<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
COMMISSION FILE NO. 0-23928
PDS FINANCIAL CORPORATION
(exact name of Registrant as specified in its charter)
MINNESOTA 41-1605970
- ------------------------------- -------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6171 MCLEOD DRIVE, LAS VEGAS, NEVADA 89120
------------------------------------------
(Address of Principal Executive Offices)
(702) 736-0700
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date:
CLASS OUTSTANDING AS OF MAY 3, 2000
----- -----------------------------
Common Stock, $.01 par value 3,708,952 shares
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<PAGE>
PDS FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION
------
<TABLE>
<CAPTION>
Item 1. Financial Statements: PAGE
----
<S> <C> <C>
Consolidated Balance Sheets - March 31, 2000 (unaudited) and December 31, 1999......................3
Consolidated Statements of Income - Three Months Ended
March 31, 2000 and 1999 (unaudited).................................................................4
Consolidated Statements of Cash Flows - Three Months Ended
March 31, 2000 and 1999 (unaudited).................................................................5
Notes to Consolidated Financial Statements (unaudited)............................................6-7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............8-10
Item 3. Quantitative and Qualitative Disclosures About Market Risk.........................................10
PART II OTHER INFORMATION
-------
Item 6. Exhibits and Reports on Form 8-K...................................................................11
</TABLE>
2
<PAGE>
PDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------------ ------------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $2,460,000 $2,860,000
Restricted cash 2,864,000 2,831,000
Notes, accounts, and leases receivable, net 56,200,000 48,616,000
Equipment under operating leases, net 29,261,000 41,287,000
Equipment held for sale or lease 6,920,000 6,616,000
Refundable income tax deposits 403,000 403,000
Deferred income taxes 877,000 976,000
Other assets, net 4,540,000 4,444,000
------------------ ------------------
$103,525,000 $108,033,000
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable:
Equipment vendors $1,786,000 $6,363,000
Other 1,009,000 717,000
Customer deposits 7,657,000 7,141,000
Notes payable 67,556,000 66,549,000
Subordinated debt 13,363,000 13,323,000
Accrued expenses and other 1,871,000 3,836,000
------------------ ------------------
93,242,000 97,929,000
------------------ ------------------
Stockholders' equity:
Common stock, $.01 par value, 20,000,000 shares authorized,
3,708,952 and 3,706,971 shares issued and outstanding
at March 31, 2000 and December 31, 1999, respectively 38,000 37,000
Additional paid-in capital 11,549,000 11,546,000
Accumulated deficit (1,304,000) (1,479,000)
------------------ ------------------
10,283,000 10,104,000
------------------ ------------------
$103,525,000 $108,033,000
================== ==================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
PDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31,
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------------------ ------------------
<S> <C> <C>
REVENUES:
Equipment sales $2,604,000 $1,286,000
Revenue from sales-type leases 9,762,000 1,015,000
Operating lease rentals 3,913,000 2,545,000
Finance income 1,419,000 936,000
Fee income 317,000 1,074,000
------------------ ------------------
18,015,000 6,856,000
------------------ ------------------
COSTS AND EXPENSES:
Equipment sales 2,731,000 1,246,000
Sales-type leases 8,634,000 724,000
Depreciation on leased equipment 2,810,000 1,801,000
Interest 2,186,000 1,779,000
Selling, general and administrative 1,380,000 1,090,000
------------------ ------------------
17,741,000 6,640,000
------------------ ------------------
INCOME BEFORE INCOME TAXES 274,000 216,000
PROVISION FOR INCOME TAXES 99,000 82,000
------------------ ------------------
NET INCOME $175,000 $134,000
================== ==================
NET INCOME PER SHARE:
Basic $0.05 $0.04
Diluted $0.05 $0.04
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 3,709,000 3,648,000
Diluted 3,709,000 3,657,000
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
PDS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities $(2,777,000) $1,143,000
---------------- ---------------
INVESTING ACTIVITIES
Purchase of equipment for leasing (13,918,000)
Proceeds from sale of equipment under operating leases 1,366,000
Other (100,000)
---------------- ---------------
Net cash provided by (used in) investing activities 1,366,000 (14,018,000)
---------------- ---------------
FINANCING ACTIVITIES
Proceeds from borrowings 7,774,000 18,582,000
Repayment of borrowings (6,767,000) (6,869,000)
Proceeds from issuance of common stock 4,000
---------------- ---------------
Net cash provided by financing activities 1,011,000 11,713,000
---------------- ---------------
CHANGE IN CASH AND CASH EQUIVALENTS
Net decrease in cash and cash equivalents (400,000) (1,162,000)
Cash and cash equivalents at beginning of period 2,860,000 1,269,000
---------------- ---------------
Cash and cash equivalents at end of period $2,460,000 $107,000
================ ===============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
PDS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and disclosures required by generally
accepted accounting principles for annual financial statements. In the
opinion of management, all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair presentation
have been included. The results of operations for any interim period
are not necessarily indicative of results for the full year. For
further information, please refer to the consolidated financial
statements of PDS Financial Corporation (the "Company"), and the
related notes, included within the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999 (the "1999 Form
10-K"), previously filed with the Securities and Exchange Commission.
The balance sheet at December 31, 1999 was derived from the
audited financial statements included in the Company's 1999
Form 10-K.
2. NOTES PAYABLE
Recourse and non-recourse obligations consist of the
following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------- ----------------
<S> <C> <C>
Lines of credit with a maximum aggregate balance of $46,000,000 bearing
interest at rates from 7.3% to 10.3%, secured by related investment in
leases and equipment held for sale or lease $24,399,000 $26,351,000
Equipment notes bearing interest at rates from 8.0% to 15%, secured by
related investment in leases:
Recourse 17,877,000 18,472,000
Non-recourse 26,559,000 23,244,000
---------------- ----------------
68,835,000 68,067,000
Unamortized loan discounts (1,279,000) (1,518,000)
---------------- ----------------
$67,556,000 $66,549,000
================ ================
</TABLE>
6
<PAGE>
PDS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. EARNINGS PER SHARE
Common stock options and warrants were not included in the
computation of diluted earnings per share for the quarter ended March
31, 2000, because the exercise price was greater than the average
market price of the common stock. The weighted average exercise price
for the options and warrants was $5.40 and $11.27 respectively, at
March 31, 2000. Diluted weighted average shares outstanding at March
31, 1999 includes the dilutive effect of the assumed exercise of
options for 9,000 shares of common stock.
4. SEGMENT INFORMATION
The Company conducts business with external customers through
the operations of its PDS Slot Source ("Slot Source") and PDS Finance
("Finance") segments. In addition, employees of the Company provide
certain legal, accounting and compliance, personnel and other
administrative support services on behalf of Slot Source and Finance.
Specifically identifiable costs are allocated to Slot Source and
Finance. The other costs associated with these activities (SG & A) are
not separately allocated to each business unit.
The accounting policies of each business unit are the same as
those described in Note 1 of Notes to Consolidated Financial Statements
included in the Company's 1999 Form 10-K. The Company evaluates the
performance of its operating segments based on earnings before income
taxes. On January 1, 2000, the Company began allocating interest and
other specifically identifiable expenses to the Slot Source and Finance
segments based on their identifiable assets. Amounts for 1999 have been
reclassified to conform with this presentation. Financial performance
measurements for Slot Source, Finance, and SG & A are set forth below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SLOT
------------------ ----
MARCH 31, 2000 SOURCE FINANCE SG & A TOTAL
-------------- ------ ------- ------ -----
<S> <C> <C> <C> <C>
Revenues $2,455,000 $15,560,000 $18,015,000
Income (loss) before
income taxes (194,000) 1,509,000 ($1,041,000) 274,000
Identifiable assets 8,441,000 90,059,000 5,025,000 103,525,000
THREE MONTHS ENDED
------------------
MARCH 31, 1999
--------------
Revenues $2,301,000 $4,555,000 $6,856,000
Income (loss) before
income taxes (37,000) 1,111,000 ($858,000) 216,000
Identifiable assets 8,624,000 64,723,000 4,742,000 78,238,000
</TABLE>
5. SUBSEQENT EVENT
On April 26, 2000, the Company announced that it had withdrawn its
offer for, and terminated the non-binding letter of intent to acquire the
capital stock of Four Queens, Inc. from Elsinore Corporations.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company is engaged in the business of financing and leasing gaming
equipment and supplying reconditioned gaming devices to casino operators. The
gaming equipment financed by the Company consists primarily of slot machines,
video gaming machines and other gaming devices. In addition, the Company
finances furniture, fixtures and other gaming related equipment, including
gaming tables and chairs, restaurant and hotel furniture, vehicles, security and
surveillance equipment, computers and other office equipment. In 1996, the
Company introduced SlotLease, a specialized operating lease program for slot
machines and other electronic gaming devices. The Company believes it is
currently the only independent leasing company licensed in the states of Nevada,
New Jersey, Colorado, Illinois, Iowa, Indiana, Mississippi, Minnesota and New
Mexico to provide this financing alternative. In 1997, the Company established
PDS Slot Source, a reconditioned gaming device sales and distribution division,
to complement its leasing and financing activities and to generate equipment
sales to casino operators.
The Company's strategy is to increase its portfolio of assets under
lease and reconditioned gaming device sales, and thereby increase revenues and
cash flows. In addition to its leasing activities, the Company also originates
note transactions, which it generally sells to institutional investors for fee
income. In some of its transactions, the Company holds the leases or notes for a
period of time after origination, or retains a partial ownership interest in the
leases or notes. The Company believes its ability to recondition and distribute
used gaming devices enhances the gaming devices' values at the end of an
operating lease and facilitates additional financing transactions. In the last
three years, the Company has significantly increased the amount of leases and
collateralized equipment loans ("financing transactions") held in its own
portfolio.
The Company's quarterly operating results, including net income, have
historically fluctuated due to the timing of completion of large financing
transactions, as well as the timing of recognition of the resulting fee income
upon subsequent sale. These transactions can be in the negotiation and
documentation stage for several months, and recognition of the resulting fee
income by the Company may fluctuate greatly from quarter to quarter. Thus, the
results of any quarter are not necessarily indicative of the results which may
be expected for any other period.
The Company's operating results are subject to quarterly fluctuations
resulting from a variety of factors, including variations in the mix of
financing transactions between operating leases, direct finance leases, and
notes receivable, changes in the gaming industry which effect the demand for
reconditioned gaming devices sold by the Company's Slot Source division,
economic conditions, in which a detrimental change can cause customers to delay
new investments and increase the Company's bad debt experience, and reduce the
level of fee income obtained through the sale of leases or financing
transactions.
RESULTS OF OPERATIONS
Gross originations of financing transactions were $8.1 million and $8.6
million for the three months ended March 31, 2000 and 1999, respectively.
Revenues for the first quarter of 2000 totaled $18.0 million, a 160% increase
compared to $6.9 million in the year earlier quarter. The increase in revenues
is primarily attributable to sales-type lease revenue associated with the early
termination of certain equipment under operating lease and refinancing of such
equipment as sales-type leases.
Revenues from equipment sales and sales-type leases totaled $12.4
million in the first quarter of 2000, a 439% increase from $2.3 million for the
comparable quarter in 1999. Such revenues include sales of both equipment which
had been under operating leases, and used gaming devices which the Company
reconditioned in its Slot Source division. Revenue from sales and sale-type
leases of Slot Source reconditioned gaming devices totaled $2.5 million in the
current quarter compared to $2.3 million in previous year. Gross margin from
such sales decreased from 14% in the quarter ended March 31, 1999 to 7% in the
current year. The decrease primarily reflects a more profitable sales mix in the
quarter ended March 31, 1999.
8
<PAGE>
Equipment under operating lease, net was $29.3 million at March 31,
2000 compared to $41.3 million at December 31, 1999. The decline in equipment
under operating lease, net, reflects equipment sold to original lessees at lease
termination and the early termination of certain operating leases and sales of
the underlying equipment to the original lessee under sales-type leases. The
average operating lease portfolio was approximately $40 million for the three
months ended March 31, 2000 compared to $28 million for the three months ended
March 31, 1999. Consequently, rental revenue from operating leases and related
depreciation expense were $3.9 million and $2.8 million, respectively, for the
three months ended March 31, 2000, compared to $2.5 million and $1.8 million,
respectively, for the three months ended March 31, 1999.
Finance income totaled $1.4 million for the three months ended March
31, 2000, an increase compared to $936,000 in for the comparable quarter in
1999. The increase of $483,000 primarily reflects the larger portfolio of notes
receivable, leveraged leases and direct finance leases held by the Company
during the quarter compared the first quarter 1999.
Fee income totaled $.3 million and $1.1 million, for the three months
ended March 31, 2000 and 1999, respectively. The decrease of $794,000 is
primarily attributable to the Company's strategy of holding more transactions
for its own account, and consequently fewer transactions were sold for fee
income.
Interest expense totaled $2.2 million in the current quarter, compared
to $1.8 million for the comparable quarter in 1999. This increase is due to
higher levels of outstanding borrowings which were utilized to fund the
increased investment in the Company's leasing portfolio.
Selling, general and administrative expenses totaled $1.4 million and
$1.1 million for the three months ended March 31, 2000 and 1999, respectively.
The increase of $300,000 is primarily attributable to an increase in legal fees
associated with licensing and bad debt recovery efforts. Additionally, the
Company incurred approximately $50,000 in due diligence costs related to the
possible acquisition of Four Queens. The Company had entered into a non-binding
letter of intent to acquire the capital stock of The Four Queens, Inc. in March
2000. However, the parties were not able to come to terms in negotiating a
definitive agreement. On April 24, 2000, PDS announced the termination of the
letter of intent.
The effective income tax rate was 36% and 38% for the three months
ended March 31, 2000 and 1999, respectively. In both periods, the effective rate
was higher than the federal statutory tax rate of 34%, due primarily to state
income taxes. The decrease in the effective income tax rate reflects a larger
portion of the Company's business occurring in the state of Nevada.
LIQUIDITY AND CAPITAL RESOURCES
The Company's unrestricted cash and cash equivalents totaled $2.5
million at March 31, 2000, compared to $2.9 million at December 31, 1999. During
the first quarter of 2000, cash used in operating activities totaled $2.8
million, compared with cash provided by operating activities of $1.1 million in
the first quarter of 1999. The higher level of cash used in the first quarter of
2000 primarily reflects significant payments of accounts payable and other
accrued liabilities partially offset by proceeds from the sales of notes and
direct financing leases. Cash provided by investing activities totaled $1.4
million in the first quarter 2000, compared to cash used by investing activities
of $14.0 million in the comparable quarter 1999. In the first quarter of 1999,
investment in equipment for leasing totaled $13.9 million. No such investment
was made in the first quarter 2000. The $1.0 million provided by financing
activities in the first quarter of 2000 was generated from borrowings used
principally to fund financing transactions, offset by principal payments on
debt.
The Company's lease portfolio declined $.9 million from year-end 1999
to the quarter ended March 31, 2000. This decline is primarily due to
depreciation exceeding leases originated for the Company's portfolio in the
current period.
9
<PAGE>
At March 31, 2000, total borrowings were $67.6 million, compared to
$66.6 million at December 31, 1999. At March 31, 2000, the Company's revolving
credit and working capital facilities aggregated approximately $71 million.
Advances under these agreements aggregated approximately $42 million at March
31, 2000. The Company's current financial resources, including the estimated
cash flows from operations and the revolving credit facilities are expected to
be sufficient to fund the Company's anticipated working capital needs. In
addition to the borrowing activities summarized above, the Company has developed
a network of financial institutions to which it sells transactions on a regular
basis. The Company is, from time to time, dependent upon the need to liquidate
or externally finance transactions originated and held in its investment
portfolio. In the future the Company may seek to raise capital to fund its
growth strategy through debt or financings, however we cannot predict when such
an event will occur, nor if such capital would be available at favorable terms,
if at all.
Inflation has not had a significant impact on the Company's operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE FACTORS ABOUT MARKET RISK
INTEREST RATE RISK
The Company generally provides financing (both leases and loans) to
customers at fixed rates of interest (either with stated interest rates or
implicit rates). The Company either sells the leases or loans to investors, or
holds such transactions in its portfolio. For larger transactions retained in
the portfolio, the Company obtains fixed rate commitments from financing sources
such as banks and financial institutions prior to providing such financing to
customers, which substantially reduces the interest rate risk during the
origination process. For smaller transactions, the Company may originate the
transaction using internally available funds, and shortly after origination use
the security as collateral for borrowing on one of several lines of credit. Such
lines of credit have floating rates of interest until a specific amount is
borrowed under the facility, at which time the amount borrowed will be assigned
a fixed rate of interest payable over its remaining term. Therefore changes in
interest rates have not historically had a direct impact on the Company's
earnings. The Company does not currently manage this interest rate risk with
derivative financial instruments and does not believe this risk is material.
The Company's existing portfolio of fixed rate receivables and borrowings
will fluctuate in value based on changes in market rates of interest. However
the Company does not believe that the changes in the fair values are material.
CURRENCY RISK
All of the Company's transactions are conducted and accounts are
denominated in United States Dollars and as such the Company does not currently
have exposure to foreign currency risk.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein which are not historical facts are
forward-looking statements with respect to events, the occurrence of which
involves risks and uncertainties, including without limitation strict regulation
by gaming authorities, competition the Company faces or may face in the future,
uncertainty of market acceptance of the SlotLease program and PDS Slot Source,
the ability of the Company to continue to obtain adequate financing, the ability
of the Company to recover its investment in gaming equipment leased under
operating leases as well as its investment in used gaming machines purchased for
refurbishment and resale to customers, the risk of default with respect to the
Company's financing transactions, the Company's dependence on key employees,
potential fluctuations in the Company's quarterly results, general economic and
business conditions, and other risk factors detailed from time to time in the
Company's reports filed with the Securities and Exchange Commission.
10
<PAGE>
PART II- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) The following exhibits are included with this quarterly report on
Form 10-Q as required by Item 601 of Regulation S-K.
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
10.26 Deferred Compensation Plan, adopted
February 4, 2000 but first effective as of
April 1, 2000
27 Financial Data Schedule for the period
ended March 31, 2000
b) Reports on Form 8-K. During the quarter ended March 31, 2000 the
Company filed reports on Form 8-K dated January 11, 2000 regarding
the engagement of new independent accountants, Piercy, Bowler,
Taylor & Kern, Certified Public Accountants & Business Advisors, A
Public Corporation, to audit the Company's financial statements as
of, and for the year ending, December 31, 1999, and filed a report
on form 8-K, dated March 11, 2000, regarding the signing of a
non-binding letter of intent with Elsinore Corporation to acquire
the capital stock of Four Queens, Inc.
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PDS FINANCIAL CORPORATION
Dated: May 12, 2000 By:/s/ Peter D. Cleary
------------------------
President and Chief Operating Officer
(a duly authorized officer)
11
<PAGE>
EXHIBIT 10.26
PDS FINANCIAL CORPORATION
DEFERRED COMPENSATION PLAN
Adopted February 4, 2000
----------
but first Effective April 1, 2000
-------
<PAGE>
PDS FINANCIAL CORPORATION
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
ARTICLE I. PURPOSE AND INTENT ........................................... 1
Section 1.1 Purpose
Section 1.2 Intent
ARTICLE II. DEFINITIONS .................................................. 1
Section 2.1 Definitions
Section 2.2 Rules of Interpretation
ARTICLE III. ELIGIBILITY AND PARTICIPATION ................................ 5
Section 3.1 Eligibility
Section 3.2 Participation
Section 3.3 Suspension of Eligibility
Section 3.4 Specific Exclusion
ARTICLE IV. CREDITS TO ACCOUNTS .......................................... 6
Section 4.1 Deferred Compensation
Section 4.2 Deferral Elections of Eligible Compensation
Section 4.3 Effectiveness of Deferral Election
Section 4.4 Deferral Elections of Bonus Awards
Section 4.5 Discretionary Amounts
Section 4.6 Participant Accounts
ARTICLE V. VALUATION OF ACCOUNTS ........................................ 8
Section 5.1 Establishment of Accounts
Section 5.2 Adjustments of Accounts
Section 5.3 Hypothetical Accounts
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C> <C>
ARTICLE VI. VESTING OF ACCOUNT ........................................... 9
Section 6.1 Vested Benefit
Section 6.2 Forfeiture on Account of Termination for Cause
Section 6.3 Limitation on Benefits
ARTICLE VII. DISTRIBUTIONS ............................................... 10
Section 7.1 Distribution of Benefits
Section 7.2 Form of Distribution
Section 7.3 Payment to Beneficiary
Section 7.4 Change in Control Distributions
Section 7.5 Hardship Withdrawals
Section 7.6 Designation of Beneficiaries
Section 7.7 Death Prior to Full Distribution
Section 7.8 Facility of Payment
Section 7.9 Form of Distribution
Section 7.10 Distributions As a Result of Tax Determination
Section 7.11 No Parachute Payment
ARTICLE VIII. FUNDING OF PLAN ............................................. 17
Section 8.1 Unfunded and Unsecured Plan
Section 8.2 Corporate Obligation
ARTICLE IX. AMENDMENT AND TERMINATION ................................... 18
Section 9.1 Amendment and Termination
Section 9.2 No Oral Amendments
Section 9.3 Plan Binding on Successors
ARTICLE X. DETERMINATIONS -- RULES AND REGULATIONS .................... 20
Section 10.1 Determinations
Section 10.2 Rules and Regulations
Section 10.3 Method and Executing Instruments
Section 10.4 Claims Procedure
Section 10.5 Limitations and Exhaustion
ARTICLE XI. PLAN ADMINISTRATION ......................................... 24
Section 11.1 Officers
Section 11.2 Chief Executive Officer
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
Section 11.3 Board of Directors
Section 11.4 Committee
Section 11.5 Delegation
Section 11.6 Conflict of Interest
Section 11.7 Administrator
Section 11.8 Service of Process
Section 11.9 Expenses
Section 11.10 Spendthrift Provision
Section 11.11 Tax Withholding
Section 11.12 Certifications
Section 11.13 Errors in Computations
Section 11.14 No Employment Rights
Section 11.15 Participants Should Consult Advisors
ARTICLE XII. CONSTRUCTION ................................................ 27
Section 12.1 Applicable Laws
Section 12.2 Effect on Other Plans
Section 12.3 Disqualification
Section 12.4 Rules of Document Construction
Section 12.5 Choice of Law
Section 12.6 No Employment Contract
</TABLE>
-iii-
<PAGE>
PDS FINANCIAL CORPORATION
DEFERRED COMPENSATION PLAN
ARTICLE I
PURPOSE AND INTENT
Section 1.1 PURPOSE. PDS Financial Corporation, a Minnesota corporation
doing business in Nevada, hereby establishes the PDS Financial Corporation
Deferred Compensation Plan, effective as of April 1, 2000, in order to
provide financial incentives to certain key employees of PDS Financial
Corporation to encourage their commitment to employment with PDS Financial
Corporation and the success of PDS Financial Corporation. The purpose of the
PDS Financial Corporation Deferred Compensation Plan is to assist PDS
Financial Corporation in retaining certain key employees, encouraging their
commitment to the success of PDS Financial Corporation, and attracting key
employees by offering them and opportuniy to defer compensation and
participate in the success of PDS Financial Corporation.
Section 1.2 INTENT. The PDS Financial Corporation Deferred Compensation
Plan is intended to be a plan which is unfunded and is maintained by PDS
Financial Corporation primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
and shall be interpreted and construed in a manner consistent with that
intent.
ARTICLE II
DEFINITIONS
Section 2.1 DEFINITIONS. As used in this document with initial capital
letters, the following terms shall have the meanings indicated unless a
different meaning is plainly required by the context:
(a) ACCOUNT - the separate bookkeeping account representing the
separate unfunded and unsecured general obligation of PDS
established with respect to each person who is a Participant in
this Plan in accordance with Article III and to which is credited
the amounts specified in Article IV and Article V and from which
are subtracted forfeitures and payments made pursuant to Article
VI and Article VII.
(b) AFFILIATE - a business entity which is affiliated in ownership
with PDS or an Employer and is recognized as an Affiliate by the
Committee for purpose of this Plan.
(c) ANNUAL VALUATION DATE - the last day of each calendar year.
<PAGE>
(d) BENEFICIARY - a person or persons designated by a Participant (or
automatically by operation of the Plan Statement) to receive all
or a part of any benefits payable on behalf of the Participant
under the terms of the Plan after the Participant's death. The
person or persons so designated shall not be considered a
Beneficiary until the death of the Participant.
(e) BOARD OF DIRECTORS - the Board of Directors of PDS or its
successor. "Board of Directors" shall also mean and refer to any
properly authorized committee of the Board of Directors.
(f) BONUS AWARDS - shall mean the bonus awards, if any, made by an
Employer for a fiscal year based upon the performance of the
Employer or the employees eligible for such awards and the
performance and profits of the Employer.
(g) CHANGE IN CONTROL - shall mean the occurrence of any of the
following:
(i) The acquisition by any person, entity or "group," within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934 (excluding for this
purpose, any employee benefit plan of PDS or any of its
"subsidiaries" which acquires beneficial ownership of
voting securities of PDS) of beneficial ownership (within
the meaning of Rule 13d-3 under the Securities Exchange Act
of 1934) of 50% or more of either the then outstanding
shares of stock or the combined voting power of then
outstanding voting securities of PDS, in one transaction or
a series of transactions; or
(ii) Individuals who, as of July 31, 1999, constituted the Board
of Directors (the "Continuing Directors") cease for any
reason to constitute at least a majority of the Board of
Directors, provide that any person becoming a director of
PDS subsequent to July 31, 1999, whose election, or
nomination for election by the stockholders of PDS, was
approved by a vote of at least a majority of the Continuing
Directors (other than an election or nomination of an
individual whose initial assumption of office is in
connection with an actual or threatened solicitation with
respect to the election or removal of directors of PDS, as
such terms are used in Rule 14a-11 of Regulation 14a under
the Securities Exchange Act to of 1934) shall be, for
purposes of the Plan, considered as though such person were
a Continuing Directors; or
(iii) (i) the occurrence of a merger, consolidation or
reorganization of PDS in which, as a consequence of the
transaction, either the Continuing
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Directors do not constitute a majority of the directors of
the continuing of surviving corporation or any person,
entity or "group," within the meaning of Section 13(d)(3)
or Section 14(d)(2) of the Securities Exchange Act to of
1934, controls 50% or more of the combined voting power of
the continuing or surviving corporation; (ii) the
occurrence of any sale, lease or other transfer, in one
transaction or a series of transaction, of all or
substantially all of the assets of PDS (at least 80%); or
(iii) the adoption by PDS of a plan for its liquidation or
dissolution.
(iv) For purposes of this definition of "Change of Control," the
term "subsidiary" shall mean any corporation, the majority
of the outstanding voting stock of which is owned, directly
or indirectly, by PDS.
(h) CODE - the Internal Revenue Code of 1986, any amendments thereto,
and any regulations or rulings issued thereunder.
(i) COMMITTEE - the Compensation Committee of the Board of Directors
described under Section 11.4 of the Plan.
(j) EFFECTIVE DATE - April 1, 2000.
(k) ELIGIBLE COMPENSATION - the compensation subject to federal
income tax withholding as described in section 1.415-2(d)(11)(ii)
of the Treasury Regulations; except, however, that Eligible
Compensation shall not include the Bonus Awards as defined in
subsection (f) of this Section 2.1 of the Plan, but shall include
any elective deferral as defined in section 402(g)(3) of the Code
and any amount which is contributed or deferred by an Employer at
the election of the eligible employee and which is not includable
in the gross income of the eligible employee by reason of section
125 of the Code or section 457 of the Code.
(l) EMPLOYERS - PDS and any business entity affiliated with PDS that
employs persons who are designated for participation in this Plan.
(m) ERISA - the Employee Retirement Income Security Act of 1974, any
amendments thereto, and any regulations or ruling s issued
thereunder.
(n) PARTICIPANT - an employee of an Employer who is determined to be
eligible to participate in this Plan, who becomes a Participant
in this Plan in accordance with the provisions under Article III,
whose Account has been credited with amounts in accordance with
the terms of the Plan, and who has
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not received the entire benefit payable to the Participant under
the terms of the Plan. An employee who has become a Participant
shall be considered to continue as a Participant in this Plan
until the date of the Participant's death or, if earlier, the
date when the Participant is no longer employed by an Employer or
an Affiliate and no amount is credited to the Participant's
Account under this Plan.
(o) PDS - PDS FINANCIAL CORPORATION, a Minnesota corporation, or any
successor thereto.
(p) PLAN - the nonqualified, supplemental retirement program
maintained by PDS for the benefit of Participants eligible to
participate therin, as set forth in the Plan Statement. (As used
herein, "Plan" does not refer to the document pursuant to which
this Plan is maintained. That document is referred to herein as
the "Plan Statement.") The Plan shall be referred to as the "PDS
Financial Corporation Deferred Compensation Plan."
(q) PLAN STATEMENT - this document entitled "PDS Financial
Corporation Deferred Compensation Plan" as adopted by the Board
of Directors of PDS effective as of April 1, 2000, as the same
may be amended from time to time thereafter.
(r) PLAN YEAR - the twelve (12) consecutive month period that begins
on January 1 and ends on December 31; the first Plan Year shall
commence January 1, 2000, and end December 31, 2000.
(s) TERMINATION OF EMPLOYMENT - a complete severance of an employee's
employment relationship with the Employers and all Affiliates, if
any, for any reason other than the employee's death. A transfer
from employment with an Employer to employment with an Affiliate
of an Employer shall not constitute a Termination of Employment.
If an Employer who is an Affiliate ceases to be an Affiliate
because of a sale of substantially all the stock or assets of the
Employer, then Participants who are employed by that Employer and
who cease to be employed by PDS or an employer on account of the
sale of substantially all the stock or assets of the Employer
shall be deemed to have thereby had a Termination of Employment
for the purpose of commencing distributions from this Plan.
(t) VALUATION DATE - the Annual Valuation Date and March 31, June 30
and September 30, and any other date designated by the Committee.
(u) VESTED - the terms shall only apply for purposes of determining
the benefit payable to or with respect to any Participant under
the terms of the Plan, and
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shall be interpreted to mean a Participant's interest in
the benefit described under the Plan which may be payable
to or on behalf of the Participant in accordance with and
subject to the terms of the Plan.
Section 2.2 RULES OF INTERPRETATION. Any reference in the Plan to a
statute or regulation shall be considered also to mean and refer to any
subsequent amendment or replacement of that statute or regulation.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
Section 3.1 ELIGIBILITY. Subject to the approval of the Board of
Directors, each employee of PDS who is an officer of PDS as of the Effective
Date shall be eligible to participate in the Plan effective as of the
Effective Date. In addition, the Board of Directors in its sole discretion
may by express to participate in this Plan for a particular Plan Year. If the
Board of Directors selects a management level or highly compensated employee
of an Employer as eligible to become a Participant in the Plan, the Board of
Directors shall inform the employee in writing of such selection and the date
on which the employee shall become a Participant in the Plan. The Board of
Directors shall not select any employee for participation unless the Board of
Directors determines that such employee is a member of a "select group of
management or highly compensated employees" (as that phrase is used in
sections 201(2), 301(a)(3), and 401(a)(1) of ERISA).
Section 3.2 PARTICIPATION. Each officer of PDS determined to be
eligible to participate in the Plan as of the Effective Date pursuant to
Section 3.1 shall be a Participant in the Plan as of the Effective Date. Any
management level or highly compensated employee who is or becomes eligible to
participate in the Plan under Section 3.1 and who is not a Participant in the
Plan as of the Effective Date, shall become a Participant in the Plan as of
the first day of a Plan Year determined by the Board of Directors or on such
other date as determined by the Board of Directors. The name of each
individual eligible to participate in the Plan and the date which such
individual becomes a Participant in this Plan shall be recorded on Exhibit A,
which exhibit is attached hereto and incorporated herein by reference and
which shall be revised by the Board of Directors from time to time to reflect
the operation of the Plan. Once an individual becomes a Participant in the
Plan, the individual shall remain a Participant until his or her death or,
if earlier, the date when the Participant is no longer employed by an
Employer or an Affiliate and the benefits which may be payable to the
Participant under the Plan have been distributed to or on behalf of the
individual.
Section 3.3 SUSPENSION OF ELIGIBILITY. Notwithstanding any provision
in the Plan Statement to the contrary, the Board of Directors may in its
discretion determine that a Participant is no longer eligible to be credited
with any amounts under Article IV of the Plan and in such event, the deferral
elections of such Participant will immediately terminate and no additional
amounts shall be credited to his or her Account under Article IV until such
time as the Participant is again
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determined to be eligible to have amounts credited to his or her Account
under Article IV by the Board of Directors. However, the individual's Account
shall continue to be adjusted in accordance with the provisions of Article V
of this Plan.
Section 3.4 SPECIFIC EXCLUSION. Notwithstanding anything apparently
to the contrary in the Plan Statement or in any written communication,
summary, resolution or document or oral communication, no individual shall be
a Participant in this Plan, develop benefits under this Plan or be entitled
to receive benefits under this Plan (either for himself or herself or his or
her survivors) unless such individual is a member of a "select group of
management or highly compensated employees" (as that phrase is used in
sections 201(2), 301(a)(3), and 401)(a)(1) of ERISA). If a court of competent
jurisdiction, any representative of the U.S. Department of Labor or any other
governmental, regulatory or similar body makes any direct or indirect, formal
or informal, determination than an individual is not a member of a "select
group of management or highly compensated employees" (as that phrase is used
in sections 201(2), 301(a)(3), and 401(a)(1) of ERISA), such individual shall
not be (and shall not have ever been) a Participant in this Plan at anytime.
If any person not so defined has been erroneously treated as a Participant in
this Plan, upon discovery of such error such person's erroneous participation
shall immediately terminate AB INITIO and the individual's Account shall be
forfeited immediately and such person shall be obligated to reimburse PDS for
all amounts erroneously paid to him or her.
ARTICLE IV
CREDITS TO ACCOUNTS
Section 4.1 DEFERRED COMPENSATION. A Participant may elect to defer
receipt of part or all of either of the following items of compensation:
(a) Eligible Compensation;
(b) Bonus Awards.
A Participant may defer an item of compensation only to the extent that the
Participant is entitled to receive such item of compensation. In the event a
deferral election is made by a Participant which is accepted and approved by
the Committee, the Participant will have no further right to such deferred
compensation other than as provided under the Plan. Such deferred
compensation shall be the record of the value of such deferred compensation
credited to a Participant's Account and shall be used solely for accounting
purposes.
Section 4.2 DEFERRAL ELECTIONS OF ELIGIBLE COMPENSATION.
(a) DEFERRAL ELECTION OF ELIGIBLE COMPENSATION. Each year a
Participant may elect to defer all or any portion of the
Eligible Compensation that would other wise become payable
to the Participant during the following calendar
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year. An election by a Participant to defer such
Eligible Compensation must be made by the Participant in
the form and manner prescribed by the Committee and must
be filed with and accepted and approved by the Committee
before January 1 of the year for which the Eligible
Compensation is payable, specifying the portion of the
Eligible Compensation to be earned in the succeeding
calendar year that is to be deferred.
(b) DEFERRAL ELECTION FOR FIRST YEAR. In the first year in
which a Participant becomes eligible to participate in
the Plan, the newly eligible Participant may make an
election to defer Eligible Compensation for services to
be performed subsequent to the election within thirty
(30) days after the date the employee becomes eligible.
This subsection (b) shall only apply, however, with
respect to an eligible Participant who becomes a
Participant in the Plan on a date other than the first
day of a Plan Year.
(c) DEFERRAL ELECTION FOR FIRST YEAR OF THE PLAN. In the
year in which the Plan is first implemented, an eligible
Participant may make an election to defer Eligible
Compensation for services to be performed subsequent to
the deferral election within thirty(30) days after the date
the Plan is effective for eligible employees.
Section 4.3 EFFECTIVENESS OF DEFERRAL ELECTION. An election by a
Participant to defer a portion of his or her Eligible Compensation pursuant
to Section 4.2 must be made by the Participant before the beginning of the
period of service for which the Eligible Compensation is payable and the
amounts so deferred shall be paid only as provided in this Plan. Such an
election shall be irrevocable. When a Participant's Account is credited with
a deferred amount, that amount shall be measured in U.S. dollars equal to
such deferred amount and shall be credited to an Account established for the
Participant as of the close of business on the date that such amount would
have otherwise been paid to the Participant. The Participant may change the
amount of, or suspend, future deferrals with respect to Eligible Compensation
otherwise payable to him or her for calendar years beginning after the date
of change suspension as he or she may specify by written notice to the
Committee. If a Participant elects to change the amount of, or suspend,
deferrals, the Participant may make a new deferral election provided that any
new election to defer payment of Eligible Compensation must be made before
the beginning of the period of service for which the Eligible Compensation is
payable. The election to defer shall be irrevocable as to the deferred
Eligible Compensation for the period for which the election is made and shall
not be effective unless accepted and approved by the Committee. The period of
deferral and form of distribution of Eligible Compensation shall be
determined in accordance with the elections made under Section 4.2 and this
Section 4.3 and in accordance with the provisions of this Plan.
Section 4.4 DEFERRAL ELECTIONS OF BONUS AWARDS. In addition to
amounts deferred by a Participant pursuant to Sections 4.2 and 4.3, each year
a Participant may elect to defer all or a
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portion of any Bonus Award that would otherwise be payable to the
Participant. An election by a Participant to defer all or a portion of a
Bonus Award that would otherwise be payable to the Participant must be made
before the beginning of the period of service for which the Bonus Award is
payable and at least twelve (12) months prior to the date on which such Bonus
Award would otherwise become payable. Such a deferral election shall be
irrevocable and must be made in the form and manner prescribed by the
Committee and must be filed with and accepted and approved by the Committee.
The period of deferral and form of distribution of a Bonus Award shall be
determined in accordance with the elections made under this Section 4.4 and in
accordance with the provisions of this Plan.
Section 4.5 DISCRETIONARY AMOUNTS. In addition to any amounts
which may be credited to the Account of a Participant pursuant to Sections
4.2, 4.3 and 4.4 for any year, the Committee may from time to time, in its
sole discretion, credit the Participant's Account with additional amounts.
Such additional amounts shall be authorized for such purpose or purposes as
the Committee may deem appropriate. Any such additional amounts shall be
credited to the Account of a Participant as of the Valuation Date coincident
with or next following the Committee's determination. Once the Committee
determines that additional amounts shall be credited to a Participant's
Account pursuant to this Section 4.5, the Committee shall provide written
notice to the Participant that additional amounts shall be credited to the
Participant's Account and shall specify the date on which such amounts shall
be credited to the Account.
Section 4.6 PARTICIPANT ACCOUNTS. An Account shall be established
and maintained for each Participant. The Account shall be credited with
amounts which shall be measured in U.S. dollars. The Account shall be
credited as described in Article V for deferred amounts attributable to
(a) Eligible Compensation as may be credited to the Account under Section 4.2
and Section 4.3, (b) Bonus Awards as may be credited to the Account under
Section 4.4, and (c) discretionary amounts as may be credited to the Account
under Section 4.5.
ARTICLE V
VALUATION OF ACCOUNTS
Section 5.1 ESTABLISHMENT OF ACCOUNTS. There shall be established
for each Participant an unfunded, bookkeeping Account which shall be adjusted
each Valuation Date.
Section 5.2 ADJUSTMENTS OF ACCOUNTS. As of each Valuation Date
(the "current Valuation Date"), the value of the amount credited to each
Account determined as of the immediately preceding Valuation Date (the
"previous Account value") shall be increased (or decreased) by the following
adjustments made in the following sequence:
(a) INTERMEDIATE DISTRIBUTION SUBTRACTION. The previous
Account value shall be reduced by the total amount
distributed to or with respect to the Participant, or
forfeited pursuant to Section 6.2, from such Account as
of a
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date subsequent to the immediately preceding Valuation
Date put prior to the current Valuation Date.
(b) DEFERRAL AMOUNTS. The previous Account value (as
adjusted above) shall be increased by the amounts
deferred, if any, pursuant to Article IV of the Plan.
(c) INVESTMENT ADJUSTMENT. The previous Account value (as
adjusted above) shall be increased to reflect an
additional amount, which shall be credited to each
Participant's Account as of the close of the last day
of each calendar quarter, equal to the average cost of
long term funds for PDS for the calendar year ending
prior to the calendar year in which occurs the calendar
quarter for which this adjustment is to be made. This
average cost will be calculated as follows: the
interest expense shall be divided by the monthly
average outstanding interest bearing obligations of
PDS. However, the Committee specifically reserves the
authority and right to amend, alter or wholly revise
this rate of adjustment and to adopt another adjustment
factor or interest rate as the Committee may designate
from time to time, provided that notice is given to
Participants of such other factor or interest rate
prior to the effective date on which such factor rate
is to apply.
(d) FINAL DISTRIBUTION SUBTRACTION. The previous Account
value (as adjusted above) shall be reduced by the total
amount distributed to or with respect to the
Participant, or forfeited pursuant to Section 6.2, from
such Account as of the current Valuation Date.
Section 5.3 HYPOTHETICAL ACCOUNTS. The Accounts established under
this Plan shall be hypothetical in nature and shall be maintained for
bookkeeping purposes only. Neither the Plan nor any of the Accounts (or
sub-accounts) shall hold or be required to hold any actual funds or assets.
ARTICLE VI
VESTING OF ACCOUNT
Section 6.1 VESTED BENEFIT. Subject to Section 6.2 and except as
elsewhere specifically provided, the amounts credited to the Account of each
Participant shall be one hundred percent (100%) Vested at all times.
Section 6.2 FORFEITURE ON ACCOUNT OF TERMINATION FOR CAUSE.
Notwithstanding Section 6.1 hereof, a Participant shall not be Vested in any
amounts in any amounts credited to his or her Account under the Plan and any
such amounts so credited to that Account shall be forfeited and the
Participant shall have no claim to any such amounts so credited to that
Account in the event of the Participant's involuntary "Termination of
Employment for cause" as determined by the Committee,
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which determination shall be made in its sole and absolute discretion. For
purposes of this Section 6.2, "Termination of Employment for cause" means
termination based upon any of the following:
(a) the willful and continued failure by the Participant to
substantially perform Participant's duties with the
Employers (other than any such failure resulting from
Participant's incapacity due to physical or mental
illness) after a written demand for substantial
performance is delivered to the Participant
specifically identifying the manner in which the
Participant has not substantially performed the
Participant's duties;
(b) the engaging by the Participant in willful misconduct
which is demonstrably injurious to any one or more of
the Employers monetarily or otherwise;
(c) the conviction of the Participant of a felony; or
(d) any act or failure to act described in any employment
agreement the Participant has entered into with any one
or more of the Employers.
Section 6.3 LIMITATION ON BENEFITS. The benefits that may be
payable to or on behalf of a Participant under the Plan shall not exceed a
cash payment equal to the value of the Vested amounts credited to the
Participant's Account under Article IV and any amounts credited to that
Account under Article V.
ARTICLE VII
DISTRIBUTIONS
Section 7.1 DISTRIBUTION OF BENEFITS. In the event a Participant
becomes eligible to receive any benefits under the Plan, such benefits
payable to or on behalf of a Participant under the Plan shall be
distributable in accordance with this Section 7.1.
(a) DISTRIBUTION OF BENEFITS. Distribution of
Participant's Vested Plan benefits shall be made (or,
in the case of installments, shall commence) as soon as
practicable after the Valuation Date immediately
following the earliest to occur of any of the following
events while in the employment of an Employer or an
Affiliate:
(i) the Participant's death;
(ii) subject to Section 6.2, the Participant's
Termination of Employment; or
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(iii) the termination of this Plan.
(b) AMOUNT OF DISTRIBUTABLE BENEFITS. The benefits that
are distributable to or on behalf of a Participant
under the Plan shall not exceed the value of the Vested
amounts credited to the Participant's Account pursuant
to Articles IV and V (reduced by the amounts of any
applicable payroll, withholding and other taxes.)
(c) APPLICATION FOR DISTRIBUTION. A Participant shall not
be required to make application to receive payment.
Distribution shall not be made to any Beneficiary,
however, until such Beneficiary shall have filed a
written application for benefits in a form acceptable
to the Committee and such application shall have been
approved by the Committee.
(d) CODE SECTION 162(m) DELAY. If the Committee determines
that delaying the time the initial payments are made or
commenced would increase the probability that such
payments would be fully deductible for federal or state
income tax purposes, PDS may unilaterally delay the
time of the making or commencement of payments for up
to twenty-four (24) months after the date such payments
would otherwise be payable.
Section 7.2 FORM OF DISTRIBUTION. Benefits payable to the
Participant or, in the event of the Participant's death, to the Participant's
designated Beneficiary under the Plan shall be paid as follows:
(a) ACCOUNTS WHICH EXCEED $100,000. If the amount credited
to the Participant's Account equals or exceeds One
Hundred Thousand Dollars ($100,000) as of the
distribution commencement date under Section 7.1,
distribution shall be made in a series of three (3)
annual installments, unless the Participant has made a
valid election to receive a single lump sum as
permitted by Section 7.2(c). The amount of each annual
installment shall be determined, as of a Valuation
Date, by dividing the amount credited to the Account as
of the Valuation Date as of which the installment is
being paid by the number of the remaining installment
payments to be made (including the payment being
determined). The Participant's Account shall continue
to be adjusted in accordance with the provisions of
Article V of the Plan.
(b) ACCOUNTS WHICH DO NOT EXCEED $100,000. If the amount
credited to the Participant's Account does not exceed
One Hundred Thousands Dollars ($100,000) as of the
distribution commencement date under Section 7.1,
distribution shall be made in the form of a single lump
sum.
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(c) LUMP SUM ELECTION. Other than as required by Section 7.2(b),
benefits payable to the Participant or, in the event of the
Participant's death, to the Participant's designated Beneficiary
under the Plan shall be distributed in the form of a single lump
sum if, and only if, the Participant makes an election to receive
distribution of the amount credited to his or her Account in a
single lump sum on a form to be furnished by, and which must be
filed with, the Committee. However, an election of this lump sum
payment option shall not be effective until the lapse of a period
of twelve (12) months following the date on which such election
form is accepted and approved by the Committee. Further, in no
event will any such election of a lump sum payment option be
effective if such election is made during the calendar year in
which a distributable event described in Section 7.1 occurs and no
election may be made once a distributable event occurs. No spouse,
former spouse, Beneficiary or other person shall have any right to
participate in the Participant's election to receive a single lump
sum.
Section 7.3 PAYMENT TO BENEFICIARY. The Beneficiary of a deceased
Participant shall receive the payment of any benefits payable on behalf of
the Participant under the Plan in such form and manner as the Participant
would have received had the Participant survived. Such distribution shall be
made (or, in the case of installments, shall commence) as soon as practicable
after the Valuation Date immediately following the date the written application
for benefits filed by the Beneficiary is accepted and approved by
the Committee.
Section 7.4 CHANGE IN CONTROL DISTRIBUTIONS.
(a) WHEN AVAILABLE. A Participant or Beneficiary may apply for and
receive a distribution of the entire payable to or with respect to
the Participant under the Plan (after reduction for the forfeiture
described in subsection (c) of this Section 7.4) if a Change in
Control has occurred. To receive such a Change in Control
distribution, the Participant or Beneficiary must file a written
distribution application with the Committee. The Committee. shall
approve the Change in Control distribution if such application has
been filed and a Change in Control has occurred.
(b) PAYMENT. Distribution of the entire benefit payable to or with
respect to the Participant under the Plan (after reduction for the
forfeiture described in subsection (c) of this Section 7.4) shall
be made as of the Valuation Date coincident with or next following
the approval of a completed application by the Committee. Such
Change in Control distribution shall be made by PDS or its
successor in a lump sum payment as soon as administratively
feasible after such Valuation Date. The amount of the Change in
Control distribution shall be equal to the value of the Vested
amounts credited to the Account as
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of such Valuation Date (after reduction for the forfeiture
described in subsection (c) below).
(c) FORFEITURE. Upon the approval of a Change in Control
distribution, there shall be irrevocably forfeited from the amount
payable to the Participant or his or her Beneficiary under this
Section 7.4 an amount equal to ten percent (10%) of the amount
payable to the Participant or his or her Beneficiary under this
Section 7.4.
Section 7.5 HARDSHIP WITHDRAWALS. In addition to the other distribution
provisions of this Article VII and notwithstanding any provision herein to
the contrary, in the event a Participant incurs an unforeseeable emergency,
the Participant may request, by providing a written request to the Committee,
a hardship withdrawal of all or any portion of his or her benefits from his
or her Account under the Plan. An unforeseeable emergency is a severe
financial hardship to the Participant resulting from a sudden and unexpected
illness or accident of the Participant or of a dependent (as defined in
section 152(a) of the Code) of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. If such a request is approved by the Committee, which decision
by the Committee shall be made in its sole discretion on a case by case
basis, a hardship withdrawal may be permitted under this Section 7.5.
Withdrawals of amounts because of an unforeseeable emergency are only
permitted to the extent reasonably needed to satisfy the emergency need. This
provision shall be interpreted and construed in a manner consistent with the
requirements of sections 1.457-2(h)(4) and 1.457-2(h)(5) of the Treasury
Regulations.
Section 7.6 DESIGNATION OF BENEFICIARIES.
(a) RIGHT TO DESIGNATE. Each Participant may designate, upon forms to
be furnished by and filed with the Committee, one or more primary
Beneficiaries or alternative Beneficiaries to receive all or a
specified portion of any benefits which may be payable with
respect to the Participant under the Plan in the event of such
Participant's death. The Participant may change or revoke any such
designation from time to time without notice to or consent from
any Beneficiary. No such designation, change or revocation shall
be effective unless executed by the Participant and received and
accepted by the Committee during the Participant's lifetime.
(b) FAILURE OF DESIGNATION. If a Participant:
(i) fails to designate a Beneficiary,
(ii) designates a Beneficiary and thereafter revokes such
designation without naming another Beneficiary, or
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(iii) designates one or more Beneficiaries and all such
Beneficiaries so designated fail to survive the Participant,
the benefits which may be payable with respect to the Participant
under the Plan, or the part thereof as to which such Participant's
designation fails, as the case may be, shall be payable to the
first class of the following classes of automatic Beneficiaries
with a member surviving the Participant and (except in the case of
surviving issue) in equal shares if there is more than one member
in such class surviving the Participant:
(i) Participant's surviving spouse,
(ii) Participant's surviving issue per stirpes and not per
capita,
(iii) Participant's surviving parents,
(iv) Participant's surviving brothers and sisters,
(v) Representatives of Participant's estate.
(c) DISCLAIMERS BY BENEFICIARIES. A Beneficiary entitled to a
distribution of all or portion of the benefits which may be
payable with respect to the Participant under the Plan may
disclaim an interest therein subject to the following
requirements. To be eligible to disclaim, a Beneficiary must be a
natural person, must not have received a distribution of all or
any portion of the benefits which may be payable with respect to
the Participant under the Plan at the time such disclaimer is
executed and delivered, and must have attained at least age
twenty-one (21) years as of the date of the Participant's death.
Any disclaimer must be in writing and must be executed personally
by the Beneficiary before a notary public. A disclaimer shall
state that the Beneficiary's entire interest in the undistributed
benefits payable with respect to the Participant under the Plan is
disclaimed or shall specify what portion thereof is disclaimed. To
by effective, duplicate original executed copies of the disclaimer
must be both executed and actually delivered to the Committee
after the date of the Participant's death but not later than one
hundred eighty (180) days after the date of the Participant's
death. A disclaimer shall be irrevocable when delivered to the
Committee. A disclaimer shall be considered to be delivered to the
Committee only when actually received and acknowledged by the
Committee. The Committee shall be the sole judge of the content,
interpretation and validity of a purported disclaimer. Upon the
filing of a valid disclaimer, the Beneficiary shall be considered
not to have survived the Participant as to the interest
disclaimed. A disclaimer by a beneficiary shall not be considered
to be a transfer of an interest in violation.
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of the provisions of Article VII and shall not be considered to be
an assignment or alienation of benefits in violation of federal
law prohibiting the assignment or alienation of benefits under
this Plan. No other form of attempted disclaimer shall recognized
by the Committee.
(d) DEFINITIONS. When used herein and, unless the Participant has
otherwise specified in the Participant's Beneficiary designation,
when used in a Beneficiary designation, "issue" means all persons
who are lineal descendants of the person whose issue are referred
to, including legally adopted descendants and their descendants
but not including illegitimate descendants and their descendants;
"child" means an issue of the first generation; "per stirpes"
means in equal shares among living children of the person whose
issue are referred to and the issue (taken collectively) of each
deceased child of such person, with such issue taking by right of
representation of such deceased child; and "survive and
"surviving" mean living after the death of the Participant.
(e) SPECIAL RULES. Unless the Participant has otherwise specified in
the Participant's Beneficiary designation, the following rules
shall apply:
(i) If there is not sufficient evidence that a Beneficiary
was living at the time of death of the Participant, it
shall be deemed that the Beneficiary was not living at
the time of the death of the Participant.
(ii) The automatic Beneficiaries specified in subsection (b)
of this Section 7.6 and the Beneficiaries designated by
the Participant shall become fixed at the time of the
Participant's death so that, if a Beneficiary survives
the Participant but dies before the receipt of all payments
due such Beneficiary hereunder, such remaining payments
shall be payable to the representative of such
Beneficiary's estate.
(iii) If the Participant designates as a Beneficiary the person
who is the Participants's spouse on the date of the
designation, either by name or by relationship, or both,
the dissolution, annulment or other legal termination of
the marriage between the Participant and such person shall
automatically revoke such designation. (The foregoing
shall not prevent the Participant from designating a
former spouse as a Beneficiary on a form executed by the
Participant and received by the Committee after the date
of the legal termination of the marriage between the
Participant and such former spouse, and during the
Participant's lifetime.)
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(iv) Any designation of a nonspouse Beneficiary by name
that is accompanied by a description of relationship
to the Participant shall be given effect without
regard to whether the relationship to the Participant
exists either then or at the Participant's death.
(v) Any designation of a Beneficiary only by statement of
relationship to the Participant shall be effective only
to designate the person or persons standing in such
relationship to the Participant at the Participant's
death.
(f) VALIDITY OF DESIGNATION. A Beneficiary designation is
permanently void if it either is executed or is filed by a
Participant who, at the time of such execution or filing, is
then a minor under the law of the state of the Participant's
legal residence. The Committee shall be the sole judge of the
content, interpretation and validity of a purported
Beneficiary designation.
(g) NO SPOUSAL RIGHTS. Prior to the death of the Participant, no
spouse or surviving spouse of a Participant and no person
designated to be a Beneficiary shall have any rights or
interest in the benefits credited under this Plan including,
but not limited to, the right to be the sole Beneficiary or to
consent to the designation of Beneficiaries (or the changing
of designated Beneficiaries) by the Participant.
Section 7.7 DEATH PRIOR TO FULL DISTRIBUTION. If, at the death of
the Participant, any payment to the Participant was due or otherwise
distributable but not actually paid, the amount of such payment shall be
included in the Account which is payable to the Beneficiary (and shall not
be paid to the Participant's estate).
Section 7.8 FACILITY OF PAYMENT. In case of the legal disability,
including minority, of a Participant or Beneficiary eligible to receive
distribution of a benefit payable under the terms of the Plan, such benefit
shall be paid PDS, if the Committee shall be advised of the existence of such
condition:
(i) to the duly appointed guardian, conservator or other
legal representative of such Participant or Beneficiary,
or
(ii) to a person or institution entrusted with the care or
maintenance of the incompetent or disabled Participant or
Beneficiary, provided such person or institution has
satisfied the Committee that the payment will be used
for the best interest and assist in the care of such
Participant or Beneficiary, and provided further, that no
prior claim for said payment has been made by duly
appointed guardian,
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conservator or other legal representative of such
Participant or Beneficiary.
Any payment made in accordance with the foregoing provisions of this section
shall constitute a complete discharge of any liability or obligation of PDS
therefor.
Section 7.9 FORM OF DISTRIBUTION. Distribution from this Plan shall
be payable only in U.S. dollars.
Section 7.10 DISTRIBUTIONS AS A RESULT OF TAX DETERMINATION.
Notwithstanding any provision in this Plan to the contrary, if, at any time,
a court or the Internal Revenue Service determines that the value of any
amounts credited to a Participant's Account under the Plan is includable in
the gross income of the Participant and subject to tax, the Committee may, in
its sole discretion, permit a lump sum distribution of an amount equal to the
value of such amounts determined to be includable in the Participant's gross
income.
Section 7.11 NO PARACHUTE PAYMENT. If the Committee in its
reasonable discretion following consultation with appropriate tax and/or
legal advisors reasonably determines that a distribution will likely
constitute an "excess parachute payment" under section 280G of the Code, the
"excess parachute payment" will not be distributed in order to avoid any
adverse tax consequences under section 280G. Furthermore, if such a
determination is made subsequent to a Change in Control, the Committee shall,
at the expense of PDS, promptly request a written opinion of an "independent
auditor" with respect to the applicability of such section 280G and the
amount of the distribution shall be limited to avoid such an excess parachute
payment unless and until the independent auditor delivers its written
unqualified opinion, a copy of which shall be provided to the Participant, to
the effect that a distribution of benefits will not constitute a parachute
payment under section 280G of the Code. As used in this Section 7.11, the
term "independent auditor" means the firm of certified public accountants
which at the time of the Change in Control had been most recently engaged by
PDS or such other comparable and nationally recognized firm of certified
public accountants as may be selected by the Committee in its reasonable
discretion.
ARTICLE VIII
FUNDING OF PLAN
Section 8.1 UNFUNDED AND UNSECURED PLAN. The Plan shall at all times
be considered entirely unfunded both for tax purposes and for purposes of
Title I of ERISA, and no provision shall at any time be made with respect to
segregating assets of an Employer for payment of any amounts under the Plan.
The obligation of an Employer to make payments under this Plan constitutes
only the unsecured (but legally enforceable) promise of the Employer to make
such payments. Any funds invested under the Plan by an Employer shall
continue for all purposes to be part of the general assets of the Employer
and available to the general creditors of the Employer in the event of a
bankruptcy (involvement in a pending proceeding under the Federal Bankruptcy
Code) or insolvency
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(inability to pay debts as they mature) of the Employer. No Participant shall
have any lien, prior claim or other security interest in any property of PDS.
PDS shall have no obligation to establish or maintain any fund, trust or
account (other than a bookkeeping account or reserve) for the purpose of
funding or paying the benefits promised under this Plan. If such a fund,
trust or account is established, the property therein shall remain the sole
and exclusive property of PDS. PDS shall be obligated to pay the cost of this
Plan out of its general assets. All references to accounts, accruals, gains,
losses, income, expenses, payments, custodial funds and the like are included
merely for the purpose of measuring the obligation of an Employer to
Participants in this Plan and shall not be construed to impose on the Employer
the obligation to create any separate fund for purposes of this Plan.
Section 8.2 CORPORATE OBLIGATION. Neither the officers of PDS nor
any member of this Committee in any way secures or guarantees the payment of
any benefit or amount which may become due and payable hereunder to or with
respect to any Participant. Each Participant and other person entitled at any
time to payments hereunder shall look solely to the assets of his or her
Employer for such payments as an unsecured, general creditor. After benefits
shall have been paid to or with respect to a Participant and such payment
purports to cover in full the benefit hereunder, such former Participant or
other person or persons, as the case may be, shall have no further right or
interest in the other assets of any Employer in connection with this Plan. No
person shall be under any liability or responsibility for failure to effect
any of the objectives or purposes of this Plan by reason of the insolvency of
PDS.
ARTICLE IX
AMENDMENT AND TERMINATION
Section 9.1 AMENDMENT AND TERMINATION.
(a) BEFORE A CHANGE IN CONTROL. Prior to the occurrence of a
Change in Control, the Board of Directors may unilaterally
amend a Plan Statement prospectively, retroactively or
both, at any time and for any reason deemed sufficient by
it without notice to any person affected by this Plan and
may likewise terminate this Plan both with regard to
persons currently receiving benefits under the Plan and
persons expecting to receive benefits in the future;
provided, however, that:
(i) the benefit, if any, payable to or with respect to
a Participant who has had a Termination of Employment
as of the effective date of such amendment or the
effective date of such termination shall not be,
without the written consent of the Participant,
diminished or delayed by such amendment or termination
(but the Board of Directors may amend the Plan
Statement to otherwise modify the payment of any
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such benefit including, but not limited to,
accelerating the value of all remaining payments into
a single lump sum payment), and
(ii) the benefit, if any, payable to or with respect to
each other Participant determined as if such
Participant had a Termination of Employment on the
effective date of such amendment or the effective date
of such termination shall not be, without the written
consent of the Participant, diminished or delayed by
such amendment or termination (but the Board of
Directors may amend the Plan Statement to otherwise
modify the payment of any such benefit including, but
not limited to, accelerating the value of all
remaining payments into a single lump sum payment).
(b) AFTER A CHANGE IN CONTROL.
(i) EXISTING PARTICIPANTS. After the occurrence of a
Change in Control, the Board of Directors may only
amend the Plan Statement or terminate this Plan as
applied to Participants who are Participants on the
date of the Change in Control if:
(A) all benefits payable to or with respect to
persons who were Participants as of the Change
in Control (including benefits earned before and
benefits earned after the Change in Control) have
been paid in full, or
(B) eighty percent(80%) of all the Participants
determined as of the date of the Change in
Control give knowing and voluntary written
consent to such amendment or termination.
(ii) NEW PARTICIPANTS. After the occurrence of a Change
in Control, as applied to Participants who are not
Participants on the date of the Change in Control,
the Board of Directors may unilaterally amend the
Plan Statement prospectively, retroactively or both,
at any time and for any reason deemed sufficient by
it without notice to any person affected by this
Plan and may likewise terminate this Plan.
Section 9.2 NO ORAL AMENDMENTS. No modification of the terms of the
Plan Statement or termination of this Plan shall be effective unless it is in
writing and signed on behalf of the Board of Directors by a person authorized
to execute such writing. No oral representation concerning the interpretation
or effect of the Plan Statement shall be effective to amend the Plan
Statement.
Section 9.3 PLAN BINDING ON SUCCESSORS. PDS will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise to all or substantially all of the business
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and/or assets of PDS), by agreement, to expressly assume and agree to perform
this Plan in the same manner and to the same extent that PDS would be
required to perform it if no such succession had taken place.
ARTICLE X
DETERMINATIONS -- RULES AND REGULATIONS
Section 10.1 DETERMINATIONS. The Board of Directors and the
Committee shall make such determinations as may be required from time to time
in the administration of this Plan. The Board of Directors and the Committee
shall have the discretionary authority and responsibility to interpret and
construe the Plan Statement and to determine all factual and legal questions
under this Plan, including but not limited to the entitlement of Participants
and Beneficiaries to any benefits which may be payable under the Plan, and
the amounts of their respective interests. Each interested party may act and
rely upon all information reported to them hereunder and need not inquire
into the accuracy thereof, nor be charged with any notice to the contrary.
Section 10.2 RULES AND REGULATIONS. Any rule not in conflict or at
variance with the provisions hereof may be adopted by the Committee.
Section 10.3 METHOD OF EXECUTING INSTRUMENTS. Information to be
supplied or written notices to be made or consents to be given by the
Committee pursuant to any provision of the Plan Statement may be signed in
the name of the Committee by any officer who has been authorized to make such
certification or to give such notices or consents.
Section 10.4 CLAIMS PROCEDURE. The claims procedure set forth in
this Section 10.4 shall be the exclusive administrative procedure for the
disposition of claims for benefits arising under this Plan.
(a) ORIGINAL CLAIM. Any person may, if he or she so
desires, file with the Committee a written claim for
benefits under this Plan. Within ninety (90) days
after the filing of such a claim, the Committee shall
notify the claimant in writing whether the claim is
upheld or denied in whole or in part or shall furnish
the claimant a written notice describing specific
special circumstances requiring a specified amount of
additional time (but not more than one hundred eighty
(180) days from the date the claim was filed) to reach
a decision on the claim. If the claim is denied in
whole or in part, the Committee shall state in writing:
(i) the specific reasons for the denial;
(ii) the specific references to the pertinent
provisions of the Plan Statement on which the
denial is based;
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(iii) a description of any additional material or
information necessary for the claimant to
perfect the claim and an explanation of why such
material or information is necessary; and
(iv) an explanation of the claims review procedure
set forth in this section.
(b) REVIEW OF DENIED CLAIM. Within sixty (60) days after
receipt of notice that the claim has been denied in
whole or in part, the claimant may file with the Board
of Directors a written request for a review and may,
in conjunction therewith, submit written issues and
comments. Within sixty (60) days after the filing of
such a request for review, the Board of Directors
shall notify the claimant in writing whether, upon
review, the claim was upheld or denied in whole or in
part or shall furnish the claimant a written notice
describing specific special circumstances requiring a
specified amount of additional time (but not more than
one hundred twenty (120) days from the date the
request for review was filed) to reach a decision on
the request for review.
(c) GENERAL RULES.
(i) No inquiry or question shall be deemed to be a
claim or a request for a review of a denied
claim unless made in accordance with the claims
procedure. The Committee may require that any
claim for benefits and any request for a review
of a denied claim be filed on forms to be
furnished by the Committee upon request.
(ii) All decisions on Original claims shall be made
by the Committee and all decisions on requests
for a review of denied claims shall be made by
the Board of Directors.
(iii) the Committee and the Board of Directors may, in
their discretion, hold one or more hearings on a
claim or a request for a review of a denied
claim.
(iv) A claimant may be represented by a lawyer or
other representative (at the claimant's own
expense), but the Committee and the Board of
Directors reserves the right to require the
claimant to furnish written authorization. A
claimant's representative shall be entitled,
upon request, to copies of all notices given to
the claimant.
(v) The decision of the Committee on a claim and a
decision of the Board of Directors on a request
for a review of a denied claim shall be served
on the claimant in writing. If a decision or
notice is not
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received by a claimant within the time
specified, the claim or request for a review of
a denied claim shall be deemed to have been
denied.
(vi) Prior to filing a claim or a request for a
review of a denied claim, the claimant or his or
her representative shall have a reasonable
opportunity to review a copy of the Plan
Statement and all other pertinent documents in
the possession of the Committee and the Board of
Directors.
(vii) The Committee and the Board of Directors may
permanently or temporarily delegate its
responsibilities under this claims procedure to
an individual or a committee of individuals.
Section 10.5 LIMITATIONS AND EXHAUSTION.
(a) LIMITATIONS. No claim shall be considered under these
administrative procedures unless it is filed with the
Committee within one (1) year after the claimant knew
(or reasonably should have known) of the principal
facts on which the claim is based. Every untimely
claim shall be denied by the Committee without regard
to the merits of the claim. No legal action (whether
arising under section 502 or section 510 or ERISA or
under any other statute or non-statutory law) may be
brought by any claimant on any matter pertaining to
this Plan unless the legal action is commenced in the
proper forum before the earlier of:
(i) two (2) years after the claimant knew (or
reasonably should have known) of the principal
facts on which the claim is based, or
(ii) ninety (90) days after the claimant has
exhausted these administrative procedures.
Knowledge of all facts that a Participant knew (or
reasonably should have known) shall be imputed to each
claimant who is or claims to be a Beneficiary of the
Participant (or otherwise claims to derive an
entitlement by reference to a Participant) for the
purpose of applying the one (1) year and two (2) year
periods.
(b) EXHAUSTION REQUIRED. Except as provided in subsection
(c) of this Section 10.5, the exhaustion of these
administrative procedures is mandatory for resolving
every claim and dispute arising under this Plan. As to
such claims and disputes:
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(i) no claimant shall be permitted to commence any
legal action relating to any such claim or
dispute (whether arising under section 502 or
section 510 of ERISA or under any other statute
or non-statutory law) unless a timely claim has
been filed under these administrative procedures
and these administrative procedures have been
exhausted; and
(ii) in any such legal action all explicit and
implicit determinations by the Committee and the
Board of Directors (including, but not limited
to, determinations as to whether the claim was
timely filed) shall be afforded the maximum
deference permitted by law.
(c) EXHAUSTION NOT REQUIRED. The exhaustion of these
administrative procedures is not mandatory for
resolving any dispute arising under this Plan insofar
as the dispute pertains to any matter that arose after
a Change in Control or within the one hundred twenty
(120) days before a Change in Control. As to such
matters:
(i) a claimant shall be permitted to commence a
legal action relating to any such matter
(whether arising under section 502 or section
510 of ERISA or under any other statute or
non-statutory law) even if a timely claim has
not been filed under these administrative
procedures and even if these administrative
procedures have not been exhausted; and
(ii) in any legal action regarding the benefits
payable to or with respect to a Participant,
notwithstanding Section 10.1, determinations by
the Committee and the Board of Directors
(including determinations regarding when any
matter arose) shall not be afforded any
deference and the matter shall be heard DE NOVO;
and
(iii) if a Participant is the prevailing party in
litigating any claim for benefits under this
Plan, the Employers shall be jointly and
severally liable to pay reasonable attorney's
fees and costs of the action to the Participant.
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ARTICLE XI
PLAN ADMINISTRATION
Section 11.1 OFFICERS. Except as hereinafter provided, functions
generally assigned to PDS shall be discharge by its officers or delegated and
allocated as provided herein.
Section 11.2 CHIEF EXECUTIVE OFFICER. Except as hereinafter provided, the
Chief Executive Officer of PDS may delegate or redelegate and allocate and
reallocate to one or more persons or to a committee of persons jointly or
severally, and whether or not such persons are directors, officers or
employees, such functions assigned to PDS generally hereunder as the Chief
Executive Officer may from time to time deem advisable.
Section 11.3 BOARD OF DIRECTORS. Notwithstanding the foregoing, the Board
of Directors shall have the exclusive authority, which may not be delegated,
to amend the Plan Statement, to terminate this Plan and to determine
eligibility to participate in this Plan under Section 3.1.
Section 11.4 COMMITTEE. The Committee shall be the Compensation Committee
of the Board of Directors of PDS and whose member shall serve at the pleasure
of the Board of Directors of PDS. Members of the Committee shall serve
without compensation with respect to their duties in the administration of
the Plan, but their reasonable expenses shall be an expense of the
administration of the Plan and shall be paid by PDS. The Committee may elect
such officers as the Committee may decide upon. A member of the Committee
shall automatically be removed as a member of the Committee at the earliest
time such individual ceases to be a director. This removal shall occur
automatically and without any requirement for action by the Employers or any
notice to the individual so removed. The Committee shall:
(a) establish rules for the functioning of the Committee, including
the times and places for holding meetings, the notices to be
given in respect of such meetings and the numbers who shall
constitute a quorum for the transaction of business;
(b) organize and delegate to such of its members as it shall select
authority to execute or authenticate rules, advisory opinions or
instructions, and other instruments adopted or authorized by the
Committee; adopt such bylaws or regulations as it deems desirable
for the conduct of its affairs; appoint a secretary, who need
not be a member of the Committee, to keep its records and
otherwise assist the Committee in the performance of its duties;
keep a record of all its proceedings and acts and keep all books
of account, records and other data as may be necessary for the
proper administration of the Plan; notify the Employers of any
action taken by the Committee and, when required, notify any
other interested person or persons;
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(c) determine from the records of the Employers the compensation,
status and other facts regarding Participants and other employees;
(d) prescribe forms to be used for distributions, notifications,
etc., as may be required in the administration of the Plan;
(e) set up such rules, applicable to all Participants similarly
situated, as are deemed necessary to carry out the terms of this
Plan Statement;
(f) perform all other acts reasonably necessary for administering the
Plan and carrying out the provisions of this Plan Statement and
performing the duties imposed on it by the Board of Directors of
PDS;
(g) resolve all questions of administration of the Plan not
specifically referred to in this section;
(h) in accordance with regulations of the Secretary of Labor, provide
adequate notice in writing to any claimant whose claim for
benefits under the Plan has been denied, setting forth the
specific reasons for such denial, written in a manner calculated
to be understood by the claimant; and
(i) delegate or redelegate to one or more persons, jointly or
severally, and whether or not such persons are members of the
Committee or employees of any Employer, such functions assigned
to the Committee hereunder as it may from time to time deem
advisable.
If there shall at any time be three (3) or more members of the Committee
serving hereunder who are qualified to perform a particular act, the same may
by performed, on behalf of all, by a majority of those qualified, with or
without the concurrence of the minority. No person who failed to join or
concur in such act shall be held liable for the consequences thereof, except
to the extent that liability is imposed under the Employee Retirement Income
Security Act of 1974.
Section 11.5 DELEGATION. The Board of Directors and the members of the
Committee shall not be liable for an act or omission of another person with
regard to a responsibility that has been allocated to or delegated to such
other person pursuant to the terms of the Plan Statement or pursuant to
procedures set forth in the Plan Statement.
Section 11.6 CONFLICT OF INTEREST. If any individual to whom authority
has been delegated or redelegated hereunder shall also be a Participant in
this Plan, such Participant shall have no authority with respect to any
matter specially affecting such Participant's individual interest hereunder
or the interest of a person superior to him or her in the organization (as
distinguished from the interest of all Participants and Beneficiaries or a
broad class of Participants and Beneficiaries), all such authority being
reserved exclusively to other individuals as the case may be, to the exclusion
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of such Participant, and such Participant shall act only in such
Participant's individual capacity in connection with any such matter.
Section 11.7 ADMINISTRATOR. PDS shall administrator for purposes of
section 3(16)(A) of ERISA.
Section 11.8 SERVICE OF PROCESS. In the absence of any designation to the
contrary by the Committee, the Secretary of PDS is designated as the
appropriate and exclusive agent for the receipt of directed to this Plan in
any legal proceeding, including arbitration, involving this Plan.
Section 11.9 EXPENSES. All expenses of administering this Plan shall be
borne by PDS.
Section 11.10 SPENDTHRIFT PROVISION. No Participant or Beneficiary shall
have any interest in the Account which can be transferred nor shall any
Participant of Beneficiary have any power to anticipate, alienate, dispose of,
pledge or encumber the same while in the possession or control of the
Employers, nor shall the Committee recognize any assignment thereof, either
in whole or in part, nor shall the Account be subject to attachment,
garnishment, execution following judgment or other legal process before the
Account is distributed to the Participant or Beneficiary.
The power to designate Beneficiaries to receive any benefits payable to
or with respect to a Participant under the Plan in the event of such
Participant's death shall not permit or be construed to permit such power or
right to be exercised by the Participant so as thereby to anticipate, pledge,
mortgage or encumber such benefits or any part thereof and any attempt of a
Participant to so exercise said power in violation of this provision shall be
of no force and effect and shall be disregarded by the Committee.
Section 11.11 TAX WITHHOLDING. The Employer shall withhold the amount of
any federal, state or local income tax or other tax required to be withheld
by the Employer under applicable law with respect to any amount payable under
this Plan.
Section 11.12 CERTIFICATIONS. Information to be supplied or written
notices to be made or consents to be given by the Committee pursuant to any
provision of this Plan may be signed in the name of the Committee by any
officer who has been authorized to make such certification or to give such
notices or consents.
Section 11.13 ERRORS IN COMPUTATIONS. PDS shall not be liable or
responsible for any error in the computation of the Account or the
determination of any benefit payable to or with respect to any Participant
resulting from any misstatement of fact made by the Participant or by or on
behalf of any survivor to whom such benefit shall be payable, directly or
indirectly, to PDS and used by the Committee in determining the benefit. The
Committee shall not be obligated or required to increase the benefit payable
to or with respect to such Participant which, on discovery of the
misstatement, is found to be understated as a result of such misstatement of
the Participant. However, the benefit
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of any Participant which is overstated by reason of any such misstatement or
any other reason shall be reduced to the amount appropriate in view of the
truth (and to recover any prior overpayment).
Section 11.14 NO EMPLOYMENT RIGHTS. Neither the Plan nor any action taken
under the Plan shall be construed as providing any Participant any right to
be retained in the service or employ of PDS.
Section 11.15 PARTICIPANTS SHOULD CONSULT ADVISORS. Neither PDS nor its
directors, officers, employees or agents makes any representation or warranty
with respect to the federal, state or other tax, financial, estate planning,
or the securities or other legal implications of participation in the Plan.
Participants should consult with their own tax, financial and legal advisors
with respect to their participation in the Plan.
ARTICLE XII
CONSTRUCTION
Section 12.1 APPLICABLE LAWS.
(a) ERISA STATUS. This Plan is adopted with the understanding that
it is an unfunded plan maintained primarily for the purpose of
providing deferred compensation for a "select group of management
or highly compensated employees" as provided in section 201(2),
section 301(a)(3) and section 401(a)(1) of ERISA. Each provision
shall be interpreted and administered accordingly.
(b) IRC STATUS. This Plan is intended to be a nonqualified deferred
compensation arrangement. The rules of section 401(a) ET. SEQ. of
the Code shall not apply to this Plan. The rules of section
3121(v) and section 3306(r)(2) of the Code shall apply to this
Plan.
(c) REFERENCE TO LAWS. Any reference in the Plan Statement to a
statute or regulation shall be considered also to mean and refer
to any subsequent amendment or replacement of that statute or
regulation.
Section 12.2 EFFECT ON OTHER PLANS. This Plan shall not alter, enlarge or
diminish any person's employment rights or obligations or rights or
obligations under any other employee pension benefit or employee welfare
benefit plan maintained by PDS. It being expressly intended that this Plan
shall not be affected by the benefit structures of any other plan maintained
by PDS as any such plan may exist at the adoption of this Plan or upon the
commencement of participation or at any other time.
-27-
<PAGE>
Section 12.3 DISQUALIFICATION. Notwithstanding any other provision of the
Plan Statement or any election or designation made under this Plan, any
individual who feloniously and intentionally kills a Participant shall be
deemed for all purposes of this Plan and all elections and designations made
under this Plan to have died before such Participant. A final judgement of
conviction of felonious and international killing is conclusive for this
purpose. In the absence of a conviction of felonious and intentional killing,
the Committee shall determine whether the killing was felonious and
intentional for this purpose.
Section 12.4 RULES OF DOCUMENT CONSTRUCTION.
(a) An individual shall be considered to have attained a given age on
such individual's birthday for that age (and not on the day
before). Individuals born on February 29 in a leap year shall be
considered to have their birthdays on February 28 in each year
that is not a leap year.
(b) Whenever appropriate, words used herein in the singular may be
read in the plural, or words used herein in the plural may be
read in the singular; the masculine may include the feminine;
and the words "hereof," "herein" or "hereunder" or other similar
compounds of the word "here" shall mean and refer to the entire
Plan Statement and not to any particular paragraph or Section of
the Plan Statement unless the context clearly indicates to the
contrary.
(c) The titles given to the various Sections of the Plan Statement
are inserted for convenience of reference only and are not part
of the Plan Statement, and they shall not be considered in
determining the purpose, meaning or intent of any provision
hereof.
(d) Notwithstanding any thing apparently to the contrary contained in
the Plan Statement, the Plan Statement shall be construed and
administered to prevent the duplication of benefits provided
under this Plan and any other qualified or nonqualified plan
maintained in whole or in part by the Employers.
Section 12.5 CHOICE OF LAW. This instrument has been executed and
delivered in the State of Nevada and has been drawn in conformity to the laws
of that State and shall, except to the extent that federal law is
controlling, be construed and enforced in accordance with the laws of the
State of Nevada.
Section 12.6 NO EMPLOYMENT CONTRACT. This Plan is not and shall not be
deemed to constitute a contract of employment between an Employer and any
person, nor shall anything herein contained be deemed to give any person any
right to be retained in an Employer's employ or in any way limit or restrict
the Employer's right or power to discharge any person at any time and to
treat any person without regard to the effect which such treatment might have
upon him or her as a
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<PAGE>
Participant in this Plan. Neither the terms of the Plan Statement nor the
benefits under this Plan nor the continuance of the Plan shall be a term of
the employment of any employee. The Employers shall not be obliged to
continue this Plan.
April 1, 2000 PDS FINANCIAL CORPORATION
By /s/ Lona Finley
________________________________
Lona Finley
Its Corporate Secretary/Director
____________________________
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,324
<SECURITIES> 0
<RECEIVABLES> 88,287
<ALLOWANCES> 2,826
<INVENTORY> 6,920
<CURRENT-ASSETS> 0<F1>
<PP&E> 5,820<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 103,525
<CURRENT-LIABILITIES> 12,323
<BONDS> 80,919<F3>
0
0
<COMMON> 38
<OTHER-SE> 10,245
<TOTAL-LIABILITY-AND-EQUITY> 103,525
<SALES> 12,366
<TOTAL-REVENUES> 18,015
<CGS> 11,365
<TOTAL-COSTS> 15,555
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,186
<INCOME-PRETAX> 274
<INCOME-TAX> 99
<INCOME-CONTINUING> 175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 175
<EPS-BASIC> .05
<EPS-DILUTED> .05
<FN>
<F1>The Company does not prepare a CLASSIFIED BALANCE SHEET.
<F2>Includes prepaid expenses of $777 income tax assets, $1,280 and PP&E of $873.
<F3>Includes nonrecourse debt of $26,559.
</FN>
</TABLE>
