Item 1.01 Entry into a Material Definitive Agreement.
On December 16, 2021, the Company entered into a Services Agreement with Mitsui
& Co. (U.S.A.), Inc. under which Mitsui employee Kota Odagiri is expected to
assist the Company in strategic development of business opportunities and
relationships in transportation related industries and the evaluation of new
technologies in the automotive and trucking sectors. The Company will pay a
quarterly fee of $87,500 for these services, as more fully discussed in the
Services Agreement incorporated herein by reference and attached hereto as
Exhibit 10.1.
Item 404(a) Related Party Disclosures With Respect to Mitsui
Entities affiliated with Roger S. Penske, our Chair of the Board and Chief
Executive Officer, are parties to a stockholders agreement described below. Mr.
Penske is also Chair of the Board and Chief Executive Officer of Penske
Corporation, and, through entities affiliated with Penske Corporation, our
largest stockholder. The parties to the stockholders agreement are Mitsui & Co.,
Ltd., Mitsui & Co, (USA), Inc. (collectively, "Mitsui"), Penske Corporation and
Penske Automotive Holdings Corp. (collectively the "Penske companies"). Mitsui
and the Penske companies are our two largest shareholders owning, together with
affiliates, 17.1% and 45.1% of our common stock, respectively.
Pursuant to the stockholders agreement, which expires on March 26, 2030, the
Penske companies agreed to vote their shares for up to two directors who are
representatives of Mitsui and Mitsui agreed to vote its shares for up to
fourteen directors voted for by the Penske companies. In addition, the Penske
companies agreed that if they transfer any of our shares of common stock, Mitsui
would be entitled to "tag along" by transferring a pro rata amount of its shares
upon similar terms and conditions, subject to certain limitations.
We and Mitsui have agreed that Mitsui has a right to (1) an observer at all of
our Board of Directors meetings so long as Mitsui owns at least 2.5% of our
outstanding common stock, and (2) designate a senior executive so long as Mitsui
owns at least 10% of our outstanding common stock.
Both the Penske companies and Mitsui possess registration rights pursuant to
which they are able on two remaining occasions each to register all or part of
our common stock held by them, subject to specified limitations. They are also
entitled to request inclusion of all or any part of their common stock in any
registration of securities by us on Forms S-1 or S-3 under the Securities Act of
1933, as amended.
We hold a 28.9% ownership interest in Penske Truck Leasing Co., L.P ("PTL"). PTL
is owned 41.1% by Penske Corporation, 28.9% by us, and 30.0% by Mitsui. Penske
Transportation Solutions ("PTS") is the universal brand name for PTL's various
business lines through which it is capable of meeting customers' needs across
the supply chain with a broad product offering that includes full-service truck
leasing, truck rental and contract maintenance, along with logistics services
such as dedicated contract carriage, distribution center management,
transportation management, lead logistics provider services and dry van
truckload carrier services.
The PTS partnership agreement, among other things, provides us with specified
partner distribution and governance rights and restricts our ability to transfer
our interest. In addition, the partnership has a six member advisory committee
and we are entitled to one of the representatives serving on the advisory
committee. The PTS partnership agreement requires PTS, subject to applicable law
and the terms of its credit agreements, to make quarterly distributions to the
partners with respect to each fiscal year by no later than 45 days after the end
of each of the first three quarters of the year and by April 15 of the following
year. PTS' partnership agreement and certain principal debt agreements allow
partner distributions only as long as it is not in default under those
agreements and the amount it pays does not exceed 50% of its consolidated net
income, unless its debt-to-equity ratio is at least 3:1, in which case its
distributions may not exceed 80% of its consolidated net income. We receive pro
rata cash distributions relating to this investment, typically in April, May,
August, and November of each year.
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We may transfer our directly owned interests with the unanimous consent of the
other partners, or if we provide the remaining partners with a right of first
offer to acquire our interests, except that we may transfer up to 9.02% of our
interest to Penske Corporation without complying with the right of first offer
to the remaining partner. We and Penske Corporation have previously agreed that
(1) in the event of any transfer by Penske Corporation of their partnership
interests to a third party, we will be entitled to "tag-along" by transferring a
pro rata amount of our partnership interests on similar terms and conditions,
and (2) Penske Corporation is entitled to a right of first refusal in the event
of any transfer of our partnership interests, subject to the terms of the
partnership agreement. Additionally, PTS has agreed to indemnify the general
partner for any actions in connection with managing PTS, except those taken in
bad faith or in violation of the partnership agreement.
The partnership agreement allows Penske Corporation to give notice to require
PTS to begin to effect an initial public offering of equity securities, subject
to certain limitations, as soon as practicable after the first anniversary of
the initial notice, and, beginning in 2025, we and Mitsui continue to have a
similar right to require PTS to begin an initial public offering of equity
securities, subject to certain limitations, as soon as reasonably practicable.
During the nine months ended September 30, 2021, and in the 2020 calendar year,
we received $106.4 million and $72.2 million, respectively, of pro rata cash
distributions relating to this investment. Our Chair and Chief Executive Officer
also serves as Chair of PTS, for which he is compensated by PTS. As a limited
partner, we do not influence or control the amount of that compensation. In
2020, our subsidiary operating retail commercial truck dealerships, Premier
Truck Group, assisted in providing customer financing arrangements at several
PTS used truck sales centers in the United States and Canada generating $3.2
million in commissions to PTG in 2020.
Our Australian subsidiary, Penske Transportation Group International owns a
28.33% interest in a joint venture with a PTS subsidiary to lease trucks in
Australia and New Zealand. The joint venture combines our sales expertise in
Australia with PTS's truck leasing experience. We continue to be party to a
stockholder's agreement relating to this investment that provides us with
specified distribution and governance rights and restricts our ability to
transfer our interests.
Mr. Yamanaka, one of our Board members who resigned as set forth below, and
Executive Vice President - Strategic Relationship Management received $384,554
in total compensation for 2020, including a tax allowance of $12,526 relating to
. . .
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On December 16, 2021, Masashi Yamanaka resigned from our Board of Directors and
the Board of Directors filled the vacancy created by Mr. Yamanaka's resignation
by appointing Kota Odagiri as a director.
Mr. Odagiri, 51, is an employee of Mitsui and has spent the last 29 years with
Mitsui and its affiliates in various capacities, most recently serving as the
Chairman and Managing Director of Bussan Auto Finance India Pvt. Ltd. from April
2020 to December 2021. From March 2019 to March 2020, he served as Deputy
Managing Director of India Yamaha Motor Pvt. Ltd. and from April 2017 to
February 2019, he served as General Manager, Group Management Framework
Department in Mitsui's First Motor Vehicles Division. From January 2015 to March
2017, he served as General Manager, Yamaha Business Department in Mitsui's Third
Motor Vehicles Division. Mr. Odagiri will not receive any compensation from the
Company for serving as our director (other than a company vehicle and charitable
match opportunity up to $50,000). Mr. Odagiri is also expected to provide
services to the Company under the Services Agreement referenced in Item 1.01
above, all of which Item 1.01 disclosures are incorporated herein by reference.
Related party transactions disclosure under Item 404(a) of Regulation S-K with
respect to this Item is included in Item 1.01 of this report on Form 8-K, which
disclosure is incorporated herein by reference.
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Item 8.01 Other Events
On December 16, 2021, the Company's Board of Directors approved a new $250
million securities repurchase authorization. During the fourth quarter of 2021
to date, the Company has repurchased 541,332 shares for $54.1 million, leaving
only $17.0 million of remaining securities repurchase authority prior to the new
authorization.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit Index
Exhibit No. Description
10.1 Services Agreement dated as of December 16, 2021 between us and Mitsui &
Co. (U.S.A.), Inc.
104 Cover Page Interactive Data File (formatted as inline XBRL).
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