-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B1JfJ3cwu2lAVYjHAY0xiFK8gCIZZqjkA8VPS6vdBrocLL7SBe6cBMzgus5r4NQc ScwPfjGCHhdGy3UaQWToNw== 0000814677-99-000010.txt : 19991101 0000814677-99-000010.hdr.sgml : 19991101 ACCESSION NUMBER: 0000814677-99-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLM INTERNATIONAL INC CENTRAL INDEX KEY: 0000814677 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943041257 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09670 FILM NUMBER: 99737599 BUSINESS ADDRESS: STREET 1: STEUART ST TOWER STE 800 STREET 2: ONE MARKET PLZ CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 4159741399 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-9670 ------------------------------- PLM INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 94-3041257 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Market, Steuart Street Tower, Suite 800, San Francisco, CA 94105-1301 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (415) 974-1399 ---------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: common stock - $.01 par value; outstanding as of October 28, 1999 - 7,982,974 shares. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands of dollars, except per share amounts)
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1999 1998 1999 1998 ---------------------------------------------------------- REVENUES Operating lease income $ 7,344 $ 3,295 $ 16,634 $ 8,341 Management fees 1,966 2,344 6,198 7,036 Partnership interests and other fees 263 61 579 742 Acquisition and lease negotiation fees -- 548 1,079 2,363 (Loss) gain on the sale or disposition of assets, net (29) 283 (41 ) 1,492 Aircraft brokerage and services -- 204 -- 1,090 Other 343 345 1,031 1,369 -------------------------------------------------------------- Total revenues 9,887 7,080 25,480 22,433 -------------------------------------------------------------- COSTS AND EXPENSES Operations support 4,121 3,160 9,943 9,505 Depreciation and amortization 2,172 1,221 5,651 3,461 General and administrative 1,322 2,003 4,851 6,174 -------------------------------------------------------------- Total costs and expenses 7,615 6,384 20,445 19,140 -------------------------------------------------------------- Operating income 2,272 696 5,035 3,293 Interest expense (1,425) (912) (3,862) (2,806) Interest income 60 376 252 838 Other income, net 700 15 577 478 -------------------------------------------------------------- Income before income taxes 1,607 175 2,002 1,803 Provision for income taxes 633 68 790 703 -------------------------------------------------------------- Net income from continuing operations 974 107 1,212 1,100 Income from discontinued operations, net of income tax 403 1,255 1,182 2,446 -------------------------------------------------------------- Net income before cumulative effect of accounting change 1,377 1,362 2,394 3,546 Cumulative effect of accounting change -- -- (236) -- -------------------------------------------------------------- Net income to common shares $ 1,377 $ 1,362 $ 2,158 $ 3,546 ============================================================== Basic earnings per weighted-average common share outstanding: Income from continuing operations $ 0.12 $ 0.01 $ 0.15 $ 0.13 Discontinued operations 0.05 0.15 0.15 0.29 Cumulative effect of accounting change -- -- (0.03) -- -------------------------------------------------------------- Net income $ 0.17 $ 0.16 $ 0.27 $ 0.42 ============================================================== Diluted earnings per weighted-average common share outstanding: Income from continuing operations $ 0.12 $ 0.01 $ 0.15 $ 0.13 Discontinued operations 0.05 0.15 0.14 0.28 Cumulative effect of accounting change -- -- (0.03) -- -------------------------------------------------------------- Net income $ 0.17 $ 0.16 $ 0.26 $ 0.41 ==============================================================
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (in thousands of dollars, except share amounts) ASSETS
September 30, December 31, 1999 1998 ---------------------------------------- Cash and cash equivalents $ 2,315 $ 8,786 Receivables (net of allowance for doubtful accounts of $0.7 million as of September 30, 1999 and $0.4 million as of December 31, 1998) 7,162 5,003 Receivables from affiliates 3,213 2,944 Investment in direct finance leases, net 1,871 2,082 Net assets of discontinued operations 25,140 27,342 Equity interest in affiliates 19,743 22,588 Assets held for sale 8,004 -- Trailers held for operating leases 97,344 63,044 Less accumulated depreciation (19,304) (15,516) ------------------------------------------- 78,040 47,528 Restricted cash and cash equivalents 1,545 2,261 Other, net 3,784 3,424 ------------------------------------------- Total assets $ 150,817 $ 121,958 =========================================== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Short term warehouse facility $ 7,600 $ -- Senior secured notes 22,559 28,199 Senior secured loan 10,294 14,706 Other secured debt 40,420 13,142 Payables and other liabilities 10,457 9,648 Deferred income taxes 8,492 6,066 ------------------------------------------- Total liabilities 99,822 71,761 Shareholders' equity: Common stock ($.01 par value, 50,000,000 shares authorized, 7,977,974 issued and outstanding as of September 30, 1999 and 8,159,919 as of December 31, 1998) 112 112 Paid-in capital, in excess of par 75,057 74,947 Treasury stock (4,057,781 shares as of September 30, 1999 and 3,875,836 shares as of December 31, 1998) (16,542) (15,072) Accumulated deficit (7,632) (9,790) ------------------------------------------------------------------------------------------------------------------ Total shareholders' equity 50,995 50,197 ------------------------------------------- Total liabilities and shareholders' equity $ 150,817 $ 121,958 ===========================================
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME For the Year Ended December 31, 1998 and the Nine Months Ended September 30, 1999 (in thousands of dollars)
Accumulated Common Stock Deficit & ------------------------------------------- Paid-in Accumulated Capital in Other Total At Excess Treasury Comprehensive Comprehensive Shareholders' Par of Par Stock Income Income Equity =============================================================================================== Balances, December 31, 1997 $ 112 $ 74,650 $ (13,435) $ (14,779) $ 46,548 Comprehensive income Net income 4,857 $ 4,857 4,857 Other comprehensive income: Foreign currency translation income 132 132 132 ================= Comprehensive income $ 4,989 ================= Exercise of stock options 218 211 429 Common stock repurchases (2,059) (2,059) Reissuance of treasury stock 79 211 290 - ---------------------------------------------------------------------------------------------------- -------------- Balances, December 31, 1998 112 74,947 (15,072) (9,790) 50,197 Comprehensive income Net income 2,158 $ 2,158 2,158 ================= Exercise of stock options 9 570 579 Common stock repurchases (2,149) (2,149) Reissuance of treasury stock, net 101 109 210 =========================================================== =============== Balances, September 30, 1999 $ 112 $ 75,057 $ (16,542) $ (7,632) $ 50,995 =========================================================== ===============
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars)
For the Nine Months Ended September 30, 1999 1998 -------------------------------- OPERATING ACTIVITIES Net income from continuing operations $ 1,212 $ 1,100 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,651 3,461 Foreign currency translation -- (80) Deferred income tax expense (benefit) 2,426 (7,298) Loss (gain) on sale or disposition of assets, net 41 (1,529) Loss on sale of investment in subsidiary -- 245 Undistributed residual value interests 716 1,032 Minority interest in net loss of subsidiaries -- (100) Increase (decrease) in payables and other liabilities 977 (3,669) (Increase) decrease in receivables and receivables from affiliates (2,428) 2,310 Amortization of organization and offering costs 2,129 2,129 (Increase) decrease in other assets (266) 883 ---------------------------------- Cash provided by (used in) operating activities of continuing operations 10,458 (1,516) Cash provided by operating activities of discontinued operations 6,095 14,777 ---------------------------------- Net cash provided by operating activities 16,553 13,261 ---------------------------------- INVESTING ACTIVITIES Principal payments received on finance leases 211 170 Purchase of property, plant, and equipment (512) (182) Purchase of transportation equipment and capital improvements (57,985) (41,849) Proceeds from the sale of transportation equipment for lease 394 6,150 Proceeds from the sale of assets held for sale 13,801 22,366 Sale of investment in subsidiary -- 176 Decrease in restricted cash and restricted cash equivalents 716 10,629 Investing activities of discontinued operations 12,301 (67,653) ------------------------------------ Net cash used in investing activities (31,074) (70,193) FINANCING ACTIVITIES Borrowings of short-term warehouse credit facilities 39,008 16,256 Repayment of short-term warehouse credit facilities (31,408) (16,000) Borrowings of senior secured notes -- 5,000 Repayment of senior secured notes (5,640) (3,765) Repayment of senior secured loan (4,412) (4,412) Borrowings of other secured debt 28,570 173 Repayment of other secured debt (1,292) (114) Proceeds from exercise of stock options 579 411 Reissuance of treasury stock, net 42 -- Purchase of stock (2,149) (1,017) Net financing activities of discontinued operations (15,248) 61,553 --------------------------------- Net cash provided by financing activities 8,050 58,085 --------------------------------- Net (decrease) increase in cash and cash equivalents (6,471) 1,153 Cash and cash equivalents at beginning of period 8,786 5,224 ================================= Cash and cash equivalents at end of period $ 2,315 $ 6,377 ================================= SUPPLEMENTAL INFORMATION Net cash paid for interest from continuing operations $ 3,840 $ 2,891 ================================= Net cash paid for interest from discontinued operations $ 7,937 $ 7,280 ================================= Net cash paid for income taxes $ 212 $ 1,529 =================================
See accompanying notes to these consolidated financial statements. PLM INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 1. GENERAL In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary, consisting primarily of normal recurring accruals, to present fairly PLM International, Inc. and its wholly- and majority-owned subsidiaries (the Company's) financial position as of September 30, 1999 and December 31, 1998, statements of income for the three and nine months ended September 30, 1999 and 1998, statements of changes in shareholders' equity and comprehensive income for the year ended December 31, 1998 and the nine months ended September 30, 1999 and statements of cash flows for the nine months ended September 30, 1999 and 1998. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying consolidated financial statements. For further information, reference should be made to the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, on file with the Securities and Exchange Commission. 2. RECLASSIFICATIONS Certain prior-period amounts have been reclassified to conform to the current period's presentation. 3. DISCONTINUED OPERATIONS In the third quarter of 1999, the Company entered into a non-binding letter of intent to sell its wholly-owned commercial and industrial leasing subsidiary American Finance Group, Inc. (AFG). Completion of the sale is expected to occur during the first quarter of 2000. Accordingly, effective with the issuance of the third quarter 1999 financial statements, AFG's results of operations and net assets have been classified as discontinued operations and prior periods have been restated. For business segment reporting purposes, AFG's data was previously reported as the segment "Commercial and industrial equipment leasing and financing". The components of amounts reflected in the income statements and balance sheets for the discontinued operations are as follows:
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1999 1998 1999 1998 ------------------------------------------------------------ Income Statement Revenue $ 6,257 $ 7,843 $ 19,676 $ 20,342 Costs and expenses (5,617) (5,849) (17,741) (16,325) ------------------------------------------------------------ Operating income 640 1,994 1,935 4,017 Income tax (237) (739) (753) (1,571) ------------------------------------------------------------- Net income from discontinued operations $ 403 $ 1,255 $ 1,182 $ 2,446 =============================================================
3. DISCONTINUED OPERATIONS (continued) Net assets of discontinued operations as of September 30, 1999 and December 31, 1998 are as follow:
September 30, December 31, 1999 1998 ----------------------------------------- (in thousands of dollars) Cash and cash equivalents $ 360 $ -- Restricted cash 8,473 8,088 Receivables 1,337 2,279 Investment in direct finance leases 118,677 143,006 Loan receivables 23,445 23,493 Commercial and industrial equipment, net 19,638 16,689 Other assets, net 1,989 3,898 Warehouse credit facility (20,100) (34,420) Nonrecourse securitized debt (110,679) (111,222) Payables and other liabilities (3,450) (12,120) Deferred income taxes (14,550) (12,349) ======================================== Net assets of discontinued operations $ 25,140 $ 27,342 ========================================
4. FINANCING TRANSACTION ACTIVITIES American Finance Group, Inc., originates and manages lease and loan transactions on primarily new commercial and industrial equipment that is financed by nonrecourse securitized debt for the Company's own account or sold to unaffiliated investors. The Company uses one of its warehouse credit facilities to finance the acquisition of these assets prior to permanent financing by nonrecourse securitized debt or sale. The majority of these transactions are accounted for as direct finance leases, while some transactions qualify as operating leases or loans. During the nine months ended September 30, 1999, the Company funded $34.8 million in equipment that was placed on finance lease. Also during the nine months ended September 30, 1999, the Company sold equipment on finance lease with an original equipment cost of $40.5 million, resulting in a net gain of $0.4 million. During the nine months ended September 30, 1999, the Company funded $6.1 million in loans to customers. 5. EQUIPMENT Equipment held for operating lease includes trailers and commercial and industrial equipment that is depreciated on the straight-line method down to the equipment's estimated salvage value. During the nine months ended September 30, 1999, the Company funded $20.3 million in commercial and industrial equipment that was placed on operating lease. During the nine months ended September 30, 1999, the Company sold commercial and industrial equipment that was on operating lease for a net gain of $1.7 million. During the first nine months of 1999, the Company purchased trailers for $36.2 million and sold trailers with a net book value of $0.4 million for $0.4 million. The Company classifies equipment as held for sale if the particular asset is subject to a pending contract for sale or is held for sale to an affiliated program. Equipment held for sale is valued at the lower of the depreciated cost or the fair value less costs to sell. During the first nine months of 1999, the Company 5. EQUIPMENT (continued) purchased marine containers for $21.8 million, and sold marine containers for $13.8 million to affiliated programs at cost, which approximated their fair market value. As of September 30, 1999, the Company held marine containers with a net book value of $8.0 million for sale to affiliated programs. As of December 31, 1998, the Company had no equipment held for sale. 6. DEBT The Company has warehouse credit facilities for PLM Financial Services, Inc. (FSI) and AFG. FSI has a $24.5 million warehouse credit facility to be used to acquire assets on an interim basis prior to sale to affiliated programs or unaffiliated third parties, and to purchase trailers prior to obtaining permanent financing. FSI's facility is shared with PLM Equipment Growth Fund VI, PLM Equipment Growth & Income Fund VII, and Professional Lease Management Income Fund I, LLC. Borrowings under this facility by the other eligible borrowers reduce the amount available to be borrowed by the Company. All borrowings under this facility are guaranteed by the Company. AFG has a $60.0 million warehouse credit facility to be used to acquire assets on an interim basis prior to placement in the Company's nonrecourse securitization facility or sale to unaffiliated third parties. These facilities expire on December 14, 1999. The Company believes it will be able to renew these facilities on substantially the same terms upon expiration. As of September 30, 1999, FSI and PLM Equipment Growth Fund VI had $7.6 million and $1.0 million in borrowings outstanding on the $24.5 million facility and there were no other borrowings outstanding on the facility by any of the other eligible borrowers. As of September 30, 1999, AFG had $20.1 million in borrowings outstanding on its $60.0 million facility. The Company has available a nonrecourse securitization facility to be used to acquire assets by AFG, secured by direct finance leases, operating leases, and loans on commercial and industrial equipment that generally have terms from one to seven years. The facility allowed the Company to borrow up to $150.0 million through October 12, 1999. In October 1999, this facility was amended to extend the facility through October 10, 2000 and reduce the amount available to be borrowed to $125.0 million. Repayment of the facility matches the terms of the underlying leases. As of September 30, 1999, there were $105.5 million in borrowings under this facility. The Company is required to hedge the interest rate exposure to the Company on at least 90% of the aggregate discounted lease balance (ADLB) of those leases and loans used as collateral in its nonrecourse securitization facility. As of September 30, 1999, 90% of the ADLB had been hedged. During the first nine months of 1999, the Company made principal payments of $2.4 million on its nonrecourse notes payable remaining. As of September 30, 1999, the Company had $5.2 million in nonrecourse notes payable. Principal and interest on the notes are due monthly beginning April 1998 through March 2001. The notes bear interest ranging from 8.32% to 9.5% per annum and are secured by direct finance leases for commercial and industrial equipment that have terms corresponding to the repayment of the notes. In the second quarter of 1999, the Company entered into a $15.0 million credit facility loan agreement bearing interest at LIBOR plus 1.5%. This facility allows the Company to borrow up to $15.0 million within a one-year period. As of September 30, 1999, the Company had borrowed $8.6 million under this facility. Principal payments of $0.1 million are due quarterly beginning August 2000, with a final payment of $1.4 million due August 2006. During the first nine months of 1999, the Company entered into four $5.0 million debt agreements bearing interest at 6.20%, 6.81%, 6.90%, and 7.05%, respectively, each with payments of $0.1 million due monthly through 2006, with a final payment of $1.3 million, $1.3 million, $1.3 million, and $1.2 million, respectively, due in 2006, secured by certain trailer equipment. In return for favorable financing terms, these agreements give beneficial tax treatment in these secured trailers to the lenders. During the first nine months of 1999, the Company repaid $4.4 million of the senior secured loan, $5.6 million of the senior secured notes, and $1.3 million of the other secured debt, in accordance with the debt repayment schedules. 7. SHAREHOLDERS' EQUITY During the first nine months of 1999, the Company repurchased 359,215 shares of the Company's common stock for $2.1 million, under the $5.0 million common stock repurchase program authorized by the Company's Board of Directors in December 1998. As of September 30, 1999, 422,515 shares had been repurchased under this plan, for a total of $2.5 million. During the nine months ended September 30, 1999, 27,486 shares were issued from treasury stock as part of the senior management bonus program (net of forfeited shares), 6,784 shares were issued from treasury stock as a stock grant, and 143,000 shares were issued for the exercise of stock options. Consequently, the total common shares outstanding decreased to 7,977,974 as of September 30, 1999 from the 8,159,919 outstanding as of December 31, 1998. Net income per basic weighted-average common share outstanding was computed by dividing net income to common shares by the weighted-average number of shares deemed outstanding during the period. The weighted-average number of shares deemed outstanding for the basic earnings per share calculation during the three months ended September 30, 1999 was 8,061,551 and during the three months ended September 30, 1998 was 8,356,102. The weighted-average number of shares deemed outstanding for the basic earnings per share calculation during the nine months ended September 30, 1999 was 8,097,489, and during the nine months ended September 30, 1998 was 8,358,214. The weighted-average number of shares deemed outstanding, including potentially dilutive common shares, for the diluted earnings per weighted-average share calculation during the three months ended September 30, 1999 was 8,137,547, and during the three months ended September 30, 1998 was 8,503,075. The weighted-average number of shares deemed outstanding, including potentially dilutive common shares, for the diluted earnings per weighted-average share calculation during the nine months ended September 30, 1999 was 8,204,268, and during the nine months ended September 30, 1998 was 8,518,381. 8. LEGAL MATTERS The Company and various of its wholly-owned subsidiaries are named as defendants in a lawsuit filed as a purported class action in January 1997 in the Circuit Court of Mobile County, Mobile, Alabama, Case No. CV-97-251 (the Koch action). Plaintiffs, who filed the complaint on their own and on behalf of all class members similarly situated, are six individuals who invested in certain California limited partnerships for which the Company's wholly-owned subsidiary, PLM Financial Services, Inc. (FSI), acts as the general partner, including PLM Equipment Growth Fund IV (Fund IV), PLM Equipment Growth Fund V (Fund V), PLM Equipment Growth Fund VI (Fund VI), and PLM Equipment Growth & Income Fund VII (Fund VII) (the Partnerships). The complaint asserts eight causes of action against all defendants, as follows: fraud and deceit, suppression, negligent misrepresentation and suppression, intentional breach of fiduciary duty, negligent breach of fiduciary duty, unjust enrichment, conversion, and conspiracy. Plaintiffs allege that each defendant owed plaintiffs and the class certain duties due to their status as fiduciaries, financial advisors, agents, and control persons. Based on these duties, plaintiffs assert liability against defendants for improper sales and marketing practices, mismanagement of the Partnerships, and concealing such mismanagement from investors in the Partnerships. Plaintiffs seek unspecified compensatory and recissory damages, as well as punitive damages, and have offered to tender their limited partnership units back to the defendants. In March 1997, the defendants removed the Koch action from the state court to the United States District Court for the Southern District of Alabama, Southern Division (Civil Action No. 97-0177-BH-C) (the court) based on the court's diversity jurisdiction, and the court denied plaintiffs' motion to remand, which denial was upheld on appeal. In December 1997, the court granted defendants motion to compel arbitration of the named plaintiffs' claims, based on an agreement to arbitrate contained in the limited partnership agreement of each Partnership. Plaintiffs appealed this decision, but in June 1998 voluntarily dismissed their appeal pending settlement of the Koch action, as discussed below. In June 1997, the Company and the affiliates who are also defendants in the Koch action were named as defendants in another purported class action filed in the San Francisco Superior Court, San Francisco, 8. LEGAL MATTERS (Continued) California, Case No. 987062 (the Romei action). The plaintiff is an investor in Fund V, and filed the complaint on her own behalf and on behalf of all class members similarly situated who invested in certain California limited partnerships for which FSI acts as the general partner, including the Partnerships. The complaint (as amended in August 1997) alleges the same facts and the same nine causes of action as in the Koch action, plus additional causes of action against all of the defendants, including alleged unfair and deceptive practices, constructive fraud, unjust enrichment, a claim for treble damages and violations of the California Securities Law of 1968. In July 1997, defendants filed with the district court for the Northern District of California (Case No. C-97-2847 WHO) a petition (the petition) under the Federal Arbitration Act seeking to compel arbitration of plaintiff's claims and for an order staying the state court proceedings pending the outcome of the arbitration. In October 1997, the district court denied the Company's petition to compel arbitration, but in November 1997, agreed to hear the Company's motion for reconsideration of this order. The hearing on this motion has been taken off calendar and the district court has dismissed the petition pending settlement of the Romei action, as discussed below. The state court action continues to be stayed pending such resolution. In May 1998, all parties to the Koch and Romei actions entered into a memorandum of understanding related to the settlement of those actions (the monetary settlement), following which the parties agreed to an additional equitable settlement (the equitable settlement). The terms of the monetary settlement and the equitable settlement are contained in a Stipulation of Settlement that was filed with the court. The monetary settlement provides for a settlement and release of all claims against defendants in exchange for payment for the benefit of the class of up to $6.0 million. The final settlement amount will depend on the number of claims filed by authorized claimants who are members of the class, the amount of the administrative costs incurred in connection with the settlement, and the amount of attorneys' fees awarded by the court. The Company will pay up to $0.3 million of the monetary settlement, with the remainder being funded by an insurance policy. The equitable settlement provides, among other things: (a) for the extension of the operating lives of Funds V, VI, and VII by judicial amendment to each of their partnership agreements, such that FSI, the general partner of each such partnership, be permitted to reinvest partnership funds in additional equipment into the year 2004, and will liquidate the partnerships' equipment in 2006; (b) that FSI is entitled to earn front-end fees (including acquisition and lease negotiation fees) up to 20% in excess of the compensatory limitations set forth in the North American Securities Administrator's Association's Statement of Policy; (c) for a one-time repurchase of up to 10% of the outstanding units of Funds V, VI, and VII by the respective partnership at 80% of such partnership's net asset value; and (d) for the deferral of a portion of FSI's management fees until such time as certain performance thresholds have, if ever, been met by the partnerships. The equitable settlement also provides for payment of the equitable class attorneys' fees from partnership funds in the event, if ever, that distributions paid to investors in Funds V, VI, and VII during the extension period reach a certain internal rate of return. Defendants will continue to deny each of the claims and contentions and admit no liability in connection with the monetary and equitable settlements. The court, among other things, preliminarily approved the monetary and equitable settlements in June 1999, and set a final fairness hearing for November 16, 1999. For settlement purposes, the monetary settlement class (the monetary class) consists of all investors, limited partners, assignees, or unit holders who purchased or received by way of transfer or assignment any units in the Partnerships between May 23, 1989 and June 29, 1999. The equitable settlement class (the equitable class) consists of all investors, limited partners, assignees or unit holders who on June 29, 1999 held any units in Funds V, VI, and VII, and their assigns and successors in interest. The monetary settlement remains subject to certain conditions, including but not limited to notice to the monetary class for purposes of the monetary settlement and final approval of the monetary settlement by the court following a final fairness hearing. The equitable settlement remains subject to numerous conditions, including but not limited to: (a) notice to the equitable class, (b) review and clearance by the SEC, and dissemination to the members of the equitable class, of solicitation statements regarding the proposed extensions, (c) disapproval by less than 50% of the limited partners in Funds V, VI, and VII of 8. LEGAL MATTERS (Continued) the proposed amendments to the limited partnership agreements, (d) judicial approval of the proposed amendments to the limited partnership agreements, and (e) final approval of the equitable settlement by the court following a final fairness hearing. The monetary settlement, if approved, will go forward regardless of whether the equitable settlement is approved or not. The Company continues to believe that the allegations of the Koch and Romei actions are completely without merit and intends to continue to defend this matter vigorously if the monetary settlement is not consummated. The Company is involved as plaintiff or defendant in various other legal actions incidental to its business. Management does not believe that any of these actions will be material to the financial condition of the Company. 9. PURCHASE COMMITMENTS As of September 30, 1999, the Company had committed to purchase $16.3 million of equipment for its commercial and industrial lease and finance receivable portfolio. From October 1, 1999 to October 28, 1999, the Company funded $4.4 million of the commitments outstanding as of September 30, 1999 for its commercial and industrial lease and finance receivable portfolio. As of October 28, 1999, the Company had committed to purchase $14.5 million of equipment for its commercial and industrial lease and finance receivable portfolio. As of September 30, 1999, the Company had committed to purchase $10.0 million of marine containers. As of September 30, 1999, the Company had accrued $3.4 million for marine containers, which the Company has taken delivery of and the Company had classified these containers as assets held for sale. 10. OPERATING SEGMENTS The Company operates in three operating segments: trailer leasing, commercial and industrial equipment leasing and financing, and the management of investment programs and other transportation equipment leasing. The trailer leasing segment includes 22 trailer rental facilities that engage in short to mid-term operating leases of refrigerated and dry van trailers to a variety of customers and management of trailers for the investment programs. The management of investment programs and other transportation equipment leasing segment involves managing its syndicated investment programs, from which it earns fees and equity interests, and arranging short to mid-term operating leases of other transportation equipment. The commercial and industrial equipment leasing and financing segment originates finance and operating leases and loans on commercial and industrial equipment that is financed through a securitization facility, brokers equipment, and manages institutional programs owning commercial and industrial equipment. In the third quarter of 1999, the Company entered into a non-binding letter of intent to sell its wholly-owned commercial and industrial leasing subsidiary American Finance Group, Inc. (AFG). This segment is accounted for as discontinued operations. The Company evaluates the performance of each segment based on profit or loss from operations before allocating general and administrative expenses and before allocating income taxes. The segments are managed separately because each operation requires different business strategies. 10. OPERATING SEGMENTS (continued) The following tables present a summary of the operating segments (in thousands of dollars):
Commercial Management and of Investment Industrial Programs Equipment and Other Leasing Transportation Trailer and Equipment For the three months ended September 30, 1999 Leasing Financing Leasing Other1 Total ------------------------------------------------------------------------------- REVENUES Lease income $ 7,069 $ -- $ 275 $ -- $ 7,344 Fees earned 227 -- 2,002 -- 2,229 Loss on sale or disposition of assets, net (29) -- -- -- (29) Other 10 -- 333 -- 343 ------------------------------------------------------------------------------- Total revenues 7,277 -- 2,610 -- 9,887 ------------------------------------------------------------------------------- COSTS AND EXPENSES Operations support 3,365 -- 691 65 4,121 Depreciation and amortization 2,053 -- 119 -- 2,172 General and administrative expenses -- -- -- 1,322 1,322 ------------------------------------------------------------------------------ Total costs and expenses 5,418 -- 810 1,387 7,615 ------------------------------------------------------------------------------ Operating income (loss) 1,859 -- 1,800 (1,387) 2,272 Interest expense, net (902) -- (463) -- (1,365) Other income, net -- -- 700 -- 700 ------------------------------------------------------------------------------ Income (loss) before income taxes $ 957 $ -- $ 2,037 $ (1,387) $ 1,607 =============================================================================== Income from discontinued operations, net of $ -- $ 403 $ -- $ -- $ 403 tax ============================================================================== Total assets as of September 30, 1999 $ 83,781 $ 25,140 $ 35,084 $ 6,812 $150,817 ============================================================================== Commercial Management and of Investment Industrial Programs Equipment and Other Leasing Transportation Trailer and Equipment For the three months ended September 30, 1998 Leasing Financing Leasing Other1 Total ------------------------------------------------------------------------------ REVENUES Lease income $ 2,721 $ -- $ 574 $ -- $ 3,295 Fees earned 306 -- 2,647 -- 2,953 Gain on sale or disposition of assets, net 40 -- 243 -- 283 Other -- -- 549 -- 549 ------------------------------------------------------------------------------ Total revenues 3,067 -- 4,013 -- 7,080 ------------------------------------------------------------------------------ COSTS AND EXPENSES Operations support 1,205 -- 1,311 644 3,160 Depreciation and amortization 1,014 -- 207 -- 1,221 General and administrative expenses -- -- -- 2,003 2,003 ------------------------------------------------------------------------------ Total costs and expenses 2,219 -- 1,518 2,647 6,384 ------------------------------------------------------------------------------ Operating income (loss) 848 -- 2,495 (2,647) 696 Interest expense, net (414) -- (122) -- (536) Other income, net -- -- 15 -- 15 ------------------------------------------------------------------------------ Income (loss) before income taxes $ 434 $ -- $ 2,388 $ (2,647) $ 175 =============================================================================== Income from discontinued operations, net of $ -- $ 1,255 $ -- $ -- $ 1,255 tax =============================================================================== Total assets as of September 30, 1998 $ 38,692 $ 26,694 $ 32,179 $ 9,147 $106,712 ============================================================================== 1 Includes costs not identifiable to a particular segment such as general and administrative and certain operations support exprenses.
10. OPERATING SEGMENTS (continued)
Commercial Management and of Investment Industrial Programs Equipment and Other Leasing Transportation Trailer and Equipment For the nine months ended September 30, 1999 Leasing Financing Leasing Other2 Total ----------------------------------------------------------------------------- REVENUES Lease income $ 15,746 $ -- $ 888 $ -- $ 16,634 Fees earned 628 -- 7,228 -- 7,856 Loss on sale or disposition of assets, net (41) -- -- -- (41) Other 10 -- 1,021 -- 1,031 ----------------------------------------------------------------------------- Total revenues 16,343 -- 9,137 -- 25,480 ----------------------------------------------------------------------------- COSTS AND EXPENSES Operations support 7,754 -- 1,579 610 9,943 Depreciation and amortization 5,292 -- 359 -- 5,651 General and administrative expenses -- -- -- 4,851 4,851 ----------------------------------------------------------------------------- Total costs and expenses 13,046 -- 1,938 5,461 20,445 ----------------------------------------------------------------------------- Operating income (loss) 3,297 -- 7,199 (5,461) 5,035 Interest expense, net (2,090) -- (1,520) -- (3,610) Other income (expenses), net -- -- 700 (123) 577 ----------------------------------------------------------------------------- Income (loss) before income taxes $ 1,207 $ -- $ 6,379 $ (5,584) $ 2,002 ============================================================================= Income from discontinued operations, net of $ -- $ 1,182 $ -- $ -- $ 1,182 tax ============================================================================= Cumulative effect of accounting change, net of tax $ -- $ (236) $ -- $ -- $ (236) ============================================================================= Total assets as of September 30, 1999 $ 83,781 $ 25,140 $ 35,084 $ 6,812 $150,817 ============================================================================= Commercial Management and of Investment Industrial Programs Equipment and Other Leasing Transportation Trailer and Equipment For the nine months ended September 30, 1998 Leasing Financing Leasing Other2 Total ----------------------------------------------------------------------------- REVENUES Lease income $ 6,154 $ -- $ 2,187 $ -- $ 8,341 Fees earned 822 -- 9,319 -- 10,141 Gain on sale or disposition of assets, net 113 -- 1,379 -- 1,492 Other 3 -- 2,456 -- 2,459 ----------------------------------------------------------------------------- Total revenues 7,092 -- 15,341 -- 22,433 ----------------------------------------------------------------------------- COSTS AND EXPENSEs Operations support 3,148 -- 5,044 1,313 9,505 Depreciation and amortization 2,541 -- 920 -- 3,461 General and administrative expenses -- -- -- 6,174 6,174 ----------------------------------------------------------------------------- Total costs and expenses 5,689 -- 5,964 7,487 19,140 ----------------------------------------------------------------------------- Operating income (loss) 1,403 -- 9,377 (7,487) 3,293 Interest expense, net (1,096) -- (872) -- (1,968) Other income (expenses), net (1) -- 479 -- 478 ----------------------------------------------------------------------------- Income (loss) before income taxes $ 306 $ -- $ 8,984 $ (7,487) $ 1,803 ============================================================================= Income from discontinued operations, net of $ -- $ 2,446 $ -- $ -- $ 2,446 tax ============================================================================= Total assets as of September 30, 1998 $ 38,692 $ 26,694 $ 32,179 $ 9,147 $106,712 ============================================================================= 2 Includes costs not identifiable to a particular segment such as general and administrative and certain operations support expenses.
11. CUMULATIVE EFFECT OF ACCOUNTING CHANGE FROM DISCONTINUED OPERATIONS, NET OF TAX In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities," which requires costs related to start-up activities to be expensed as incurred. The statement requires that initial application be reported as a cumulative effect of a change in accounting principle. The Company adopted this statement during the first quarter of 1999, at which time it took a $0.2 million charge, net of tax of $0.2 million, related to start-up costs of its commercial and industrial equipment operations which is being accounted for as discontinued operations. 12. SUBSEQUENT EVENTS In October 1999, the Company sold $4.6 million of containers held for sale to an affiliated program at its cost, which approximated their fair market value. In October 1999, the Company amended its nonrecourse securitization facility to extend the facility through October 10, 2000 and reduce the amount available to be borrowed under this facility to $125.0 million. In October 1999, the Company entered into two debt agreements totaling $5.0 million bearing interest at 6.71%, with payments of $0.1 million due monthly beginning November of 1999 and a final payment of $0.8 million due November 2006, secured by certain trailer equipment. In return for favorable financing terms, these agreements give beneficial tax treatment in these secured trailers to the lenders. On October 26, 1999, the Company agreed to sell its wholly -owned subsidiary, American Finance Group, Inc., for approximately $29 million in cash to Guaranty Federal Bank, subject to closing adjustments which are not expected to be material. Consummation of the transaction is subject to various conditions, including the approval of PLM shareholders, and closing of the transaction is expected to occur only after such approval has been secured and all other conditions have been satisfied. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TRAILER LEASING The Company operates 22 trailer rental facilities that engage in short-term and mid-term operating leases. Nineteen of these facilities operate predominantly refrigerated trailers used to transport temperature-sensitive commodities, consisting primarily of food products. Three facilities operate only dry van (non-refrigerated) trailers. The Company intends to move virtually all of its dry van trailers to these facilities. In 1999, the Company has opened three new refrigerated trailer yards. MANAGEMENT OF INVESTMENT PROGRAMS AND OTHER TRANSPORTATION EQUIPMENT LEASING The Company has syndicated investment programs from which it earns various fees and equity interests. Professional Lease Management Income Fund I, LLC (Fund I) was structured as a limited liability company with a no front-end fee structure. The previously syndicated limited partnership programs allow the Company to receive fees for the acquisition and initial leasing of the equipment. The Fund I program does not provide for acquisition and lease negotiation fees. The Company invested the equity raised through syndication for these programs in transportation equipment and related assets, which it then manages on behalf of the investors. The equipment management activities for these types of programs generate equipment management fees for the Company over the life of a program. The limited partnership agreements generally entitle the Company to receive a 1% or 5% interest in the cash distributions and earnings of a partnership, subject to certain allocation provisions. The Fund I agreement entitles the Company to a 15% interest in the cash distributions and earnings of the program, subject to certain allocation provisions. The Company's interest in the earnings and distributions of Fund I will increase to 25% after the investors have received distributions equal to their original invested capital. In 1996, the Company announced the suspension of public syndication of equipment leasing programs with the close of Fund I. As a result of this decision, revenues earned from managed programs, which include management fees, partnership interests and other fees, and acquisition and lease negotiation fees, will be reduced in the future as the older programs liquidate and the managed equipment portfolio for these programs becomes permanently reduced. The Company will occasionally own transportation equipment prior to sale to affiliated programs. During this period, the Company earns lease revenue and incurs interest expense. COMMERCIAL AND INDUSTRIAL EQUIPMENT LEASING AND FINANCING The Company funds and manages long-term direct finance leases, operating leases, and loans through its American Finance Group, Inc. (AFG) subsidiary. Master lease agreements are entered into with predominantly investment-grade lessees and serve as the basis for marketing efforts. The underlying assets represent a broad range of commercial and industrial equipment, such as point-of-sale, materials handling, computer and peripheral, manufacturing, general-purpose plant and warehouse, communications, medical, and construction and mining equipment. Through AFG, the Company is also engaged in the management of institutional programs for which it receives management fees. In previous years, the Company acquired equipment for the institutional programs for which it earned acquisition fees, but the Company does not anticipate acquiring equipment for the institutional programs in the future. The Company also earns syndication fees for arranging purchases and sales of equipment between other unaffiliated third parties. In the third quarter of 1999, the Company entered into a non-binding letter of intent to sell its wholly-owned commercial and industrial leasing subsidiary American Finance Group, Inc. (AFG). COMPARISON OF THE COMPANY'S OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 The following analysis reviews the operating results of the Company: REVENUES
For the Three Months Ended September 30, 1999 1998 ----------------------------------------- (in thousands of dollars) Operating lease income $ 7,344 $ 3,295 Management fees 1,966 2,344 Partnership interests and other fees 263 61 Acquisition and lease negotiation fees -- 548 (Loss) gain on the sale or disposition of assets, net (29) 283 Aircraft brokerage and services -- 204 Other 343 345 ----------------------------------------- Total revenues $ 9,887 $ 7,080
The fluctuations in revenues for the three months ended September 30, 1999, compared to the same quarter in 1998, are summarized and explained below. OPERATING LEASE INCOME BY TYPE:
For the Three Months Ended September 30, 1999 1998 ----------------------------------------- (in thousands of dollars) Refrigerated and dry van over-the-road trailers $ 7,069 $ 2,721 Lease income from assets held for sale 263 128 Intermodal trailers -- 451 Other 12 (5) ----------------------------------------- Total operating lease income $ 7,344 $ 3,295
Operating lease income includes revenues generated from assets held for operating leases and assets held for sale that are on lease. Operating lease income increased $4.0 million during the third quarter of 1999, compared to the same quarter of 1998, due to the following: (a) A $4.3 million increase in operating lease income was generated from refrigerated and dry van trailer equipment, of which $3.9 million was due to an increase in the amount of these types of equipment owned and on operating lease, and $0.4 million was due to higher utilization. For the quarter ended September 30, 1999, the average investment in refrigerated and dry van trailer equipment was $92.1 million, compared to $44.7 million for the third quarter of 1998. (b) A $0.1 million increase in operating lease income generated from assets held for sale. During the third quarter of 1999, the Company owned marine containers, which generated $0.3 million in operating lease income. As of September 30, 1999, these marine containers are held for sale. During the third quarter of 1998, the Company owned a 14.7% interest in an entity owning a marine vessel that generated $0.1 million in operating lease income. The Company sold its interest in the entity that owned the marine vessel, at cost, which approximated the fair market value, to an affiliated program during the third quarter of 1998. These increases in operating lease income were partially offset by a $0.5 million decrease in operating lease income from intermodal trailers due to the sale of all of the Company's intermodal trailers during August 1998. MANAGEMENT FEES: Management fees are, for the most part, based on the gross revenues generated by equipment under management. Management fees were $2.0 million and $2.3 million for the quarters ended September 30, 1999 and 1998, respectively. The decrease in management fees resulted from a net decrease in managed equipment from the PLM Equipment Growth Fund (EGF) programs. With the termination of syndication activities in 1996, management fees from the older programs are decreasing and are expected to continue to decrease as the programs liquidate their equipment portfolios. PARTNERSHIP INTERESTS AND OTHER FEES: The Company records as revenues its equity interest in the earnings of the Company's affiliated programs. The net earnings and distribution levels from the affiliated programs were $0.3 million and $0.5 million for the quarters ended September 30, 1999 and 1998, respectively. In addition, a decrease of $0.1 million and $0.4 million in the Company's residual interests in the programs was recorded during the quarters ended September 30, 1999 and 1998, respectively. The decrease in net earnings and distribution levels and residual interests in 1999, compared to 1998, resulted mainly from the disposition of equipment in certain of the EGF programs. Residual income is based on the general partner's share of the present value of the estimated disposition proceeds of the equipment portfolios of the affiliated partnerships when the equipment is purchased. Net decreases in the recorded residual values result when partnership assets are sold and the proceeds are less than the original investment in the sold equipment. ACQUISITION AND LEASE NEGOTIATION FEES: During the quarter ended September 30, 1999, the Company did not purchase any equipment on behalf of the EGF programs and no acquisition and lease negotiation fees were recorded. This is compared to the Company's purchase of $10.0 million in transportation and other equipment during the quarter ended September 30, 1998, resulting in a $0.5 million decrease in acquisition and lease negotiation fees. Because of the Company's decision to halt syndication of equipment leasing programs with the close of Fund I in 1996 and because Fund I has a no front-end fee structure, acquisition and lease negotiation fees will be substantially reduced in the future. (LOSS) GAIN ON THE SALE OR DISPOSITION OF ASSETS, NET: During the quarter ended September 30, 1999, the Company recorded $29,000 in loss on the sale or disposition of transportation equipment with a net book value of $0.2 million for proceeds of $0.2 million. During the quarter ended September 30, 1998, the Company recorded $0.3 million in gain on the sale or disposition of assets with a net book value of $5.2 million for proceeds of $5.5 million. AIRCRAFT BROKERAGE AND SERVICES: Aircraft brokerage and services revenue decreased $0.2 million during the quarter ended September 30, 1999, compared to the same quarter of 1998, due to the sale of the Company's aircraft leasing and spare parts brokerage subsidiary in August 1998. COSTS AND EXPENSES For the Three Months Ended September 30, 1999 1998 ----------------------------------------- (in thousands of dollars) Operations support $ 4,121 $ 3,160 Depreciation and amortization 2,172 1,221 General and administrative 1,322 2,003 ----------------------------------------- Total costs and expenses $ 7,615 $ 6,384 OPERATIONS SUPPORT: Operations support expense, including salary and office-related expenses for operational activities, equipment insurance, repair and maintenance costs, equipment remarketing costs, costs of goods sold, and provision for doubtful accounts, increased $1.0 million (30%) for the quarter ended September 30, 1999, compared to the quarter ended September 30, 1998. Operations support expenses related to the trailer leasing segment increased $2.2 million due to the expansion of its trailer rental operations. This increase was offset by a $1.2 million decrease in operations support expenses related to the management of investment programs and other transportation equipment leasing segment, and other expenses mainly related to the sale of the Company's aircraft leasing and spare parts brokerage subsidiary in August 1998, and the sale of other transportation equipment including intermodal trailers (discussed in the operating lease income section). DEPRECIATION AND AMORTIZATION: Depreciation and amortization expenses increased $1.0 million (78%) for the quarter ended September 30, 1999, compared to the quarter ended September 30, 1998. The increase resulted from an increase in depreciation for refrigerated trailer equipment on operating lease. GENERAL AND ADMINISTRATIVE: General and administrative expenses decreased $0.7 million (34%) during the quarter ended September 30, 1999, compared to the same quarter in 1998, primarily due to a $0.4 million decrease in compensation and benefits expenses due to a decrease in staffing, $0.2 million decrease in professional services, and $0.1 million decrease in rent and office related expenses due to a decrease in staffing and office space requirements. OTHER INCOME AND EXPENSES For the Three Months Ended September 30, 1999 1998 ----------------------------------------- (in thousands of dollars) Interest expense $ (1,425) $ (912) Interest income 60 376 Other income, net 700 15 INTEREST EXPENSE: Interest expense increased $0.5 million (56%) during the quarter ended September 30, 1999, compared to the same quarter in 1998, due to an increase in borrowings to fund trailer purchases. INTEREST INCOME: Interest income decreased $0.3 million (84%) during the quarter ended September 30, 1999, compared to the same quarter of 1998, as a result of lower average cash balances during the quarter ended September 30, 1999, compared to the same quarter of 1998. OTHER INCOME, NET: Other income of $0.7 million for the quarter ended September 30, 1999 represents mileage income received from the railroads. PROVISION FOR INCOME TAXES: For the three months ended September 30, 1999, the provision for income taxes was $0.6 million, representing an effective rate of 39%. For the three months ended September 30, 1998, the provision for income taxes was $0.1 million, representing an effective rate of 39%. NET INCOME FROM DISCONTINUED OPERATIONS: Net income from discontinued operations was $0.4 million for the three months ended September 30, 1999 compared to $1.3 million for the three months ended September 30, 1998. Income from discontinued operations for the three months ended September 30, 1999 and 1998 included revenues of $6.3 million and $7.8 million, respectively. Operating lease income from discontinued operations increased to $2.4 million for the three months ended September 30, 1999, compared to $2.1 million for the same period of 1998 which resulted from an increase in the amount of commercial and industrial equipment owned and on operating lease. Finance lease income decreased to $2.7 million for the three months ended September 30, 1999 compared to $3.5 million for the same period of 1998 which resulted from a decrease in commercial and industrial equipment that were on finance lease. Acquisition and lease negotiation fees from discontinued operations decreased $0.3 million during the third quarter of 1999 compared to the same quarter of 1998 due to no equipment being purchased by AFG for the institutional investment programs during the third quarter of 1999, compared to $11.9 million for the same quarter of 1998 for which the Company earned $0.3 million in acquisition and lease negotiation fees. During the third quarter of 1999, AFG recorded a $0.5 million gain on the sale or disposition of commercial and industrial equipment, compared to $1.0 million for the same quarter of 1998. Depreciation and amortization expense from discontinued operations increased to $2.1 million for the three months ended September 30, 1999, compared to $1.6 million for the same quarter of 1998 due to an increase in commercial and industrial equipment on operating lease. Interest expenses decreased to $2.3 million for the three months ended September 30, 1999 compared to $3.1 million for the same period of 1998 due to lower average debt outstanding during the three months ended September 30, 1999, compared to the same period in 1998. NET INCOME As a result of the foregoing, for the three months ended September 30, 1999, net income was $1.4 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.17. For the same quarter in 1998, net income was $1.4 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.16. Comparison of the Company's Operating Results for the Nine Months Ended September 30, 1999 and 1998 The following analysis reviews the operating results of the Company: REVENUES For the Nine Months Ended September 30, 1999 1998 ------------------------------------ (in thousands of dollars) Operating lease income $ 16,634 $ 8,341 Management fees 6,198 7,036 Partnership interests and other fees 579 742 Acquisition and lease negotiation fees 1,079 2,363 (Loss) gain on the sale or disposition of assets, net (41) 1,492 Aircraft brokerage and services -- 1,090 Other 1,031 1,369 ----------------------------------------- Total revenues $ 25,480 $ 22,433 The fluctuations in revenues for the nine months ended September 30, 1999, compared to the nine months ended September 30, 1998, are summarized and explained below. OPERATING LEASE INCOME BY TYPE:
For the Nine Months Ended September 30, 1999 1998 ----------------------------------------- (in thousands of dollars) Refrigerated and dry van over-the-road trailers $ 15,746 $ 6,153 Lease income from assets held for sale 850 412 Intermodal trailers -- 1,630 Other 38 146 ----------------------------------------- Total operating lease income $ 16,634 $ 8,341
Operating lease income includes revenues generated from assets held for operating leases and assets held for sale that are on lease. Operating lease income increased $8.3 million during the nine months ended September 30, 1999, compared to the same period of 1998, due to the following: (a) A $9.6 million increase in operating lease income was generated from refrigerated and dry van trailer equipment of which $7.0 million was due to an increase in the amount of these types of equipment owned and on operating lease, and $2.6 million was due to higher utilization. For the nine months ended September 30, 1999, the average investment in refrigerated and dry van trailer equipment was $80.1 million, compared to $42.1 million for the same period of 1998. (b) A $0.4 million increase in operating lease income was generated from assets held for sale. During the nine months ended September 30, 1999, the Company purchased $21.8 million in marine containers and sold $13.8 million to affiliated programs at cost, which approximated their fair market value. The Company earned $0.9 million in operating lease income on these marine containers during the nine months ended September 30, 1999. During the nine months ended September 30, 1998, the Company owned an entity owning a marine vessel that generated $0.4 million in operating lease income. The Company sold its interest in the entity that owned the marine vessel at cost, which approximated fair market value, to an affiliated program during 1998. These increases in operating lease income were partially offset by the following: (a) A $1.6 million decrease in operating lease income from intermodal trailers due to the sale of all of the Company's intermodal trailers in 1998. (b) A $0.1 million decrease in other operating lease income was due to the Company's strategic decision to dispose of certain transportation assets and exit certain equipment markets. MANAGEMENT FEES: Management fees are, for the most part, based on the gross revenues generated by equipment under management. Management fees were $6.2 million and $7.0 million for the nine months ended September 30, 1999 and 1998, respectively. The decrease in management fees resulted from a net decrease in managed equipment from the PLM Equipment Growth Fund (EGF) programs. With the termination of syndication activities in 1996, management fees from the older programs are decreasing and are expected to continue to decrease as the programs liquidate their equipment portfolios. PARTNERSHIP INTERESTS AND OTHER FEES: The Company records as revenues its equity interest in the earnings of the Company's affiliated programs. The net earnings and distribution levels from the affiliated programs were $1.1 million and $1.5 million for the nine months ended September 30, 1999 and 1998, respectively. In addition, a decrease of $0.6 million and $0.8 million in the Company's residual interests in the programs was recorded during the nine months ended September 30, 1999 and 1998, respectively. The decrease in net earnings, distribution levels and residual interests in 1999, compared to 1998, resulted mainly from the disposition of equipment in certain of the EGF programs. Residual income is based on the general partner's share of the present value of the estimated disposition proceeds of the equipment portfolios of the affiliated partnerships when the equipment is purchased. Net decreases in the recorded residual values result when partnership assets are sold and the proceeds are less than the original investment in the sold equipment. ACQUISITION AND LEASE NEGOTIATION FEES: During the nine months ended September 30, 1999, the Company, on behalf of the EGF programs, purchased transportation and other equipment for $37.1 million. The Company did not take acquisition and lease negotiation fees on $16.6 million of this equipment, as the Company has reached certain fee limitations for one of its limited partnership programs per the partnership agreement. This is compared to the Company's purchase of $42.9 million in transportation and other equipment during the nine months ended September 30, 1998, resulting in a $1.3 million decrease in acquisition and lease negotiation fees. Because of the Company's decision to halt syndication of equipment leasing programs with the close of Fund I in 1996 and because Fund I has a no front-end fee structure, acquisition and lease negotiation fees will be substantially reduced in the future. GAIN (LOSS) ON THE SALE OR DISPOSITION OF ASSETS, NET: During the nine months ended September 30, 1999, the Company recorded $41,000 in loss on the sale or disposition of transportation equipment. During the nine months ended September 30, 1998, the Company recorded $1.5 million in gain on the sale or disposition of assets. Of this gain, $0.5 million resulted from the Company purchased and subsequently sold railcars to an unaffiliated third party. AIRCRAFT BROKERAGE AND SERVICES: Aircraft brokerage and services revenue decreased $1.1 million during the nine months ended September 30, 1999, compared to the same period of 1998, due to the sale of the Company's aircraft leasing and spare parts brokerage subsidiary in August 1998. OTHER REVENUE: Other revenue decreased $0.3 million during the nine months ended September 30, 1999, compared to the same period of 1998, primarily due to decreased revenue earned for providing data processing services to the affiliated programs. COSTS AND EXPENSES For the Nine Months Ended September 30, 1999 1998 ----------------------------------------- (in thousands of dollars) Operations support $ 9,943 $ 9,505 Depreciation and amortization 5,651 3,461 General and administrative 4,851 6,174 ----------------------------------------- Total costs and expenses $ 20,445 $ 19,140 OPERATIONS SUPPORT: Operations support expense, including salary and office-related expenses for operational activities, equipment insurance, repair and maintenance costs, equipment remarketing costs, costs of goods sold, and provision for doubtful accounts, increased $0.4 million (5%) for the nine months ended September 30, 1999, compared to the same period of 1998. Operations support expense related to the trailer leasing segment increased $4.6 million due to the expansion of PLM Rental, with the addition of a total of twelve rental yards in 1998 and 1999 and new trailers to existing yards. These increases were offset by a $4.2 million decrease in operations support expenses related to the management of investment programs and other transportation equipment leasing segment, and other expenses mainly related to the sale of the Company's aircraft leasing and spare parts brokerage subsidiary in August 1998, and the sale of other transportation equipment including intermodal trailers (discussed in the operating lease income section). DEPRECIATION AND AMORTIZATION: Depreciation and amortization expenses increased $2.2 million (63%) for the nine months ended September 30, 1999, compared to the nine months ended September 30, 1998. The increase resulted from an increase in depreciation of $2.8 million from refrigerated trailer equipment on operating lease, which was partially offset by the reduction of $0.6 million in depreciation expense from intermodal trailers and other equipment. GENERAL AND ADMINISTRATIVE: General and administrative expenses decreased $1.3 million (21%) during the nine months ended September 30, 1999, compared to the same period in 1998, primarily due to a $0.7 million decrease in rent and office related expenses, a $0.5 million decrease in compensation and benefits expenses, a $0.1 million decrease in travel and entertainment expenses, a $0.1 million decrease in insurance expenses, and a $0.1 million decrease in sublease commissions. These increases were due to a decrease in staffing and office space requirements. OTHER INCOME AND EXPENSES For the Nine Months Ended September 30, 1999 1998 --------------------------------------- (in thousands of dollars) Interest expense $ (3,862) $ (2,806) Interest income 252 838 Other income, net 577 478 INTEREST EXPENSE: Interest expense increased $1.1 million (38%) during the nine months ended September 30, 1999, compared to the same period in 1998. Interest expense related to the trailer leasing segment increased $1.0 million due to an increase in borrowings to fund trailer purchases. INTEREST INCOME: Interest income decreased $0.6 million (70%) during the nine months ended September 30, 1999, compared to the same period of 1998, as a result of lower average cash balances during the nine months ended September 30, 1999, compared to the same period of 1998. OTHER INCOME, NET: Other income of $0.6 million for the nine months ended September 30, 1999 represents $0.7 million of mileage income received from the railroads, partially offset by $0.1 million in expenses related to the settlement of a lawsuit. During the nine months ended September 30, 1998, the Company recorded other income of $0.7 million related to the settlement of a lawsuit against Tera Power Corporation and others, and recorded expense of $0.3 million related to a legal settlement for the Koch and Romei actions (refer to Note 8). PROVISION FOR INCOME TAXES: For the nine months ended September 30, 1999, the provision for income taxes was $0.8 million, representing an effective rate of 39%. For the nine months ended September 30, 1998, the provision for income taxes was $0.7 million, representing an effective rate of 39%. NET INCOME FROM DISCONTINUED OPERATIONS: Net income from discontinued operations was $1.2 million for the nine months ended September 30, 1999 compared to $2.4 million for the nine months ended September 30, 1998. Income from discontinued operations for the nine months ended September 30, 1999 and 1998 included revenues of $19.7 million and $20.3 million, respectively. Operating lease income from discontinued operations increased to $6.8 million for the nine months ended September 30, 1999, compared to $6.4 million for the same period of 1998 due to an increase in the amount of commercial and industrial equipment owned and on operating lease. Finance lease income decreased to $8.6 million for the nine months ended September 30, 1999 compared to $9.2 million for the same period of 1998 due to a decrease in commercial and industrial assets that were on finance lease. Acquisition and lease negotiation fees from discontinued operations decreased $0.7 million for the nine months ended September 30, 1999, compared to the same period of 1998 due to no equipment being purchased by AFG for the institutional investment programs during the first nine months of 1999, compared to $26.0 million for the same period of 1998, for which the Company earned $0.7 million of acquisition and lease negotiation fees. During the first nine months of 1999 and 1998, AFG recorded $2.1 million gain on the sale or disposition of commercial and industrial equipment. Operations support from discontinued operations increased to $4.1 million for the nine months ended September 30, 1999 compared to $3.4 million for the same period of 1998 primarily due to an increase in compensation and benefits expense resulting from a new bonus program initiated in 1999 to retain AFG employees during AFG's potential sale and increased staffing. Depreciation and amortization expenses increased to $5.7 million for the nine months ended September 30, 1999, compared to $5.4 million for the same quarter of 1998 due to an increase in the commercial and industrial equipment on operating lease. Interest expense decreased to $7.4 million for the nine months ended September 30, 1999 compared to $7.9 million for the same period of 1998 due to lower average debt outstanding during the nine months ended September 30, 1999, compared to the same period in 1998. Other expenses of $1.0 million for the nine months ended September 30, 1999 represent the expense related to the proposed initial public offering of AFG (during the first quarter of 1999, the Company's Board of Directors determined that it was in the Company's best interest to sell AFG rather than proceed with a stock offering, and therefore wrote off all associated offering costs). CUMULATIVE EFFECT OF ACCOUNTING CHANGE: In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities," which requires costs related to start-up activities to be expensed as incurred. The statement requires that initial application be reported as a cumulative effect of a change in accounting principle. The Company adopted this statement during the first quarter of 1999, at which time it took a $0.2 million charge, net of tax of $0.2 million, related to start-up costs of its commercial and industrial equipment operations which is being accounted for as discontinued operations. NET INCOME As a result of the foregoing, for the nine months ended September 30, 1999, net income was $2.2 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.27 and $0.26, respectively. For the same period in 1998, net income was $3.5 million, resulting in basic and diluted earnings per weighted-average common share outstanding of $0.42 and $0.41, respectively. LIQUIDITY AND CAPITAL RESOURCES Cash requirements have historically been satisfied through cash flow from operations, borrowings, and the sale of equipment. Liquidity in the remainder of 1999 and beyond will depend, in part, on the continued remarketing of the equipment portfolio at similar lease rates, the management of existing sponsored programs, the effectiveness of cost control programs, the purchase and sale of equipment, the volume of trailer equipment leasing transactions, additional borrowings, and the potential proceeds from the sale of AFG. Management believes the Company can accomplish the preceding and that it will have sufficient liquidity and capital resources for the next twelve months. Future liquidity is influenced by the factors summarized below. DEBT FINANCING: NONRECOURSE SECURITIZED DEBT: The Company has available a nonrecourse debt facility for up to $125.0 million, secured by direct finance leases, operating leases, and loans on commercial and industrial equipment at AFG that generally have terms of one to seven years. The facility is available for a one-year period expiring October 10, 2000. Repayment of the facility matches the terms of the underlying leases. As of September 30, 1999, $105.5 million in borrowings was outstanding under this facility. As of October 28, 1999, $104.4 million in borrowings was outstanding under this facility. In addition to the $125.0 million nonrecourse debt facility discussed above, as of September 30, 1999 and October 28, 1999, the Company also had $5.2 million and $5.0 million, respectively, in nonrecourse notes payable secured by direct finance leases on commercial and industrial equipment at AFG that have terms corresponding to the note repayment schedule that began April 1998 and ends March 2001. The notes bear interest from 8.32% to 9.5% per annum. FSI WAREHOUSE CREDIT FACILITY: Assets acquired and held on an interim basis by FSI for sale to affiliated programs or third parties have, from time to time, been partially funded by this warehouse credit facility. This facility is also used to temporarily finance the purchase of trailers prior to permanent financing being obtained. This facility expires on December 14, 1999. The Company believes it will be able to renew this facility on substantially the same terms upon its expiration. This facility is shared with EGF VI, PLM Equipment Growth & Income Fund VII (EGF VII), and Fund I. Borrowings under this facility by the other eligible borrowers reduce the amount available to be borrowed by the Company. All borrowings under this facility are guaranteed by the Company. This facility provides 80% financing for transportation assets purchased by the Company. The Company can hold assets under this facility for up to 150 days. Interest accrues at prime or LIBOR plus 162.5 basis points, at the option of the Company. As of September 30, 1999, the Company and EGF VI had $7.6 million and $1.0 million outstanding borrowings under this facility, respectively. As of October 28, 1999, the Company had $0.9 million in borrowings outstanding under this facility, and there were no borrowings outstanding under this facility by any other eligible borrowers. AFG WAREHOUSE CREDIT FACILITY: Assets acquired and held on an interim basis by AFG for placement in the Company's securitization facility or for sale to unaffiliated third parties have, from time to time, been partially funded by a $60.0 million warehouse credit facility. The facility expires December 14, 1999; however, the Company believes it will be able to renew this facility on substantially the same terms upon its expiration. This facility provides for financing of 100% of the present value of the lease stream of commercial and industrial equipment for up to 90% of original equipment cost of the assets held on this facility. Borrowings secured by investment-grade lessees can be held under this facility until the facility's expiration. Borrowings secured by noninvestment-grade lessees may be outstanding for 120 days. Interest accrues at prime or LIBOR plus 137.5 basis points, at the option of the Company. As of September 30, 1999, the Company had $20.1 million outstanding under this facility. As of October 28, 1999, the Company had $21.1 million outstanding under this facility. SENIOR SECURED NOTES: The Company's senior secured notes agreement, which had an outstanding balance of $22.6 million as of September 30, 1999 and October 28, 1999, bears interest at LIBOR plus 240 basis points. The Company has pledged substantially all of its future management fees, acquisition and lease negotiation fees, data processing fees, and partnership distributions as collateral to the facility. The facility required quarterly interest-only payments through August 15, 1997, with principal plus interest payments beginning November 15, 1997. Principal payments of $1.9 million are payable quarterly through termination of the loan on August 15, 2002. SENIOR SECURED LOAN: The Company's senior loan with a syndicate of insurance companies, which had an outstanding balance of $10.3 million as of September 30, 1999 and October 28, 1999, provides that equipment sale proceeds from pledged equipment or cash deposits be placed into a collateral account or used to purchase additional equipment to the extent required to meet certain debt covenants. Pledged equipment for this loan consists of the storage equipment and virtually all trailer equipment purchased prior to August 1998. As of September 30, 1999, the cash collateral balance for this loan was $2,000 and is included in restricted cash and cash equivalents on the Company's balance sheet. The facility bears interest at 9.78% and required quarterly interest payments through June 30, 1997, with quarterly principal payments of $1.5 million plus interest charges beginning June 30, 1997 and continuing until termination of the loan in June 2001. OTHER SECURED DEBT: As of September 30, 1999, the Company had $31.8 million in six debt agreements, bearing interest from 5.35% to 7.05%, each with payments of $0.1 million due monthly in advance. The debt is secured by certain trailer equipment. In the second quarter of 1999, the Company entered into a $15.0 million credit facility loan agreement bearing interest at LIBOR plus 1.5%. This facility allows the Company to borrow up to $15.0 million within a one-year period. As of September 30, 1999, the Company had borrowed $8.6 million under this facility. Payments of $0.1 million are due quarterly beginning August 2000, with a final payment of $1.4 million due August 2006. INTEREST-RATE SWAP CONTRACTS: The Company has entered into interest-rate swap agreements in order to manage the interest-rate exposure associated with its nonrecourse securitized debt. As of September 30, 1999, the swap agreements had a weighted-average duration of 1.40 years, corresponding to the terms of the related debt. As of September 30, 1999, a notional amount of $94.8 million of interest-rate swap agreements effectively fixed interest rates at an average of 6.52% on such obligations. For the nine months ended September 30, 1999, interest expense increased by $0.5 million due to these arrangements. TRAILER LEASING: The Company operates 22 trailer rental facilities that engage in short-term and mid-term operating leases. Nineteen of these facilities operate predominantly refrigerated trailers used to transport temperature-sensitive commodities, consisting primarily of food products. Three facilities operate only dry van (non-refrigerated) trailers. The Company intends to move virtually all of its dry van trailers to these facilities. In 1999, the Company has opened three new refrigerated trailer yards. During the nine months ended September 30, 1999, the Company purchased $36.2 million of primarily refrigerated trailers and sold refrigerated and dry van trailers with a net book value of $0.4 million for proceeds of $0.4 million. The net proceeds from the sale of assets that were collateralized as part of the senior loan facility were placed in a collateral account. OTHER TRANSPORTATION EQUIPMENT LEASING AND OTHER: During the first nine months of 1999, the Company purchased marine containers for $21.8 million, and the Company sold $13.8 million to affiliated programs, at cost, which approximated their fair market value. In October 1999, the Company sold an additional $4.6 million of these marine containers to an affiliated program, at cost which approximated their fair value. STOCK REPURCHASE PROGRAM: In December 1998, the Company announced that its Board of Directors had authorized the repurchase of up to $5.0 million of the Company's common stock. As of October 28, 1999, 422,515 shares had been repurchased under this plan for a total of $2.5 million. Management believes that, through debt and equity financing, possible sales of equipment, proceeds from the potential sale of AFG, and cash flows from operations, the Company will have sufficient liquidity and capital resources to meet its projected future operating needs over the next twelve months. EFFECTS OF THE YEAR 2000: It is possible that the Company's currently installed computer systems, software products, and other business systems, or those of the Company's vendors, service providers, and customers, working either alone or in conjunction with other software or systems, may not accept input of, store, manipulate, and output dates on or after January 1, 2000 without error or interruption, a possibility commonly known as the "Year 2000" or "Y2K" problem. The Company has established a special Year 2000 oversight committee to review the impact of Year 2000 issues on its business systems in order to determine whether such systems will retain functionality after December 31, 1999. As of September 30, 1999, the Company has completed inventory, assessment, remediation, and testing stages of its Year 2000 review of its core business information systems. Specifically, the Company (a) has integrated Year 2000-compliant programming code into its existing internally customized and internally developed transaction processing software systems and (b) the Company's accounting and asset management software systems have been made Year 2000 compliant. In addition, numerous other software systems provided by vendors and service providers have been replaced with systems represented by the vendor or service provider to be Year 2000 functional. These systems have been fully tested as of September 30, 1999 and are compliant. As of September 30, 1999, the Company has spent $0.1 million to become Year 2000 compliant and does not anticipate any additional Year 2000-compliant expenditures. Some risks associated with the Year 2000 problem are beyond the ability of the Company to control, including the extent to which third parties can address the Year 2000 problem. The Company is communicating with vendors, services providers, and customers in order to assess the Year 2000 compliance readiness of such parties and the extent to which the Company is vulnerable to any third-party Year 2000 issues. As part of this process, vendors and service providers were ranked in terms of the relative importance of the service or product provided. All service providers and vendors who were identified as of medium to high relative importance were surveyed to determine Year 2000 status. The Company has received satisfactory responses to Year 2000 readiness inquiries from surveyed service providers and vendors. It is possible that certain of the Company's equipment lease portfolio may not be Year 2000 compliant. The Company has contacted equipment manufacturers of the portion of the Company's leased equipment portfolio identified as date sensitive to assure Year 2000 compliance or to develop remediation strategies. The Company does not expect that non-Year 2000 compliance of its leased equipment portfolio will have an adverse material impact on its financial statements. The Company has surveyed the majority of its lessees and the majority of those surveyed have responded satisfactorily to Year 2000 readiness inquiries. There can be no assurance that the software systems of such parties will be converted or made Year 2000 compliant in a timely manner. Any failure by such other parties to make their respective systems Year 2000 compliant could have a material adverse effect on the business, financial position, and results of operations of the Company. The Company has made and will continue an ongoing effort to recognize and evaluate potential exposure relating to third-party Year 2000 noncompliance. The Company will implement a contingency plan if the Company determines that third-party noncompliance would have a material adverse effect on the Company's business, financial position, or results of operation. The Company is currently developing a contingency plan to address the possible failure of any systems, vendors or service providers due to Year 2000 problems. For the purpose of such contingency planning, a reasonably likely worst case scenario primarily anticipates an inability to access systems and data on a temporary basis resulting in possible delay in reconciliation of funds received or payment of monies owed. The Company is evaluating whether there are additional scenarios which have not been identified. Contingency planning will encompass strategies up to and including manual processes. The Company anticipates that these plans will be completed by December 31, 1999. ACCOUNTING PRONOUNCEMENTS: In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which standardizes the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, by requiring that an entity recognize those items as assets or liabilities in the statement of financial position and measure them at fair market value. FASB Statement No. 137, "Accounting for Derivatives, Instruments, and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133, an amendment of FASB Statement No. 133," issued in June 1999, defers the effective date of Statement No. 133. Statement No. 133, as amended, is now effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. As of September 30, 1999, the Company is reviewing the effect SFAS No. 133 will have on the Company's consolidated financial statements. FORWARD-LOOKING INFORMATION: Except for historical information contained herein, the discussion in this Form 10-Q contains forward-looking statements that contain risks and uncertainties, such as statements of the Company's plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. The Company's actual results could differ materially from those discussed here. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk exposure is that of interest rate risk. A change in the U.S. prime interest rate, LIBOR rate, or lender's cost of funds based on commercial paper market rates, would affect the rate at which the Company could borrow funds under its various borrowing facilities. Increases in interest rates to the Company, which may cause the Company to raise the implicit rates charged to its customers, could in turn, result in a reduction in demand for the Company's lease financing. The Company's warehouse credit facilities, $8.6 million of other secured debt, and the senior secured notes are variable rate debt. The Company estimates a 1 percent increase or decrease in the Company's variable rate debt would result in an increase or decrease, respectively, in interest expense of $0.2 million in 1999, $0.1 million in 2000, $0.2 million in 2001, $0.1 million in 2002, $0.1 million in 2003, and $0.1 million thereafter. The Company estimates a 2 percent increase or decrease in the Company's variable rate debt would result in an increase or decrease, respectively, in interest expense of $0.4 million in 1999, $0.3 million in 2000, $0.3 million in 2001, $0.2 million in 2002, $0.1 million in 2003, and $0.3 million thereafter. All of the Company's other financial assets and liabilities are at fixed rates. PART II - OTHER INFORMATION Item 1. Legal Proceedings See Note 8 to the consolidated financial statements. Item 5. Other information The Company has agreed to sell its wholly -owned subsidiary, American Finance Group, Inc., for approximately $29 million in cash to Guaranty Federal Bank, subject to closing adjustments which are not expected to be material. Consummation of the transaction is subject to various conditions, including the approval of PLM shareholders, and closing of the transaction is expected to occur only after such approval has been secured and all other conditions have been satisfied. A copy of the agreement relating to such sale is attached as Exhibit 10.7. Item 6. Exhibits and Reports on Form 8-K (A) Exhibits 10.1 Severance Agreement among PLM International, Inc. and certain employees dated August 1999. 10.2 Amendment #1 dated April 2, 1999 to Master Lease Agreement among PLM International, Inc. and Wells Fargo Equipment Finance, Inc. dated April 2, 1999. 10.3 Master Lease Agreement among PLM International, Inc. and Associates Leasing, Inc. dated August 25, 1999. 10.4 Master Lease Agreement among PLM Rental Inc. and Fleet Capital, Inc. dated September 23, 1999. 10.5 Amendment #2 dated October 12, 1999 to Master Lease Agreement among PLM International, Inc. and Wells Fargo Equipment Finance, Inc. dated April 2, 1999. 10.6 Master Lease Agreement among PLM Rental Inc. and US Bancorp dated September 22, 1999. 10.7 Stock Sales Agreement among PLM International, Inc. and Guaranty Federal Bank dated October 26, 1999. (B) Reports on Form 8-K Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLM INTERNATIONAL, INC. /s/Richard K Brock ------------------------- Richard K Brock Vice President and Corporate Controller Date: October 28, 1999 EX-27 2
5 1,000 9-MOS DEC-31-1999 SEP-30-1999 3,860 0 12,246 0 0 0 97,344 (19,304) 150,817 0 80,873 0 0 0 58,627 150,817 0 25,480 0 20,445 577 0 3,862 2,002 790 1,212 1,182 0 236 2,158 0.27 0.26
EX-10.1 3 SEVERANCE AGREEMENT THIS SEVERANCE AGREEMENT ("Agreement") is made and entered into on this __ day of August, 1999, by and between PLM INTERNATIONAL, INC., its successors and/or assigns (the "Company"), and _____________ ("Employee"). WHEREAS, Employee currently holds the position(s) of __________ of the Company; and WHEREAS, in the event any person or group proposes a change in control transaction (as defined in Section 2 of this Agreement), the Board of Directors would consider such proposal in order to determine whether it was fair and in the best interest of the shareholders; and WHEREAS, any such consideration by the Board of Directors may lead to uncertainty regarding the future path of the Company and the long-term prospects for executive employment with the Company; and WHEREAS, the Company's Board of Directors believes it is important to the enhancement of shareholder value that, notwithstanding such uncertainty, Employee act vigorously and constructively in any negotiations being conducted in connection with a change in control transaction to achieve the result most favorable to the Company's shareholders and continue to manage the on-going business of the Company in order to achieve the most positive results attainable; and WHEREAS, as an inducement for Employee to remain in the employ of the Company before and after a change in control transaction, this Agreement provides for certain incentives for Employee upon a change in control and for certain severance benefits to be paid and provided to Employee in the event Employee's employment is terminated without cause (as defined herein) following or resulting from a change in control transaction. NOW, THEREFORE, in consideration of the above premises and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Employee agree as follows: 1. Term. The term of this Agreement shall commence on the date hereof and shall continue (i) until December 31, 1999 so long as no Change in Control (as defined below) has occurred on or before December 31, 1999; or (ii) until all obligations under this Agreement have been met in the event a Change in Control has occurred on or before December 31, 1999. 2. Change in Control. A. For the purposes of this Agreement only, the term "Change in Control" shall mean the occurrence of any one of the following events: (i) Any person or group (a "Person"), within the meaning of Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), acquiring "beneficial ownership" ("Beneficial Ownership"), as defined in Rule 13d-3 under the Exchange Act, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company's then outstanding securities; provided, however, in determining whether a Change in Control has occurred, voting securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (a) an employee benefit plan (or trust forming a part thereof) maintained by the Company or any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interests is owned, directly or indirectly, by the Company (for purposes of this definition, a "Subsidiary"), (b) the Company or its Subsidiaries, or (c) any Person in connection with a "Non-Control Transaction" (as hereinafter defined); (ii) A merger, consolidation or reorganization (collectively, a "Transaction") involving the Company unless such Transaction is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a Transaction involving the Company where: (a) The stockholders of the Company immediately before such Transaction own, directly or indirectly, immediately following such Transaction, at least fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation resulting from such Transaction (the "Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Transaction, or (b) No Person, other than (1) the Company, (2) any Subsidiary, or (3) any employee benefit plan (or any trust forming a part thereof) maintained by the Company or any Subsidiary, has Beneficial Ownership of more than fifty percent (50%) of the combined voting power of the Surviving Corporation's then outstanding voting securities; (iii) The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary of the Company); provided however, that in no event shall the sale or other disposition of the Company's subsidiary American Finance Group, Inc. (AFG) by itself, or the sale or other disposition of the Company's subsidiary PLM Rental, Inc. (PLMR) by itself, be deemed to be a sale or other disposition of all or substantially all of the assets of the Company for the purposes of this Agreement; and further provided however, that in the event either AFG or PLMR is sold or otherwise disposed of during the term of this Agreement, then the later sale or other disposition of PLMR (in the case of an earlier sale or disposition of AFG) or AFG (in the case of an earlier sale or disposition of PLMR) shall be deemed to be a sale or other disposition of all or substantially all of the assets of the Company; or (iv) The stockholders of the Company approve a plan of dissolution or liquidation of the Company. B. In the event that a Change in Control transaction as defined in this Agreement occurs, and such transaction is also deemed to be a Change in Control as defined in and under the Employment Agreement (the "Employment Agreement") dated as of _________ between the Company and Employee (specifically, a majority of the members of the Continuing Directors of the Board of Directors of the Company does not approve the Change in Control event specifically for purposes of the Employment Agreement), then the terms and conditions of the Employment Agreement, including but not limited to Sections 10.2, 11, 12 and 13 thereof, shall govern and supercede this Agreement. 3. Stock Options and Grants. A. Upon the occurrence of a Change in Control, any and all options to purchase stock and grants of stock (common or otherwise) in the Company granted to Employee pursuant to any plan or otherwise, including options granted pursuant to the 1988 Management Stock Compensation Plan and/or the 1998 Management Stock Compensation Plan, and any and all grants of stock in the Company granted to Employee pursuant to the 1996 Mandatory Management Stock Bonus Plan (collectively, any or all of these plans shall be referred to herein as the "Stock Plans"), shall become immediately accelerated and fully vested and any restrictions on such options and grants shall, to the extent permissible under applicable securities laws, fully lapse. The Company shall endeavor to cause any restrictions on the options or grants not lapsed by operation of this Section 3 to so lapse. B. Upon the vesting of all such options and grants (whether pursuant to this Section 3 or Section 6(C)(ii) below) and, in the case of options, so long as such options have not expired, Employee may elect by written notice to the Company at any time following such vesting that the Company "cash-out" such options and/or grants by paying to Employee within five (5) days of the notice the value of the options and/or grants so long as Employee surrenders to the Company, and agrees to the cancellation of, the options or grants. The value of the options and/or grants shall be calculated based on the higher of (i) the price paid to the Company's shareholders in connection with a tender offer that results in a Change in Control or (ii) the average daily closing price of the common stock of the Company for the ten days preceding the date of the Change in Control (or if the accelerated vesting occurs pursuant to Section 6(C)(ii), for the ten days preceding the Date of Termination (as defined below)), less (in the case of options only) the exercise price of the option. In the event Employee does not elect to "cash-out" pursuant to Section 3(B), then Employee's rights regarding such options and grants shall be as set forth in the Stock Plans and agreements governing such options and grants, except that Employee shall be deemed to be fully vested and any restrictions on such options and grants shall remain fully lapsed. 4. Termination By Company In Connection With a Change in Control. A. In the event that Employee's employment is terminated by the Company subsequent to or resulting from a Change in Control for a reason other than Cause or Disability, the Company shall pay Employee the Severance Benefits specified in Section 6(C). B. For purposes of this Agreement, "Cause" shall be limited to: (i) The willful and continued failure by Employee to perform his/her day to day responsibilities substantially in the same manner as performed prior to the Change in Control (other than any failure resulting from Employee's incapacity due to physical or mental illness), which has not been cured within ten (10) days after written demand for substantial performance is delivered by the Company to Employee, which demand specifically identifies the manner in which Employee has not substantially performed his/her day to day responsibilities. The financial condition of the Company (including any subsidiary, division or department thereof), and/or Employee's contribution thereto, shall not be considered for the purposes of determining whether Employee has willfully failed to perform his/her day to day responsibilities; (ii) A willful and intentional act or omission by Employee which is, in the reasonable determination of the Company, materially injurious to the Company, monetarily or otherwise. For purposes of subsection (i) above and this subsection (ii), no act or omission on Employee's part shall be considered willful and intentional unless done, or omitted to be done, by him/her not in good faith and without the reasonable belief that his/her action(s) or omission(s) was in the best interests of the Company; or (iii) The conviction of Employee of, or his/her admission or plea of nolo contendere to, a crime involving an act of moral turpitude, which is a felony or which results or is intended to result, directly or indirectly, in gain or personal enrichment of Employee, relatives of Employee, or their affiliates at the expense of the Company; provided, however, that, notwithstanding anything to the contrary contained in this Section 4(B), "Cause" shall not be deemed to include a refusal by Employee to execute any certificate or document that Employee in good faith determines contains any untrue statement of a material fact. C. For the purposes of this Agreement, Disability shall mean if, as a result of Employee's incapacity due to physical or mental illness, Employee shall have been absent or substantially absent from his/her duties hereunder for a period of six (6) consecutive months, and within thirty (30) days after a Notice of Termination (as hereinafter defined) is given, which Notice of Termination may be given before or after the end of such six month period, Employee shall not have returned to the performance of his/her duties hereunder on a full-time basis, Employee's employment shall terminate upon the expiration of such thirty (30) days. Employee's absence or substantial absence from his/her duties will be treated as resulting from incapacity due to physical or mental illness if Employee is "totally disabled from his/her own occupation." Total disability from Employee's own occupation will exist where (i) because of sickness or injury, Employee cannot perform the important duties of his/her occupation, (ii) Employee is either receiving Doctor's Care or has furnished written proof acceptable to the Company that further Doctor's Care would be of no benefit, and (iii) Employee does not work at all. Doctor's Care means regular and personal care of a Doctor which, under prevailing medical standards, is appropriate for the condition causing the disability. 5. Termination by Employee. A. Employee may terminate his/her employment during the term of this Agreement upon thirty (30) days' Notice of Termination to the Company for any reason. If Employee terminates his/her employment hereunder subsequent to a Change in Control and such termination is made for any of the reasons listed in Section 5(B) (such reason(s) to be detailed in the Notice of Termination), such termination shall be deemed to have been done for good reason ("Good Reason") and the Company shall pay Employee the Severance Benefits specified in Section 6(C), below. B. Reasons constituting "Good Reason" shall include: (i) Any breach by the Company of any material provision of this Agreement which has not been cured within ten (10) days after written notice detailing such non-compliance is given by Employee to the Company; (ii) Any demonstrable and material diminution of the base and/or incentive compensation, duties, responsibilities, authority or powers of Employee as they relate to any positions or offices held by Employee during the term of this Agreement; provided that Employee provides a reasonable description of any such diminution(s) and a statement that Employee finds, in good faith, such diminution to be a material diminution and that, as such, he/she elects to terminate his/her employment hereunder for Good Reason; (iii) The failure of the Company to include Employee in any Employee Benefit Plan or Incentive Compensation Plan for which Employee has previously participated or would reasonably expect to participate in. Employee may reasonably expect to participate in an Employee Benefit Plan or Incentive Compensation Plan if, without limitation, other employees of the Company with similar titles, levels of responsibilities or salaries participate or have participated in such plan; or (iv) Any requirement by the Company that Employee relocate his/her primary business office to a geographical area greater than twenty (20) miles from the Company 's principal executive offices as existing on January 1, 1999, or if Employee is based in an office other than the Company's principal executive offices, twenty (20) miles from the Company's office where Employee is based as of January 1, 1999. C. In the event Employee terminates his/her employment for Good Reason and the Company disputes that the termination was for Good Reason, the Company shall have the burden of proving that any such reason was not "Good Reason". 6. Compensation Upon Termination. A. Termination For Cause. Following a Change in Control, if Employee's employment is terminated for Cause as defined in this Agreement, the Company shall pay Employee his/her full Base Salary (and any accrued but unused vacation and personal days) through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations to Employee under this Agreement. The rights, limitations and obligations of each of the Employee and the Company under any other agreement or plan, including but not limited to any stock option or bonus plan, deferred compensation plan and related agreement(s), as of the Date of Termination shall remain in full force and effect. B. Termination for Disability. Following a Change in Control, if Employee's employment is terminated for Disability as defined in this Agreement, the Company shall pay to Employee his/her full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given. The Company shall also pay to Employee any accrued but unused vacation and personal days, and the Company shall also provide benefits to Employee pursuant to the standard policy of the Company with respect to terminated disabled employees. The rights, limitations and obligations of each of the Employee and the Company under any other agreement or plan, including but not limited to any stock option or bonus plan, deferred compensation plan and related agreement(s), as of the Date of Termination shall remain in full force and effect. C. Termination Without Cause or Termination by Employee For Good Reason. If, (a) subsequent to or resulting from a Change in Control the Company terminates Employee's employment hereunder other than for Cause or Disability, or (b) subsequent to a Change in Control Employee terminates his/her employment for Good Reason, the Company shall, in addition to paying Employee his/her full Base Salary through the Date of Termination at the rate in effect at the time the Notice of Termination is given and any accrued but unused vacation and personal days (as required by law), pay to Employee within seven (7) business days of the Date of Termination, and provide to Employee, the following severance benefits: (i) The Company shall pay to Employee a lump sum amount equal to _________ (__) months of Employee's Base Salary at the highest rate in effect during the twelve (12) months immediately preceding the Date of Termination, less customary payroll deductions; (ii) Any and all options to purchase stock (common or otherwise) in the Company granted to Employee following a Change in Control pursuant to any plan or otherwise, and any and all grants of stock in the Company granted to Employee following a Change in Control pursuant to any plan or otherwise, shall become immediately accelerated and fully vested and any restrictions on such options, grants or equivalent or similar rights shall, to the extent permissible under applicable securities laws, fully lapse. The Company shall endeavor to cause any restrictions on the options, grants or equivalent or similar rights not lapsed by operation of this Section 6(C) to so lapse. Employee shall have the same rights in such accelerated and vested options and grants as provided in Section 3(B) and the Company shall pay to Employee the value of the options and/or grants upon receipt of Employee's written notice of his/her election to "cash-out" pursuant to Section 3(B); (iii) At the Employee's election by written notice to the Company made within four (4) business days following the Date of Termination, the Company shall pay to Employee in a lump sum the total amount of any Monthly Executive Compensation Benefit payments that are payable under the Executive Deferred Compensation Agreement (the "Executive Deferred Compensation Agreement") dated as of ______, between the Company and Employee, which amount shall have been determined pursuant to the terms of Sections 5(a) and 5(b) of the Executive Deferred Compensation Agreement after taking into consideration the automatic acceleration of vesting as provided in Section 10.1, including Section 10.1(a) and 10.1(b), of the Executive Deferred Compensation Agreement. In the event Employee does not elect to a lump sum payment of the total amount of any Monthly Executive Compensation Benefit payments that are payable under the Executive Deferred Compensation Agreement, then such amounts shall be paid pursuant to the terms of such Executive Deferred Compensation Agreement; and (iv) Employee shall continue to participate in all life insurance, medical, health, dental and disability plans, programs or arrangements ("Insurance Plans") in which Employee participated immediately prior to the Date of Termination on the same terms as Employee participated immediately prior to the Date of Termination for the shorter period of (a) months from the Date of Termination or (b) Employee's commencement of full time employment with a new company that provides Employee with benefits at least as favorable as those provided by the Company; provided that Employee's continued participation is possible under the general terms and provisions of such plans and programs and Employee will continue to be obligated to pay the same employee portion of any premium and any deductible and/or co-payments associated with such insurance Plans as was required immediately prior to the Date of Termination. Employee's right to continued group benefits after any period covered by the Company will be determined in accordance with federal and state law. (v) The payments and benefits provided for in this Section 6(C) are in addition to, and shall not be deemed to be in lieu of, any other payments and/or benefits to which Employee is entitled, including without limitation any and all payments and benefits under any other pension and retirement plan and arrangement, supplemental pension and retirement plan and arrangement, stock option plan(s), and/or insurance and disability plans. D. Other Termination by Employee. If following a Change in Control Employee terminates his/her employment for any reason other than Good Reason, the Company shall pay to Employee his/her full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and any accrued but unused vacation and personal days, and the Company shall have no further obligations to Employee under this Agreement. The rights, limitations and obligations of each of the Employee and the Company under any other agreement or plan, including but not limited to any stock option or bonus plan, deferred compensation plan and related agreement(s), as of the Date of Termination shall remain in full force and effect. E. Termination Prior to a Change in Control. This Agreement does not provide for the payment or provision of severance benefits in connection with a termination by Employee or the Company prior to and not in connection with a Change in Control. Employee's rights to any such benefits shall continue to be governed by law or other written agreement, if any exists between Employee and the Company, and nothing in this Agreement is intended to change, or shall be construed as changing, any of the legal or contractual rights of either party to terminate Employee's employment (for Cause, at-will, for Good Reason, or otherwise) prior to and not in connection with a Change in Control. F. Section 280G. Notwithstanding any other provisions of this Agreement or any other agreement between the Company and the Executive, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company or any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (all such payments and benefits, including the severance benefits provided hereunder, being hereinafter called "Total Payments") would not be deductible (in whole or part), by the Company, an affiliate or Person making such payment or providing such benefit as a result of section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), then, to the extent necessary to make such portion of the Total Payments deductible (and after taking into account any reduction in the Total Payments provided by reason of section 280G of the Code in such other plan, arrangement or agreement), the benefits provided hereunder shall be reduced (if necessary, to zero); provided, however, that, notwithstanding the terms of any other plan or agreement, the Executive may elect to have the benefits payable under any other plan or agreement reduced (or eliminated) prior to any reduction of the benefits payable under this Agreement, which may include, in the case of the Executive Deferred Compensation Agreement (if Employee is a party to such agreement), an election to reduce the Executive's Compensation Period under the Executive Deferred Compensation Agreement (without increasing the amount determined under Section 1.1 of the Executive Deferred Compensation Agreement as Executive's Monthly Deferred Compensation Benefit). (i) For purposes of this limitation, (a) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a "payment" within the meaning of section 280G(b) of the Code shall be taken into account, (b) no portion of the Total Payments shall be taken into account that, in the opinion of tax counsel ("Tax Counsel") selected by the Executive and reasonably accepted by the Company, does not constitute a "parachute payment" within the meaning of section 280G(b)(2) of the Code, including by reason of section 280G(b)(4)(A) of the Code, (c) the benefits payable under this Agreement shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clauses (a) or (b)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of section 280G(b)(4)(B) of the Code or are otherwise not subject to disallowance as deductions by reason of section 280G of the Code, in the opinion of Tax Counsel, and (d) the value of any noncash benefit or any deferred payment or benefit included in the Total Payments shall be determined in accordance with the principles of sections 280G(d)(3) and (4) of the Code. (ii) If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that, notwithstanding the good faith of the Executive and the Company in applying the terms of this Section 6(F), the Total Payments paid to or for the Executive's benefit are in an amount that would result in any portion of such Total Payments being subject to the Excise Tax, then, if such repayment would result in (a) no portion of the remaining Total Payments being subject to the Excise Tax and (b) a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes, the Executive shall have an obligation to pay the Company upon demand an amount equal to the sum of (x) the excess of the Total Payments paid to or for the Executive's benefit over the Total Payments that could have been paid to or for the Executive's benefit without any portion of such Total Payments being subject to the Excise Tax; and (y) interest on the amount set forth in clause (x) of this sentence at the rate provided in section 1274(b)(2)(B) of the Code from the date of the Executive's receipt of such excess until the date of such payment. (iii) By execution and delivery of this Agreement, the provisions of Section 10.4 of the Executive Deferred Compensation Agreement are hereby superseded and such section is hereby declared null and void. 7. Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise and, except as otherwise provided in Section 6(C)(iv), no payment or benefit provided for in this Agreement shall be reduced by any compensation earned by Employee as the result of employment by another employer after the termination of his/her employment with the Company. 8. Other Definitions. The following definitions shall apply for purposes of this Agreement: A. Notice of Termination. Any purported termination by the Company or by Employee shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon. Any purported termination of Employee's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of this paragraph shall not be effective. B. Date of Termination. "Date of Termination" shall mean, as applicable, (a) if Employee's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that Employee shall not have returned to the performance of his/her duties on a full-time basis during such thirty (30) day period), (b) the date specified in the Notice of Termination in compliance with the terms of this Agreement, or (c) if no date is specified, the date on which a Notice of Termination is given. 9. Successors; Binding Agreement. A. The Company shall require any successors or assigns (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent as if they were an original party hereto, and this Agreement shall inure to the benefit of any such successor or assign. B. This Agreement shall inure to the benefit of and be enforceable by Employee's executors, administrators, successors, heirs, distributes, devisees and legatees. 10. Other Agreements. Except as expressly set forth herein, nothing in this Agreement is intended to alter the obligations of the Company and/or the Employee in connection with any other written agreement between the Company and the Employee, including any employment agreement, option agreement, deferred compensation agreement, confidentiality agreement or indemnity agreement. 11. Covenant Not to Compete. In consideration of the mutual terms and agreements set forth herein, Employee hereby agrees that until the first anniversary of Employee's Date of Termination, (i) Employee will not recruit any employee of the Company or its subsidiaries or solicit or induce, or attempt to solicit or induce, any employee of the Company or its subsidiaries, provided that nothing herein shall preclude Employee from hiring any person who contacts Employee for employment and who has not been employed by the Company or its subsidiaries at any time during the preceding six months, and (ii) provided that Employee has received the severance benefits described in Section 6(C) hereof, Employee will not solicit, divert or take away, or attempt to solicit, divert or take away, the business or patronage of any of existing clients, customers or accounts of the Company or its Subsidiaries. For purposes of this Section 11, a client, customer or account of the Company shall be deemed to be an existing client, customer or account if such client, customer or account is a party to a rental, term or master lease with the Company or is being invoiced on a regular basis by the Company as of the Date of Termination. 12. Miscellaneous. 12.1 Written notices required by this Agreement shall be delivered to the Company or Employee in person or sent by overnight courier or certified mail, with a return receipt requested, to the Company's registered address and to Employee's last shown address on the Company's records, respectively. Notice sent by certified mail shall be deemed to be delivered two days after mailing, and all other notices shall be deemed to be delivered when received. 12.2 This Agreement contains the full and complete understanding of the parties regarding the subject matter contained herein and supersedes all prior representations, promises, agreements and warranties, whether oral or written. 12.3 This Agreement shall be governed by and interpreted according to the laws of the state of California. 12.4 The captions of the various sections of this Agreement are inserted only for convenience and shall not be considered in construing this Agreement. 12.5 This Agreement can be modified, amended or any of its terms waived only by a writing signed by both parties. 12.6 If any provision of this Agreement shall be held invalid, illegal or unenforceable, the remaining provisions of the Agreement shall remain in full force and effect and the invalid, illegal or unenforceable provision shall be limited or eliminated only to the extent necessary to remove such invalidity, illegality or unenforceability in accordance with the applicable law at that time. 12.7 In the event the Company is party to a transaction which is otherwise intended to qualify for "pooling of interests accounting treatment, then (A) this Agreement shall, to the extent practicable, be interpreted so as to permit such accounting treatment, and (B) to the extent that the application of clause (A) of this Section 12.7 does not preserve the availability of such accounting treatment, then, to the extent that any provision of the Agreement disqualifies the transaction as a "pooling" transaction (including if applicable, the entire Agreement), such provision shall be null and void as of the date hereof. All determinations under this Section 12.7 shall be made by the accounting firm whose opinion with respect to "pooling of interests" is required as a condition of consummation of such transaction. 12.8 If either party institutes an action to enforce the terms of this Agreement, the prevailing party in such action shall be entitled to recover reasonable attorneys' fee, costs and expenses. 12.9 No remedy made available to either party by any of the provisions of this Agreement is intended to be exclusive of any other remedy. Each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder as well as those remedies existing at law, in equity, by statute or otherwise. IN WITNESS WHEREOF, the parties have executed this document under seal as of the date specified above. PLM INTERNATIONAL, INC. EMPLOYEE By: __________________________ _________________________________ Its: __________________________ ATTEST: _______________________ ATTEST: _____________________ EX-10.2 4 Amendment No. 1 to Master Lease dated April 2, 1999 Between PLM International, Inc. ("Lessee") And Wells Fargo Equipment Finance, Inc. ("Lessor") Lessor and Lessee hereby agree to amend the Lease as follows: 1. Paragraph 6 is amended by adding the following to the end thereof: For Administrative convenience and as an accommodation to Lessee, Lessor agrees that Lessee may be named as owner on certificate of titles for the Equipment. 2. Paragraph 9 is amended by adding the following to the end thereof: Notwithstanding anything to the contrary in this paragraph 9, Lessee may, from time to time, sublet the Equipment without the prior consent of Lessor, provided however that Lessee shall remain fully obligated to Lessor under this Lease and the term of the sublease shall not extend beyond the term of the Lease. 3. The last sentence of paragraph 12 is amended to read: Any insurance or condemnation proceeds received shall be credited to Lessee's obligation under this paragraph and Lessee shall be entitled to any surplus. 4. Except as modified herein, the terms and conditions of the Lease remain the same. IN WITNESS WHEREOF, Lessor and Lessee have executed this Amendment this 2nd day of April, 1999. Wells Fargo Equipment Finance, Inc. PLM International, Inc. By: /s/ Sheryl L. Parranto By: /s/ J. Michael Allgood Its: Officer Its: V.P. and CFO EX-10.3 5 TRUCK LEASE AGREEMENT (TRAC/Non-Maintenance) THIS LEASE AGREEMENT is made as of August 25, 1999 by and between Associates Leasing, Inc. (hereinafter called "Lessor"), an Indiana corporation with a place of business located at 6160 Stoneridge Mall Rd., Stuite #280, Pleasanton, CA 94588 and PLM International, Inc., (hereinafter "Lessee"), a Delaware corporation with its principal place of business located at One Market, Steuart Street Tower, Suite 800, San Francisco, CA 94105. IN CONSIDERATION of the mutual covenants hereinafter contained, Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, one or more vehicles as shall from time to time be described in Schedules, Vehicle Purchase Orders or Delivery Receipts executed by authorized employees and agents of Lessee and accepted by Lessor, at its sole discretion, for the rental and lease term and upon the terms and conditions set forth below: 1. THIS AGREEMENT is a contract of leasing only and shall consist of the general terms and conditions stated herein which shall be applicable to every Vehicle leased hereunder, any Schedule which may hereafter be attached hereto describing certain Vehicles either individually or as a class and the specific terms for each, and Delivery Receipts or other evidences of ordering or delivery for each Vehicle delivered to Lessee by Lessor. without limiting the generality of the above, it is agreed that the terms hereof may be changed for specific Vehicles by the Schedules relating thereto. All of said Schedules, Delivery Receipts and evidences of ordering or delivery are hereby incorporated by reference and made a part hereof. Wherever used herein, the term "Vehicle" or "Vehicles" shall mean such passenger automobiles, trucks and other vehicles and trailers as are leased hereunder from time to time, together with all additional equipment and accessories thereon. Vehicles shall at all times remain the property of, and shall be registered in the name of Lessor, but shall be under the full and complete control of Lessee. During the term of this lease renewal of registration in the name of Lessor shall be the responsibility and expense of Lessee, and Lessor will, upon Lessee's request, furnish to Lessee a power of attorney to this end. Lessee recognizes that it has acquired no right, title, option or interest in or to any of the Vehicles and agrees that it shall not assert any claim in or to an interest in any Vehicle other than that of a lessee. Lessee shall at all times, and at its sole expense and cost, keep the Vehicle(s) free from all levies, attachments, liens and encumbrances and other judicial process other than those arising solely from acts of Lessor. Lessee shall give Lessor immediate written notice of any action taken by a third party which may jeopardize Lessor's rights in any Vehicle and shall indemnify and hold Lessor harmless from any loss or damages caused thereby. 2. LESSEE AGREES to pay Monthly Rental for each Vehicle in the amounts stated in the Schedule "A" applicable to such Vehicle. Such amounts shall be equal to the product of the Monthly Rental Factors stated in such Schedule for such Vehicle multiplied by the Schedule "A" Value of such vehicle stated in such Schedule. The Monthly Rentals are subject to final depreciation adjustment as provided in Section 9 of this Lease, using a Final Adjustment Percentage which is stated in the Schedule "B" applicable to such Vehicle. "Schedule "A" Value" as used herein shall mean the amount designated as such in the Schedule "A" of such Vehicle, representing the value of such Vehicle as determined by Lessor. Lessee acknowledges that Schedule "A" Values set forth in the Schedules are based upon the manufacturer's price and the amount of required equipment in effect on the date the Schedule is executed. The "Residual Value" assigned to each Vehicle represents the product of (a) the Schedule "A" Value multiplied by (b) the Final Adjustment Percentage corresponding to expiration of the Maximum Term for such Vehicle, and is provided for informational purposes only. In addition to the Monthly Rental, Lessee shall pay to Lessor upon demand and as Additional Rental all other charges payable by Lessee which have been paid by Lessor. Lessor shall provide Lessee with documentation of any such charges sufficient to enable Lessee to account for such payments. 3. THE TERM of this Lease in relation to each Vehicle shall extend for a period not in excess of the Maximum Term noted in the Schedule 'A" relating to such Vehicle. The Lease Term shall commence on the earlier of (i) the date when such Vehicle is delivered to Lessee or (ii) forty-eight hours after Lessee has been notified, orally or in writing, that the Vehicle is ready for delivery (hereinafter called the "Delivery Date"). If the Delivery Date for such Vehicle is on or before the fifteenth day of a month, the Monthly Rental for such Vehicle shall commence as of the first day of such calendar month and if the Delivery Date for such Vehicle is on or after the sixteenth day of a month, the Monthly Rental for such Vehicle shall commence as of the first day of the next succeeding calendar month. Lessee may terminate this Lease as to any Vehicle on any anniversary of the Delivery Date for such Vehicle by (i) giving notice to Lessor; and either (ii) returning such Vehicle to Lessor on such anniversary date in accordance with Section 8 hereof; and paying to Lessor any amount owing pursuant to Section 9 hereof relating to such Vehicle; or (iii) paying to Lessor the Final Adjustment Amount relating to such Vehicle. For each Vehicle so terminated, the term of this Lease shall end on the earlier of (i) the date Lessee pays to Lessor the Final Adjustment Amount relating to such Vehicle; (ii) the date such Vehicle is sold in accordance with Section 8 hereof or (iii) forty-five days after the later of (a) such anniversary date or (b) the date the Vehicle is actually returned to Lessor and for each Vehicle as to which the Maximum Term has expired, the term of this Lease shall end on the earlier of (i) the date such Vehicle is sold in accordance with Section 8 hereof or (ii) forty-five days after the later of (a) the last day of the Maximum Term or (b) the date the Vehicle is actually returned to Lessor. if such date is before the fifteenth day of a month, no Monthly Rental for such Vehicle shall be payable for such month; if such date is on or after the fifteenth day of a month, a full Monthly Rental shall be payable for such month without proration. Lessee may terminate this Lease as to any Vehicle effective at any other time only upon terms hereafter agreed to by Lessor. Lessor's failure to deliver vehicles at the time and places specified, by reason of labor disorders or other circumstances or events beyond the control of Lessor, shall not impute liability of any kind to Lessor. 4. THIS LEASE MAY BE TERMINATED by either party regarding vehicles not then ordered or under lease by giving written notice thereof to the other party at least five days in advance of the proposed termination date. After the giving of such notice no additional or replacement vehicles will be delivered for lease hereunder. Notwithstanding expiration or termination, all of the provisions of the Lease shall continue in full force and effect with respect to each Vehicle then ordered pursuant to request of Lessee or then under lease until the end of the lease term for such Vehicle as provided in Section 3 hereof. 5. USE OF VEHICLES under this Lease is permitted only in the conduct of Lessee's business in the United States and occasionally in Canada and only for lawful purposes. The conduct of Lessee's business shall consist of subleasing the Vehicles from time to time to various third-party sublessess. When not subleased, the Vehicles shall be stored at any of Lessee's *number rental business locations throughout the United States. Lessee shall require all sublessees of the Vehicles to comply with all relevant provisions of this Lease Agreement. No Vehicle shall be used off an improved road or for transportation of passengers or of material designated as extra-hazardous, radioactive, flammable or explosive. Lessee will permit the Vehicles to be operated only by safe and careful drivers who are qualified and properly licensed in accordance with the laws of the jurisdiction where such Vehicles are used. All operators of the Vehicles will be conclusively presumed to be the agents, employees or servants of Lessee and not of Lessor. Upon any complaint from Lessor specifying illegal, negligent, reckless, careless or abusive handling of the Vehicles, Lessee shall promptly take such steps as may be necessary to stop and prevent the recurrence of any such practice. Lessee shall in all respects comply, and cause all persons operating the Vehicles to comply, with all applicable requirements of law (including but not limited to rules, regulations, statutes and ordinances) relating to the licensing maintenance and operation of the Vehicles (including weight limitations, tire requirements, load, axle and spring limits) and with all terms and conditions of policies of insurance relating to the Vehicle. Lessee agrees that it will not load any Vehicle in excess of the lesser of (i) the payload capacity noted in the manufacturer's specifications for such Vehicle or (ii) the maximum amount permitted by applicable law. 6. MONTHLY RENTAL and all other amounts owing by Lessee shall be paid to Lessor at its address stated on page one hereof or at such other place as Lessor shall hereafter notify Lessee in writing. Monthly Rentals shall be due and payable in advance on the first day of each and every month during the term hereof; provided, however, that the first Monthly Rental for a Vehicle with a Delivery Date on or before the fifteenth day of a month shall be due and payable on the Delivery Date, whether or not Lessee shall have received a statement for such amount. Lessor will render to Lessee monthly statements of the amounts payable on all Vehicles under this Lease and Lessee shall, within ten (10) days after receipt of such statements, make payment by one wire transfer for each such statement to the order of Lessor for the Monthly Rental, Additional Rent and other sums, if any, covered by such statements without abatement, off-set or counterclaim arising out of any circumstance whatsoever. Lessee hereby waives any and all existing or future claims of off-set against the Monthly Rentals, Additional Rents and Adjusted Rents due hereunder, and agrees to make such payments regardless of any off-set or claim which may be asserted by Lessee or on its behalf. For each Monthly Rental or other sum due hereunder which is not paid when due, Lessee agrees to pay Lessor a delinquency charge calculated thereon at the rate of 1 1/2% per month for the period of delinquency or, at Lessor's option, 5% of such Monthly Rental or other sum due hereunder, provided that such a delinquency charge is not prohibited by law, otherwise at the highest rate Lessee can legally obligate itself to pay and/or Lessor can legally collect. 7. FEES, TAXES, GOVERNMENTAL ASSESSMENTS AND CHARGES (INCLUDING INTEREST AND PENALTIES THEREON) of whatsoever nature, by whomsoever payable, (other than federal, state or local taxes levied on the net income of Lessor) levied, assessed or incurred during the entire term of the Lease in connection with the Vehicles including, but not limited to, the titling and registration of the Vehicles in all jurisdictions required by the nature of Lessee's business and the purchase, sale, ownership, rental, use, inspection and operation thereof, shall be paid by Lessee. In the event any of said fees, taxes, governmental assessments and charges shall have been paid by Lessor, or if Lessor is required to collect or pay any thereof, Lessee shall reimburse Lessor therefor, upon demand, as Additional Rent, to the end that Lessor shall receive the rental as provided in Sections 2 and 9 hereof as a net return on the Vehicles. If requested by Lessor, Lessee agrees to file, or to refrain from filing, on behalf of Lessor in form satisfactory to Lessor and before the due date thereof, all required tax returns and reports concerning the Vehicles with all appropriate governmental agencies and to mail a copy thereof to Lessor concurrently with the filing thereof. Lessee further agrees to keep or cause to be kept and made available to Lessor any and all necessary records relative to the use of the Vehicles and/or pertaining to the aforesaid fees, taxes, goverrmental, assessments and charges. Lessee's obligations under this Section shall survive the expiration or termination of this Lease. 8. LESSEE SHALL RETURN each Vehicle to Lessor, at Lessee's expense, at the expiration or termination of this Lease in relation to such Vehicle at the location where delivery was made or at such other location as is designated by Lessor in the same working order, condition and repair as when received by Lessee, excepting only reasonable wear and tear caused by normal usage of such Vehicle, together with all license plates, registration certificates, or other documents relating to such Vehicle. Upon request of Lessee, Lessor may at its sole discretion allow Lessee to retain some or all of such license plates or other documents. Unless otherwise agreed by Lessor, Lessee shall give Lessor at least sixty, and not more than ninety, days notice of the return of any Vehicle. After said return, Lessor shall cause such Vehicle to be sold at public or private sale, at wholesale, for the highest cash offer received and still open at the time of sale. The "net sale proceeds" for said Vehicle shall be the net amount received and paid to Lessor after deducting the cost of sale, the cost of cleaning, repairing, equipping or transporting said vehicle and any other expenses of Lessor in connection therewith. Alternatively, Lessee may purchase each Vehicle for the Final Adjustment Amount. Upon receipt of payment of the Final Adjustment Amount together with any and all applicable sales or other taxes due in connection therewith, and any and all remaining sums or other amounts payable under this Lease Agreement or a relevant Schedule, Lessor shall transfer all its right, title and interest in and to the Vehicle to Lessee. The Vehicle shall be transferred AS-IS and WHERE-IS without any express or implied representations or warranties. 9. FINAL ADJUSTMENT for each Vehicle will be made upon receipt of the net sale proceeds therefor and, unless any default shall have occurred and except as provided below; Lessor shall pay to Lessee the amount, if any, by which the sum of (a) the net sale proceeds, and (b) surplus insurance recoveries, if any, on such Vehicle, exceeds (c) a Final Adjustment Amount, as defined herein, for such vehicle calculated as of the rental payment date next preceding the date such Vehicle was returned to Lessor (referred to hereafter as the "Calculation Date'). The Final Adjustment Amount for any Vehicle as of a Calculation Date shall be computed by multiplying the Schedule 'Al Value for such Vehicle by that percentage ("Final Adjustment Percentage") opposite the respective Calculation Date as set forth in the Final Adjustment Table attached hereto as Schedule B. If the sum of items (a) and (b) is less than item (c), Lessee shall, within ten days after notice thereof, pay the deficiency to Lessor as Adjusted Rental without abatement, off-set or counterclaim arising out of any circumstance whatsoever. Lessor shall promptly determine the aforesaid amounts and shall render statements therefor to Lessee. Lessor may apply any sums received as proceeds from any vehicle which would otherwise be due to Lessee hereunder against any other obligation of Lessee and Lessor may off-set the amount of any such rental adjustment against any claim it may have against Lessee. 10. LOSS OF OR DAMAGE TO EACH VEHICLE and loss of use thereof, from whatsoever cause, are risks hereby assumed by Lessee from the date hereof until such Vehicle is returned to and sold by Lessor. If any Vehicle is lost, stolen, damaged or destroyed, Lessee shall promptly notify Lessor thereof. Lessor shall have no obligation to repair or replace any such Vehicle. There shall be no abatement of rental otherwise due hereunder during the period a vehicle is stolen or missing or during the time required for any repair, adjustment, servicing or replacement of a Vehicle and Monthly Rentals will continue to accrue until Final Adjustment is made. Final Adjustment in relation to lost, stolen or destroyed Vehicles shall be made as provided in Section 9, promptly upon payment of the Final Adjustment Amount or after sale of the salvage and/or receipt of insurance proceeds, as applicable or within forty-five days after such loss, theft or destruction; whichever is earlier. For purposes of Final Adjustment, lost or stolen Vehicles shall be deemed to have been sold as of the date of such loss or theft, and the amount of net sale proceeds therefor shall be deemed to be zero. In no event shall Lessor be liable to Lessee, its employees or agents for business or other losses by reason of loss, theft, destruction, repair, servicing or replacement of any Vehicle. ll.A LIABILITY AND PHYSICAL DAMAGE INSURANCE, for bodily injury and property damage to others, and damage to or loss of vehicles by collision, fire, theft, or otherwise, from the time each Vehicle is delivered to Lessee until the Vehicle is sold after return to Lessor and legal title passes to the purchaser thereof, shall be purchased and maintained by Lessee. Lessor shall not be required to order vehicles for Lessee's use until binders disclosing insurance coverage as herein provided have been delivered to Lessor. All insurance policies shall provide primary coverage, shall name Lessor as additional insured, shall be in such amounts and with such insurers as shall be approved by Lessor, shall provide for a minimum of 15 days prior written notice to Lessor before cancellation or material change for any reason, and shall provide that no act or default of any person other than Lessor shall affect Lessor's right to recovery under such policies. The minimum requirement shall be a combined single limit of $1,000,000 and actual cash value for fire, theft, comprehensive and collision. Lessor may from time to time by notice to Lessee specify higher minimum requirements or additional risks to be insured against. Lessee shall deliver the policies or other satisfactory evidence of insurance required hereunder to Lessor, but Lessor shall be under no duty to examine such evidence of insurance nor to advise Lessee in the event said insurance is not in compliance with this Lease. Evidence of renewal of all expiring policies will be delivered to Lessor at least 60 days prior to their respective expiration dates. Lessor does not assume any liability for loss of or damage to the contents or personal property contained in any Vehicles, and Lessee hereby releases and saves Lessor free from any and all liability for loss of or damage to any contents or personal property contained in said Vehicles regardless of the circumstances under which such loss or damage may occur. ll.B INDEMNITIES: The term "Liabilities" as used herein shall include any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements of whatsoever kind and nature, including legal fees and expenses, (whether or not any of the transactions contemplated hereby are consummated), imposed on, incurred by or asserted against Lessor (which term as used herein shall include Lessor's successors, assigns, agents, employees and servants) or the Vehicles (whether by way of strict or absolute liability or otherwise), and in any way relating to or arising out of this lease or the selection, manufacture, purchase, acceptance, ownership, delivery, non-delivery, lease, possession, use, operation, condition, servicing, maintenance, repair, improvement, alteration, replacement, storage, return other disposition of the Vehicles including, but not limited to, (i) claims as a result of latent, patent or other defects, whether or not discoverable by Lessor and Lessee; (ii) claims for patent, trademark or copyright infringement; (iii) tort claims of any kind, (whether based on strict liability, on Lessor's alleged negligence or otherwise), including claims for injury or damage to property or injury or death to any person (including Lessee's employees); and (iv) claims for any interruption of service or loss of business or anticipatory profits, or consequential damages. Lessor shall have no responsibility or liability to Lessee, its successors or assigns, or any other person with respect to any and all Liabilities and, irrespective of any insurance coverage and commencing on the date each Vehicle is ready for delivery to Lessee, Lessee hereby assumes liability for, and hereby agrees, at its sole cost and expense, to indemnify, defend, protect, save and keep harmless Lessor from and against any and all Liabilities. Where a Vehicle is operated by Lessee with a trailer or other equipment not covered by this Lease, then in such event, Lessee warrants that such trailer or other equipment will be in good operating condition, compatible in all respects with the Vehicles with which such trailer or other equipment is to be used, and in all respects in full compliance with all federal, state and local statutes, ordinances, rules or regulations covering said trailer or other equipment, including but not limited to all licensing and operating requirements. Lessee hereby assumes liability for, and hereby agrees, at its sole cost and expense, to indemnify, defend, protect, save and keep harmless Lessor from and against any and all costs, expenses, damages, (including damages for loss of any Vehicles leased hereunder) and Liabilities resulting from Lessee's failure to properly connect, operate or maintain such trailer or other equipment or to comply with any of the foregoing requirements or from any other cause. Lessee agrees to give Lessor prompt written notice of any claim or liability hereunder indemnified against. ll.C LESSEE'S TAX RELATED INDEMNITIES to Lessor are as follows: (1) General Indemnity. Lessee agrees to pay and to indemnify and hold Lessor harmless, on an after-tax basis, from and against all sales, use, personal property, leasing, leasing use, stamp or other taxes, levies, imposts, duties, charges or withholdings of any nature (together with any penalties, fines or interest thereon) now or hereafter imposed against Lessor, Lessee or the Vehicles or any part thereof or upon the purchase, ownership, delivery, leasing, possession, use, operation, return or other disposition thereof, or upon the rentals, receipts or earnings arising therefrom, or upon or with respect to this Lease (excluding, however, Federal and State taxes on, or measured by, the net income of Lessor). Lessee agrees to file, on behalf of Lessor, all required tax returns concerning the Vehicles with all appropriate governmental agencies and to furnish to Lessor a copy of each such return, including evidence of payment, promptly after the due date of each such filing; provided, that, in the event Lessee is not permitted to file any such return on behalf of Lessor, then Lessee agrees to prepare and forward each such return to Lessor in a timely manner with instructions to Lessor with respect to the filing thereof. (2) Income Tax Indemnity. Lessee and Lessor agree that Lessor shall be entitled to accelerated cost recovery (or depreciation) deductions with respect to the Vehicles, and if and only if as the result of the acts or omissions of the Lessee, either the United States government or any state tax authority disallow, eliminate, reduce, recapture, or disqualify, in whole or in part, any benefits consisting of accelerated cost recovery (or depreciation) deduction with respect to any Vehicle, Lessee shall then indemnify Lessor by payment to Lessor, upon demand, of a sum which shall be equal to the amount necessary to permit Lessor to receive (on an after-tax basis over the full term of this Lease) the same after-tax cash flow and after-tax yield assumed by Lessor in evaluating the transactions contemplated by this Lease (referred to hereafter as 'Economic Return") that Lessor would have realized had there not been a loss or disallowance of such benefits, together with, on an after-tax basis, any interest or penalties which may be assessed by the governmental authority with respect to such loss or disallowance. In addition, if Lessee shall make any addition or improvement to any Vehicle, and as a result thereof, Lessor is required to include an additional amount in its taxable income, Lessee shall also pay to Lessor, upon demand, an amount which shall be equal to the amount necessary to permit Lessor to receive (on an after-tax basis over the full term of this Lease) the same Economic Return that Lessor would have realized had such addition or improvement not been made. (3) Payment and Enforceability. All amounts payable by Lessee pursuant to subsection ll.C.(l) or ll.C.(2) shall be payable directly to Lessor except to the extent paid to a governmental agency or taxing authority. All the indemnities contained in subsection ll.C.(l) or ll.C.(2) shall continue in full force and effect notwithstanding the expiration or other termination of this Lease in whole or in part and are expressly made for the benefit of, and shall be enforceable by, Lessor. Lessee's obligations under subsection ll.C.(l) and ll.C.(2) shall be that of primary obligor irrespective of whether Lessor shall also be indemnified with respect to the same matter under some other agreement by another party. (4) Duration. The obligations of Lessee under subsection ll.C. are expressly made for the benefit of, and shall be enforceable by, Lessor without necessity of declaring this Lease in default and Lessor may initially proceed directly against Lessee under this subsection ll.C. without first resorting to any other rights of indemnification it may have. In the event that, during the continuance of this Lease, an event occurs which gives rise to a liability pursuant to this subsection ll.C., such liability shall continue, notwithstanding the expiration or termination of this Lease, until all payments or reimbursements with respect to such liability are made. ll.D ALL OF LESSEE'S obligations, indemnities and liabilities under this Section 11 shall survive the expiration or termination of this Lease. Notwithstanding anything else herein to the contrary, in the event that Lessee fails to procure or maintain insurance as above provided or fails to perform any other of Lessee's duties or obligations as set forth in this Lease, Lessor may, but shall have no obligation to, obtain such insurance at Lessee's expense and perform such other duties and obligations of Lessee and any amounts expended therefor shall be due and payable immediately as Additional Rent. Lessee shall not use or permit the use of any Vehicle at any time when the insurance described above is not in effect. 12.A EXPENSE OF OPERATION AND MAINTERNCE of Vehicles in accordance with manufacturer's recommendations and in condition satisfactory to Lessor, including but not limited to, cost of fuel, oil, grease, repairs, maintenance, tires, tubes, storage, parking, tolls, fines and penalties shall be the responsibility and obligation of Lessee. Lessee shall reimburse Lessor if Lessor shall pay any of such operating or maintenance expenses. If tires or parts are removed from a Vehicle, Lessee shall provide comparable replacements therefor and such replacements shall become part of the Vehicles by accession. Lessor may inspect the Vehicles and Lessee's books and records relating thereto at any time during Lessor's usual business hours. Lessee agrees to remove all markings from the Vehicles, at Lessee's expense, prior to the return of the Vehicles to Lessor. 12.B ADDITIONAL EQUIPMENT REQUIRED BY LAW. In the event that subsequent to the Delivery Date of a Vehicle any federal, state or local law, ordinance, rule or regulation shall require the installation of any additional equipment or accessories, including but not limited to anti-pollution and/or safety devices, or in the event that any other modifications of the Vehicles shall be required by virtue of such law, ordinance, rule or regulation, then and in any of such events, Lessee shall pay the full cost thereof, including installation expenses. Lessor may, at its option, arrange for the installation of such equipment or the performance of such modifications, and Lessee agrees to pay the full cost thereof as Additional Rent, immediately upon receipt of an invoice for same. 13. NO WARRANTIES; LIMITATION ON LIABILITY: Lessee acknowledges and agrees (i) that the Vehicles are of a size, design, capacity and manufacture selected by Lessee, (ii) that the Lessor is not the manufacturer or seller of the Vehicles or the manufacturer's or seller's agent and (iii) that LESSEE LEASES THE VEHICLES "AS-IS" AND THAT LESSOR HAS NOT MADE, AND DOES NOT HEREBY MAKE, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, QUALITY, MATERIAL, WORKMANSHIP, DESIGN, CAPACITY, MERCHANTABILITY, DURABILITY, FITNESS OR SUITABILITY OF THE VEHICLES FOR ANY USE OR PURPOSE OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED WITH RESPECT TO THE VEHICLES. IN NO EVENT SHALL LESSOR BE LIABLE FOR LOSS OF OR DAMAGE TO CARGO, LOSS OF PROFITS OR BUSINESS OR FOR INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE, HOWSOEVER CAUSED. Provided Lessee is not in default hereunder, during the term of this Lease as to any Vehicle, Lessor hereby assigns to Lessee any rights Lessor may have under any manufacturer's or seller's warranty, to the extent that such assignment may be made without impairing Lessor's ability to assert such rights in its own name under such warranty. 14.A DEFAULT under this Lease shall occur in the event (i) Lessee shall fail to pay when due any part of the Monthly Rentals, Additional Rents or Adjusted Rents payable hereunder or to provide or maintain the insurance required hereby; (ii) any of Lessee's warranties or representations shall be or become untrue or breached; (iii) Lessee shall fail, after fifteen days notice thereof, to correct any failure in the due performance and observance of any other of the covenants and obligations of Lessee hereunder; (iv) Lessee shall default under any other agreement with Lessor or its affiliates; (v) Lessee transfers a substantial portion of its assets other than in the ordinary course of business; (vi) a voluntary or involuntary petition under any statute relating to bankruptcy, reorganization or receivership or under any other statute relating to the relief of debtors shall be filed by or against Lessee or any guarantor of Lessee's obligations hereunder; or (vii) Lessee or any guarantor of Lessee's obligations hereunder shall make an assignment for the benefit of creditors, admit in writing to being insolvent or, if Lessee or such guarantor is a natural person, if such person shall die. 14.B LESSOR'S REMEDIES: (1) In the event of such default described above, Lessor shall have no further obligation to lease vehicles to Lessee and, at the option of Lessor, all rights of Lessee hereunder and in and to the Vehicles shall forthwith terminate. Upon such termination Lessee agrees that Lessor may, without notice to Lessee, either take possession of any or all Vehicles (with or without legal process) or require Lessee to return all Vehicles forthwith to Lessor at such location as Lessor shall designate. Lessee authorizes Lessor and Lessor's agents to enter any premises where the Vehicles may be found for the purpose of repossessing the same. If Lessor retakes possession of any of the Vehicles and at the time of such retaking there shall be in, upon, or attached to the Vehicles any property, goods, or things of value belonging to Lessee or in the custody or control of Lessee, Lessor is hereby authorized to take possession of such property, goods, and things of value and hold the same for Lessee or to place such property, goods, or things of value in public storage for the account of, and the expense of, Lessee. Lessor may at its option (i) sell any or all of the vehicles which are returned or repossessed pursuant to this Section and hold Lessee liable for Adjusted Rental as provided in Section 9, or (ii) lease any or all of the Vehicles to a person other than Lessee for such term and such rental as Lessor may elect in its sole discretion, and apply the proceeds of such lease, after first deducting all costs and expenses relating to the termination of this Lease and the retaking of the vehicles, to Lessee's obligations hereunder; provided, however, that Lessee shall pay to Lessor immediately upon demand, as liquidated damages for loss of bargain and not as a penalty, a sum with respect to each such Vehicle which represents the excess of the present value at the time of termination of all Monthly Rentals which would otherwise have accrued hereunder to the end of the Maximum Term for such Vehicle over the present value at the time of termination of all Monthly Rentals which would otherwise have accrued hereunder to the end of the Maximum Term for such Vehicle over the present value of the aggregate of the rentals to be paid for such Vehicle by such third party for such period (such present values to be computed in each case on the basis of a discount factor equal to the per annum lending rate publicly announced from time to time by Continental Illinois National Bank and Trust Company of Chicago as its prime rate, base rate or reference rate for unsecured loans of the shortest maturity to corporate borrowers in effect on the date this Lease is terminated by Lessor, from the respective dates upon which such Monthly Rentals would have been payable hereunder had this Lease not been terminated). In addition to the other remedies set forth herein, if any vehicle is not returned to Lessor, or if Lessor is prevented from taking possession thereof, Lessee shall pay to Lessor immediately upon demand the Final Adjustment Amount as provided in Section 9, as if such vehicle had been sold on the date this Lease was terminated, and the amount of net sale proceeds therefor were zero. (2) Whether or not the Vehicles are returned to, sold or leased by Lessor, Lessor shall also recover from Lessee all unpaid Monthly Rentals, Additional Rents and Adjusted Rents then due or owing together with all costs and expenses, including attorneys' fees, incurred by Lessor in the enforcement of its rights and remedies under this Lease. In addition, Lessor may retain as liquidated damages all Monthly Rentals and Additional Rents and sale proceeds received, including any refunds and other sums which otherwise would be payable to Lessee, and a sum equal to the aggregate of all Monthly Rentals and other amounts, including but not limited to any early termination fee customarily charged by Lessor, (the due dates of which Rentals and other amounts Lessor may accelerate at its option) which would have been due during the period ending, for each Vehicle, on the earliest date on which Lessee could have effectively terminated this Lease as to such Vehicle pursuant to Section 3 if Lessee had not defaulted, in sum total not to exceed the Economic Return. (3) The remedies in this Lease provided in favor of Lessor shall not be deemed exclusive or alternative, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law or in equity. Lessee hereby waives any right to trial by jury in any action relating to this Lease, as well as any requirements of law, now or hereafter in effect, which might limit or modify any of the remedies herein provided, to the extent that such waiver is permitted by law. The failure of Lessor to exercise any of the rights granted it hereunder shall not constitute a waiver of any such right or establish a custom or course of dealing. Except as expressly allowed in Section 5, above, 15. EXCEPT AS EXPRESSLY allowed in Section 5, above, neither this lease, any rights or obligations hereunder, nor any rights in or to the Vehicles may be assigned or subleased by Lessee without the prior written consent of Lessor and no such assignment or sublease shall be valid or binding on Lessor. Lessor may assign this Lease or an interest hereunder or in the Vehicles for any purpose without consent of or notice to Lessee. 16. LESSEE AGREES that at any time and from time to time, after the execution and delivery of this Lease, it shall, upon request of Lessor, execute and deliver such further documents and do such further acts and things as Lessor may reasonably request in order fully to effect the purposes of this Lease and to protect Lessor's interest in the vehicles, including, but not limited to, furnishing any and all information necessary to enable Lessor or its insurer to defend itself in any litigation arising in connection herewith. Lessee hereby authorizes Lessor to insert serial numbers, delivery and Monthly Rental due dates, and other data on the Schedules, Delivery Receipts and other documents relating hereto when such numbers, date and data become known to Lessor. 17. NOTICES required or permitted to be given hereunder shall be given in writing either personally or by registered or certified mail addressed to the respective party at its address listed on page one hereof or, if such party has previously given notice of a change of address, to the address specified in the last such notice of change of address. Notices shall be deemed received when delivered if personally delivered or, if mailed, two business days after deposit postage prepaid in the United States mails. 18. THIS LEASE will become effective only upon acceptance by Lessor. This form is intended for general use throughout the United States. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall be ineffective in such jurisdiction to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. It is the intention of the parties hereto that this contract constitute a lease for tax and other purposes; however, if for purposes of perfection, this contract is interpreted by any court as a lease intended as security, Lessee hereby grants to Lessor a security interest in the vehicles. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. This Lease and any Schedules and other documents relating hereto may be modified only in a writing signed by the party against whom enforcement is sought. No vehicle dealer nor any employee or agent of any dealer or of any other person has authority to make any representations to Lessee on Lessor's behalf as to the performance of the Vehicles, or as to any provision of this Lease or as to any other matter whatsoever. Lessee has no authority to, and shall not, make any warranty or representation concerning the Vehicles to any person on Lessor's behalf. Date: August 25, 1999 LESSEE: PLM International, Inc. LESSOR: Associates Leasing, Inc. By: /s/ Richard K Brock By: /s/ Joseph M. Pitch Title: Acting Chief Financial Officer Title: Vice President EX-10.4 6 FLEET CAPITAL LEASING MASTER EQUIPMENT LEASE AGREEMENT No. 33092 LESSOR: FLEET CAPITAL CORPORATION LESSEE: PLM RENTAL, INC. a Rhode Island corporation a Delaware corporation Address: 50 Kennedy Plaza Address: One Market Plaza, Providence, Rhode Island 02903-2305 Steuart Tower, Suite 800 San Francisco, California 94105 1. LEASE OF EQUIPMENT Subject to the terms and conditions set forth herein (the "Master Lease") and in any Lease Schedule incorporating the terms of this Master Lease (each, a "Lease Schedule"), Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the items and units of personal property described in each such Lease Schedule, together with all replacements, parts, additions, accessories and substitutions therefor (collectively, the "Equipment"). As used in this Lease, the term "Item of Equipment" shall mean each functionally integrated and separately marketable group or unit of Equipment subject to this Lease. Each Lease Schedule shall constitute a separate, distinct and independent lease of Equipment and contractual obligation of Lessee. References to "the Lease," "this Lease" or "any Lease" shall mean and refer to any Lease Schedule which incorporates the terms of this Master Lease, together with all exhibits, addenda, schedules, certificates, riders and other documents and instruments executed and delivered in connection with such Lease Schedule or this Master Lease, all as the same may be amended or modified from time to time. The Equipment is to be delivered at the location specified or referred to in the applicable Lease Schedule. The Equipment shall be deemed to have been accepted by Lessee for all purposes under this Lease upon Lessor's receipt of an Acceptance Certificate with respect to such Equipment, executed by Lessee after receipt of all other documentation required by Lessor with respect to such Equipment. Lessor shall not be liable or responsible for any failure or delay in the delivery of the Equipment to Lessee for whatever reason. As used in this Lease, "Acquisition Cost" shall mean (a) with respect to all Equipment subject to a Lease Schedule, the amount set forth as the Acquisition Cost in the Lease Schedule and the Acceptance Certificate applicable to such Equipment; and (b) with respect to any item of Equipment, the total amount of all vendor or seller invoices (including Lessee invoices, if any) for such item of Equipment, together with all acquisition fees and costs of delivery, installation, testing and related services, accessories, supplies or attachments procured or financed by Lessor from vendors or suppliers thereof (including items provided by Lessee) relating or allocable to such item of Equipment ("Related Expenses"). As used in this Lease with respect to any Equipment, the terms "Acceptance Date," "Rental Payment(s)," "Rental Payment Date(s)," "Rental Payment Numbers," "Rental Payment Commencement Date," "Lease Term" and "Lease Term Commencement Date" shall have the meanings and values assigned to them in the Lease Schedule and the Acceptance Certificate applicable to such Equipment. 2. TERM AND RENT The Lease Term for any Equipment shall be as specified in the applicable Lease Schedule. Rental Payments shall be in the amounts and shall be due and payable as set forth in the applicable Lease Schedule. Lessee shall, in addition, pay interim rent to Lessor on a pro-rata, per-diem basis from the Acceptance Date to the Lease Term Commencement Date set forth in the applicable Acceptance Certificate, payable on such Lease Term Commencement Date. If any rent or other amount payable hereunder shall not be paid within 10 days of the date when due, Lessee shall pay as an administrative and late charge an amount equal to 5% of the amount of any such overdue payment. In addition, Lessee shall pay overdue interest on any delinquent payment or other amounts due under the Lease (by reason of acceleration or otherwise) from 30 days after the due date until paid at the rate of 1 1/2% per month or the maximum amount permitted by applicable law, whichever is lower. All payments to be made to Lessor shall be made to Lessor in immediately available funds at the address shown above, or at such other place as Lessor shall specify in writing. THIS IS A NON-CANCELABLE, NON-TERMINABLE LEASE OF EQUIPMENT FOR THE ENTIRE LEASE TERM PROVIDED IN EACH LEASE SCHEDULE HERETO. 3. POSSESSION; PERSONAL PROPERTY No right, title or interest in the Equipment shall pass to Lessee other than the right to maintain possession and use of the Equipment for the Lease Term (provided no Event of Default has occurred) free from interference by any person claiming by, through, or under Lessor. The Equipment shall always remain personal property even though the Equipment may hereafter become attached or affixed to real property. Lessee agrees to give and record such notices and to take such other action at its own expense as may be necessary to prevent any third party (other than an assignee of Lessor) from acquiring or having the right under any circumstances to acquire any interest in the Equipment or this Lease 4. DISCLAIMER OF WARRANTIES LESSOR IS NOT THE MANUFACTURER OR SUPPLIER OF THE EQUIPMENT, NOR THE AGENT THEREOF, AND MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT, ITS FITNESS FOR A PARTICULAR PURPOSE, ITS DESIGN OR CONDITION, ITS CAPACITY OR DURABILITY, THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN THE MANUFACTURE OR ASSEMBLY OF THE EQUIPMENT, OR THE CONFORMITY OF THE EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER RELATING THERETO, OR PATENT INFRINGEMENTS, AND LESSOR HEREBY DISCLAIMS ANY SUCH WARRANTY. LESSOR IS NOT RESPONSIBLE FOR ANY REPAIRS OR SERVICE TO THE EQUIPMENT, DEFECTS THEREIN OR FAILURES IN THE OPERATION THEREOF. Lessee has made the selection of each item of Equipment and the manufacturer and/or supplier thereof based on its own judgment and expressly disclaims any reliance upon any statements or representations made by Lessor. For so long as no Event of Default for event or condition which, with the passage of time or giving of notice, or both, would become such an Event of Default) has occurred and is continuing, Lessee shall be the beneficiary of, and shall be entitled to, all rights under any applicable manufacturer's or vendor's warranties with respect to the Equipment, to the extent permitted by law. If the Equipment is not delivered, is not properly installed, does not operate as warranted, becomes obsolete, or is unsatisfactory for any reason whatsoever, Lessee shall make all claims on account thereof solely against the manufacturer or supplier and not against Lessor, and Lessee shall nevertheless pay all rentals and other sums payable hereunder. Lessee acknowledges that neither the manufacturer or supplier of the Equipment, nor any sales representative or agent thereof, is an agent of Lessor, and no agreement or representation as to the Equipment or any other matter by any such sales representative or agent of the manufacturer or supplier shall in any way affect Lessee's obligations hereunder. 5. REPRESENTATIONS, WARRANTIES AND COVENANTS Lessee represents and and warrants to and covenants with Lessor that: (a) Lessee has the form of business organization indicated above and is duly organized and existing in good standing under the laws of the state listed in the caption of this Master Lease and is duly qualified to do business wherever necessary to carry on its present business and operations and to own its property; (b) this Lease has been duly authorized by all necessary action on the part of Lessee consistent with its form of organization, does not require any further shareholder or partner approval, does not require the approval of, or the giving notice to, any federal, state, local or foreign governmental authority and does not contravene any law binding on Lessee or contravene any certificate or articles of incorporation or by-laws or partnership certificate or agreement, or any agreement, indenture, or other instrument to which Lessee is a party or by which it may be bound; (c) this Lease has been duly executed and delivered by authorized officers or partners of Lessee and constitutes a legal, valid and binding obligation of Lessee enforceable in accordance with its terms; (d) Lessee has not and will not, directly or indirectly, create, incur or permit to exist any lien, encumbrance, mortgage, pledge, attachment or security interest on or with respect to the Equipment or this Lease (except those of persons claiming by, through or under Lessor); (e) the Equipment will be used solely in the conduct of Lessee's business and, unless subleased in the ordinary course of Lessee's business, will remain in the Lessee's locations shown on the applicable Lease Schedule unless Lessor otherwise agrees in writing and Lessee has completed all notifications, filings, recordings and other actions in such new location as Lessor may reasonably request to protect Lessor's interest in the Equipment; (f) there are no pending or threatened actions or proceedings before any court or administrative agency which materially adversely affect Lessee's financial condition or operations, and all credit, financial and other information provided by Lessee or at Lessee's direction is, and all such information hereafter furnished will be, true, correct and complete in all material respects; and (g) Lessor has not selected, manufactured or supplied the Equipment to Lessee and has acquired any Equipment subject hereto solely in connection with this Lease and Lessee has received and approved the terms of any purchase order or agreement with respect to the Equipment. 6. INDEMNITY Lessee assumes the risk of liability for, and hereby agrees to indemnify and hold safe and harmless, and covenants to defend, Lessor, its employees, servants and agents from and against: (a) any and all liabilities, losses, damages, claims and expenses (including legal expenses of every kind and nature) arising out of the manufacture, purchase, shipment and delivery of the Equipment to Lessee, acceptance or rejection, ownership, titling, registration, leasing, possession, operation, use, return or other disposition of the Equipment, including, without limitation, any liabilities that may arise from patent or latent defects in the Equipment (whether or not discoverable by Lessee), any claims based on absolute tort liability or warranty and any claims based on patent, trademark or copyright infringement; (b) any and all loss or damage of or to the Equipment; and (c) any obligation or liability to the manufacturer or any supplier of the Equipment arising under any purchase orders issued by or assigned to Lessor. 7. TAXES AND OTHER CHARGES Lessee agrees to comply with all laws, regulations and governmental orders related to this Lease and to the Equipment and its use or possession, and to pay when due, and to defend and indemnify Lessor against liability for all license fees, assessments, and sales, use, property, excise, privilege and other taxes (including any related interest or penalties) or other charges or fees now or hereafter imposed by any governmental body or agency upon any Equipment, or with respect to the manufacturing, ordering, shipment, purchase, ownership, delivery, installation, leasing, operation, possession, use, return, or other disposition thereof or the rentals hereunder (other than taxes on or measured solely by the net income of Lessor). Any fees, taxes or other lawful charges paid by Lessor upon failure of Lessee to make such payments shall at Lessor's option become immediately due from Lessee to Lessor. If any Lease Schedule is denominated as a "True Lease Schedule," then, with respect to the Equipment set forth on such True Lease Schedule, Lessee hereby covenants and agrees that Lessor shall be entitled to the following tax benefits (the "Tax Benefits"), Lessor will be entitled to cost recovery deductions under Section 168 of the Internal Revenue Code of 1986, as amended (the "Code"), using a 200% declining balance method of depreciation switching to the straight line method for the first taxable year for which such method will yield larger depreciation deductions, and assuming a half-year convention and zero salvage value, for the applicable recovery period for such Equipment as set forth in the True Lease Schedule with respect to such Equipment. Lessee further acknowledges and agrees that Lessor has entered into such True Lease Schedule on the assumption that Lessor will be taxed throughout the Lease Term of the True Lease Schedule at Lessor's federal corporate income tax rate existing on the date of such Lease Schedule (the "Assumed Tax Rate"). With respect to Equipment set forth on any such True Lease Schedule, Lessee agrees that: Lessee will not claim that Lessee is the owner of the Equipment subject thereto or that Lessee is otherwise entitled to all or any of the Tax Benefits; Lessee will not take any action inconsistent with Lessor's anticipated Tax Benefits; and the Equipment will not constitute "public utility property" or "tax-exempt use property" within the meaning of sections 168(i)(1 0) or 168(h) of the Code. If , as the result of any act, omission and/or misrepresentation of Lessee, there shall be a loss, disallowance, recapture or delay in claiming all or any portion of the Tax Benefits with respect to the Equipment, or there shall be included in Lessor's gross income for Federal, state or local income tax purposes any amount on account of any addition, modification or improvement to or in respect of any of the Equipment made or paid for by Lessee, or if there shall be a change in the Assumed Tax Rate (any loss, disallowance, recapture, delay, inclusion or change being herein called a "Tax Loss"), then thirty (30) days after written notice to Lessee by Lessor that a Tax Loss has occurred, Lessee shall pay Lessor a lump sum amount which, after deduction of all taxes required to be paid by Lessor with respect to the receipt of such amount, will provide Lessor with an amount necessary to maintain Lessor's after-tax economic yield and overall net after-tax cash flows at least at the same level that would have been available if such Tax Loss had not occurred, plus any interest, penalties or additions to tax which may be imposed in connection with such Tax Loss. In lieu of paying such Tax Loss in a lump sum, Lessor may require, or upon Lessee's request, may agree, in Lessor's sole discretion, that such Tax Loss shall be paid in equal periodic payments over the applicable remaining Lease Term with respect to such Equipment with each Rental Payment due and payable with respect to such Equipment. A Tax Loss shall conclusively be deemed to have occurred if either (a) a deficiency shall have been proposed by the Internal Revenue Service or other taxing authority having jurisdiction, or (b) tax counsel for Lessor has rendered an opinion to Lessor that such Tax Loss has so occurred. The foregoing indemnities and covenants set forth in Sections 6 and 7 of this Master Lease shall continue in full force and effect and shall survive the expiration or earlier termination of the Lease. 8. DEFAULT Lessee shall be in default of this Lease upon the occurrence of any one or more of the following events (each an "Event of Default"): (a) Lessee shall fail to make any payment, of rent or otherwise, under any Lease within 10 days of the date when due; or (b) Lessee shall fail to obtain or maintain any of the insurance required under any Lease; or (c) Lessee shall fail to perform or observe any covenant, condition or agreement under any Lease, and such failure continued for 10 days after notice thereof to Lessee; or (d) Lessee shall default in the payment or performance of any indebtedness or obligation to Lessor or any affiliated person, firm or entity controlling, controlled by or under common control with Lessor, under any loan, note, security agreement, lease, guaranty, title retention or conditional sales agreement or any other instrument or agreement evidencing such indebtedness with Lessor or such other affiliated person, firm or entity affiliated with Lessor; or (e) any representation or warranty made by Lessee herein or in any certificate, agreement, statement or document hereto or hereafter furnished to Lessor in connection herewith, including without limitation, any financial information disclosed to Lessor, shall prove to be false or incorrect in any material respect; or (f) death or judicial declaration of incompetence of Lessee, if an individual; the commencement of any bankruptcy, insolvency, arrangement, reorganization, receivership, liquidation or other similar proceeding by or against Lessee or any of its properties or businesses, or the appointment of a trustee, receiver, liquidator or custodian for Lessee or any of its properties of business, or if Lessee suffers the entry of an order for relief under Title 1 1 of the United States Code; or the making by Lessee of a general assignment or deed of trust for the benefit of creditors, or (g) Lessee shall default in any payment or other obligation to any third party and any applicable grace or cure period with respect thereto has expired; or (h) Lessee shall terminate its existence by merger, consolidation, sale of substantially all of its assets or otherwise; or (i) if Lessee is a privately held corporation, and more than 50% of Lessee's voting capital stock, or effective control of Lessee's voting capital stock, issued and outstanding from time to time, is not retained by the holders of such stock on the date of this Lease without the consent of Lessor, which consent shall not be unreasonably withheld; or (j) if Lessee is a publicly held corporation, there shall be a change in the ownership of Lessee's stock without the consent of Lessor, which consent shall not be unreasonably withheld, such that Lessee is no longer subject to the reporting requirements of the Securities Exchange Act of 1 934, or no longer has a class of equity securities registered under Section 12 of the Securities Act of 1933; or (k) Lessor shall determine, in its sole discretion and in good faith, that there has been a material adverse change in the financial condition of the Lessee since the date of this Lease, or that Lessee's ability to make any payment hereunder promptly when due or otherwise comply with the terms of this Lease or any other agreement between Lessor and Lessee is impaired; or (1) any event or condition set forth in subsections (b) through .(k) of this Section 8 shall occur with respect to any guarantor or other -person responsible, in whole or in part, for payment or performance of this Lease; or (m) any event or condition set forth in subsections (d) through (j) shall occur with respect to any affiliated person, firm or entity controlling, controlled by or under common control with Lessee. Lessee shall promptly notify Lessor of the occurrence of any Event of Default or the occurrence or existence of any event or condition which, upon the giving of notice of lapse of time, or both, may become an Event of Default. 9. REMEDIES; MANDATORY PREPAYMENT. Upon the occurrence of any Event of Default, Lessor may, at its sole option and discretion, exercise one or more of the following remedies with respect to any or all of the Equipment: (a) cause Lessee to promptly return, at Lessee's expense, any or all Equipment to such location as Lessor may designate in accordance with the terms of Section 18 of this Master Lease, or Lessor, at its option, may enter upon the premises where the Equipment is located and take immediate possession of and remove the same by summary proceedings or otherwise, all without liability to Lessor for or by reason of damage to property or such entry or taking possession except for Lessor's gross negligence or willful misconduct; (b) sell any or all Equipment at public or private sale or otherwise dispose of, hold, use, operate, lease to others or keep idle the Equipment, all as Lessor in its sole discretion may determine and all free and clear of any rights of Lessee; (c) remedy such default, including making repairs or modifications to the Equipment, for the account and expense of Lessee, and Lessee agrees to reimburse Lessor for all of Lessor's costs and expenses immediately upon Lessor's presentation of invoices for any such costs and expenses; (d) by written notice to Lessee, terminate the Lease with respect to any or all Lease Schedules and the Equipment subject thereto, as such notice shall specify, and, with respect to such terminated Lease Schedules and Equipment, declare immediately due and payable and recover from Lessee, as liquidated damages for loss of Lessor's bargain and not as a penalty, an amount equal to the Stipulated Loss Value, calculated as of the next following Rental Payment Date; (e) apply any deposit or other cash collateral or sale or remarketing proceeds of the Equipment at any time to reduce any amounts due to Lessor, and (f) exercise any other right or remedy which may be available to Lessor under applicable law, or proceed by appropriate court action to enforce the terms hereof or to recover damages for the breach hereof, including reasonable attorneys' fees and court costs. Notice of Lessor's intention to accelerate, notice of acceleration, notice of nonpayment, presentment, protest, notice of dishonor, or any other notice whatsoever are hereby waived by Lessee and any endorser, guarantor, surety or other party liable '.n any capacity for any of the Lessee's obligations under or in respect of the Lease. No remedy referred to in this Section 9 shall be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to Lessor at law or in equity. The exercise or pursuit by Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise or pursuit by Lessor of any or all such other remedies, and all remedies hereunder shall survive termination of this Lease. At any sale of the Equipment pursuant to this Section 9, Lessor may bid for the Equipment. Notice required, if any, of any sale or other disposition hereunder by Lessor shall be satisfied by the mailing of such notice to Lessee at least seven (7) days prior to such sale or other disposition. In the event Lessor takes possession and disposes of the Equipment, the proceeds of any such disposition shall be applied in the following order: (1) to all of Lessor's costs, charges and expenses incurred in taking, removing, holding, repairing and selling or leasing the Equipment; (2) to the extent not previously paid by Lessee, to pay Lessor for any damages then remaining unpaid hereunder; (3) to reimburse Lessee for any sums previously paid by Lessee as damages hereunder; and (4) the balance, if any, shall be retained by Lessor. A termination shall occur only upon written notice by Lessor and only with respect to such Equipment as Lessor shall specify in such notice. Termination under this Section 9 shall not affect Lessee's duty to perform Lessee's obligations hereunder to Lessor in full. Lessee agrees to reimburse Lessor on demand for any and all costs and expenses incurred by Lessor in enforcing its rights and remedies hereunder following the occurrence of an Event of Default, including, without limitation, reasonable attorney's fees, and the costs of repossession, storage, insuring, reletting, selling and disposing of any and all Equipment. The term "Stipulated Loss Value" with respect to any item of Equipment shall mean the Stipulated Loss Value as set forth in any Schedule of Stipulated Loss Values attached to and made a part of the applicable Lease Schedule. If there is no such Schedule of Stipulated Loss Values, then the Stipulated Loss Value with respect to any item of Equipment on any Rental Payment Date during the Lease Term shall be an amount equal to the sum of: (a) all Rental Payments and other amounts then due and owing to Lessor under the Lease, together with all accrued interest and late charges thereon calculated through and including the date of payment; plus (b) the net present value of: (i) all Rental Payments then remaining unpaid for the Lease Term, plus (ii) the amount of any purchase obligation with respect to such item of Equipment or, if there is no such obligation, then the fair market value of such item of Equipment at the end of the Lease Term, as estimated by Lessor in its sole discretion (accounting for the amount of any unpaid Related Expenses for such item of Equipment and, with respect to any such item of Equipment that has been attached to or installed on or in any other property leased or owned by Lessee, such value shall be determined on an installed basis, in place and in use), all discounted to net present value at a discount rate equal to the 1-year Treasury Constant Maturity rate as published in the Selected Interest Rates table of the Federal Reserve statistical release H.15(519) for the week ending immediately prior to the original Acceptance Date for such Equipment. Lessee is or may become indebted under or in respect of one or more leases, loans, notes, credit agreements, reimbursement agreements, security agreements, title retention or conditional sales agreements, or other documents, instruments or agreements, whether now existing or hereafter arising, evidencing Lessee's obligations for the payment of borrowed money or other financial accommodations ("Obligations") owing to FCC, or to one or more affiliated persons, firms or entities controlling, controlled by or under common control with Lessor ("Affiliates"). If Lessee pays or prepays all or substantially all of its Obligations owing to any Affiliate, whether or not such payment or prepayment is voluntarily or involuntarily made by Lessee before or after any default or acceleration of such Obligations, then Lessee shall pay, at Lessor's option and immediately upon notice from Lessor, all or any part of Lessee's Obligations owing to Lessor, including but not limited to Lessee's payment of Stipulated Loss Value for all or any Lease Schedules as set forth in such notice from Lessor. 10. ADDITIONAL SECURITY For so long as any obligations of Lessee shall remain outstanding under any Lease, Lessee hereby grants to Lessor a security interest in all of Lessee's rights in and to Equipment subject to such Lease from time to time, to secure the prompt payment and performance when due (by reason of acceleration or otherwise) of each and every indebtedness, obligation or liability of Lessee, or any affiliated person, firm, or entity controlling, controlled by, or under common control with Lessee, owing to Lessor, whether now existing or hereafter arising, including but not limited to all of such obligations under or in respect of any Lease. The extent to which Lessor shall have a purchase money security interest in any item of Equipment under a Lease which is deemed to create a security interest under Section 1-201(37) of the Uniform Commercial Code shall be determined by reference to the Acquisition Cost of such item financed by Lessor. In order more fully to secure its rental payments and all other obligations to Lessor hereunder, Lessee hereby grants to Lessor a security interest in any deposit of Lessee to Lessor under Section 3(d) of any Lease Schedule hereto. Such security deposit shall not bear interest, may be commingled with other funds of Lessor and shall be immediately restored by Lessee if applied under Section 9. Upon expiration of the term of this Lease and satisfaction of all of Lessee's obligations, the security deposit shall be returned to Lessee. The term "Lessor" as used in this Section 10 shall include any affiliated person, firm or entity controlling, controlled by or under common control with Lessor. 11. NOTICES Any notices or demands required or permitted to be given under this Lease shall be given in writing and by regular mail and shall become effective when deposited in the United States mail with postage prepaid to Lessor to the attention of Customer Accounts, and to Lessee at the address set forth above, or to such other address as the party to receive notice hereafter designates by such written notice. 12. USE; MAINTENANCE; INSPECTION; LOSS AND DAMAGE During the Lease Term for each item of Equipment, Lessee shall, unless Lessor shall otherwise consent in writing: (a) permit each item of Equipment to be used only within the continental United States , and occasionally within Canada (i.e., not more than 10% of all units of Equipment located in Canada at any one time; not more than 10% mileage within Canada for each unit of Equipment on an annual basis) by qualified personnel solely for business purposes and the purpose for which it was designed, provided, however, that in no event shall any Equipment be maintained or garaged in Canada, and Lessee shall, at its sole expense, service, repair, overhaul and maintain each item of Equipment in the same condition as when received, ordinary wear and tear excepted, in good operating order, consistent with prudent industry practice (but, in no event less than the same extent to which Lessee maintains other similar equipment in the prudent management of its assets and properties) and in compliance with all applicable laws, ordinances, regulations, and conditions of all insurance policies required to be maintained by Lessee under the Lease and all manuals, orders, recommendations, instructions and other written requirements as to the repair and maintenance of such item of Equipment issued at any time by the vendor and/or manufacturer thereof; (b) maintain conspicuously on any Equipment such labels, plates, decals or other markings as Lessor may reasonably require, stating that Lessor is owner of such Equipment; (c) furnish to Lessor such information concerning the condition, location, use and operation of the Equipment as Lessor may request; (d) permit any person designated by Lessor to visit and inspect any Equipment and any records maintained in connection therewith, provided, however, that the failure of Lessor to inspect the Equipment or to inform Lessee of any noncompliance shall not relieve Lessee of any of its obligations hereunder; (e) if any Equipment does not comply with the requirements of this Lease Lessee shall, within 30 days of written notice from Lessor, bring such Equipment into compliance; (f) not use any Equipment, nor allow the same to be used, for any unlawful purpose, nor in connection with any property or material that would subject the Lessor to any liability under any state or federal statute or regulation pertaining to the production, transport, storage, disposal or discharge of hazardous or toxic waste or materials; and (g) make no additions, alterations, modifications or improvements (collectively, "Improvements") to any item of Equipment that are not readily removable without causing material damage to such item of Equipment or which will cause the value, utility or useful life of such item of Equipment to materially decline. If any such Improvement is made and cannot be removed without causing material damage or decline in value, utility or useful life (a "NonSeverable Improvement"), then Lessee warrants that such Non-Severable Improvement shall immediately become Lessor's property upon being installed and shall be free and clear of all liens and encumbrances and shall become Equipment subject to all of the terms and conditions of the Lease. All such Improvements that are not Non-Severable Improvements shall be removed by Lessee prior to the return of the item of Equipment hereunder or such Improvements shall also become the sole and absolute property of Lessor without any further payment by Lessor to Lessee and shall be free and clear of all liens and encumbrances whatsoever. Lessee shall repair all damage to any item of Equipment caused by the removal of any Improvement so as to restore such item of Equipment to the same condition which existed prior to its installation and as required by this Lease. Lessee hereby assumes all risk of loss, damage or destruction for whatever reason to the Equipment from and after the earlier of the date (i) on which the Equipment is ordered or (ii) Lessor pays the purchase price of the Equipment, and continuing until the Equipment has been returned to, and accepted by, Lessor in the condition required by Section 18 hereof upon the expiration of the Lease Term. If during the Lease Term all or any portion of an item of Equipment shall become lost, stolen, destroyed, damaged beyond repair or rendered permanently unfit for use for any reason, or in the event of any condemnation, confiscation, theft or seizure or requisition of title to or use of such item, Lessee shall immediately pay to Lessor an amount equal to the Stipulated Loss Value of such item of Equipment, as of the next following Rental Payment Date. 13. INSURANCE Lessee shall procure and maintain insurance in such amounts and upon such terms and with such companies as Lessor may approve, during the entire Lease Term and until the Equipment has been returned to, and accepted by, Lessor in the condition required by Section 18 hereof, at Lessee's expense, provided that in no event shall such insurance be less than the following coverages and amounts: (a) Worker's Compensation and Employer's Liability Insurance, in the full statutory amounts provided by law; (b) Comprehensive General Liability Insurance including product/completed operations and contractual liability coverage, with minimum limits of $1,000,000 each occurrence, and Combined Single Limit Body Injury and Property Damage, $1,000,000 aggregate, where applicable; and (c) All Risk Physical Damage Insurance, including earthquake and flood, on each item of Equipment, in an amount not less than the greater of the Stipulated Loss Value of the Equipment or (if available) its full replacement value. Lessor will be included as an additional insured and loss payee as its interest may appear. Such policies shall be endorsed to provide that the coverage afforded to Lessor shall not be rescinded, impaired or invalidated by any act or neglect of Lessee. Lessee agrees to waive Lessee's right and its insurance carrier's rights of subrogation against Lessor for any and all loss or damage. In addition to the foregoing minimum insurance coverage, Lessee shall procure and maintain such other insurance coverage as Lessor may require from time to time during the Lease Term. All policies shall be endorsed or contain a clause requiring the insurer to furnish Lessor with at least 30 days' prior written notice of any cancellation or non-renewal of coverage. Upon execution of this Lease, Lessee shall furnish Lessor with a certificate of insurance or other evidence satisfactory to Lessor that such insurance coverage is in effect, provided, however, that Lessor shall be under no duty either to ascertain the existence of or to examine such insurance coverage or to advise Lessee in the event such insurance coverage should not comply with the requirements hereof. In case of failure of Lessee to procure or maintain insurance, Lessor may at its option obtain such insurance, the cost of which will be paid by the Lessee as additional rentals. Lessee further agrees to give Lessor prompt notice of any damage to or loss of, the Equipment, or any part thereof. 14. LIMITATION OF LIABILITY Lessor shall have no liability in connection with or arising out of the ownership, leasing, furnishing, performance or use of the Equipment or any special, indirect, incidental or consequential damages of any character, including, without limitation, loss of use of production facilities or equipment, loss of profits, property damage or lost production, whether suffered by Lessee or any third party. 15. FURTHER ASSURANCES Lessee shall promptly execute and deliver to Lessor such further documents and take such further action as Lessor may require in order to more effectively carry out the intent and purpose of this Lease. Lessee shall provide to Lessor, within 120 days after the close of each of Lessee's fiscal years, and, upon Lessor's request, within 45 days of the end of each quarter of Lessee's fiscal year, a copy of its financial statements prepared in accordance with generally accepted accounting principles and, in the case of annual financial statements, audited by independent certified public accountants, and in the case of quarterly financial statements certified by Lessee's chief financial officer. Lessee shall execute and deliver to Lessor upon Lessor's request any and all schedules, forms and other reports and information as Lessor may deem necessary or appropriate to respond to requirements or regulations imposed by any governmental authorities. Lessee shall execute and deliver to Lessor upon Lessor's request such further and additional documents, instruments and assurances as Lessor deems necessary (a) to acknowledge and confirm, for the benefit of Lessor or any assignee or transferee of any of Lessor's rights, title and interests hereunder (an "Assignee"), all of the terms and conditions of all or any part of this Lease and Lessor's or Assignee's rights with respect thereto, and Lessee's compliance with all of the terms and provisions hereof and (b) to preserve, protect and perfect Lessor's or Assignee's right, title or interest hereunder and in any Equipment, including, without limitation, such UCC financing statements or amendments, corporate resolutions, certificates of compliance, notices of assignment or transfers of interests, and restatements and reaffirmations of Lessee's obligations and its representations and warranties with respect thereto as of the dates requested by Lessor from time to time. In furtherance thereof, Lessor may file or record this Lease or a memorandum or a photocopy hereof (which for the purposes hereof shall be effective as a financing statement) so as to give notice to third parties, and Lessee hereby appoints Lessor as its attorney-in-fact to execute, sign, file and record UCC financing statements and other lien recordation documents with respect to the Equipment where Lessee fails or refuses to do so after Lessor's written request, and Lessee agrees to pay or reimburse Lessor for any filing, recording or stamp fees or taxes arising from any such filings 16. ASSIGNMENT; SUBLEASING This Lease and all rights of Lessor hereunder shall be assignable by Lessor absolutely or as security, without notice to Lessee, subject to the rights of Lessee hereunder for the use and possession of the Equipment for so long as no Event of Default has occurred and is continuing hereunder. Any such assignment shall not relieve Lessor of its obligations hereunder unless specifically assumed by the assignee, and LESSEE AGREES IT SHALL NOT ASSERT ANY DEFENSE, RIGHTS OF SET-OFF OR COUNTERCLAIM AGAINST ANY ASSIGNEE TO WHICH LESSOR SHALL HAVE ASSIGNED ITS RIGHTS AND INTERESTS HEREUNDER, NOR HOLD OR ATTEMPT TO HOLD SUCH ASSIGNEE LIABLE FOR ANY OF LESSOR'S OBLIGATIONS HEREUNDER. No such assignment shall materially increase Lessee's obligations hereunder. LESSEE SHALL NOT ASSIGN OR DISPOSE OF ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS LEASE OR ENTER INTO ANY SUBLEASE (EXCEPT AS PROVIDED BELOW) WITH RESPECT TO ANY OF THE EQUIPMENT WITHOUT THE EXPRESS PRIOR WRITTEN CONSENT OF LESSOR. Any provision of this Lease to the contrary notwithstanding, Lessee may rent or lease each item of Equipment in the regular course of its business to one or more of Lessee's commercial customers (each, an "End User") in the ordinary course of Lessee's business, all pursuant to one or more leases or rental agreements pertaining to the Equipment (individually and collectively referred to hereinafter as a "Lease Agreement"), the terms and conditions of which shall in all respects be subject to the prior approval of Lessor and Lessor's Assignee, and pursuant to which all of the rights of Lessee, and any End Users in and to the Equipment and the Lease Agreements shall be subject and subordinate to all of the rights, title and interests of Lessor and Lessor's Assignee therein. Attached hereto as Exhibits A and B are forms of Lease Agreements for use between Lessee and End Users, each of which have been approved by Lessor. Lessee shall, promptly upon Lessor's periodic request (not more frequently than four times per year), submit to Lessor a report listing the description, serial number, title state, title number, model year, age, original cost, capital repairs, daily, weekly and monthly lease rate, lease term, and End User name and location for each Item of Equipment then subject to this Lease and a Lease Agreement. Such report shall be certified by a duly authorized officer of Lessee. To further secure payment of all indebtedness, obligations and liabilities of Lessee owing to Lessor, of every kind and description, and all interest, taxes, fees, charges, expenses and attorneys fees chargeable to Lessee or incurred by Lessor in connection with this Lease (the "Obligations"), Lessee agrees: i. to assign and grant, and does hereby assign and grant, to Lessor and Lessor's Assignee a security interest in any and all Lease Agreements, accounts, chattel paper, instruments and general intangibles relating to the use, operation, lease or rental of the Equipment, whether now existing or hereafter arising, together with all rights arising thereunder, including all payments due and to become due thereunder, and proceeds of all of the foregoing, all of which shall constitute additional collateral subject to the terms and provisions of this Lease (the Equipment and Lease Agreements are collectively referred to hereinafter as the "Collateral"); ii. upon the occurrence of an Event of Default under this Lease and the request of Lessor or Lessor's Assignee, to mark all Lease Agreements with such legends as may be specified by Lessor or Lessor's Assignee to the effect that they are subject and subordinate to this Lease, and to deliver originals of each Lease Agreement to Lessor's Assignee so that or Lessor's Assignee shall be assured of perfection of its security interest therein by possession of all chattel paper forming a part of the Lease Agreement; and iii. to do, make, execute and deliver all such additional and further acts, assurances and instruments as Lessor's Assignee may require in order to vest in and assure to Lessor's Assignee its rights in the Collateral, including without limitation, execution and delivery of such financing statements as Lessor's Assignee may request to perfect and continue the security interests granted or otherwise contemplated herein. Upon the occurrence of an Event of Default under this Lease, Lessor or Lessor's Assignee shall have the right to notify and direct any End User to make all payments due under any Lease Agreement directly to Lessor, and Lessor shall have full authority to take possession and control of the cash and non-cash proceeds thereof, with full power to settle or compromise disputed claims thereon, and to apply the same to Lessee's Obligations hereunder in such manner and order as Lessor shall determine in its sole discretion. Lessee hereby agrees to provide Lessor with an adequate supply of executed, but undated and unaddressed forms of Notice of Assignment, in substantially the form of Exhibit C attached hereto, which Lessee hereby irrevocably authorizes Lessor to complete and send to each End User upon the occurrence of an Event of Default under this Lease. Each Lease Agreement shall provide that it shall terminate, at the option of Lessor, upon the expiration or earlier termination of this Lease (by reason of acceleration after the occurrence of an Event of Default or otherwise) with respect to the Equipment subject to such Lease Agreement. Lessee further warrants and represents that: (i) any Lease Agreement is and shall be a true lease and not a lease intended as security, as defined in the Uniform Commercial Code in effect in the State of Rhode Island (the "UCC"); (ii) each Lease Agreement is and shall be genuine and executed by the parties identified therein, which parties shall be duly authorized to execute such Lease Agreements; (iii) each Lease Agreement is and shall be the exclusive Lease Agreement executed in connection with the rental of the Equipment to the End User and for the time period identified therein; (iv) all information in each Lease Agreement or supplied by Lessee to Lessor in connection with each Lease Agreement is and shall be true and correct; (v) each Lease Agreement and the Equipment is and shall be free and clear of all liens and encumbrances of any kind other than those provided herein; (vi) the obligations of End User to make payment under a Lease Agreement shall be free and clear of any and all defenses, offsets or counterclaims which may be asserted by End User or any other party against Lessee; (vii) Lessee has not and will not, without the prior written consent of Lessor, accept in excess of one month advance rent under any Lease Agreement; (viii) Lessee will not allow the Equipment to be removed from the location(s) permitted in this Lease, and will not modify amend or extend the time for payment or waive performance in any material respect under any Lease Agreement without the express prior written consent of Lessor; and (ix) Lessee shall maintain business records concerning the Equipment and the Lease Agreements satisfactory in all respects to Lessor, and to allow Lessor to inspect and copy all such business records during regular business hours. Lessee further agrees to allow and ensure Lessor access to the Equipment in order to inspect and photograph the Equipment at each location where Lessee or any End User conducts its business or where the Equipment may then be located. Upon Lessee's failure to pay or perform any of its Obligations owing to Lessor, or the occurrence of an Event of Default thereunder, Lessor: (a) may exercise all of the rights and remedies set forth in this Lease or any Lease Agreement; (b) shall have the right to notify any End User under any Lease Agreement to make payments directly Lessor; (c) Lessor is hereby constituted and appointed as Lessee's true and lawful attorney-in-fact of with full power: (i) to endorse the name of Lessee upon any instruments of payment (including payments made under any policy of insurance) that may come into possession of Lessor in full or partial payment of any amount owing under or in respect of this Lease or any Lease Agreement; and (ii) to sell, assign, sue for, collect or compromise payment of all or any part of the Collateral in the name of Lessee or in its own name, or to make any other disposition of Collateral, or any part thereof, which disposition may be for cash, credit or any combination thereof, (it being understood and agreed that Lessor nor its agents shall be liable for any acts or omissions or for any error of judgment or mistake of fact or law in its capacity as such attorney-in-fact, and that-this power of attorney is coupled with an interest and shall be irrevocable so long as any obligations shall remain outstanding). Lessor shall have, in addition to any other rights and remedies contained in this Lease, any Lease Agreement, and any other agreements, guarantees, notes, instruments and documents now or hereafter executed by Lessee and delivered to Lessor, all of the rights and remedies of a secured party under the Uniform Commercial Code and any applicable laws, all of which shall be deemed cumulative and not alternative and are not exclusive of any other remedies provided by law. 17. LESSEE'S OBLIGATION UNCONDITIONAL This Lease is a net lease and Lessee hereby agrees that it shall not be entitled to any abatement of rents or of any other amounts payable hereunder by Lessee, and that its obligation to pay all rent and any other amounts owing hereunder shall be absolute and unconditional under all circumstances, including, without limitation, the following circumstances: (i) any claim by Lessee to any right of set-off, counterclaim, recoupment, defense or other right which Lessee may have against Lessor, any seller or manufacturer of any Equipment or anyone else for any reason whatsoever; (ii) the existence of any liens, encumbrances or rights of others whatsoever with respect to any Equipment, whether or not resulting from claims against Lessor not related to the ownership of such Equipment; or (iii) any other event or circumstances whatsoever. Each Rent Payment or other amount paid by Lessee hereunder shall be final and Lessee will not seek to recover all or any part of such payment from Lessor for any reason whatsoever. 18. RETURN OF EQUIPMENT Upon the expiration or earlier termination of the Lease Term with respect to any Equipment, and provided that Lessee has not validly exercised any purchase option with respect thereto, Lessee shall: (a) return the Equipment to a location and in the manner designated by the Lessor within the continental United States, including, as reasonably required by Lessor, securing arrangements for the disassembly and packing for shipment by an authorized representative of the manufacturer of the Equipment, shipment with all parts and pieces on a carrier designated or approved by Lessor, and then reassembly (including, if necessary, repair and overhaul) by such representative at the return location in the condition the Equipment is required to be maintained by the Lease and in such condition as will make the Equipment immediately able to perform all functions for which the Equipment was originally designed (or as upgraded during the Lease Term), and immediately qualified for the manufacturer's (or other authorized servicing representative's) then-available service contract or warranty; (b) cause the Equipment to qualify for all applicable licenses or permits necessary for its operation for its intended purpose and to comply with all specifications and requirements of applicable federal, state and local laws, regulations and ordinances; (c) upon Lessor's request, provide suitable storage, acceptable to Lessor, for the Equipment for a period not to exceed 180 days from the date of return; (d) cooperate with Lessor in attempting to remarket the Equipment, including display and demonstration of the Equipment to prospective purchasers or lessees, and allowing Lessor to conduct any private or public sale or auction of the Equipment on Lessee's premises. All costs incurred in connection with any of the foregoing shall be the sole responsibility of the Lessee. During any period of time from the expiration or earlier termination of the Lease until the Equipment is returned in accordance with the provisions hereof or until Lessor has been paid the applicable purchase option price if any applicable purchase option is exercised, Lessee agrees to pay to Lessor additional per them rent ("Holdover Rent"), payable promptly on demand in an amount equal to 125% of the highest monthly Rental Payment payable during the Lease Term divided by 30, provided, however, that nothing contained herein and no payment of Holdover Rent hereunder shall relieve Lessee of its obligation to return the Equipment upon the expiration or earlier termination of the Lease. 19. RELATED LEASE SCHEDULES In the event that any Equipment subject to a Lease shall become attached to, affixed to, or used in connection with Equipment subject to any other Lease hereunder (each a "Related Lease Schedule"), Lessee agrees that: (a) if Lessee elects to exercise any purchase option, early termination option, renewal option, purchase obligation or early purchase option under any Lease; or (b) if Lessee elects to return the Equipment under any Lease in accordance therewith, then, in either case, Lessor shall have the right, in its discretion, to require the same disposition for all Equipment subject to a Related Lease Schedule. 20. MISCELLANEOUS; ENFORCEABILITY AND GOVERNING LAW The term "Lessee" as used in the Lease shall mean and include any and all Lessees who sign below, each of whom shall be jointly and severally liable under the Lease. This Master Lease will not be binding on Lessor until accepted and executed by Lessor, notice of which is hereby waived by Lessee. Any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given. Time is of the essence in the payment and performance of all of Lessee's obligations under the Lease. The captions in this Lease are for convenience only and shall not define or limit any of the terms hereof. Any provisions of this Lease which are unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof, and any such unenforceability in any jurisdiction shall not render unenforceable such provisions in any other jurisdiction. To the extent permitted by applicable law, Lessee hereby waives; (a) any provisions of law which render any provision hereof unenforceable in any respect; (b) all rights and remedies under Rhode Island General Laws Sections 6A-2.1-508 through 522 or corresponding provisions of the Uniform Commercial Code article or division pertaining to personal property leasing in any jurisdiction in which enforcement of this Lease is sought. THIS LEASE AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF RHODE ISLAND, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW. LESSEE HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF RHODE ISLAND AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND FOR THE PURPOSES. OF ANY SUIT, -ACTION OR OTHER -PROCEEDING ARISING OUT OF ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY HAVE TO THE VENUE OF SUCH COURTS. LESSEE HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS LEASE. Any action by Lessee against Lessor for any cause of action relating to this Lease shall be brought within one year after any such cause of action first arises. THIS LEASE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES CONCERNING THE LEASE OF THE EQUIPMENT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. LESSEE ACKNOWLEDGES AND CERTIFIES THAT NO SUCH ORAL AGREEMENTS EXIST. THIS LEASE MAY NOT BE AMENDED, NOR MAY ANY RIGHTS UNDER THE LEASE BE WAIVED, EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTY CHARGED WITH SUCH AMENDMENT OR WAIVER. Executed and delivered by duly authorized representatives of the parties hereto as of the date set forth below. DATED AS OF: SEPTEMBER 23, 1999 FLEET CAPITAL CORPORATION PLM RENTAL, INC. By: /s/Robert H. Cormier By: /s/ Richard K Brock Title: Vice President Title: Acting CFO, V.P. and Corporate Controller EX-10.5 7 Amendment #2 To Master lease #46494 dated April 2, 1999 (the "Lease") Between Wells Fargo Equipment Finance, Inc. ("Lessor") And PLM International, Inc. ("Lessee") Lessor and Lessee hereby agree to amend the Lease as follows: 1. Paragraph 17(i) is amended by inserting the following to the beginning thereof, "without Lessor's prior written consent which shall not be unreasonably withheld, conditioned or delayed provided there is no material adverse change in Lessee's credit worthiness as a result thereof,". 2. "Paragraph 17(j) is amended by inserting the following to the beginning thereof, "without Lessor's prior written consent which shall not be unreasonably withheld, conditioned or delayed provided the credit worthiness of the new entity is equal or better than Lessee's as of the date of this lease,". 3. Paragraph 17 is further amended by adding the following to the end thereof: (k) Lessee shall fail to have closed the sale its subsidiary operation, American Finance Group, Inc., by March 31, 2000, however, Lessor retains the right to grant Lessee an extension to this date at Lessor's sole discretion, which shall not be unreasonably withheld. (l) Lessee's ration of Earnings Before Interest and Taxes (EBIT) to Interest Expense shall be no less than 1.35 to 1.0. Lessee's Net Income shall be no less than $1.00 for any two consecutive quarters. (m) Lessee's Tangible Net Worth Leverage defined as Total Liabilities to Tangible Net Worth shall be no greater than 3.0 to 1.0. EBIT, Net Income and Tangible Net Worth shall be calculated in accordance with GAAP. 4. Except as modified herein, the terms and conditions of the Lease remain the same. Dated: October 12, 1999 WELLS FARGO EQUIPMENT FINANCE, INC. PLM INTERNATIONAL, INC. By: Sheryl L. Parranto By: /s/ Richard K Brock Its: Officer Its: Chief Financial Officer EX-10.6 8 MASTER LEASE AGREEMENT U.S. BANCORP THIS LEASE, DATED AS OF SEPTEMBER 22, 1999, IS MADE BY AND BETWEEN U.S. BANCORP LEASING & FINANCIAL, HEREAFTER REFERRED TO AS "LESSOR," AND PLM RENTAL, INC., HEREAFTER REFERRED TO AS "LESSEE." LESSOR AND LESSEE COVENANT AND AGREE AS FOLLOWS: 1. PROPERTY LEASED. Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor the personal property ("Property") together with any replacements, additions, repairs, now or hereafter incorporated therein as described in any Schedule to Master Lease Agreement ("Schedule") now or hereafter executed by the parties hereto, the terms of which are incorporated herein. 2. TERM. This Lease shall become effective on the execution hereof by Lessor. The Term of this Lease may consist of an "Interim Term" and a "Base Term" in regard to each Schedule. The Interim Term for each Schedule shall begin on the date that Lessee executes a Delivery and Acceptance Certificate in connection with any item of Property or provides to Lessor written approval for payment for such item of Property. Each Interim Term shall continue until the Base Term Commencement Date set forth in each Schedule. The Base Term for each Schedule shall begin on the Base Term Commencement Date and shall continue for the period specified in each Schedule. During each Interim Term if any, Lessee shall pay rental ('Interim Rental") in the amount set forth in each Schedule plus applicable tax thereon. 3. RENT, PAYMENT AND TAXES. Rental payments are specified in each Schedule. All rents shall be payable by Lessee each month on or before the payment date shown in each Schedule at Lessor's address herein, or as otherwise directed by Lessor, without notice or demand and without abatement set-off or deduction of any amount whatsoever. Lessee shall pay when due all taxes, fees, assessments, or other charges, however designated, now or hereafter levied or based upon the rentals, ownership, use, possession, leasing, operation, control, or maintenance of the Property, whether or not paid or payable by Lessor, excluding Lessor's income, franchise and business and occupation taxes, and shall supply Lessor with proof of payment satisfactory to Lessor at least seven (7) days before delinquency. At its option, Lessor may pay any tax, assessment insurance premium, expense, repair, release, confiscation expense, lien, encumbrance, or other charge or fee payable hereunder by Lessee, and any amount so paid shall be repayable by Lessee on demand. For any payment due hereunder which is not paid within ten (10) days after the date such payment is due, Lessee agrees to pay a late charge calculated thereon at a rate of five percent (5.0%) of such overdue amount. The parties hereto agree that: a) the amount of such late charge represents a reasonable estimate of the cost that Lessor would incur in processing each delinquent payment by Lessee and that such late charge shall be paid as liquidated damages for each delinquent payment; and, b) the payment of late charges and the payment of Default Interest are distinct and separate from one another. Acceptance of any late charge or interest shall not constitute a waiver of default with respect to the overdue amount or prevent Lessor from exercising any other available rights and remedies. Payments received shall be applied first to delinquent amounts due, including late charges, then to current installments. If any such rental payment is made by check and such check is returned to Lessor for any reason, including without limitation, insufficient funds in Lessee's account then Lessee shall be assessed a fee of $25.00 in addition to any other late charge or any other fee which may be applicable. If the Property is located in a jurisdiction which imposes any "Sales," "Use," or "Rental" tax, Lessor shall collect such tax from Lessee and remit such tax to the appropriate taxing authority or Lessee shall remit such tax directly to the appropriate taxing authority. Such requirement may only be waived if Lessee is exempt from such tax under applicable laws or regulations. Lessee is responsible for ensuring that such exemption is properly documented in accordance with such laws and regulations and that such documentation is provided to Lessor at the inception of each Schedule. If the Property is subject to Personal Property Taxes, both Lessee and Lessor are required to advise the proper taxing authorities of all leased property. Lessee agrees that it will report the Property as having an original cost as set forth on each Schedule and as Property leased from U.S. BANCORP LEASING & FINANCIAL. If Lessor receives an invoice from the taxing authorities for applicable Personal Property Taxes, Lessor shall pay any such taxes directly and Lessee agrees to reimburse Lessor for all such taxes paid by Lessor. If Lessee receives such invoice, Lessee agrees to promptly remit such tax directly to the taxing authority and maintain proof of payment Upon termination of each Schedule, Lessor will, if applicable, estimate Personal Property Taxes on the Property based upon the most recent tax assessment of the Property or on the tax rates and taxable value calculations as available from the appropriate taxing jurisdiction. In the event that the actual personal property tax bill is within $500.00 of such estimate, then Lessor shall not seek reimbursement from Lessee for any underpayment and Lessor may retain any overpayment. If the difference between such estimate and the actual tax bill exceeds $500.00, Lessor shall refund or Lessee shall remit the entire difference. 4. LOSS OR DAMAGE. No loss or damage to the Property, or any part of it shall impair any obligation of Lessee hereunder. Lessee assumes all risk of damage to or loss of the Property, however caused, while in transit and during the term hereof. If any Property is totally destroyed, Lessee may substitute property of like kind and value (subject to approval by Lessor in its sole discretion) or may pay to Lessor the proportionate value of that item of Property relative to the total cost of the Property plus recovery of applicable tax benefits, less the amount of any recovery received by Lessor from any insurance or other source. 5. OWNERSHIP, LOCATION, MAINTENANCE AND USE. Lessee transfers to Lessor all right title and interest, including any and all ownership interest which Lessee may have in or to the Property. Lessee represents and wan-ants that it has the legal right to make such transfer and that such transfer does not constitute a transfer of all or substantially all of the assets of Lessee, and that such transfer does not constitute all or a portion of a 'bulk transfer" under the Uniform Commercial Code. It is agreed between the parties hereto that Lessor shall be the owner of, and hold title to, the Property for all purposes throughout each Schedule. At its own risk, Lessee shall use or permit the use of the Property primarily at the location specified in the Schedule and, without Lessor's prior written consent shall not loan, sublet remove from such location, part with possession or otherwise dispose of the Property. Lessee shall at its sole expense maintain the Property in good repair, appearance and functional order and in compliance with any manufactures and regulatory maintenance and performance standards, shall keep complete records and documents regarding its use, maintenance and repair, shall not use or permit the use of the Property in any unintended, injurious or unlawful manner, shall not permit use or operation of the Property by any one other than Lessee's qualified employees and shall not change or alter the Property without Lessor's written consent. Lessee shall not create, cause, or permit any kind of claim levy, lien or legal process on the Property, and shall forthwith satisfy, remove and procure the release thereof. The Property is and always shall remain personal property. Lessee shall not cause or permit the Property to be used or located in such a manner that it might be deemed a fixture. Lessee shall secure from each person not a party hereto who might secure an interest, lien or other claim in the Property, a waiver thereof. Lessee shall affix and maintain, at its expense, in a prominent and visible location, all ownership notices supplied by Lessor. Lessee shall permit Lessor to mark the Property in a manner sufficient to identify the Property as Lessor's Property. 6. LEASE. This is a non-cancelable contract of lease only and nothing herein or in any other document executed in conjunction herewith shall be construed as conveying or granting to Lessee any option to acquire any right title or interest, legal or equitable, in or to the Property, other than use, possession and quiet enjoyment of the Property, subject to and upon full compliance with the provisions hereof Lessee and Lessor agree that this Lease is a "Finance Lease" as defined by the Uniform Commercial Code Article 2A, the Uniform Personal Property Leasing Act. Notwithstanding the foregoing, Lessee hereby grants to Lessor a security interest in and to the Property as security for all Lessees obligations to Lessor of every kind and nature. Lessee hereby acknowledges that all of the leased Property was selected by Lessee from Supplier(s) chosen by Lessee. Lessee is familiar with all Supply Contract rights provided by the Supplier(s) and is aware that the Supplier(s) may be contacted for a full description of any rights Lessee may have under any Supply Contract. Providing Lessee is not in Default under this Lease, Lessor hereby assigns to Lessee without recourse, all rights arising under any warranties applicable to the Property provided by the manufacturer or any other person. All proceeds of any warranty claim from the manufacturer or any other person shall first be used to repair the affected Property. 7. GENERAL INDEMNIFICATION AND INSURANCE. Lessee assumes liability for, and agrees to defend, indemnify and hold Lessor harmless from any claim, liability, loss, cost expense, or damage of every nature (including, without limitation, fines, forfeitures, penalties, settlements, and attorneys' fees) by or to any person whomsoever, regardless of the basis, including wrongful, negligent or improper act or misuse by Lessor, which directly or indirectly results from or pertains to the leasing, manufacture, delivery, ownership, use, possession, selection, performance, operation, inspection, condition (including without limitation, latent or other defects, and whether or not discoverable), improvements, removal, return or storage of the Property, except arising while the Property is in the possession of Lessor. Upon request of Lessor, Lessee shall assume the defense of all demands, claims, or actions, suits and all proceedings against Lessor for which indemnity is provided and shall allow Lessor to participate in the defense thereof. Lessor shall be subrogated to all rights of Lessee for any matter which Lessor has assumed obligation hereunder, and may settle any such demand, claim, or action with Lessee's prior consent (which shall not be unreasonably withheld), and without prejudice to Lessor's right to indemnification hereunder. At its expense, Lessee shall maintain in force, at all times from shipment of the Property to Lessee until surrender thereof, property damage insurance and liability insurance with such deductibles and from such insurance carriers as shall be satisfactory to Lessor. The Property must be insured against all risks which are customarily insured against on the type of property leased hereunder. The amount of Lessee's liability insurance shall not be less than $1,000,000.00. Such insurance policies must name Lessor as an additional insured and loss payee, and provide for ten (10) days advance written notice to Lessor of modification or cancellation. Lessee shall, upon request deliver to Lessor satisfactory evidence of the insurance coverage. In the event Lessee fails to do so, Lessor may, at Lessor's option, in addition to any other rights available to Lessor, obtain coverage, and any sum paid therefor by Lessor (including any charges assessed by Lessor for such service) shall be immediately due and payable to Lessor by Lessee. 8. INCOME TAX INDEMNITY. Lessee and Lessor hereby agree and assume as follows: (a) This Lease will be a lease for Federal and Oregon state income tax purposes; Lessor will be treated as the purchaser, owner, lessor, and original user of the Property and Lessee will be treated as the lessee of the Property for such purposes. (b) Lessor shall be entitled to depreciation deductions with respect to each item of Property as provided by Section 167(a) of the Internal Revenue Code of 1986, as amended (the "Code"), determined under Section 168 of the Code by using the applicable depreciation method, the applicable recovery period, and the applicable convention, all as may be specified on the applicable Schedule for the Property, and Lessor shall also be entitled to corresponding Oregon depreciation deductions. (c) For purposes of determining depreciation deductions, the Property shall have an income tax basis equal to Lessor's cost for the Property specified on the applicable Schedule, plus such expenses of the transaction incurred by Lessor as may be included in basis under Section 10 1 2 of the Code. (d) The maximum federal and Oregon income tax rates applicable to Lessor in effect on the date of execution and delivery of a Schedule with respect to an item or items of property will not change during the lease term applicable to such Property. If, as the result of the acts or omissions of the Lessee, the assumptions, representations, warranties, or covenants of Lessee contained in this Lease or in any other agreement relating to the Property shall prove to be incorrect and (i) Lessor shall determine that it is not entitled to claim all or any portion of the depreciation deductions in the amounts and in the taxable yearns determined as specified in (b) and (c), above, or (ii) such depreciation deductions are disallowed, adjusted, recomputed, reduced, or recapture, in whole or in part, by the Internal Revenue Service or Oregon Department of Revenue (such determination, disallowance, adjustment, recomputation, reduction, or recapture being herein called a "Loss"), then Lessee shall pay to Lessor as an indemnity and as additional rent such amount as shall, in the reasonable opinion of Lessor, cause Lessor's after-tax economic yield (the "Net Economic Return") to equal the Net Economic Return that would have been realized by Lessor if such Loss had not occurred. The amount payable to Lessor pursuant to this section shall be payable on the next succeeding rental payment date after written demand therefor from Lessor accompanied by a written statement describing in reasonable detail such Loss and the computation of the amount so payable. 9. INSPECTION AND REPORTS. Lessor shall have the right at any reasonable time, to enter on Lessee's premises or elsewhere and inspect the Property and any records and documents regarding its use, maintenance and repair. Upon Lessor's request, but in no event later than thirty (30) days after such request, Lessee will deliver all information requested by Lessor which Lessor deems necessary to determine Lessee's current financial condition or faithful performance of the terms hereof. Lessee shall give Lessor immediate notice and copy of all tax notices, reports, or inquiries, and of all seizure, attachment, or judicial process affecting or relating to the use, maintenance, operation, possession or ownership of the Property. 10. LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee represents and warrants to Lessor that as of the date of this Lease and of each Schedule: (a) Lessee has adequate power and capacity to enter into this Lease, any Schedule, and any other documents required to be delivered in connection with this Lease (collectively, the "Documents"); the Documents have been duly authorized, executed and delivered by Lessee and constitute valid, legal and binding agreements, enforceable in accordance with their terms; there are no proceedings presently pending or threatened against Lessee which will impair its ability to perform under the Lease; and all information supplied to Lessor is accurate and complete. (b) Lessee's entering into the Lease and leasing the Property does not and will not; (i) violate any Judgment order, or law applicable to the Lease, Lessee or Lessees organizational documents; or (ii) result in the creation of any lien, security interest or other encumbrance upon the Property, other than as granted hereunder. (c) All information and representations furnished by Lessee to Lessor concerning the Property are accurate and correct. (d) All financial data of Lessee or of any consolidated group of companies of which Lessee is a member ("Lessee Group"), delivered to Lessor have been prepared in accordance with generally accepted accounting principles applied on a consistent basis with prior periods and fairly present the financial position and results from operations of Lessee, or of the Lessee Group, as of the stated date and period(s). Since the date of the most recently delivered financial data, there has been no material adverse change in the financial or operating condition of Lessee or of the Lessee Group. (e) If Lessee is a business entity, it is and will be validly existing and in good standing under laws of the state of its organization; the persons signing the Documents are acting with all necessary authority and hold the offices indicated below their signatures, which are genuine. 11. ASSIGNMENT. LESSEE SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS LEASE OR ENTER INTO ANY SUBLEASE OF ALL OR ANY PART OF THE LEASED PROPERTY WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR WHICH SHALL NOT BE UNREASONABLY WITHHELD. IN CONNECTION WITH THE GRANTING OF SUCH CONSENT AND THE PREPARATION OF NECESSARY DOCUMENTATION, A FEE SHALL BE ASSESSED EQUAL TO ONE PERCENT (1%) OF THE TOTAL REMAINING BALANCE THEN DUE HEREUNDER. LESSEE AGREES THAT LESSOR MAY ASSIGN OR TRANSFER THIS LEASE OR LESSOR'S INTEREST IN THE LEASED PROPERTY WITHOUT NOTICE TO LESSEE. Any assignee of Lessor shall have all of the rights, but none of the obligations, of Lessor under this Lease and Lessee will not assert against any assignee of Lessor any defense, counter claim or offset that Lessee may have against Lessor. Lessee acknowledges that any assignment or transfer by Lessor will not materially change Lessee's duties or obligations under this Lease nor materially increase the burdens or risks imposed on Lessee. Lessee shall cooperate with Lessor in executing any documentation reasonably required by Lessor or any assignee of Lessor to effectuate any such assignment. 12. SURRENDER. On the expiration or termination of the term specified in each Schedule, unless Lessee shall exercise any purchase option granted in connection with such Schedule, Lessee shall, at its risk and expense and according to manufacturer's recommendations, assemble, prepare for delivery, and deliver the applicable Property and all manuals, records, certificates and documents regarding its use, maintenance and repair to any location specified by Lessor within the continental United States. To the extent that any such purchase option specifies that the purchase price shall be the "fair market value' of the Property, the term "fair market value" shall be defined as the value of the Property in continued use. Upon return of the Property any upgrades and improvements shall become the property of Lessor. Any upgrades, parts or improvements may only be removed from the Property if their removal shall not impair the Property's ability to operate according to any manufacturers and regulatory performance standards and specifications. The Property shall be delivered unencumbered and free of any liens, charges, or other obligations (including delivery expense and sales or use taxes, if any, arising from such delivery) and shall be in good working order, in the same condition, appearance, and functional order as when first leased hereunder, reasonable wear excepted, and in the condition specified or described in the applicable Schedule. At Lessor's request Lessee shall at Lessee's expense provide Lessor with a written certification by an independent engineer or other recognized expert acceptable to Lessor to the effect that the Property is in the condition required hereunder. In lieu of delivery, Lessor may, at its option, direct Lessee to dispose of all or a portion of the Property in a proper and lawful manner at a recognized disposal site at Lessees sole cost and responsibility. 13. DEFAULT. Time is of the essence under this Lease, and Lessee shall be in default in the event of any of the following ("Event of Default"): (a) any failure to pay when due the full amount of any payment required hereunder, including, without limitation, rent, taxes, liens, insurance, indemnification, repair or other charge; (b) any misstatement or false statement in connection with, or non-performance of any of Lessee's obligations, agreements, or affirmations under or emanating from, this Lease which continues for more than ten (10) days after written notice; (c) Lessee's death, dissolution, termination of existence; (d) if any of the following actions or proceedings are not dismissed within sixty (60) days after commencement: Lessee's insolvency, becoming the subject of a petition in bankruptcy, either voluntary or involuntary, or in any other proceeding under federal bankruptcy laws; making an assignment for benefit of creditors; or being named in, or the Property being subjected to a suit for the appointment of a receiver, (e) any failure to pay, as and when due, any obligation of Lessee in excess of $250,000 (which is not disputed by Lessee in good faith), whether or not to Lessor, arising independently of this Lease; (f) any removal, sale, transfer, sublease, encumbrance, seizure or levy of or upon the Property; or (g) bankruptcy, insolvency, termination, death, dissolution, or default of any guarantor for Lessee. 14. REMEDIES. Upon the occurrence of any Event of Default pursuant to Section 13(a) which continues for more than ten (10) days and at any time thereafter and upon the occurrence of any Event of Default pursuant to Sections 13(b) through (g) which continues for more than ten (10) days after written notice and at any time thereafter, Lessor shall have all remedies provided by law; and, without limiting the generality of the foregoing and without terminating this Lease, Lessor, at its sole option, shall have the right at any time to exercise concurrently, or separately, without notice to Lessee (unless specifically stated), any one or all of the following remedies: (a) Request Lessee to assemble the Property and make it available to Lessor at a reasonable place designated by Lessor and put Lessor in possession thereof on demand; (b) Immediately and without legal proceedings or notice to Lessee, enter the premises, take possession of, remove and retain the Property or render it unusable (any such taking shall not terminate this Lease); (c) Declare the entire amount of rent and other sums payable hereunder immediately due and payable; however, in no event shall Lessor be entitled to recover any amount in excess of the maximum permitted by applicable law; Terminate the leasing of any or all items of Property. Such termination shall occur only upon notice by Lessor and only as to such items of Property as Lessor specifically elects to terminate. This Lease shall continue in full force and effect as to any remaining items. (e) Recover the sum of. (i) any accrued and unpaid rent, plus (ii) the present value of all future rentals reserved in the Lease and contracted to be paid over the unexpired term of the Lease, discounted at the rate of six percent (6%); plus, (iii) the anticipated residual value of the Property as of the expiration of this Lease or any renewal thereof, (iv) any indemnity payment if then determinable; (v) all commercially reasonable costs and expenses incurred by Lessor in any repossession, recovery, storage, repair, sale, re-lease or other disposition of the Property, including reasonable attorneys' fees and costs incurred in connection therewith or otherwise resulting from Lessee's default (including any incurred at trial, on appeal or in any other proceeding); and, (vi) the value of all tax benefits lost to Lessor as a result of Lessee's default or the enforcement by Lessor of any remedy; plus interest on each of the foregoing at a rate of fifteen percent (15.0%) per annum ("Default Interest"); and, (f) In an effort to mitigate its damages, Lessor shall re-lease or sell any or all of the Property at a public or private sale on such terms and notice as Lessor shall deem reasonable. The proceeds of any sale or lease shall be applied in the following order of priorities: (i) to pay all of Lessor's expenses in taking, removing, holding, repairing and disposing of Property; then (ii) to pay any late charges and interest accrued; then (iii) to pay accrued but unpaid rent together with the anticipated residual value, future rent, interest and all other due but unpaid sums (including any indemnification and sums due under other Leases or agreements in default). Any remaining proceeds will reimburse Lessee for payments which it made to reduce the amounts owed to Lessor in the preceding sentence. Lessor shall keep any excess. If the proceeds of any sale or lease are not enough to pay the amounts owed to Lessor under this Section, Lessee shall pay the deficiency. No remedy referred to in this paragraph is intended to be exclusive, but shall be cumulative and in addition to any other remedy referred to above or otherwise available to Lessor at law or in equity. 15. LESSEE'S WAIVER. Upon the execution by Lessee of a Delivery and Acceptance Certificate in connection with each Schedule hereto, to the extent permitted by applicable law, Lessee hereby waives Lessee's rights to: (i) cancel or repudiate this Lease; (ii) reject or revoke acceptance of the Property; (iii) recover damages from Lessor for any breaches of warranty; (iv) claim, grant or permit a security interest in the Property in Lessee's possession or control for any reason; (v) deduct all or part of any claimed damages resulting from Lessor's default if any, under this Lease; (vi) accept any partial delivery of the property; (vii) "cover" by making any purchase or lease of or contract to purchase or lease property in substitution for the Property; (viii) commence legal action against Lessor for specific performance, replevin, sequestration, claim and delivery or the like for the Property. 16. NOTICES, PAYMENTS AND G0VERNING LAW. All notices and payments shall be mailed or delivered to the respective parties at the below address, or such other address as a party may provide in writing from time to time. This Lease shall be considered to have been made in the State of Oregon and shall be interpreted, and the rights and liabilities of the parties determined, in accordance with applicable federal law and the laws of the State of Oregon. In the event of suit enforcing this Lease, Lessee agrees that venue may, at Lessor's option, be laid in the county of Lessor's address below. 17. SEVERABILITY. If any of the provisions of this Lease are contrary to, prohibited by, or held invalid under applicable laws, regulations or public policy of any jurisdiction in which it is sought to be enforced, then that provision shall be considered inapplicable and omitted but shall not invalidate the remaining provisions. In no event shall this Lease be enforced in any way which permits Lessor to charge or collect interest in excess of the maximum lawful rate. Should interest collected exceed such rate, Lessor shall refund such excess interest to Lessee. In such event Lessee agrees that Lessor shall not be subject to any penalties provided by law for contracting for or collecting interest in excess of the maximum lawful rate. 18. SURVIVAL. All of Lessor's rights, privileges and indemnities contained herein shall survive the expiration or other termination of the Lease and any Schedules, and the rights, privileges and indemnities contained herein are expressly made for the benefit of, and shall be enforceable by, Lessor, its successors and assigns. 19. LESSOR'S DISCLAIMERS. Lessor has obtained the Property based on specifications furnished by the Lessee. Lessor does not deal in property of this kind or otherwise hold itself or its agents out as having knowledge or skill peculiar to the Property. Lessee acknowledges that it has relied on its own skill and experience in selecting property suitable to the Lessee's particular needs or purposes and has neither relied upon the skill or judgment of Lessor nor believes that Lessor or its agents possess any special skill or judgment in the selection of Property for Lessees particular purposes. Further, Lessee has not notified Lessor of Lessee's particular needs in using the Property. Lessee understands and agrees that neither the Supplier(s) nor any salesman or any agent of the Supplier(s) is an agent of Lessor. No salesman or agent of supplier is authorized to waive or alter any term or condition of this Lease, and no representation as to the Property or any other matter by the Supplier shall in any way affect Lessee's duty to pay the rent and perform its obligations as set forth in this Lease. Lessor shall not be liable to Lessee for any incidental, consequential, or indirect damages or for any act, neglect, omission, breach or default by any third party. LESSOR ASSUMES NO RESPONSIBILITY FOR AND MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THE TITLE, DESIGN, COMPLIANCE WITH SPECIFICATIONS, CONDITION, QUALITY, WORKMANSHIP, OR THE SUITABILITY, SAFETY, ADEQUACY, OPERATION, USE OR PERFORMANCE OF THE PROPERTY OR AS TO ITS MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR AS TO PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT. ANY DELAY IN DELIVERY SHALL NOT AFFECT THE VALIDITY OF THIS LEASE. LESSOR SHALL NOT BE LIABLE TO LESSEE FOR ANY REPRESENTATION, CLAIM, BREACH OF WARRANTY, EXPENSE OR LOSS DIRECTLY OR INDIRECTLY CAUSED BY ANY PERSON, INCLUDING LESSOR, IN ANY WAY RELATED TO THE PROPERTY. 20. ENTIRE AGREEMENT, WAIVERS, SUCCESSORS, NOTICE. This Lease and any Schedule expressly referring hereto (each, a "Transaction") contain the entire agreement of the parties and shall not be qualified or supplemented by course of dealing. However, in any case where the Lessor takes an assignment from a vendor of its security interest in the same Property, the terms of the Transaction shall be incorporated into the assigned agreement and shall prevail over any inconsistent terms therein but shall not be construed to create a new contract. No waiver or modification by Lessor of any of the terms or conditions hereof shall be effective unless in writing signed by an officer of Lessor. No waiver or indulgence by Lessor of any default or deviation by Lessee of any required performance shall be a waiver of Lessor's right to subsequent or other full and timely performance. This Lease shall be binding on the parties hereto and their respective successors and assigns and shall inure to the benefit of such successors and assigns. Paragraph headings shall not be considered a part of this Lease. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LESSOR AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE LESSEE'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY LESSOR TO BE ENFORCEABLE. BY INITIALING THIS SECTION, LESSEE ACKNOWLEDGES THAT LESSEE RAS READ THE ABOVE PARAGRAPHS UNDER SECTION 19, LESSORS DISCLAIMERS, AND SECTION 20, ENTIRE AGREEMENT, AND FULLY UNDERSTANDS THEIR CONTENT. INITIALED: /s/ RKB 21. POWER OF ATTORNEY. LESSEE HEREBY AUTHORIZES AND APPOINTS LESSOR AS ITS ATTORNEY-IN-FACT TO COMPLETE, AMEND AND EXECUTE ON LESSEE'S BEHALF FINANCING STATEMENTS IN CONNECTION WITH THIS LEASE AND TO CONFORM THE DESCRIPTION OF THE PROPERTY (INCLUDING SERIAL NUMBERS) IN ANY SUCH FINANCING STATEMENTS OR OTHER DOCUMENTATION. LESSEE WILL ALSO PROMPTLY EXECUTE AND DELIVER TO LESSOR SUCH FURTHER DOCUMENTS AND TAKE FURTHER ACTION AS LESSOR MAY REQUEST TO MORE EFFECTIVELY CARRY OUT THE INTENT AND PURPOSE OF T'HIS LEASE. IN WITNESS WHEREOF, Lessor and Lessee have each caused this Master Lease Agreement to be duly executed as of the day and year first above written. PLM RENTAL, INC. (LESSEE) By: /s/ Richard K Brock Chief Financial Officer U.S. BANCORP LEASING & FINANCIAL (LESSOR) By: /s/Rick DiStephanco Its: Senior Vice President Address for All Notices: U.S. BANCORP LEASING & FINANCIAL P.O. BOX 2177, 7659 S.W. MOHAWK STREET TUALATIN, OREGON 97062-2177 EX-10.7 9 SEVERANCE AGREEMENT THIS SEVERANCE AGREEMENT ("Agreement") is made and entered into on this __ day of August, 1999, by and between PLM INTERNATIONAL, INC., its successors and/or assigns (the "Company"), and _____________ ("Employee"). WHEREAS, Employee currently holds the position(s) of __________ of the Company; and WHEREAS, in the event any person or group proposes a change in control transaction (as defined in Section 2 of this Agreement), the Board of Directors would consider such proposal in order to determine whether it was fair and in the best interest of the shareholders; and WHEREAS, any such consideration by the Board of Directors may lead to uncertainty regarding the future path of the Company and the long-term prospects for executive employment with the Company; and WHEREAS, the Company's Board of Directors believes it is important to the enhancement of shareholder value that, notwithstanding such uncertainty, Employee act vigorously and constructively in any negotiations being conducted in connection with a change in control transaction to achieve the result most favorable to the Company's shareholders and continue to manage the on-going business of the Company in order to achieve the most positive results attainable; and WHEREAS, as an inducement for Employee to remain in the employ of the Company before and after a change in control transaction, this Agreement provides for certain incentives for Employee upon a change in control and for certain severance benefits to be paid and provided to Employee in the event Employee's employment is terminated without cause (as defined herein) following or resulting from a change in control transaction. NOW, THEREFORE, in consideration of the above premises and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Employee agree as follows: 1. Term. The term of this Agreement shall commence on the date hereof and shall continue (i) until December 31, 1999 so long as no Change in Control (as defined below) has occurred on or before December 31, 1999; or (ii) until all obligations under this Agreement have been met in the event a Change in Control has occurred on or before December 31, 1999. 2. Change in Control. A. For the purposes of this Agreement only, the term "Change in Control" shall mean the occurrence of any one of the following events: (i) Any person or group (a "Person"), within the meaning of Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), acquiring "beneficial ownership" ("Beneficial Ownership"), as defined in Rule 13d-3 under the Exchange Act, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company's then outstanding securities; provided, however, in determining whether a Change in Control has occurred, voting securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (a) an employee benefit plan (or trust forming a part thereof) maintained by the Company or any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interests is owned, directly or indirectly, by the Company (for purposes of this definition, a "Subsidiary"), (b) the Company or its Subsidiaries, or (c) any Person in connection with a "Non-Control Transaction" (as hereinafter defined); (ii) A merger, consolidation or reorganization (collectively, a "Transaction") involving the Company unless such Transaction is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a Transaction involving the Company where: (a) The stockholders of the Company immediately before such Transaction own, directly or indirectly, immediately following such Transaction, at least fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation resulting from such Transaction (the "Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Transaction, or (b) No Person, other than (1) the Company, (2) any Subsidiary, or (3) any employee benefit plan (or any trust forming a part thereof) maintained by the Company or any Subsidiary, has Beneficial Ownership of more than fifty percent (50%) of the combined voting power of the Surviving Corporation's then outstanding voting securities; (iii) The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary of the Company); provided however, that in no event shall the sale or other disposition of the Company's subsidiary American Finance Group, Inc. (AFG) by itself, or the sale or other disposition of the Company's subsidiary PLM Rental, Inc. (PLMR) by itself, be deemed to be a sale or other disposition of all or substantially all of the assets of the Company for the purposes of this Agreement; and further provided however, that in the event either AFG or PLMR is sold or otherwise disposed of during the term of this Agreement, then the later sale or other disposition of PLMR (in the case of an earlier sale or disposition of AFG) or AFG (in the case of an earlier sale or disposition of PLMR) shall be deemed to be a sale or other disposition of all or substantially all of the assets of the Company; or (iv) The stockholders of the Company approve a plan of dissolution or liquidation of the Company. B. In the event that a Change in Control transaction as defined in this Agreement occurs, and such transaction is also deemed to be a Change in Control as defined in and under the Employment Agreement (the "Employment Agreement") dated as of _________ between the Company and Employee (specifically, a majority of the members of the Continuing Directors of the Board of Directors of the Company does not approve the Change in Control event specifically for purposes of the Employment Agreement), then the terms and conditions of the Employment Agreement, including but not limited to Sections 10.2, 11, 12 and 13 thereof, shall govern and supercede this Agreement. 3. Stock Options and Grants. A. Upon the occurrence of a Change in Control, any and all options to purchase stock and grants of stock (common or otherwise) in the Company granted to Employee pursuant to any plan or otherwise, including options granted pursuant to the 1988 Management Stock Compensation Plan and/or the 1998 Management Stock Compensation Plan, and any and all grants of stock in the Company granted to Employee pursuant to the 1996 Mandatory Management Stock Bonus Plan (collectively, any or all of these plans shall be referred to herein as the "Stock Plans"), shall become immediately accelerated and fully vested and any restrictions on such options and grants shall, to the extent permissible under applicable securities laws, fully lapse. The Company shall endeavor to cause any restrictions on the options or grants not lapsed by operation of this Section 3 to so lapse. B. Upon the vesting of all such options and grants (whether pursuant to this Section 3 or Section 6(C)(ii) below) and, in the case of options, so long as such options have not expired, Employee may elect by written notice to the Company at any time following such vesting that the Company "cash-out" such options and/or grants by paying to Employee within five (5) days of the notice the value of the options and/or grants so long as Employee surrenders to the Company, and agrees to the cancellation of, the options or grants. The value of the options and/or grants shall be calculated based on the higher of (i) the price paid to the Company's shareholders in connection with a tender offer that results in a Change in Control or (ii) the average daily closing price of the common stock of the Company for the ten days preceding the date of the Change in Control (or if the accelerated vesting occurs pursuant to Section 6(C)(ii), for the ten days preceding the Date of Termination (as defined below)), less (in the case of options only) the exercise price of the option. In the event Employee does not elect to "cash-out" pursuant to Section 3(B), then Employee's rights regarding such options and grants shall be as set forth in the Stock Plans and agreements governing such options and grants, except that Employee shall be deemed to be fully vested and any restrictions on such options and grants shall remain fully lapsed. 4. Termination By Company In Connection With a Change in Control. A. In the event that Employee's employment is terminated by the Company subsequent to or resulting from a Change in Control for a reason other than Cause or Disability, the Company shall pay Employee the Severance Benefits specified in Section 6(C). B. For purposes of this Agreement, "Cause" shall be limited to: (i) The willful and continued failure by Employee to perform his/her day to day responsibilities substantially in the same manner as performed prior to the Change in Control (other than any failure resulting from Employee's incapacity due to physical or mental illness), which has not been cured within ten (10) days after written demand for substantial performance is delivered by the Company to Employee, which demand specifically identifies the manner in which Employee has not substantially performed his/her day to day responsibilities. The financial condition of the Company (including any subsidiary, division or department thereof), and/or Employee's contribution thereto, shall not be considered for the purposes of determining whether Employee has willfully failed to perform his/her day to day responsibilities; (ii) A willful and intentional act or omission by Employee which is, in the reasonable determination of the Company, materially injurious to the Company, monetarily or otherwise. For purposes of subsection (i) above and this subsection (ii), no act or omission on Employee's part shall be considered willful and intentional unless done, or omitted to be done, by him/her not in good faith and without the reasonable belief that his/her action(s) or omission(s) was in the best interests of the Company; or (iii) The conviction of Employee of, or his/her admission or plea of nolo contendere to, a crime involving an act of moral turpitude, which is a felony or which results or is intended to result, directly or indirectly, in gain or personal enrichment of Employee, relatives of Employee, or their affiliates at the expense of the Company; provided, however, that, notwithstanding anything to the contrary contained in this Section 4(B), "Cause" shall not be deemed to include a refusal by Employee to execute any certificate or document that Employee in good faith determines contains any untrue statement of a material fact. C. For the purposes of this Agreement, Disability shall mean if, as a result of Employee's incapacity due to physical or mental illness, Employee shall have been absent or substantially absent from his/her duties hereunder for a period of six (6) consecutive months, and within thirty (30) days after a Notice of Termination (as hereinafter defined) is given, which Notice of Termination may be given before or after the end of such six month period, Employee shall not have returned to the performance of his/her duties hereunder on a full-time basis, Employee's employment shall terminate upon the expiration of such thirty (30) days. Employee's absence or substantial absence from his/her duties will be treated as resulting from incapacity due to physical or mental illness if Employee is "totally disabled from his/her own occupation." Total disability from Employee's own occupation will exist where (i) because of sickness or injury, Employee cannot perform the important duties of his/her occupation, (ii) Employee is either receiving Doctor's Care or has furnished written proof acceptable to the Company that further Doctor's Care would be of no benefit, and (iii) Employee does not work at all. Doctor's Care means regular and personal care of a Doctor which, under prevailing medical standards, is appropriate for the condition causing the disability. 5. Termination by Employee. A. Employee may terminate his/her employment during the term of this Agreement upon thirty (30) days' Notice of Termination to the Company for any reason. If Employee terminates his/her employment hereunder subsequent to a Change in Control and such termination is made for any of the reasons listed in Section 5(B) (such reason(s) to be detailed in the Notice of Termination), such termination shall be deemed to have been done for good reason ("Good Reason") and the Company shall pay Employee the Severance Benefits specified in Section 6(C), below. B. Reasons constituting "Good Reason" shall include: (i) Any breach by the Company of any material provision of this Agreement which has not been cured within ten (10) days after written notice detailing such non-compliance is given by Employee to the Company; (ii) Any demonstrable and material diminution of the base and/or incentive compensation, duties, responsibilities, authority or powers of Employee as they relate to any positions or offices held by Employee during the term of this Agreement; provided that Employee provides a reasonable description of any such diminution(s) and a statement that Employee finds, in good faith, such diminution to be a material diminution and that, as such, he/she elects to terminate his/her employment hereunder for Good Reason; (iii) The failure of the Company to include Employee in any Employee Benefit Plan or Incentive Compensation Plan for which Employee has previously participated or would reasonably expect to participate in. Employee may reasonably expect to participate in an Employee Benefit Plan or Incentive Compensation Plan if, without limitation, other employees of the Company with similar titles, levels of responsibilities or salaries participate or have participated in such plan; or (iv) Any requirement by the Company that Employee relocate his/her primary business office to a geographical area greater than twenty (20) miles from the Company 's principal executive offices as existing on January 1, 1999, or if Employee is based in an office other than the Company's principal executive offices, twenty (20) miles from the Company's office where Employee is based as of January 1, 1999. C. In the event Employee terminates his/her employment for Good Reason and the Company disputes that the termination was for Good Reason, the Company shall have the burden of proving that any such reason was not "Good Reason". 6. Compensation Upon Termination. A. Termination For Cause. Following a Change in Control, if Employee's employment is terminated for Cause as defined in this Agreement, the Company shall pay Employee his/her full Base Salary (and any accrued but unused vacation and personal days) through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations to Employee under this Agreement. The rights, limitations and obligations of each of the Employee and the Company under any other agreement or plan, including but not limited to any stock option or bonus plan, deferred compensation plan and related agreement(s), as of the Date of Termination shall remain in full force and effect. B. Termination for Disability. Following a Change in Control, if Employee's employment is terminated for Disability as defined in this Agreement, the Company shall pay to Employee his/her full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given. The Company shall also pay to Employee any accrued but unused vacation and personal days, and the Company shall also provide benefits to Employee pursuant to the standard policy of the Company with respect to terminated disabled employees. The rights, limitations and obligations of each of the Employee and the Company under any other agreement or plan, including but not limited to any stock option or bonus plan, deferred compensation plan and related agreement(s), as of the Date of Termination shall remain in full force and effect. C. Termination Without Cause or Termination by Employee For Good Reason. If, (a) subsequent to or resulting from a Change in Control the Company terminates Employee's employment hereunder other than for Cause or Disability, or (b) subsequent to a Change in Control Employee terminates his/her employment for Good Reason, the Company shall, in addition to paying Employee his/her full Base Salary through the Date of Termination at the rate in effect at the time the Notice of Termination is given and any accrued but unused vacation and personal days (as required by law), pay to Employee within seven (7) business days of the Date of Termination, and provide to Employee, the following severance benefits: (i) The Company shall pay to Employee a lump sum amount equal to _________ (__) months of Employee's Base Salary at the highest rate in effect during the twelve (12) months immediately preceding the Date of Termination, less customary payroll deductions; (ii) Any and all options to purchase stock (common or otherwise) in the Company granted to Employee following a Change in Control pursuant to any plan or otherwise, and any and all grants of stock in the Company granted to Employee following a Change in Control pursuant to any plan or otherwise, shall become immediately accelerated and fully vested and any restrictions on such options, grants or equivalent or similar rights shall, to the extent permissible under applicable securities laws, fully lapse. The Company shall endeavor to cause any restrictions on the options, grants or equivalent or similar rights not lapsed by operation of this Section 6(C) to so lapse. Employee shall have the same rights in such accelerated and vested options and grants as provided in Section 3(B) and the Company shall pay to Employee the value of the options and/or grants upon receipt of Employee's written notice of his/her election to "cash-out" pursuant to Section 3(B); (iii) At the Employee's election by written notice to the Company made within four (4) business days following the Date of Termination, the Company shall pay to Employee in a lump sum the total amount of any Monthly Executive Compensation Benefit payments that are payable under the Executive Deferred Compensation Agreement (the "Executive Deferred Compensation Agreement") dated as of ______, between the Company and Employee, which amount shall have been determined pursuant to the terms of Sections 5(a) and 5(b) of the Executive Deferred Compensation Agreement after taking into consideration the automatic acceleration of vesting as provided in Section 10.1, including Section 10.1(a) and 10.1(b), of the Executive Deferred Compensation Agreement. In the event Employee does not elect to a lump sum payment of the total amount of any Monthly Executive Compensation Benefit payments that are payable under the Executive Deferred Compensation Agreement, then such amounts shall be paid pursuant to the terms of such Executive Deferred Compensation Agreement; and (iv) Employee shall continue to participate in all life insurance, medical, health, dental and disability plans, programs or arrangements ("Insurance Plans") in which Employee participated immediately prior to the Date of Termination on the same terms as Employee participated immediately prior to the Date of Termination for the shorter period of (a) months from the Date of Termination or (b) Employee's commencement of full time employment with a new company that provides Employee with benefits at least as favorable as those provided by the Company; provided that Employee's continued participation is possible under the general terms and provisions of such plans and programs and Employee will continue to be obligated to pay the same employee portion of any premium and any deductible and/or co-payments associated with such insurance Plans as was required immediately prior to the Date of Termination. Employee's right to continued group benefits after any period covered by the Company will be determined in accordance with federal and state law. (v) The payments and benefits provided for in this Section 6(C) are in addition to, and shall not be deemed to be in lieu of, any other payments and/or benefits to which Employee is entitled, including without limitation any and all payments and benefits under any other pension and retirement plan and arrangement, supplemental pension and retirement plan and arrangement, stock option plan(s), and/or insurance and disability plans. D. Other Termination by Employee. If following a Change in Control Employee terminates his/her employment for any reason other than Good Reason, the Company shall pay to Employee his/her full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and any accrued but unused vacation and personal days, and the Company shall have no further obligations to Employee under this Agreement. The rights, limitations and obligations of each of the Employee and the Company under any other agreement or plan, including but not limited to any stock option or bonus plan, deferred compensation plan and related agreement(s), as of the Date of Termination shall remain in full force and effect. E. Termination Prior to a Change in Control. This Agreement does not provide for the payment or provision of severance benefits in connection with a termination by Employee or the Company prior to and not in connection with a Change in Control. Employee's rights to any such benefits shall continue to be governed by law or other written agreement, if any exists between Employee and the Company, and nothing in this Agreement is intended to change, or shall be construed as changing, any of the legal or contractual rights of either party to terminate Employee's employment (for Cause, at-will, for Good Reason, or otherwise) prior to and not in connection with a Change in Control. F. Section 280G. Notwithstanding any other provisions of this Agreement or any other agreement between the Company and the Executive, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company or any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (all such payments and benefits, including the severance benefits provided hereunder, being hereinafter called "Total Payments") would not be deductible (in whole or part), by the Company, an affiliate or Person making such payment or providing such benefit as a result of section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), then, to the extent necessary to make such portion of the Total Payments deductible (and after taking into account any reduction in the Total Payments provided by reason of section 280G of the Code in such other plan, arrangement or agreement), the benefits provided hereunder shall be reduced (if necessary, to zero); provided, however, that, notwithstanding the terms of any other plan or agreement, the Executive may elect to have the benefits payable under any other plan or agreement reduced (or eliminated) prior to any reduction of the benefits payable under this Agreement, which may include, in the case of the Executive Deferred Compensation Agreement (if Employee is a party to such agreement), an election to reduce the Executive's Compensation Period under the Executive Deferred Compensation Agreement (without increasing the amount determined under Section 1.1 of the Executive Deferred Compensation Agreement as Executive's Monthly Deferred Compensation Benefit). (i) For purposes of this limitation, (a) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a "payment" within the meaning of section 280G(b) of the Code shall be taken into account, (b) no portion of the Total Payments shall be taken into account that, in the opinion of tax counsel ("Tax Counsel") selected by the Executive and reasonably accepted by the Company, does not constitute a "parachute payment" within the meaning of section 280G(b)(2) of the Code, including by reason of section 280G(b)(4)(A) of the Code, (c) the benefits payable under this Agreement shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clauses (a) or (b)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of section 280G(b)(4)(B) of the Code or are otherwise not subject to disallowance as deductions by reason of section 280G of the Code, in the opinion of Tax Counsel, and (d) the value of any noncash benefit or any deferred payment or benefit included in the Total Payments shall be determined in accordance with the principles of sections 280G(d)(3) and (4) of the Code. (ii) If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that, notwithstanding the good faith of the Executive and the Company in applying the terms of this Section 6(F), the Total Payments paid to or for the Executive's benefit are in an amount that would result in any portion of such Total Payments being subject to the Excise Tax, then, if such repayment would result in (a) no portion of the remaining Total Payments being subject to the Excise Tax and (b) a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes, the Executive shall have an obligation to pay the Company upon demand an amount equal to the sum of (x) the excess of the Total Payments paid to or for the Executive's benefit over the Total Payments that could have been paid to or for the Executive's benefit without any portion of such Total Payments being subject to the Excise Tax; and (y) interest on the amount set forth in clause (x) of this sentence at the rate provided in section 1274(b)(2)(B) of the Code from the date of the Executive's receipt of such excess until the date of such payment. (iii) By execution and delivery of this Agreement, the provisions of Section 10.4 of the Executive Deferred Compensation Agreement are hereby superseded and such section is hereby declared null and void. 7. Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise and, except as otherwise provided in Section 6(C)(iv), no payment or benefit provided for in this Agreement shall be reduced by any compensation earned by Employee as the result of employment by another employer after the termination of his/her employment with the Company. 8. Other Definitions. The following definitions shall apply for purposes of this Agreement: A. Notice of Termination. Any purported termination by the Company or by Employee shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon. Any purported termination of Employee's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of this paragraph shall not be effective. B. Date of Termination. "Date of Termination" shall mean, as applicable, (a) if Employee's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that Employee shall not have returned to the performance of his/her duties on a full-time basis during such thirty (30) day period), (b) the date specified in the Notice of Termination in compliance with the terms of this Agreement, or (c) if no date is specified, the date on which a Notice of Termination is given. 9. Successors; Binding Agreement. A. The Company shall require any successors or assigns (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent as if they were an original party hereto, and this Agreement shall inure to the benefit of any such successor or assign. B. This Agreement shall inure to the benefit of and be enforceable by Employee's executors, administrators, successors, heirs, distributes, devisees and legatees. 10. Other Agreements. Except as expressly set forth herein, nothing in this Agreement is intended to alter the obligations of the Company and/or the Employee in connection with any other written agreement between the Company and the Employee, including any employment agreement, option agreement, deferred compensation agreement, confidentiality agreement or indemnity agreement. 11. Covenant Not to Compete. In consideration of the mutual terms and agreements set forth herein, Employee hereby agrees that until the first anniversary of Employee's Date of Termination, (i) Employee will not recruit any employee of the Company or its subsidiaries or solicit or induce, or attempt to solicit or induce, any employee of the Company or its subsidiaries, provided that nothing herein shall preclude Employee from hiring any person who contacts Employee for employment and who has not been employed by the Company or its subsidiaries at any time during the preceding six months, and (ii) provided that Employee has received the severance benefits described in Section 6(C) hereof, Employee will not solicit, divert or take away, or attempt to solicit, divert or take away, the business or patronage of any of existing clients, customers or accounts of the Company or its Subsidiaries. For purposes of this Section 11, a client, customer or account of the Company shall be deemed to be an existing client, customer or account if such client, customer or account is a party to a rental, term or master lease with the Company or is being invoiced on a regular basis by the Company as of the Date of Termination. 12. Miscellaneous. 12.1 Written notices required by this Agreement shall be delivered to the Company or Employee in person or sent by overnight courier or certified mail, with a return receipt requested, to the Company's registered address and to Employee's last shown address on the Company's records, respectively. Notice sent by certified mail shall be deemed to be delivered two days after mailing, and all other notices shall be deemed to be delivered when received. 12.2 This Agreement contains the full and complete understanding of the parties regarding the subject matter contained herein and supersedes all prior representations, promises, agreements and warranties, whether oral or written. 12.3 This Agreement shall be governed by and interpreted according to the laws of the state of California. 12.4 The captions of the various sections of this Agreement are inserted only for convenience and shall not be considered in construing this Agreement. 12.5 This Agreement can be modified, amended or any of its terms waived only by a writing signed by both parties. 12.6 If any provision of this Agreement shall be held invalid, illegal or unenforceable, the remaining provisions of the Agreement shall remain in full force and effect and the invalid, illegal or unenforceable provision shall be limited or eliminated only to the extent necessary to remove such invalidity, illegality or unenforceability in accordance with the applicable law at that time. 12.7 In the event the Company is party to a transaction which is otherwise intended to qualify for "pooling of interests accounting treatment, then (A) this Agreement shall, to the extent practicable, be interpreted so as to permit such accounting treatment, and (B) to the extent that the application of clause (A) of this Section 12.7 does not preserve the availability of such accounting treatment, then, to the extent that any provision of the Agreement disqualifies the transaction as a "pooling" transaction (including if applicable, the entire Agreement), such provision shall be null and void as of the date hereof. All determinations under this Section 12.7 shall be made by the accounting firm whose opinion with respect to "pooling of interests" is required as a condition of consummation of such transaction. 12.8 If either party institutes an action to enforce the terms of this Agreement, the prevailing party in such action shall be entitled to recover reasonable attorneys' fee, costs and expenses. 12.9 No remedy made available to either party by any of the provisions of this Agreement is intended to be exclusive of any other remedy. Each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder as well as those remedies existing at law, in equity, by statute or otherwise. IN WITNESS WHEREOF, the parties have executed this document under seal as of the date specified above. PLM INTERNATIONAL, INC. EMPLOYEE By: __________________________ _________________________________ Its: __________________________ ATTEST: _______________________ ATTEST: _____________________ -----END PRIVACY-ENHANCED MESSAGE-----