1 Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration to take place in
San Francisco, California, in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, and judgment upon the award by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitrator(s) shall award attorneys' fees to the prevailing party, if any, in
the arbitration, and any court entering judgment upon such award shall award
attorneys' fees and costs to the party causing such judgment to be entered.
16. Notices
All notices, consents, requests, demands, or other communications
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given when delivered, or when mailed by United States certified mail,
postage prepaid, as follows:
If to the Company: PLM International, Inc.
One Market Plaza
Steuart Street Tower, Suite 800
San Francisco, California 94l05
If to Executive:
or to such other address as the Company or Executive shall have last designated
by notice to the other. Any item shall be effective upon delivery, and any item
mailed by United States certified mail, postage prepaid, shall be deemed to have
been delivered on the third business day following the date deposited in the
mail.
17. Waiver
No failure on the part of either the Company or Executive to
exercise, no delay in exercising, or course of dealing with respect to, any
right, power, or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power, or privilege preclude
any other or further exercise of such right, power, or privilege, or of any
other right, power, or privilege. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law.
18. Invalid Provision
Invalidity or unenforceability of any particular provision of this
Agreement shall not affect the provisions of this Agreement, and this Agreement
shall be construed in all aspects as if the invalid or unenforceable provision
were omitted.
19. Enumeration and Headings
The enumeration and headings of this Agreement are merely for
convenience of reference; they shall not be construed to constitute
representations or warranties, or to have any substantive significance.
20. Entire Agreement
This writing constitutes the entire understanding between the
parties with respect to the matters it deals with, and such understanding may be
modified, altered, or amended only by the written agreement of the parties
hereto. The Company and the Executive expressly agree that this agreement
supersedes and replaces any prior agreement that may already be in effect with
respect to the matters covered herein, and, except as provided in paragraph 1.4
of this agreement, any such prior agreement will become null and void upon the
execution and delivery of this agreement.
21. Governing Law
This agreement shall be construed in accordance with and governed
by California law.
<PAGE>
22. Counterparts
This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Agreement by signing any such counterpart.
PLM INTERNATIONAL, INC.
By: /s/Robert N. Tidball
President
Date:
EXECUTIVE
/s/ Richard K Brock
Date: 1/30/99
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
This EXECUTIVE DEFERRED COMPENSATION AGREEMENT (this "Agreement") is made
this 18th day of January, 1999, by and between PLM International, Inc., a
Delaware corporation, its affiliates and subsidiaries (collectively, the
"Company"), and Susan C. Santo ("Executive").
RECITALS:
A. Executive is a management employee of the Company, serving the Company
in such capacity as the Company's board of directors or officers may designate
from time to time.
B. The Company and Executive have, prior to the date of this Agreement,
agreed, and shall in the future, apart from this Agreement, agree, from time to
time, on the amount(s) that the Company is to pay Executive as Executive's basic
current cash compensation (that is, Executive's salary, hereinafter referred to
as Executive's "Salary"), as well as on other amounts of compensation for
personal services (including, but not by way of limitation, bonuses, consultancy
fees, and commissions).
C. In consideration of the personal services required to be performed by
Executive in order for Executive or Executive's Beneficiary to receive any of
the benefits provided under this Agreement, and in recognition of the importance
that certain of the Company's management employees, now and in the future, may
place upon its actions to secure adequate retirement and death benefits for its
management employees -- but specifically disavowing any intention of setting any
policy or precedent, binding or otherwise, with respect to the retirement or
death benefits, if any, that the Company may at any time, now or in the future,
decide to provide to any of its employees, management or otherwise, other than
Executive -- the Company desires to make provision for pension and death
benefits for Executive, as specified in the provisions of this Agreement.
WHEREFORE THE PARTIES AGREE AS FOLLOWS:
1. Deferred Compensation Benefits
1.1 Commencing on the first Business Day of any Compensation
Period, and continuing on the first Business Day of each of the following months
until the end of such Compensation Period, the Company shall pay Executive a
Monthly Executive Deferred Compensation Benefit under this Agreement. The
Monthly Executive Deferred Compensation Benefit shall be computed according to
the following formula:
Monthly Executive Deferred Compensation Benefit = VF (AF (S/M))
where "S" equals the sum of all of the amounts paid to Executive as Salary
during Executive's last 60 months of employment with the Company (or, if
Executive was an employee of the Company for less than 60 months, during all of
Executive's months of employment with the Company), "M" is the number of months
in the period of consecutive months used in the computation of S, "AF" is
Executive's Accrual Factor, and "VF" is Executive's Vesting Factor.
1.2 For the purposes of paragraph 1.1, a month of employment shall
be any calendar month during which Executive has been a full-time employee of
the Company at all times. In computing the number of months during which
Executive was employed by the Company preceding a Compensation Period, periods
of normal paid vacation or of paid leave, of whatever type, shall be treated as
periods during which Executive was a full-time employee of the Company. Any
unpaid leave of absence taken by Executive with the Company's consent shall be
treated (a) as beginning on the first day of the calendar month in which it
actually began and ending on the last day of the calendar month in which it
actually ended, and (b) as a period during which Executive was not a full-time
employee of the Company.
1.3 Except as otherwise provided in this Agreement, Executive's
"Accrual Factor" shall be determined under the following table:
Years of Service Accrual Factor
-------------------------------------------------------
1 5%
2 10%
3 15%
4 20%
5 25%
6 30%
7 35%
8 40%
9 45%
10 50%
11 55%
12 60%
13 65%
14 70%
15 or more 75%
For the purpose of determining Executive's Accrual Factor under the above table,
a "Year of Service" shall be any calendar year during which Executive is or was
actually employed by the Company as a full-time employee for at least 40 weeks.
For the purpose of the preceding sentence, any calendar week shall be treated as
a week of full-time employment if Executive was a full-time employee of the
Company on any day during such week.
1.4 Except as provided in paragraph l.5, or Section 6 or 12,
Executive's "Vesting Factor" shall be determined under the following table:
Years of Service
Occurring After
Calendar Year 1985 Vesting Factor
1 0%
2 0%
3 0%
4 0%
5 or more 100%
For the purpose of determining Executive's Vesting Factor under the above table,
a Year of Service shall be computed in the same manner as a Year of Service for
the purpose of computing Executive's Accrual Factor under paragraph l.3, except
that calendar years preceding the calendar year in which this Agreement was
entered into by and between the Company and Executive (or, if earlier, the
calendar year of any prior Agreement which this Agreement supersedes) shall not
be counted.
1.5 Notwithstanding anything that might otherwise be to the
contrary in paragraph 1.4, if Executive terminates employment with the Company
on account of a Layoff, or on account of his or her death or a period of illness
ending in death, Executive's Vesting Factor shall be determined under the
following table:
Years of Service
Occurring After
Calendar Year 1985 Vesting Factor
1 20%
2 40%
3 60%
4 80%
5 or more 100%
For the purposes of this paragraph l.5, a "Layoff" shall mean a
termination of employment initiated by the Company as part of a general
reduction in the size of the Company's work force or management in response to a
reduction in the volume, or a structural change in the nature of, the Company's
business, or its manner of conducting business, where the circumstances of the
termination indicate that the Executive's job performance has not generally been
unsatisfactory and that, but for the reduction in the volume, or change in the
structural nature of the Company's business, or its manner of conducting
business, the Company would probably not have terminated Executive's employment.
l.6 The "Compensation Period" shall be the period of consecutive
calendar months commencing with the first Business Day of the second calendar
month following the later of (a) the calendar month in which Executive attains
age 60, or (b) the calendar month in which Executive terminates employment with
the Company, and ending with the last day of the earlier of (x) the calendar
month following the calendar month in which Executive again becomes an employee
of the Company, or (y) the last day of the 59th month following the first month
of the Compensation Period.
l.7 For the purposes of this Agreement, a "Business Day" shall be
any day other than Saturday, Sunday, or a Holiday. A "Holiday" shall be any day
on which the Company's Executive offices are not open for general business, and
on which the Company's nonmanagement employees are not required to report for
work other than by special arrangement.
l.8 For the purpose of this Agreement, the terms "employee" and
"employment" shall have their common law meanings, and shall not include,
respectively, an independent contractor or the work relationship between the
Company and an independent contractor.
l.9 (a) For the purpose of computing Executive's Accrual Factor,
any period of time during which Executive was employed by any of the following
employers shall be treated as a period of time during which Executive was
employed by the Company, so that if Executive has been employed by any such
employer he shall be in the same position with respect to the computation of his
Accrual Factor as he would be had his service (Years of Service and any portion
of any Year of Service) for such employer been service with the Company:
PLM Companies, Inc.
Transcisco Industries, Inc.
PLM International, Inc.
l.9 (b) For the purposes of computing Executive's Vesting Factor,
any period of time during which Executive was employed by any of the following
employers shall be treated as a period of time during which Executive was
employed by the Company, so that if Executive has been employed by any such
employer he shall be in the same position with respect to the computation of his
Vesting Factor as he would be had his service (Years of Service and any portion
of any Year of Service) for such employer been service with the Company:
PLM Companies, Inc.
Transcisco Industries, Inc.
PLM International, Inc.
<PAGE>
2. Reduction for Prior Payments
If Monthly Executive Deferred Compensation Benefit payments become
payable under Section l of this Agreement, and with respect to any previous
Compensation Period(s) Executive has previously received Monthly Executive
Deferred Compensation Benefit payments, then, notwithstanding anything in
Section l of this Agreement that might otherwise be to the contrary, the rules
provided in Section l of this Agreement, which generally provide that a
Compensation Period ends no later than the last day of the 59th calendar month
after the first calendar month of the Compensation Period, shall be applied by
substituting "the Nth calendar month" for "the 59th calendar month" each place
"the 59th calendar month" appears, where "N" is the number obtained by
subtracting from 59 the total number of Monthly Executive Deferred Compensation
Benefit payments previously received by Executive with respect to any previous
Compensation Period(s).
3. Death Benefits
3.1 If Executive dies during a Compensation Period the Company
shall continue to make Monthly Executive Deferred Compensation Benefit payments,
until the end of the Compensation Period, exactly as if Executive had not died,
except that, commencing with the first Monthly Executive Compensation Benefit
payment payable after the l0th Business Day following the Company's actual
receipt of notice of Executive's death, all remaining Monthly Executive Deferred
Compensation Benefit payments shall be paid to Executive's Beneficiary.
3.2 If Executive dies other than during a Compensation Period,
then Executive shall be assumed for all purposes of this Agreement to have (a)
terminated employment with the Company (i) if the Executive is not employed by
the Company at the time of his death, on the day Executive actually last
terminated employment with the Company or (ii) if the Executive is employed by
the Company at the time of his death, on the first day of the calendar year
following the calendar year in which Executive actually died (in which case
Executive shall be assumed to have provided his or her services to the Company
until such date on a full-time basis), (b) survived until the attainment of age
60, and (c) died on the second day of the second calendar month following his or
her attainment of age 60. The provisions of paragraph 3.l shall then be applied
using the assumed facts set forth in the previous sentence.
3.3 Executive's Beneficiary shall be:
(a) such person as Executive may have instructed in an unrevoked
writing delivered to the Company's General Counsel, and accepted by the
Company's General Counsel for the purpose of designating a Beneficiary under
this Agreement; otherwise,
(b) such person as Executive may have designated in Executive's
last will and testament duly admitted to probate; otherwise,
(c) Executive's estate.
3.4 Notwithstanding anything contained in this Agreement that
might otherwise be to the contrary, no amount constituting property of a
surviving or former spouse of Executive due to the application of any community
or other marital property law shall be paid to any person other than such
surviving or former spouse, or such surviving or former spouse's estate, without
the written consent of such surviving or former spouse, or of the executor or
administrator of such surviving or former spouse's estate. Prior to making any
payment under this Agreement the Company may require the potential recipient of
such payment to supply the Company with such proof as the Company shall
reasonably require to ensure that the payment in question complies with the
provisions of this paragraph 3.4.
4. Source of Payments
The Deferred Compensation Benefits payable under this Agreement
are non-transferable and subject to substantial risks of forfeiture within the
meaning of section 83 of the Internal Revenue Code of 1986. The Company may, but
is not required to, establish a trust or other fund separate and beyond the
reach of the creditors of the Company to secure the Deferred Compensation
Benefits payable under this Agreement. In the event that such a trust or other
fund is established by the Company, the Company may, but is not required to
contribute any specified amounts or assets to such trust or other fund. It is
the intent that the Deferred Compensation Benefits be paid from any amounts
available in such trust or other fund, however, in any event the Company remains
obligated as provided under this Agreement to the extent that Deferred
Compensation Benefits are not paid by such trust or other fund.
5. Acceleration of Payments
Notwithstanding anything contained in Sections l or 3 of this
Agreement that might otherwise be to the contrary, the Company's Board of
Directors shall have the power in its discretion to pay the total amount of any
Monthly Executive Compensation Benefit payments that may become payable under
this Agreement either in a single sum or in a lesser number of installments than
if payments were made monthly as would otherwise be provided in Sections l or 3.
If the Company's Board of Directors decides to pay Executive's Monthly Executive
Compensation Benefit as a single sum, or in such lesser number of installments,
then the dollar amount(s)) owed by the Company to Executive or Executive's
Beneficiary under this Agreement shall be less than the sum of the nominal
dollar amounts that would otherwise be owed under Sections l or 3 in order to
take into account the time value of money. The dollar amounts that shall be owed
by the Company under this Agreement in the case of a single sum payment or
payment in a lesser number of installments than would otherwise be made in
Sections l or 3 shall be the amount determined by:
(a) discounting to present value, using generally accepted
accounting principles, the stream of payments that would otherwise be payable
under Sections l or 3 assuming that Executive's Compensation Period lasted for
as long as necessary to exhaust the Company's payment obligation under Sections
l or 3 (taking into account any reduction of such obligation provided for by
Section 2 of this Agreement), and assuming an interest rate reasonably
approximate to the interest rate that the Company would pay a commercial lender
in connection with a loan to the Company, made at the time the payment is made,
of an amount approximately equal to the amount(s)) to be paid to Executive under
Sections l or 3 of this Agreement, and for a term reasonably approximate to the
period over which such payments would be made; and,
(b) increasing, if appropriate, to future value, using the same
principles used in subparagraph (a) above, the payment(s) actually to be made,
taking into account the time(s) when such payment(s)) is/are actually to be
made.
6. Form of Payments
6.1 Except as provided in Section 6.2 below, all payments to
Executive under this Agreement shall be made in cash.
6.2 If the Company makes one or more payment(s) to Executive under
Section 5, such payment(s) may, at Executive's option be wholly or partially in
the form of one or more immediate or deferred annuity contracts on the sole life
of the Executive or jointly on the lives of Executive and Executive's
Beneficiary, with any term certain or refund feature elected by Executive.
7. Forfeitures of Otherwise Vested Amounts
Notwithstanding anything contained in this Agreement that might
otherwise be to the contrary, Executive's Vesting Factor for the purposes of
paragraphs l.4 and l.5 of this Agreement shall, if it is not already zero
percent, be reduced to zero percent and shall, forever thereafter, remain, zero
percent if:
(a) Executive resigns from the Company's employment against the
wishes of the Company;
(b) Executive materially breaches any trade secrets or other
confidentiality agreement between the Company and Executive;
(c) Executive's employment terminates within the 48-consecutive
month period consisting of the 24 months immediately preceding and the 24 months
immediately following the Company's discovery of any misconduct in connection
with Executive's employment, including fraud or embezzlement;
(d) After counseling with respect to the importance of such an
examination to the financial interests of the Company, and after a reasonable
period for deliberation, Executive refuses to undergo any medical or other
examination in connection with the acquisition or potential acquisition of any
life insurance policy, annuity, or other investment whose price may reflect a
mortality risk factor, that the Company may desire to acquire.
8. Service During Retirement or Disability
8.1 Executive may continue to be involved in the Company's affairs
during a Compensation Period provided, however, that Executive's involvement in
such affairs shall in no way be required as a condition of receiving any payment
under this Agreement, and provided that during any Compensation Period the
Company shall have no right under this Agreement to require Executive to perform
any services for, or otherwise be involved in the affairs of, the Company.
8.2 If Executive provides services to the Company during a
Compensation Period, the compensation, if any, that Executive shall receive from
the Company for such services shall be the subject of an agreement or
understanding between Executive and the Company other than this Agreement. In
particular, this Agreement shall not preclude or otherwise affect Executive's
receipt of compensation from the Company for services performed during a
Compensation Period, nor shall any payments due under this Agreement be reduced
or offset by any such compensation.
9. Taxes
9.1 If and to the extent that the Company determines in good faith
that any amount otherwise payable to Executive or Executive's Beneficiary under
this Agreement is subject to Federal Insurance Contributions Act ("FICA") taxes,
California State Disability Insurance ("SDI") taxes, or any other payroll taxes
(including, but not by way of limitation, federal or state income tax
withholding on wages, deferred compensation, disability benefits, death
benefits, or similar amounts, or any federal or state withholding tax on
employee wages, deferred compensation, disability benefits, death benefits, or
similar amounts that may be enacted after the date of this Agreement
(collectively "Employee Payroll Taxes"), then the Company (or the trust, as the
case may be) shall deduct from such amount the sum, if any, of:
(a) Executive's portion as an employee or former employee of the
Company, or Executive's Beneficiary portion or a beneficiary of a former
employee of the Company -- but not the Company's portion -- of FICA taxes under
Sections 3102 of the Internal Revenue Code of l986, as amended (the "Code"), or
under any related or successor provision(s) of federal law;
(b) SDI taxes under Sections 2901, 984, and 986 of the California
Unemployment Insurance Code, or under any related or successor provisions of
state law; and
(c) the amount of any other applicable Employee Payroll Taxes due
with respect to such gross amounts, to the extent that, as a matter of federal
or state tax law, they are imposed on Executive or Executive's Beneficiary.
9.2 The amount of any reduction(s) under Section 9.l above shall
for the purposes of this Agreement and for federal and state tax purposes --
including federal and state payroll tax deposit and reporting purposes -- be
treated by the Company, Executive, or/and Executive's Beneficiary, as employee
FICA, SDI, or/and other Employee Payroll Taxes withheld from Executive's wages
or benefits as an employee or former employee of the Company, or from other
appropriate amounts.
9.3 Except as otherwise provided in this Section 9 of this
Agreement, the gross amounts otherwise payable to Executive or Executive's
Beneficiary under this Agreement shall not be reduced on account of any other
taxes that may be imposed on the Company on account of or in connection with the
Company's payments to Executive or Executive's Beneficiary under this Agreement.
10. Automatic Acceleration of Vesting and Optional Acceleration of
Payment in the Case of A Change in Control; Section 280G Cutback
10.1 Notwithstanding anything contained in this Agreement that
might otherwise appear to the contrary other than Section 10.4 automatically, as
a consequence of the operation of this Agreement, and without any requirement
for any approval on the part of the Company's board of directors or any officer
or group of officers of the Company, in the event of any Change in Control of
the Company, if Executive is an employee of the Company at the time of such
Change in Control of the Company, then effective with the occurrence of such
Change in Control of the Company:
(a) Executive shall be treated for all purposes of this Agreement
as if Executive 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
(b) Executive's Vesting Factor under Section l.4 of this Agreement
shall, except as it may be affected by Section 7 of this Agreement prior to the
date of the Change in Control of the Company, become and forever thereafter
remain 1.
10.2 Moreover, notwithstanding anything contained in this
Agreement that might otherwise appear to the contrary, in the case of any Change
in Control of the Company, the Company's board of directors may at any time
direct that, in addition to the provision of Section 10.1 above, this Agreement
shall be applied (a) if Executive had already terminated employment with the
Company prior to the Change in Control of the Company, as if Executive 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 occurred, or (b) if
Executive was an employee of the Company on the date on which the Change in
Control of the Company occurred, as if Executive had terminated employment with
the Company, and had done so on the day following the day on which Executive
shall be deemed to have attained age 60 under Section 10.1.
10.3 Except than as provided in Section 11 below, for purposes of
this Agreement, "Change in Control of the Company" shall mean a change in the
ownership of the Company's stock that would be required to be reported in
response to Item 6(e) of Schedule l4A of Regulation l4A promulgated under the
Securities Exchange Act of l934 as in effect on the date of this Agreement or,
if such Item 6(e) is no longer in effect, a change in ownership that would be
required to be reported under any regulation issued by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of l934 that serves
similar purposes as such Item 6(e); provided however, that in any event a Change
in Control of the Company shall be deemed to have occurred if and when (a) any
"person" (as such term is used in Sections l3 (d) and l4 ((d)(2)) of the
Securities Exchange Act of l934) is or becomes a beneficial owner, directly or
indirectly, of securities of the Company representing more than 15% of the
combined voting power of the Company's then outstanding securities, or (b) there
is a change in the Board of Directors which change is the result of a proxy
solicitation(s) or other action(s) to influence voting at a shareholders'
meeting of the Company (other than by voting one's own stock) by a Person or
group of Persons who has Beneficial Ownership of 5% or more of the combined
voting power of the securities of the Employer and which causes the Continuing
Directors to cease to be a majority of the Board of Directors of the Employer.
For purposes of the preceding sentence, "Continuing Directors" shall mean a
member of the Board of Directors who (i) is a member of the Board of Directors
on the date hereof, or (ii) who subsequently becomes a member of the Board of
Directors and who either (x) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are Directors
on the date hereof, or (y) is appointed or recommended for election with the
affirmative vote of a majority of the Directors then in office who are described
in subsections (i) and (ii)(x) above, as applicable.
10.4 (a) Notwithstanding anything that might otherwise be to the
contrary in this Agreement, if as a result of the application of Sections 10.1
or/and 10.2 of this Agreement Executive's Vesting Factor or/and the timing of
any payments to Executive under this Agreement is/are accelerated upon the
occurrence of a Change in Control of the Company, then the Executive shall
engage outside counsel ("280G Counsel") to render an opinion as to whether the
payment of any amount or portion of any amount that would be paid by the Company
to Executive under this Agreement but for this Section 10.4 would, more probably
than not, be deductible for federal income tax purposes notwithstanding Section
280G of the Code, or any successor provision. If 280G Counsel is unable to
render its opinion that the entire amount consisting of the aggregate of all
payments due Executive under this Agreement (disregarding this Section 10.4
would, more probably than not, be deductible, then 280G Counsel shall determine
the maximum present value of payments (using the present value rules applicable
under Section 280G) that, in its opinion, Executive may receive under this
Agreement without any portion of any payment of such present value being, more
probably than not, nondeductible for federal income tax purposes as the result
of the application of Section 280G of the Code (Executive's "280G Limit"). 280G
Counsel shall then determine the number of months by which the period that would
otherwise be Executive's Compensation Period under this Agreement would be
required to be shortened (without increasing the amount determined under Section
l.l as Executive's Monthly Deferred Compensation Benefit) so that the present
value of the amounts that Executive will receive under this Agreement would not
exceed Executive's 280G Limit. The number of months that would otherwise be
included in Executive's Compensation Period shall then be shortened,
notwithstanding any other provision of this Agreement that would otherwise
appear to be to the contrary, to the number of months so determined by 280G
Counsel.
(b) The selection of 280G Counsel shall be within the Executive's
discretion, but the competence of 280G Counsel in such tax matters must be
demonstrable.
(c) If 280G Counsel determines that, in connection with an event
that constitutes a Change in Control under this Agreement, other amounts may be
payable to Executive by the Company or any affiliate of the Company (including,
but not by way of limitation, a member of an affiliated group as determined
under Section 280G(d)(5) of the Code) under any other agreements or arrangements
that would, in 280G Counsel's opinion, more likely than not be required under
Section 280G of the Code to be aggregated with payments under this Agreement in
determining whether amounts that would otherwise be paid under this Agreement
would exceed the 280G Limit, or in determining whether such other amounts
themselves might be nondeductible to the payor under Section 280G, then 280G
Counsel shall assume, in making its determinations under Section 10.4(a), that
the maximum amount payable under such other agreements or arrangement shall in
fact be paid to Executive, notwithstanding that such other agreements or
arrangements may contain their own ordering rule with respect to cutbacks
similar in principle to the cutback provided for in this Section 10.4 except to
the extent that any such agreement or arrangement, or the ordering rule provided
for in it, has been entered into as of a date following the date as of which
this Agreement is entered into and specifically refers to this Agreement.
11. Automatic Acceleration of Both Vesting and Payment in the Case of
Liquidation or Dissolution
The Company's liquidation or/and dissolution shall also constitute
a Change in Control of the Company for the purposes of Section 10 of this
Agreement, except that, in the case of the Company's liquidation or dissolution,
Section 10.2 shall be applied without the requirement for action by the
Company's board of directors, so that (a) if Executive actually terminated
employment with the Company prior to the Change in Control of the Company,
Executive shall automatically be treated as having 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 occurred or (b) if Executive was an employee of
the Company on the date on which the Change in Control of the Company occurred,
then Executive shall automatically be treated as having terminated employment
with the Company on the day after Executive is treated as having attained age 60
under Section 10.1.
12. Limited Effect
12.1 Other than as specifically provided in this Agreement, this
Agreement shall have no effect on the nature, duration, or terms of Executive's
employment relationship with the Company, or on the amount of, or the Company's
liability to pay, any Salary or other compensation to Executive.
12.2 No amount(s) that may become payable to Executive under this
Agreement shall be deemed to be salary or other compensation of Executive for
the purpose of computing benefits to which Executive may be or become entitled,
or contributions that Executive may be or become entitled to make, under any
compensation, profit sharing, or salary deferral plan -- whether qualified under
the Code or not -- of the Company, nor is anything in this Agreement intended to
affect any right or obligation that Executive may have, now or in the future,
under any such plans or arrangements.
13. Procedure for Review of Denial of Benefits
13.1 The Company's board of directors shall be the administrator
(the "Administrator") of this Agreement. The Administrator shall determine the
rights under this Agreement of Executive, of any Beneficiary of Executive, of
any surviving or former spouse of executive, or of any legatees or heirs of
Executives (the potential "Claimants"). If a Claimant disputes the
Administrator's determination of benefits under this Agreement, he, she, or it
may file a written claim for benefits with the Administrator, provided that, in
the case of any Claimant to whom the Administrator has directed a written
notification of the administrator's determination, the claim is filed within 60
days of the date the Claimant receives such notification.
13.2 If a claim for benefits under this Agreement is wholly or
partially denied, the Administrator shall provide the Claimant with a notice of
denial, written in a manner calculated to be understood by the Claimant and
setting forth:
(a) the specific reason(s) for the denial;
(b) specific references to the provisions of this Agreement on
which the denial is based;
(c) a description of any additional material or information needed
by the Claimant in order to perfect the claim, with an explanation of why the
material or information is necessary; and
(d) appropriate information as to steps to be taken if the
Claimant wishes to appeal the Administrator's denial of the claim. The notice of
denial shall be given within a reasonable time but not later than 90 days after
the claim is filed, unless special circumstances require an extension of time
for processing the claim. If an extension of time is required, written notice
shall be furnished to the Claimant within 90 days of the date the claim was
filed stating the special circumstances requiring the extension, and the date by
which a decision on the claim can be expected, which date shall be no more than
l80 days from the date the claim was filed. If no notice of denial is provided,
the Claimant may appeal the claim as though the claim had been denied.
13.3 The Claimant and/or his or her representative may appeal the
denied claim to the Administrator, and, in connection with the appeal, may:
(a) request a review on written application to the Administrator;
(b) review pertinent documents; and
(c) submit issues and comments in writing to the Administrator.
The appeal must be made within 60 days of the date the Claimant received
notification of the denied claim.
13.4 On receipt of a request for review, the Administrator shall,
within a reasonable time, but not later than 60 days after receiving the
request, provide written notification of its decision to the Claimant stating
the specific reasons and referencing the specific provisions of this Agreement
on which its decision is based, unless special circumstances require an
extension of time for processing the review. If an extension is required, the
Administrator shall notify the claimant of the special circumstances and of a
date no later than l20 days after the date the review was requested on which the
Administrator will notify the Claimant of its decision.
13.5 Nothing in this Section 13 of this Agreement shall be
interpreted as limiting in any way the Company's right to interplead any
Claimants in any court of competent jurisdiction.
14. Agreement Binding; Successors and Assigns
14.1 This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto, their permitted assigns, if any, and, but only by
operation of law, their respective next of kin, legatees, administrators,
executors, legal representatives, and successors (including remote, as well as
immediate, successors to such parties, but only by operations of law). In
applying any provision of this Agreement with respect to any successor or assign
of the Company, such provision shall be applied by treating such successor or
assign as the "Company" referred to in this Agreement, unless such treatment
would be clearly inappropriate. The principle of the preceding sentence shall
not, except as otherwise specifically provided in other provisions of this
Agreement, apply to any successor or assign of Executive or Executive's
Beneficiary.
14.2 Except by operation of law, as provided in Section l4.1
above, this Agreement may not be assigned by Executive. This Agreement may be
assigned by the Company, but only with Executive's prior written consent.
14.3 Neither Executive, Executive's estate, or Executive's
surviving spouse, if any, shall have any right to commute, encumber, or dispose
of the right to receive payments under this Agreement, and such payments and the
right to receive them, shall, to the maximum extent permissible under the law,
be nonassignable, nontransferable, and not subject to garnishment or other
attachment.
14.4 The Company shall have the right under this Agreement to
offset against its obligation to make any payment to any person under this
Agreement (including Executive, Executive's Beneficiary, or any other person)
any claims that the Company may have against such person in connection with any
transaction or occurrence between the Company and such person, or affecting the
Company and in which such person was involved, whether or not such transaction
or occurrence is otherwise connected with this Agreement in any other way.
14.5 Any defense, whether arising under this Agreement or in
connection with any other transaction or occurrence, that the Company may have
against any obligation, including the obligation to make any payment, that the
Company might otherwise have under this Agreement, shall, to the extent good
against Executive, also be good against Executive's Beneficiary or any other
Claimant.
15. Arbitration
15.1 Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration to take place in
San Francisco, California, in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, and judgment upon the award by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitrator(s) shall award attorneys' fees to the prevailing party, if any, in
the arbitration, and any court entering judgment upon such award shall award
attorneys' fees and costs to the party causing such judgment to be entered.
16. Notices
All notices, consents, requests, demands, or other communications
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given when delivered, or when mailed by United States certified mail,
postage prepaid, as follows:
If to the Company: PLM International, Inc.
One Market Plaza
Steuart Street Tower, Suite 800
San Francisco, California 94l05
If to Executive:
or to such other address as the Company or Executive shall have last designated
by notice to the other. Any item shall be effective upon delivery, and any item
mailed by United States certified mail, postage prepaid, shall be deemed to have
been delivered on the third business day following the date deposited in the
mail.
17. Waiver
No failure on the part of either the Company or Executive to
exercise, no delay in exercising, or course of dealing with respect to, any
right, power, or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power, or privilege preclude
any other or further exercise of such right, power, or privilege, or of any
other right, power, or privilege. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law.
18. Invalid Provision
Invalidity or unenforceability of any particular provision of this
Agreement shall not affect the provisions of this Agreement, and this Agreement
shall be construed in all aspects as if the invalid or unenforceable provision
were omitted.
19. Enumeration and Headings
The enumeration and headings of this Agreement are merely for
convenience of reference; they shall not be construed to constitute
representations or warranties, or to have any substantive significance.
20. Entire Agreement
This writing constitutes the entire understanding between the
parties with respect to the matters it deals with, and such understanding may be
modified, altered, or amended only by the written agreement of the parties
hereto. The Company and the Executive expressly agree that this agreement
supersedes and replaces any prior agreement that may already be in effect with
respect to the matters covered herein, and, except as provided in paragraph 1.4
of this agreement, any such prior agreement will become null and void upon the
execution and delivery of this agreement.
21. Governing Law
This agreement shall be construed in accordance with and governed
by California law.
<PAGE>
22. Counterparts
This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Agreement by signing any such counterpart.
PLM INTERNATIONAL, INC.
By: /s/ Robert N. Tidball
President and Chief Executive Officer
Date:
EXECUTIVE
/s/ Susan C. Santo
Date: 1/29/99
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/A 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
March 1, 2000 and shall apply only to the annual reports and any amendments
thereto filed with respect to the fiscal year ended December 31, 1998.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
19th day of January, 2000.
/s/Robert N. Tidball /s/Douglas P. Goodrich
- --------------------------- -----------------------------------
Robert N. Tidball Douglas P. Goodrich
/s/Randall L-W. Caudill /s/Warren G. Lichtenstein
- -------------------------- -----------------------------------
Randall L-W. Caudill Warren G. Lichtenstein
/s/Robert L. Witt /s/Harold R. Somerset
- -------------------------- -----------------------------------
Robert L. Witt Harold R. Somerset
/s/Howard M. Lorber
- --------------------------
Howard M. Lorber
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 19,135
<SECURITIES> 0
<RECEIVABLES> 178,807
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 87,564
<DEPRECIATION> (23,347)
<TOTAL-ASSETS> 292,069
<CURRENT-LIABILITIES> 0
<BONDS> 201,689
0
0
<COMMON> 59,987
<OTHER-SE> (9,790)
<TOTAL-LIABILITY-AND-EQUITY> 292,069
<SALES> 0
<TOTAL-REVENUES> 57,078
<CGS> 0
<TOTAL-COSTS> 36,490
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,608
<INCOME-PRETAX> 7,899
<INCOME-TAX> 3,042
<INCOME-CONTINUING> 4,857
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,857
<EPS-BASIC> 0.58
<EPS-DILUTED> 0.57
</TABLE>
