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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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XTRA CORPORATION
(Name of Subject Company)
XTRA CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.50 PER SHARE
(Title of Class of Securities)
984138107
(CUSIP Number of Class of Securities)
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LEWIS RUBIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
XTRA CORPORATION
200 NYALA FARMS ROAD
WESTPORT, CT 06880
TELEPHONE: (203) 221-1005
(Name, address and telephone number of person authorized
to receive notice and communication on behalf of the person(s) filing
statement)
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WITH A COPY TO:
DAVID A. FINE, ESQ.
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MA 02110-2624
TELEPHONE: (617) 951-7000
[_]Check the box if the filing relates solely to preliminary communications made
before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION.
(a) Name and Address.
The name of the subject Company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (this "Statement") relates is XTRA Corporation, a
corporation formed under the laws of the State of Delaware (the "Company"). The
address of the principal executive offices of the Company is 200 Nyala Farms
Road, Westport, CT 06880. The telephone number of the principal executive
offices of the Company is (203) 221-1005.
(b) Securities.
The title of the class of securities to which this Statement relates is the
common stock, par value $0.50 per share, of the Company (the "Company Common
Stock"). As of July 30, 2001, there were 10,506,973 shares of Company Common
Stock outstanding and 1,075,414 shares of Company Common Stock issuable upon
exercise of outstanding stock options of the Company.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) Name and Address.
The name, address and telephone number of the Company, which is the person
filing this Statement, are set forth in Item 1(a) above.
(b) Tender Offer.
This Statement relates to the tender offer by BX Merger Sub Inc. (the
"Purchaser"), a corporation formed under the laws of the State of Delaware and
a wholly-owned subsidiary of Berkshire Hathaway Inc. ("Parent"), a corporation
formed under the laws of the State of Delaware, disclosed in a Tender Offer
Statement on Schedule TO filed by the Purchaser and Parent (the "Schedule TO"),
dated August 14, 2001, offering to purchase all outstanding shares of the
Company Common Stock at a purchase price of $55.00 per share in cash (the
"Offer Price"), upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated August 14, 2001 and filed as Exhibit (a)(1) to the
Schedule TO (the "Offer to Purchase"), and the related Letter of Transmittal
(which, as may be amended and supplemented from time to time, together
constitute the "Offer").
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of July 30, 2001, among Parent, Purchaser and the Company (as such agreement
may be amended and supplemented from time to time, the "Merger Agreement"). The
Merger Agreement provides, among other things, that no later than the fourth
business day following the satisfaction or waiver of the conditions set forth
in the Merger Agreement (or such earlier date as the parties may agree) the
Purchaser will be merged with and into the Company (the "Merger"). Following
the effective time (the "Effective Time") of the Merger, the Company will
continue as the surviving corporation (the "Surviving Corporation") and a
wholly-owned subsidiary of Parent. A copy of the Merger Agreement is filed
herewith as Exhibit (e)(1) and is incorporated herein by reference.
As set forth in the Schedule TO, the principal executive offices of Parent
and the Purchaser are located at 1440 Kiewit Plaza, Omaha, Nebraska 68131.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Certain contacts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Section 14(f) of the Securities Exchange Act of 1934, as amended, and Rule 14f-
1 thereunder (the "Information Statement") that is attached as Annex B to this
Statement and is incorporated herein by reference.
Except as set forth in the response to this Item 3 or in Annex B attached
hereto or as incorporated herein by reference, to the knowledge of the Company,
there are no material agreements, arrangements or
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understandings and no actual or potential conflicts of interest between the
Company or its affiliates and (1) the Company, its executive officers,
directors or affiliates, or (2) Purchaser or Parent, or their respective
executive officers, directors or affiliates.
The Merger Agreement. Parent, Purchaser and the Company have entered into
the Merger Agreement. A summary of the terms of the Offer and the Merger
Agreement is incorporated herein by reference to the Introduction and Sections
1, 11 and 14 of the Offer to Purchase, which is being mailed to stockholders
together with this Statement and is filed herewith as Exhibit (a)(4). Such
summary is qualified in its entirety by reference to the Merger Agreement,
which is filed herewith as Exhibit (e)(1) and incorporated herein by reference.
The Stockholders Agreement. Parent, Purchaser and certain beneficial owners
of Company Common Stock have entered into a Stockholders Agreement dated July
30, 2001 (the "Stockholders Agreement"). A summary of the terms of the
Stockholders Agreement is incorporated herein by reference to the Introduction
and Section 11 of the Offer to Purchase, which is being mailed to stockholders
together with this Statement and is filed herewith as Exhibit (a)(4). Such
summary and description are qualified in their entirety by reference to the
Stockholders Agreement, which is filed herewith as Exhibit (e)(2) and
incorporated herein by reference.
The Confidentiality Agreement. The Company and Parent entered into a
Confidentiality Agreement dated July 24, 2001 (the "Confidentiality
Agreement"). Pursuant to the Confidentiality Agreement, Parent, Purchaser, and
all of their respective subsidiaries and representatives agreed to keep
confidential certain information provided by the Company or its
representatives. The foregoing description is qualified in its entirety by
reference to the Confidentiality Agreement, which is filed herewith as Exhibit
(e)(3) and incorporated herein by reference.
Effects of the Offer and the Merger under Company Option Plans and Agreements
Between the Company and its Executive Officers; Certain Other Arrangements.
Stock Options. The Merger Agreement provides that prior to the Closing Date
(as defined in the Merger Agreement), the Board of Directors of the Company
(or, if appropriate, any committee administering the Company Option Plans (as
defined below)) shall adopt such resolutions or take such other actions as are
required to adjust the terms of all outstanding Company Stock Options (as
defined below) granted under the Company Option Plans, as necessary to provide
that each Company Stock Option outstanding, whether vested or unvested,
immediately prior to the Effective Time shall be canceled in exchange for a
cash payment by the Surviving Corporation immediately following the Effective
Time of an amount equal to (i) the excess, if any, of (x) the highest price per
share of Company Common Stock to be paid pursuant to the Offer over (y) the
exercise price per share of the Company Common Stock subject to such Company
Stock Option, multiplied by (ii) the number of shares of Company Common Stock
for which such Company Stock Option shall not theretofore have been exercised.
All amounts payable pursuant to Company Stock Options shall be subject to any
required withholding of taxes or proof of eligibility of exemption therefrom.
The Merger Agreement provides that the Company Stock Options will terminate
as of the Effective Time, and the provisions in any other benefit plan
providing for the issuance, transfer or grant of any capital stock of the
Company or any interest in respect of any capital stock of the Company will be
terminated as of the Effective Time, and that the Company will ensure that
following the Effective Time no holder of a Company Stock Option or any
participant in any such plan, program or arrangement will have any right
thereunder to acquire any capital securities of the Surviving Corporation or of
Parent.
"Company Stock Option" means any option to purchase Company Common Stock
granted under any Company Option Plan.
"Company Option Plans" means the 1991 Stock Option Plan for Non-Employee
Directors, the 1987 Stock Incentive Plan, the 1997 Stock Incentive Plan,
the Deferred Director Fee Option Plan and the 1998 General Stock Incentive
Plan, each as amended.
Benefit Plans. The Merger Agreement provides that Parent shall, and shall
cause the Company to, honor in accordance with their respective terms (as in
effect on the date of the Merger Agreement), all employee
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benefit plans (as described in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and other benefit plans of the
Company; provided, however, that Parent or the Company may amend, modify, or
terminate any individual plan in accordance with its terms and applicable law
(including obtaining the consent of the other parties to and beneficiaries of
such plan to the extent required thereunder).
For purposes of all employee benefit plans (as defined in Section 3(3) of
ERISA) and other employment agreements, arrangements and policies of Parent
under which an employee's benefits depend, in whole or in part, on length of
service, credit will be given to current employees of the Company for service
with the Company prior to the Effective Time, provided that such crediting of
service does not result in duplication of benefits.
Indemnification. From and after the date when directors designated by Parent
or Purchaser have been elected to and constitute a majority of the Board of
Directors of the Company, Parent shall, and shall cause the Company to, and
from and after the Effective Time, Parent shall, and shall cause the Surviving
Corporation to indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date of the Merger Agreement or who becomes
such prior to the Effective Time, an officer, director, agent, fiduciary or
employee of the Company or any of its subsidiaries (the "Indemnified Parties")
against (i) any and all losses, claims, damages, costs, expenses, fines,
liabilities or judgments or amounts that are paid in settlement with the
approval of the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out
of the fact that such person is or was a director, officer, agent, fiduciary or
employee of the Company or any of its subsidiaries whether pertaining to any
action or omission existing or occurring at or prior to the Effective Time and
whether asserted or claimed prior to, or at or after the Effective Time
("Indemnified Liabilities"), and (ii) all Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining to
the Merger Agreement or the transactions contemplated thereby; provided,
however, that, in the case of Purchaser and the Surviving Corporation such
indemnification shall only be to the fullest extent a corporation is permitted
under the Delaware General Corporation Law (the "DGCL"), as applicable, to
indemnify its own directors, officers, agents, fiduciaries and employees, and
in the case of Parent, such indemnification shall not be limited by the DGCL
but such indemnification shall not be applicable to any claims made against the
Indemnified Parties if a judgment or other final adjudication established that
their acts or omissions were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
deliberated or arise out of, are based upon or attributable to the gaining in
fact of any financial profit or other advantage to which they were not legally
entitled. Parent, Purchaser and the Surviving Corporation, as the case may be,
will pay all expenses of each Indemnified Party in advance of the final
disposition of any such action or proceeding to the fullest extent permitted by
law upon receipt of any undertaking contemplated by Section 145(e) of the DGCL.
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Party (whether
arising before or after the Effective Time), (i) the Indemnified Parties may
retain counsel satisfactory to them and Parent and Purchaser, (ii) Parent
shall, and shall cause the Surviving Corporation to pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received, and (iii) Parent shall, and shall cause the Surviving
Corporation to use all reasonable efforts to assist in the vigorous defense of
any such matter, provided that none of Parent, Purchaser or the Surviving
Corporation shall be liable for any settlement of any claim effected without
its written consent, which consent, however, shall not be unreasonably
withheld.
Board Representation. Promptly upon the purchase by Purchaser of Shares (as
defined in the Merger Agreement) pursuant to the Offer, and from time to time
thereafter as Shares are acquired by Purchaser, Parent or their affiliates,
Purchaser shall be entitled to designate such number of directors, rounded to
the nearest whole number, to the Board of Directors of the Company as will give
Purchaser, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Board of Directors of the Company equal to that number of
directors which equals the product of the total number of directors on the
Board of Directors of the Company multiplied by the percentage that the
aggregate number of Shares beneficially owned by Parent,
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Purchaser or any of their affiliates bears to the total number of shares of
Company Common Stock then issued and outstanding. The Company shall, upon
request by Purchaser, promptly increase the size of the Board of Directors of
the Company as is necessary to enable Purchaser's designees to be elected to
the Board of Directors of the Company in accordance with Section 1.3 of the
Merger Agreement and shall cause Purchaser's designees to be so elected;
provided, however, that, if Purchaser's designees are appointed or elected to
the Board of Directors of the Company, until the Effective Time the Board of
Directors of the Company shall have at least two directors who are directors on
the date of execution of the Merger Agreement and who are neither officers of
the Company nor designees, stockholders, affiliates or associates (within the
meaning of the federal securities laws) of Parent (one or more of such
directors, the "Independent Directors"); provided further, that if less than
two Independent Directors remain, the remaining Independent Director, if any,
or if no Independent Directors remain, the other directors, shall designate
persons to fill the vacancies who shall not be either officers of the Company
or designees, stockholders, affiliates or associates of Parent, and such
persons shall be deemed to be Independent Directors for purposes of the Merger
Agreement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
At a meeting held on July 30, 2001, the Board of Directors of the Company
(i) unanimously approved the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, (ii) unanimously determined that
the Merger is advisable and that the terms of the Offer and the Merger are fair
to and in the best interests of the Company and its stockholders and (iii)
unanimously determined to recommend that the Company's stockholders accept the
Offer and tender their shares of Company Common Stock pursuant thereto and
approve and adopt the Merger Agreement. This recommendation is based in part on
the opinion of Goldman, Sachs & Co. ("Goldman Sachs"), dated July 30, 2001, to
the effect that, as of such date, the $55.00 in cash per share of Company
Common Stock to be received by the holders of such shares in the Offer and the
Merger is fair to such holders from a financial point of view. The opinion of
Goldman Sachs contains a description of the matters considered, assumptions
made and limitations on the review undertaken by Goldman Sachs in rendering its
opinion. The full text of the opinion is set forth in Annex A of this Statement
and is filed as Exhibit (a)(2) hereto and is incorporated herein by reference.
Holders of shares of Company Common Stock are urged to carefully read the
opinion in its entirety. The opinion of Goldman Sachs does not constitute a
recommendation as to whether or not any holder of shares of Company Common
Stock should tender such shares in connection with the Offer or how any holder
of shares of Company Common Stock should vote with respect to the Merger.
(b) Background; Reasons for the Board of Directors' Recommendation.
Background
The Company assumes no responsibility for the accuracy or completeness of
any information contained herein regarding Parent's or Purchaser's discussions
with any person other than the Company and its representatives, or regarding
any matters involving the executive officers of Parent or Purchaser, other than
matters in which the Company or its representatives directly participated. All
such information has been provided to the Company by Parent and Purchaser for
inclusion herein.
Beginning in 1994, the Board of Directors of the Company (the "Board")
considered a three-part approach for improving shareholder value, consisting of
continued investment in the existing business (including product line
extensions), pursuit of external growth opportunities and a stock repurchase
program. In January 1995, the Board made the first of a series of
authorizations to make repurchases of shares of Company Common Stock. Through
July 2001, the Company had repurchased approximately 6.9 million shares of
Company Common Stock at an aggregate purchase price of approximately $300
million pursuant to the stock repurchase program.
In March 1998, the Company engaged Goldman Sachs to advise the Company in
connection with potential strategic alternatives, including a possible sale of
all or a portion of the Company, and authorized Goldman Sachs to inquire
whether selected companies would be interested in pursuing a transaction with
the Company. Over the next several months, Goldman Sachs contacted over 60
potential buyers to determine their interest in
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a transaction with the Company. Following a detailed due diligence process, the
Company entered into an agreement with an entity formed by Apollo Management
IV, L.P., on behalf of its managed investment funds, and Atlas Capital Partners
LLC, an affiliate of Interpool, Inc. (together, "Apollo") to acquire the
Company. That transaction was subject to various conditions, including the
obtaining of financing by Apollo to pay a significant portion of the
acquisition consideration. Following execution of the transaction agreements
with Apollo, the United States experienced a period of turbulence in the
capital markets for debt facilities. As a result, Apollo was unable to obtain
the required financing to complete the transaction and in November 1998, the
Company and Apollo mutually agreed to terminate the transaction.
In April 2000, Julian H. Robertson, Jr., who controls two investment
advisers who manage funds that are significant stockholders of the Company,
telephoned Warren E. Buffett, chairman and chief executive officer of Parent.
Mr. Robertson was responding to a suggestion from Mr. Buffett that the Company
might fit well in the Parent's organization. Messrs. Buffett and Robertson
discussed in general terms Mr. Robertson's possible interest in selling the
shares beneficially owned by his investment advisers. Following this
conversation, on several occasions in 2000, Mr. Buffett and Mr. Lewis Rubin,
the Company's president and chief executive officer, engaged in informal,
preliminary discussions about the possibility of Parent acquiring the Company.
In late June 2001, Mr. Robertson telephoned Mr. Buffett. Mr. Robertson
explained that he was interested in selling the Shares beneficially owned by
his two investment advisers. Mr. Buffett expressed an interest in acquiring
either the Shares beneficially owned by Mr. Robertson's investment advisers or
all of the Shares of the Company.
On July 3, 2001, after being advised by Mr. Robertson of his discussions
with Mr. Buffett, Mr. Rubin telephoned Mr. Buffett, who told Mr. Rubin that
Parent would be interested in purchasing either the Shares beneficially owned
by Mr. Robertson's advisers or all of the Shares of the Company, if, in either
case, the Board would be in favor of the transaction.
On July 9, 2001, Mr. Rubin and Mr. Buffett spoke again by telephone. Mr.
Buffett said that Parent would be interested in acquiring all of the Shares of
the Company for $55.00 per Share in cash, with no financing contingency. Mr.
Buffett further stated that Parent could quickly negotiate and execute a
definitive agreement, and did not need to conduct a due diligence review other
than a review of publicly available information. Mr. Rubin inquired whether the
$55.00 per Share represented Parent's final and best offer. Mr. Buffett
responded that it was Parent's final and best offer. Mr. Rubin indicated that
he would informally present the proposal to the Board.
On July 12, 2001, the Board met telephonically to review Parent's proposal.
The Board reviewed the status of Mr. Rubin's discussions with Mr. Buffett. The
Board considered the price offered by Parent, the limited contingencies and
financial strength of Parent, the likelihood of the transaction closing
successfully, the limited interest shown by other parties in acquiring the
Company, the benefit of an all cash transaction to the Company's long-term
stockholders, the effect of the transaction on the Company's employees and the
expectation of a continued challenging economic environment. The Board
authorized Mr. Rubin to continue discussions with Mr. Buffett and to retain an
investment advisor for the Company.
On July 13, 2001, Mr. Rubin telephoned Mr. Buffett to tell him that the
Board had authorized Mr. Rubin to negotiate with Parent, engage a financial
advisor to render a fairness opinion and then return to the Board with a
definitive agreement. Parent's legal counsel then contacted the Company's legal
counsel to begin preparation of the definitive acquisition documents. During
the period from July 13 through July 30, 2001, representatives of the Company
and Parent and their respective legal counsel negotiated the terms of the
Merger Agreement.
On July 16, 2001, the Company engaged Goldman Sachs to advise the Company in
connection with the acquisition proposal. Mr. Rubin also spoke to Mr. Robertson
and informed Mr. Robertson about the proposal. Mr. Robertson indicated that he
would support Parent's proposal.
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On July 17, 2001, Parent's legal counsel contacted Mr. Robertson to indicate
that Parent, in connection with agreeing to make a cash tender offer and effect
a merger, wanted an agreement from Mr. Robertson and his two investment
advisers to tender the Shares beneficially owned by the investment advisers and
to grant Parent an option with respect to such Shares. Mr. Robertson asked
Parent's legal counsel to negotiate the terms of such an agreement with his
legal counsel.
On July 30, 2001, the Board met to consider Parent's proposal and the
detailed terms of the proposed transaction. Mr. Rubin reviewed the negotiations
with Mr. Buffett. Mr. Rubin also noted that since the termination of a prior
acquisition transaction with Apollo in November 1998, the Company had not
received any formal or informal acquisition proposals despite informal
discussions with a number of third parties regarding potential transactions.
Ropes & Gray, the Company's legal counsel, made presentations to the Board
relating to, among other things, the structure of the proposed transaction, the
arms-length negotiation of the proposed termination fee, the fiduciary
obligations of the Board and the terms of the Merger Agreement relating to the
exercise of such duties.
At the meeting, Goldman Sachs reviewed financial and comparative analyses
with respect to the proposed transaction. Goldman Sachs then advised the Board
that it was prepared to render an opinion to the Board to the effect that, as
of that date, the $55.00 in cash per share of Company Common Stock to be
received by the holders of such shares in the Offer and the Merger is fair to
such holders from a financial point of view. At the conclusion of the meeting,
the Board determined that the Merger is advisable and that the terms of the
Offer and the Merger are fair to and in the best interests of the Company and
its stockholders, by unanimous vote approved the Merger Agreement and the
transactions contemplated thereby, and determined to recommend that the
Company's stockholders accept the Offer and tender their shares pursuant to the
Offer.
Following the Board meeting on July 30, 2001, Parent, Purchaser and the
Company finalized and executed the Merger Agreement. At the same time, Parent,
Purchaser and Mr. Robertson (and the entities he controls which beneficially
own the Shares) all executed the Stockholders Agreement.
On July 31, 2001, prior to the opening of trading on the New York Stock
Exchange (the "NYSE"), the execution of the Merger Agreement and the
Stockholders Agreement was announced in a joint press release by the Company
and Parent.
Reasons for the Board of Directors' Recommendations; Factors Considered
In approving the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, and recommending that all holders of
Company Common Stock accept the Offer and tender their shares of Company Common
Stock pursuant to the Offer, approve the Merger and approve and adopt the
Merger Agreement, the Board consulted with its legal counsel and financial
advisor and considered a number of factors including, but not limited to, the
following:
1. The arms-length negotiations between the Company and Parent that
resulted in the $55.00 per share price, the historical market prices,
price to earnings ratios, EBITDA and other multiples, recent trading
activity and trading range of the Company Common Stock, including the
fact that while the Offer Price represents a premium of only
approximately 5.2% over the closing price of the Company Common Stock
on the NYSE (the "Closing Price") of $52.30 on July 30, 2001 (the last
full trading day prior to the announcement of the Offer and the
Merger), the Offer Price represents a premium of 10.6% over the $49.75
average Closing Price during the prior six month period, a premium of
15.9% over the $47.44 average Closing Price during the prior year, and
a premium of 22.2% over the $45.02 average Closing Price during the
prior two years. The limited trading volume in the shares of Company
Common Stock on the NYSE and the fact the Company's repurchases of its
stock have constituted a significant and increasing percentage of the
aggregate trading volume.
2. The financial condition, results of operations and cash flows of the
Company, including the Company's prospects as an independent company,
as well as uncertainties associated with those prospects, particularly
as a result of the current worldwide economic conditions.
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3. The current status of the industries in which the Company competes and
the resources available to the Company and the Company's competitors.
4. The opinion of Goldman Sachs, dated July 30, 2001, to the effect that,
as of such date, the $55.00 per share in cash to be received by the
holders of shares of Company Common Stock in the Offer and the Merger
is fair to such holders from a financial point of view. The full text
of the opinion, which sets forth the matters considered, assumptions
made and limitations on the review undertaken, is set forth in Annex A
to this Statement and is filed as Exhibit (a)(2) hereto and is
incorporated herein by reference. Holders of shares of Company Common
Stock are urged to read such opinion carefully in its entirety.
5. The Board's desire to enable the stockholders of the Company to achieve
liquidity with respect to all of their investment in the Company at a
fair price and the Board's conclusion that the proposed Merger
Agreement with Parent was the best way to achieve such liquidity in the
near future.
6. The fact that since the termination of the transaction with Apollo in
November 1998, while the Company had informal discussions with a number
of parties about a wide range of possible strategic transactions,
including a possible acquisition of the Company, no party other than
Parent had presented the Company with either a formal or an informal
acquisition proposal.
7. The results of the exploration by the Company of possible strategic
alliance or "stand alone" opportunities for the Company as an ongoing
independent, publicly held corporation.
8. The fact that the Offer and the Merger provide for a prompt cash tender
offer for all shares of Company Common Stock to be followed by the
Merger for the same consideration, thereby enabling the Company's
stockholders, at the earliest possible time, to obtain the benefits of
the transaction in exchange for their shares of Company Common Stock
and the fact that the Merger Agreement provides for the payment to
employees and other persons holding options to purchase Company Common
Stock of an amount equal to the difference between $55.00 and the
exercise price of such options.
9. The fact that Parent's and Purchaser's obligations under the Offer are
not subject to any financing condition, and the financial strength of
Parent.
10. The terms and conditions of the Merger Agreement, including the
parties' representations, warranties and covenants, the conditions to
their respective obligations, the limited ability of Parent and
Purchaser to terminate the Offer or the Merger Agreement and the
provision for payment of all cash with no financing condition.
11. The Company's determination that the likelihood that an unconditional
superior offer could be found was insufficient to justify the risk of
delay in proceeding with the favorable transaction with Parent.
12. The Merger Agreement permits the Board, in order to comply with its
fiduciary duties, to furnish information and enter into discussions and
negotiations, in connection with an unsolicited acquisition proposal
that is reasonably likely to result in a superior proposal and to
withdraw its recommendation of the Offer and the Merger in favor of a
superior unsolicited acquisition proposal.
13. The Merger Agreement permits the Board, in the exercise of its
fiduciary duties, to terminate the Merger Agreement in favor of a
superior acquisition proposal; provided, that following such
termination, the Company must pay Parent a fee of $15 million and up to
$1 million of the reasonably documented out-of-pocket fees and expenses
incurred by Parent and Purchaser in connection with the Merger
Agreement and the transactions contemplated thereby.
14. The terms and conditions of the Stockholders Agreement pursuant to
which investment funds controlled by Mr. Robertson, which beneficially
own approximately 30% of the issued and outstanding stock of the
Company, would agree, among other things, to tender their shares in the
transaction, vote their shares in favor of the Merger and the Merger
Agreement, and grant to Parent
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and Purchaser an irrevocable option to purchase their shares at a price
per share equal to the Offer Price or any higher price paid or to be
paid by Parent or Purchaser pursuant to the Offer or the Merger.
The foregoing discussion of information and factors considered and given
weight by the Board is not intended to be exhaustive, but is believed to
include all of the material factors, both positive and negative, considered by
the Board. In view of the variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board did not find it practicable
to, and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determinations and recommendations. In
addition, individual members of the Board may have given different weights to
different factors.
(c) Intent to Tender.
Parent and Purchaser have entered into a Stockholders Agreement with Tiger
Management L.L.C. and Tiger Performance L.L.C. (the "Tiger Advisers") and with
Tiger Management Corporation and Julian H. Robertson, Jr. pursuant to which,
among other things, the Tiger Advisers have agreed to tender all shares of
Company Common Stock owned beneficially or of record by them.
A summary of the terms of the Stockholders Agreement is incorporated herein
by reference to Section 11 of Purchaser's Offer to Purchase, filed herewith as
Exhibit (a)(4). The summary is qualified in its entirety by reference to the
Stockholders Agreement, a copy of which is filed herewith as Exhibit (e)(2)
and incorporated herein by reference.
To the Company's knowledge after reasonable inquiry, all of the Company's
executive officers and directors currently intend to either (i) tender all
shares of Company Common Stock held of record or beneficially by them pursuant
to the Offer, or (ii) vote all shares of Company Common Stock held of record
or beneficially by them for the approval and adoption of the Merger Agreement.
The foregoing does not include any shares over which, or with respect to
which, any such executive officer or director acts in a fiduciary or
representative capacity or is subject to the instructions of a third party
with respect to such tender or vote.
ITEM 5. PERSON/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
Pursuant to an engagement letter dated July 16, 2001, the Company formally
retained Goldman Sachs to act as its exclusive financial advisor in connection
with a sale of the Company and to render an opinion to the Board of Directors
regarding the fairness, from a financial point of view, of the consideration
to be received in such sale by the holders of shares of the Company Common
Stock.
Pursuant to the Company's engagement letter with Goldman Sachs, upon
consummation by the Company of a sale of 50% or more of the common stock or
assets of the Company in one or a series of transactions, the Company will pay
Goldman Sachs a customary transaction fee. The Company has agreed to reimburse
Goldman Sachs for certain costs and expenses. In addition, the Company has
also agreed to indemnify Goldman Sachs against certain liabilities and
expenses arising out of Goldman Sachs' engagement.
Except as described above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to stockholders on its behalf concerning
the Offer or the Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
No transactions in shares of Company Common Stock have been effected during
the past 60 days by the Company or any subsidiary of the Company or, to the
best of the Company's knowledge, by any executive officer, director or
affiliate of the Company.
9
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Except as set forth in this Statement, the Company is not currently
undertaking or engaged in any negotiations in response to the Offer that relate
to (1) a tender offer for or other acquisition of the Company's securities by
the Company, any subsidiary of the Company or any other person; (2) an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company or any subsidiary of the Company; (3) a purchase, sale,
or transfer of a material amount of assets of the Company or any subsidiary of
the Company; or (4) any material change in the present dividend rate or policy,
or indebtedness or capitalization of the Company.
Except as set forth in this Statement, there are no transactions,
resolutions of the Board of Directors, agreements in principle, or signed
contracts in response to the Offer that relate to one or more of the events
referred to in the preceding paragraph.
ITEM 8. ADDITIONAL INFORMATION.
Section 14(f) Information Statement. The Information Statement of the
Company attached as Annex B hereto is being furnished in connection with the
possible designation by Purchaser, pursuant to the Merger Agreement, of certain
persons to be appointed to the Board of Directors other than at a meeting of
the Company's stockholders.
ITEM 9. EXHIBITS.
The following Exhibits are filed herewith:
Exhibit
No. Description
------- -----------
(a)(1) Letter to Stockholders of the Company dated August 14, 2001.
(a)(2) Opinion of Goldman, Sachs & Co. dated July 30, 2001 (included as Annex
A to this Statement).
(a)(3) Joint Press Release issued by Parent and the Company on July 31, 2001
(incorporated by reference to the Schedule 14D-9 filed by the Company
on July 31, 2001).
(a)(4) The Offer to Purchase dated August 14, 2001 (incorporated by reference
to Exhibit (a)(1) of the Schedule TO filed by Parent and Purchaser on
August 14, 2001).
(e)(1) Agreement and Plan of Merger, dated as of July 30, 2001, among Parent,
Purchaser and the Company (incorporated by reference to Exhibit 2.1 of
the Current Report on Form 8-K filed by the Company on July 31, 2001).
(e)(2) Stockholders Agreement, dated as of July 30, 2001, among Parent,
Purchaser, Tiger Management Corporation, Tiger Management L.L.C.,
Tiger Performance L.L.C. and Julian H. Robertson, Jr. (incorporated by
reference to Exhibit 2.2 of the Current Report on Form 8-K filed by
the Company on July 31, 2001).
(e)(3) Confidentiality Agreement, dated as of July 24, 2001, between the
Company and Parent.
(e)(4) The Information Statement of the Company, dated August 14, 2001
(included as Annex B to this Statement).
10
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
XTRA Corporation
/s/ Lewis Rubin
By: _________________________________
Lewis Rubin
President & CEO
Dated: August 14, 2001
11
ANNEX A
[GOLDMAN, SACHS & CO. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
July 30, 2001
Board of Directors
XTRA Corporation
200 Nyala Farms Road
Westport, CT 06880
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.50
per share (the "Shares"), of XTRA Corporation (the "Company") of the $55.00 per
Share in cash proposed to be paid by Berkshire Hathaway Inc. ("Parent") in the
Tender Offer and Merger (as defined below) pursuant to the Agreement and Plan
of Merger, dated as of July 30, 2001 (the "Agreement"), among Parent, BX Merger
Sub Inc., a wholly-owned subsidiary of Parent ("Purchaser"), and the Company.
The Agreement provides for a tender offer for all of the Shares (the "Tender
Offer") pursuant to which Purchaser will pay $55.00 per Share in cash for each
Share accepted. The Agreement further provides that following completion of the
Tender Offer, Purchaser will be merged into the Company (the "Merger") and each
outstanding Share (other than Shares owned by Parent, Purchaser or any other
wholly-owned subsidiary of Parent) will be converted into the right to receive
$55.00 in cash.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate or other purposes. We are
familiar with the Company having provided certain investment banking services
to the Company from time to time, including having acted as placement agent in
connection with the offering of Medium Term Notes of the Company in August 2000
and as the Company's financial advisor in connection with the Agreement. We
also have provided certain investment banking services to Parent and its
affiliates from time to time and we may provide such services to Parent and its
affiliates in the future. Goldman, Sachs & Co. provides a full range of
financial advisory and securities services and, in the course of its normal
trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of the Company or Parent for its
own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to the Stockholders and Annual Reports on Form 10-K
of the Company for the fiscal years ended September 30, 2000; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company;
certain other communications from the Company to its stockholders; and certain
internal financial analyses and forecasts for the Company prepared by its
management. We have also held discussions with members of the senior management
of the Company regarding their assessment of its past and current business
operations, financial condition and future prospects. In addition, we have
reviewed the reported price and trading activity of the Shares, compared
certain financial and stock market information for the Company with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the leasing and retail industry specifically and in other industries generally
and performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial,
accounting and other information discussed with or reviewed by us and have
assumed such accuracy and completeness for the purposes of rendering this
opinion. In addition, we have not made an independent evaluation or appraisal
of
A-1
the assets and liabilities of the Company or any of its subsidiaries, and we
have not been furnished with any such evaluation or appraisal. Our advisory
services and the opinion expressed herein are provided for the information and
assistance of the Board of Directors of the Company in connection with its
consideration of the transaction contemplated by the Agreement and such opinion
does not constitute a recommendation as to whether or not any holder of Shares
should tender such Shares in connection with the Tender Offer or how any holder
of Shares should vote with respect to the Merger.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the $55.00
per Share in cash to be received by the holders of Shares in the Tender Offer
and Merger is fair from a financial point of view to such holders.
Very truly yours,
/s/ Goldman, Sachs & Co.
_____________________________________
(GOLDMAN, SACHS & CO.)
A-2
ANNEX B
XTRA CORPORATION
200 Nyala Farms Road
Westport, CT 06880
----------------
Information Statement Pursuant to
Section 14(f) of the Securities Exchange
Act of 1934 and Rule 14f-1 Thereunder
This Information Statement is being mailed on or about August 14, 2001 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Statement") of XTRA Corporation (the "Company"). You are receiving this
Information Statement in connection with the possible election of persons
designated by Berkshire Hathaway Inc. ("Parent"), a corporation formed under
the laws of the State of Delaware, to a majority of seats on the Board of
Directors (the "Board of Directors") of the Company. On July 30, 2001, the
Company entered into an Agreement and Plan of Merger (the "Merger Agreement")
with Parent and BX Merger Sub Inc. ("Purchaser"), a corporation formed under
the laws of the State of Delaware and a wholly-owned subsidiary of Parent,
pursuant to which Purchaser is required to commence a tender offer to purchase
all outstanding shares of the common stock, par value $0.50 per share, of the
Company (the "Shares" or the "Company Common Stock"), at a price per Share of
$55.00 in cash (the "Offer Price"), upon the terms and conditions set forth in
the Purchaser's Offer to Purchase, dated August 14, 2001, and in the related
Letter of Transmittal (which, together with any amendments and supplements
thereto, collectively constitute the "Offer"). Copies of the Offer to Purchase
and the Letter of Transmittal have been mailed to stockholders of the Company
and are filed as Exhibits (a)(1) and (a)(2) respectively, to the Tender Offer
Statement on Schedule TO (as amended from time to time, the "Schedule TO")
filed by Purchaser and Parent with the Securities and Exchange Commission (the
"Commission") on August 14, 2001. The Merger Agreement provides that, subject
to the satisfaction or waiver of certain conditions, following completion of
the Offer, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Purchaser will be merged with and into the Company (the "Merger").
Following consummation of the Merger, the Company will continue as the
surviving corporation (the "Surviving Corporation") and will be a wholly owned
subsidiary of Parent. At the effective time (the "Effective Time"), each issued
and outstanding Share (other than Shares that are owned by Parent, Purchaser,
any of their respective subsidiaries, Shares held by the Company as treasury
stock, and Shares held by stockholders of the Company who did not vote in favor
of the Merger Agreement and who comply with all of the relevant provisions of
Section 262 of the DGCL) will be converted into the right to receive $55.00 in
cash or any greater amount per Share paid pursuant to the Offer.
The Offer, the Merger, and the Merger Agreement are more fully described in
the Schedule 14D-9 to which this Information Statement forms Annex B, which was
filed by the Company with the Commission on August 14, 2001 and which is being
mailed to stockholders of the Company along with this Information Statement.
This Information Statement is being mailed to you in accordance with Section
14(f) of the Securities Exchange Act and Rule 14f-l promulgated thereunder. The
information set forth herein supplements certain information set forth in the
Statement. Information set forth herein related to Parent, Purchaser or the
Purchaser Designees (as defined herein) has been provided by Parent. You are
urged to read this Information Statement carefully. You are not, however,
required to take any action in connection with the matters set forth herein.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on August
14, 2001. The Offer is currently scheduled to expire at 12:00 midnight, New
York City time, on September 11, 2001, unless the Purchaser extends it.
B-1
GENERAL
The common stock is the only class of equity securities of the Company
outstanding which is entitled to vote at a meeting of the stockholders of the
Company. As of July 30, 2001 there were 10,506,973 shares of common stock
outstanding, of which Parent and the Purchaser own no shares as of the date
hereof.
RIGHTS TO DESIGNATE DIRECTORS AND PURCHASER DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of Shares by
Purchaser pursuant to the Offer, and from time to time thereafter as Shares are
acquired by Purchaser, Parent or their affiliates, Purchaser will be entitled
to designate a number of the members (the "Purchaser Designees") of the Board
of Directors as will give Purchaser representation on the Board of Directors of
the Company equal to that number of directors, rounded up to the nearest whole
number, which is the product of (a) the total number of directors (giving
effect to the directors elected pursuant to this sentence and including current
directors serving as officers of the Company) multiplied by (b) the percentage
that (i) the aggregate number of shares of Company Common Stock beneficially
owned by Parent, Purchaser or any of their affiliates bears to (ii) the total
number of shares of Company Common Stock then issued and outstanding.
The Merger Agreement provides that the Company will, upon request of
Purchaser, promptly increase the size of the Board of Directors as is necessary
to enable the Purchaser Designees to be elected to the Board and, subject to
Section 14(f) of the Securities Exchange Act and Rule 14f-l promulgated
thereunder, will cause the Purchaser Designees to be so elected.
Notwithstanding the foregoing, if Purchaser Designees are appointed or
elected to the Board of Directors, there will be until the Effective Time at
least two members of the Board who were directors on the date of the Merger
Agreement and who are not officers of the Company nor designees, stockholders,
affiliates or associates of Parent (one or more of such directors, the
"Independent Directors"); provided, further, that if less than two Independent
Directors remain, the remaining Independent Director (if any) or if no
Independent Directors remain, the other directors, shall designate persons to
fill the vacancies who shall not be either officers of the Company or
designees, stockholders, affiliates or associates of Parent, and such persons
shall be deemed to be Independent Directors for purposes of the Merger
Agreement.
The Purchaser Designees will be selected by Parent and Purchaser from among
the individuals listed below. Each of the following individuals has consented
to serve as a director of the Company if appointed or elected. None of the
Purchaser Designees currently is a director of, or holds any positions with,
the Company. Parent has advised the Company that, to the best of Parent's
knowledge, except as set forth below, none of the Purchaser Designees or any of
their affiliates beneficially owns any equity securities or rights to acquire
any such securities of the Company nor has any such person been involved in any
transaction with the Company or any of its directors, executive officers or
affiliates that is required to be disclosed pursuant to the rules and
regulations of the Commission other than with respect to transactions between
Parent, Purchaser and the Company that have been described in the Schedule TO
or the Statement.
The name, age, present principal occupation or employment and five-year
employment history of each of the individuals who may be selected as Purchaser
Designees are set forth below. Unless otherwise indicated, each such individual
has held his or her present position as set forth below for the past five
years. Unless otherwise indicated, each such person is a citizen of the United
States.
B-2
Name, Age, Principal Occupation and Employment History
Present Principal Occupation or Employment, Material
Name Age Positions Held During Past Five Years
---- --- ----------------------------------------------------
Warren E. Buffett 70 Mr. Buffett has been Chairman and Chief Executive
Officer of Parent since 1970. He is also a director of
Parent, The Coca-Cola Company, The Gillette Company and
The Washington Post Company. His business address is
1440 Kiewit Plaza, Omaha, Nebraska 68131.
Charles T. Munger 76 Mr. Munger has been a director and Vice Chairman of
Parent's Board of Directors since 1978. He is Chairman
of the Board of Directors and Chief Executive Officer of
Wesco Financial Corporation, Chairman of the Board of
Directors of Daily Journal Corporation and a director of
Costco Wholesale Corporation. His business address is
355 S. Grand Avenue, 34th Floor, Los Angeles, California
90071.
Howard G. Buffett 46 Mr. Buffett is Chairman of the Board of Directors of The
GSI Group, a company primarily engaged in the
manufacture of agricultural equipment. He is also a
director of Parent, Coca-Cola Enterprises, Inc., Lindsay
Manufacturing Co. and Mond Industries Inc. His business
address is 1004 East Illinois Street, Assumption,
Illinois 62510.
Susan T. Buffett 69 Mrs. Buffett has been a director of Parent since 1991.
Mrs. Buffett has not been employed in the past five
years. Her business address is 1440 Kiewit Plaza, Omaha,
Nebraska 68131.
Malcolm G. Chace 65 Mr. Chace serves on the board of directors of Parent. In
1996, Mr. Chace was named Chairman of the Board of
Directors of BankRI, a community bank located in the
state of Rhode Island. Prior to 1996, Mr. Chace had been
a private investor. Mr. Chace's business address is One
Providence Washington Plaza, Providence, Rhode Island
02903.
Marc D. Hamburg 52 Mr. Hamburg has been the Vice President and Treasurer of
Parent for more than the past five years. He is also the
sole director of Purchaser. His business address is 1440
Kiewit Plaza, Omaha, Nebraska 68131.
Ronald L. Olson 60 Mr. Olson has, for more than the past five years, been a
partner in the law firm of Munger, Tolles & Olson LLP.
He is also a director of Parent, Edison International,
City National Corp., Western Asset Trust, Inc. and
Pacific American Income Shares Inc. His business address
is 355 S. Grand Avenue, 35th Floor, Los Angeles,
California 90071.
Walter Scott, Jr. 69 Mr. Scott has been Chairman of the Board of Level 3
Communications, Inc., a communications and information
services company, since 1979. Level 3 Communications was
formerly known as Peter Kiewit Sons', Inc., for which,
until the spin-off of its construction operations in
March 1998, Mr. Scott also served as Chief Executive
Officer. Mr. Scott is also a director of Parent,
Burlington Resources, Inc., ConAgra, Inc., Valmont
Industries, Inc., Commonwealth Telephone Enterprises,
Inc. and RCN Corporation. His business address is 1025
Eldorado Blvd., Broomfield, Colorado 80021.
B-3
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Terms of Directors
The Company's By-Laws provide for no fewer than five directors and no more
than twelve, as determined by the Board of Directors. Each person elected to
serve as a member of the Board of Directors serves until the next Annual
Meeting of Stockholders or until his or her successor is duly elected and
qualified.
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- --------
Lewis Rubin (4)........... 63 President, Chief Executive Officer and Director
Jordan L. Ayers........... 42 Vice President, XTRA Intermodal
Jeffrey R. Blum........... 49 Vice President, Planning and Development
William H. Franz.......... 50 Vice President, XTRA Lease
Stephanie L. Johnson...... 37 Vice President and Treasurer
A. Scott Mansolillo....... 38 Vice President, General Counsel and Secretary
Michael D. Bills
(1)(3)(4)................ 44 Director
H. William Brown (1)(3)... 63 Director
Michael N. Christodolou
(l)(2)................... 40 Director
Robert B. Goergen (2)(4).. 63 Director
Martin L. Solomon (2)(3).. 64 Director
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating Committee.
(4) Member of the Executive Committee.
LEWIS RUBIN Director since 1990
XTRA Corporation President and
200 Nyala Farms Road Chief Executive Officer
Westport, CT 06880
Since 1990, Mr. Rubin, age 63, has been President and Chief Executive
Officer of the Company. From 1988 to 1990, he was a consultant with Lewis Rubin
Associates, a consulting firm advising the transportation equipment industry.
From 1984 to 1988, Mr. Rubin served as President and Chief Executive Officer of
Gelco CTI Container Services, a subsidiary of Gelco Corporation, a diversified
international management services corporation, and as an Executive Vice
President of Gelco Corporation. From 1981 to 1983, Mr. Rubin was President and
Chief Executive Officer of Flexi-Van Corporation, a company engaged in the
leasing of intermodal transportation equipment. Mr. Rubin serves as a Director
of Hexcel Corp., a company engaged in the manufacture of composite materials.
JORDAN L. AYERS Vice President,
XTRA Corporation XTRA Intermodal
200 Nyala Farms Road
Westport, CT 06880
Mr. Ayers joined the Company in 1994 as Vice President, Sales, XTRA
Intermodal and was promoted to Vice President, Sales and Marketing, XTRA
Intermodal in 1997. He was elected Divisional Executive Vice President, XTRA
Intermodal in 1999. He was elected to his present position in 1999. Mr. Ayers
was previously employed by Transamerica Leasing, a major intermodal equipment
lessor.
B-4
JEFFREY R. BLUM Vice President,
XTRA Corporation Planning and Development
200 Nyala Farms Road
Westport, CT 06880
Mr. Blum joined the Company in 1995 as Vice President of Human Resources and
became Vice President, Administration and Human Resources in 1996. He was
elected to his current position in 1999. Prior to 1995, Mr. Blum served in
similar capacities at First Winthrop Corporation from 1993 to 1995 and Signal
Capital Corporation prior to 1993.
WILLIAM H. FRANZ Vice President,
XTRA Corporation XTRA Lease
200 Nyala Farms Road
Westport, CT 06880
Mr. Franz was previously employed by two large over-the-road lessors,
Transport International Pool and Strick Lease. He joined the Company in 1992
and was elected Divisional Executive Vice President, XTRA Lease in 1993. He was
elected to his present position in 1993.
STEPHANIE L. JOHNSON Vice President and
XTRA Corporation Treasurer
200 Nyala Farms Road
Westport, CT 06880
Ms. Johnson joined the Company in January 2000 as Vice President and
Treasurer. Previously she was Director of Finance for Cullman Ventures, Inc., a
calendar manufacturer, from 1998 to 1999. Ms. Johnson served in various
corporate finance positions at General Signal Corporation from 1992 to 1997 and
Fortune Brands, Inc. prior to 1992.
A. SCOTT MANSOLILLO Vice President,
XTRA Corporation General Counsel and
200 Nyala Farms Road Secretary
Westport, CT 06880
Mr. Mansolillo joined the Company in January 2000 as Vice President, General
Counsel and Secretary. Prior to joining the Company, Mr. Mansolillo was
previously employed by The Hartford Financial Services Group as Assistant Vice
President, Capital Planning and Development from 1998 to 2000, and as Senior
Corporate Counsel, Law Department from 1992 to 1998.
MICHAEL D. BILLS Director since 1997
815 Broomley Road
Charlottesville, VA 22901
Mr. Bills, age 44, teaches at the University of Virginia's McIntire School
of Commerce. From 1995 to 1999, Mr. Bills was Chief Operating Officer and
Senior Managing Director of Tiger Management L.L.C., an investment management
company. From 1991 to 1995, Mr. Bills taught at both the University of
Virginia's Darden Graduate School of Business Administration and the McIntire
School of Commerce. From 1986 to 1991, Mr. Bills served as Managing Director of
Tiger Management L.L.C. Previously, Mr. Bills was employed by Goldman, Sachs &
Co. from 1981 to 1986. Mr. Bills currently serves as Director of the India
Magnum Fund, an investment fund managed by Morgan Stanley & Co.
B-5
H. WILLIAM BROWN Director since 1996
4137 Jackson Drive
Lafayette Hill, PA 19444
Since 1997, Mr. Brown, age 63, has been Chief Financial Officer of Maritrans
Inc., a shipping company engaged in petroleum transportation. From 1992 through
1996, Mr. Brown was Vice President-Finance & Administration and Chief Financial
Officer of Consolidated Rail Corporation, then one of the largest railroad
companies in North America. From 1986 to 1992, Mr. Brown served as Senior Vice
President-Finance of Consolidated Rail Corporation. Previously, Mr. Brown
served in various other executive capacities with Consolidated Rail Corporation
from 1978 until 1986. Mr. Brown was a member of the Board of Governors of The
Philadelphia Stock Exchange until he retired in September 1997.
MICHAEL N. CHRISTODOLOU Director since 1998
Inwood Capital Partners, L.P.
One Galleria Tower 13355 Noel Road, Suite 1050
Dallas, TX 75240
Since May 2000, Mr. Christodolou, age 40, has been Managing Partner of
Inwood Capital Partners, L.P., an investment partnership. From 1993 to 1999,
Mr. Christodolou was Director of Equity Investments for Barbnet Investment Co.,
formerly Thomas M. Taylor & Co., an investment consulting firm providing
services to entities associated with the Bass family. From 1988 to 1993, Mr.
Christodolou was an investment analyst for Thomas M. Taylor & Co. Mr.
Christodolou currently serves as Director of Lindsay Manufacturing Co., a
manufacturer of agricultural irrigation systems.
ROBERT B. GOERGEN Director since 1990
Blyth Industries, Inc.
One Weaver Street--First Floor
Greenwich, CT 06831-5118
Since 1990, Mr. Goergen, age 63, has been Chairman of the Board of Directors
of the Company. Since 1976, he has been Chairman of the Board and Chief
Executive Officer of Blyth Industries, Inc., a manufacturer and importer of
candles and home decorating accessories. Since 1979, Mr. Goergen has been the
general partner or president of various Ropart Group entities whose business is
investing in securities for their own account. As such, Mr. Goergen serves on
the board of directors of several privately-held corporations. In addition, Mr.
Goergen serves as a Director of Bionutrics, Inc., a biopharmaceutical company.
He is also Chairman of the Board of Trustees of the University of Rochester.
MARTIN L. SOLOMON Director since 1990
2665 South Bayshore Drive, Suite 906
Miami, Florida 33133
From 1997 until August, 2000, Mr. Solomon, age 64, was the Chairman and
Chief Executive Officer of American Country Holdings Inc., an insurance company
holding company. At present, he is Co-Chairman of American Country Holdings,
Inc. Since 1990, Mr. Solomon has been a private investor. From 1988 to 1990, he
was a Managing Director and general partner of Value Equity Associates I, L.P.,
an investment partnership. From 1985 to 1987, Mr. Solomon was an investment
analyst and portfolio manager with Steinhardt Partners, an investment
partnership. From 1985 to 1996, Mr. Solomon was a Director and Vice Chairman of
the Board of Great Dane Holdings, Inc., a company engaged in the manufacture of
transportation equipment, automobile stamping, and the leasing of taxis and
insurance. Mr. Solomon serves as a Director of Hexcel Corp., a company engaged
in the manufacture of composite materials; Telephone and Data Systems, Inc., a
diversified telecommunications service company with established wireless and
wireline operations; and MFN Financial Corporation, an installment loan finance
company.
B-6
Director Compensation
The Company pays its Directors, other than the Chairman, a monthly retainer
of $1,375. The Chairman of the Board is paid a monthly retainer of $5,000. All
Directors are paid a fee of $1,250 for each meeting of the Board of Directors
attended in person or by telephone. In addition, Committee chairmen and members
receive $1,250 for each Committee meeting attended. An additional monthly
retainer of $417 is also paid to Committee chairmen. Mr. Rubin, as an officer,
does not receive fees for attendance at Committee meetings. Non-employee
Directors may elect to defer part or all of their director's fees pursuant to
the Company's Deferred Director Fee Option Plan.
Deferred Director Fee Option Plan
The Company's Deferred Director Fee Option Plan (the "1993 Plan") permits
non-employee Directors to choose between receiving their fees from the Company
in the form of cash or non-qualified stock options. The option exercise price
is 50% of the fair market value of the shares at the time the options are
awarded and the amount of shares is determined by dividing the directors' fees
by the difference between the exercise price and the fair market value. Messrs.
Bills, Brown, Christodolou and Solomon have elected to participate in the 1993
Plan. As of July 31, 2001, there were outstanding under the 1993 Plan options
to purchase 20,632 shares of Company Common Stock at an average option exercise
price of $22.65. During fiscal year 2000, the following Directors were awarded
stock options pursuant to the 1993 Plan:
Securities Underlying
Name Date of Grant Options Exercise Price
- ---- ------------- --------------------- --------------
Michael D. Bills............ 12/30/99 403 $21.09
1/27/00 754 $21.87
H. William Brown............ 12/30/99 557 $21.09
1/27/00 983 $21.87
Michael N. Christodolou..... 12/30/99 723 $21.09
1/27/00 983 $21.87
Martin L. Solomon........... 12/30/99 676 $21.09
1/27/00 983 $21.87
Stock Option Plan for Non-Employee Directors
The Company has established the 1991 Stock Option Plan for Non-Employee
Directors (the "1991 Plan"), pursuant to which each of the then-current
Directors who was not an employee of the Company (each an "Eligible Director")
was awarded options to purchase 4,000 shares of Common Stock upon adoption of
the 1991 Plan. The Plan also provides initial grants to newly-elected Directors
for options to purchase 4,000 shares of Company Common Stock. Following the
initial grant, each person who is an Eligible Director on the day immediately
succeeding the day of each annual meeting of stockholders of the Company will
receive options to purchase 1,000 shares (subject to the maximum number of
shares available under the 1991 Plan) of Company Common Stock on such date. On
November 9, 1999, the Board of Directors adopted amendments (the "Amendments")
to the 1991 Plan which were approved by the stockholders at the 2000 Annual
Meeting of Stockholders. The Amendments to the 1991 Plan (i) increased from
1,000 to 3,000 the number of shares for which options will be awarded annually
to Directors, and (ii) increased from 4,000 to 6,000 the number of shares for
which options will be awarded to newly-elected Directors. The exercise price of
each option granted under the 1991 Plan is 100% of fair market value (as
defined in the 1991 Plan) on the date of award. As of July 31, 2001 there were
outstanding options to purchase 55,000 shares of the Company Common Stock under
the 1991 Plan at an average option exercise price of $47.26. The exercise price
of the options for 3,000 shares awarded to each such Director following the
2001 Annual Meeting of Stockholders was $48.13 per share. Options granted under
the 1991 Plan become exercisable on the earlier of (i) the first anniversary of
the date of grant or (ii) the date immediately prior to the date of the next
annual meeting of stockholders following the grant date provided that such date
is at least 355 days after such grant date. One Hundred Thousand (100,000)
B-7
shares have been authorized for delivery upon exercise of options under the
1991 Plan. The 1991 Plan is administered by the Compensation Committee of the
Board of Directors.
Meetings of the Board of Directors in Fiscal Year 2000
The full Board of Directors held six meetings during fiscal year 2000. Each
director then serving attended more than 75% of such Board meetings and
meetings of all committees of the Board on which he served.
Committees of the Board of Directors
The Board of Directors has established the following committees to assist it
in the discharge of its responsibilities.
Audit. The primary function of the Audit Committee, none of whose members is
an employee of the Company, is to assist the Board of Directors in fulfilling
its oversight responsibilities by reviewing (1) financial reports and other
financial information provided by the Company to any governmental body or the
public, (2) the Company's system of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board have
established, and (3) the Company's auditing, accounting and financial processes
generally. The Board of Directors has established a written charter for the
audit committee and such charter has been previously filed with the Securities
and Exchange Commission, most recently on the Company's proxy statement filed
on Schedule 14A on December 20, 2000. The Committee annually recommends to the
Board of Directors the appointment of a firm of independent auditors to audit
the financial statements of the Company and meets with such independent
auditors, the Company's internal auditor, the Chief Executive Officer (or CEO)
and the principal financial, accounting and legal personnel of the Company to
review the scope and the results of the annual audit, the amount of audit fees,
the Company's internal accounting controls, the Company's financial statements
contained in the Company's Annual Report to Stockholders and other related
matters. Messrs. Christodolou (Chairman), Brown and Bills currently serve as
members. Each of the members of the Audit Committee is independent (as defined
in the New York Stock Exchange's listing standards). The Audit Committee held
four meetings in the fiscal year ending September 30, 2000.
Compensation. The Compensation Committee is charged with the duty of review
and subsequent recommendation to the Board on matters concerning the individual
compensation of the most highly paid employees of the Company and administers
certain employee benefit plans. Messrs. Solomon (Chairman), Christodolou and
Goergen currently serve as members. The Compensation Committee held four
meetings during fiscal year 2000.
Nominating. The Nominating Committee has authority to recommend potential
Board members and the reelection or non-reelection of Directors at the
expiration of their respective terms, to present annually a slate of officers
for the Board and to make additional nominations as vacancies occur, and to
recommend appointments to standing Committees. The Nominating Committee will
consider recommendations for Director nominees submitted by stockholders by
timely written notice received by the Secretary of the Company in advance of
the applicable stockholder meeting. Messrs. Brown (Chairman), Bills and Solomon
currently serve as members. The Nominating Committee did not meet during fiscal
year 2000.
Executive. The Executive Committee has authority to act for the full Board
of Directors on most matters during intervals between meetings of the Board of
Directors. Messrs. Goergen (Chairman), Bills and Rubin currently serve as
members. The Executive Committee did not meet during fiscal year 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board consists of Mr. Solomon, Mr.
Christodolou and Mr. Goergen. Each member is a non-employee director. With the
exception of the securities beneficially owned by each, none of the members of
the Compensation Committee has any direct or indirect material interest in or
relationship with the Company outside of his position as a director.
B-8
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company Common Stock, to file with the Commission initial reports of
ownership and reports of changes in ownership of Company Common Stock and any
other of its equity securities. Officers, directors and greater-than-ten-
percent stockholders must furnish the Company with copies of all Section 16(a)
forms they file.
To the Company's knowledge, based on its review of the copies of the reports
furnished to it and written representations that no other reports were
required, the Company believes that, during fiscal year 2000, the Company's
officers, directors and greater than ten-percent beneficial owners complied
with all Section 16(a) filing requirements.
STOCK OWNERSHIP
Security Ownership Of Certain Beneficial Owners And Management
The following table sets forth certain information as of July 31, 2001
(unless otherwise indicated below) with respect to the beneficial ownership of
the outstanding shares of Company Common Stock by (i) all persons owning of
record, or beneficially to the knowledge of the Company, more than five percent
of the outstanding shares of any class, (ii) each director individually, (iii)
the Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company during the previous fiscal year and (iv) all
directors and officers of the Company as a group. Unless otherwise indicated,
the mailing address of each of the persons shown is c/o XTRA Corporation, 200
Nyala Farms Road, Westport, CT 06880.
Shares Percent
Beneficially Beneficially
Beneficial Owner Owned (1) (2) Owned (1) (2)
- ---------------- ------------- -------------
American Century Companies, Inc.
4500 Main Street
Kansas City, MO 64111............................. 1,065,500 (3) 10.1%
Jordan L. Ayers................................... 15,000 *
Michael D. Bills.................................. 21,925 *
Jeffrey R. Blum................................... 37,800 *
H. William Brown.................................. 12,872 *
Michael N. Christodolou........................... 13,585 *
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
Santa Monica, CA 90401 ........................... 622,100 (4) 5.9%
William H. Franz.................................. 86,667 *
Robert B. Goergen................................. 57,852 (5) *
Lewis Rubin....................................... 224,389 2.1%
Michael J. Soja................................... 15,368 (6) *
Martin L. Solomon................................. 45,184 *
Tiger Management Corporation
101 Park Avenue
New York, NY 10178 ............................... 3,175,594 (7) 30.3%
Westport Asset Management, Inc.
253 Riverside Avenue
Westport, CT 06880 ............................... 1,259,600 (8) 12.0%
All Executive Officers and Directors as a Group,
including those named above (15 persons)......... 481,122 4.6%
B-9
- --------
* Less than 1% of the outstanding common stock.
(1) For purposes of determining beneficial ownership of the Company Common
Stock, options exercisable within 60 days of July 31, 2001 have been
included as follows: Mr. Ayers--13,750; Mr. Bills--11,925; Mr. Blum--
35,717; Mr. Brown--12,872; Mr. Christodolou--13,585; Mr. Franz--78,334; Mr.
Goergen--6,000; Mr. Rubin--166,667; Mr. Solomon--12,882; and all Directors
and executive officers as a group--359,232. Nature of beneficial ownership
is direct and arises from sole voting and investment power, unless
otherwise noted by footnote.
(2) Includes ownership of restricted shares of the Company Common Stock, in the
following amounts: Mr. Ayers--1,250; Mr. Blum--2,083; Mr. Franz--4,166; and
Mr. Rubin--8,333.
(3) The number of shares reported as held by American Century Companies, Inc.
is as of July 10, 2001.
(4) The number of shares reported as held by Dimensional Fund Advisors, Inc. is
as of February 2, 2001.
(5) Includes 2,824 shares of Common Stock owned by Mr. Goergen's wife, 700
shares held in trust for the benefit of Mr. Goergen's mother and 10,000
shares held by The Goergen Foundation. Mr. Goergen disclaims beneficial
ownership of such shares.
(6) Mr. Soja resigned from his positions as Vice President and Chief Financial
Officer as of February 23, 2001. The number of shares listed as held by Mr.
Soja is as of that date.
(7) The number of shares reported as held by Tiger Management Corporation is as
of August 2, 2001.
(8) The number of shares reported as held by Westport Asset Management, Inc. is
as of February 14, 2001.
B-10
EXECUTIVE COMPENSATION
The following table shows for the fiscal years ended September 30, 2000,
1999 and 1998 compensation paid or accrued by the Company to (i) its Chief
Executive Officer, and (ii) its four other most highly compensated executive
officers who were serving as executive officers as of September 30, 2000 (the
"Named Executive Officers"):
Summary Compensation Table
Long-Term
Annual Compensation Compensation Awards
------------------------------ ---------------------
Restricted Securities
Name and Principal Other Annual Stock Underlying All Other
Position Year Salary Bonus Compensation Awards(1) Options Compensation(2)
- ------------------ ---- -------- -------- ------------ ---------- ---------- ---------------
Lewis Rubin............. 2000 $618,750 $452,740 -- -- 200,000 $12,411
President and Chief 1999 587,500 344,477 -- 25,000 75,000 14,250
Executive Officer 1998 537,500 593,684 -- -- -- 14,249
William H. Franz........ 2000 358,750 218,746 -- -- 100,000 12,411
Vice President, 1999 316,250 371,520 -- 12,500 37,500 14,250
XTRA Lease 1998 283,750 232,714 -- -- -- 14,249
Michael J. Soja (3)..... 2000 276,250 117,911 -- -- 65,000 12,411
Vice President and 1999 246,250 84,393 -- 6,250 18,750 14,250
Chief Financial Officer 1998 232,150 163,866 -- -- -- 14,249
Jordan L. Ayers......... 2000 183,750 31,345 -- -- 40,000 11,831
Vice President, 1999 156,750 94,830 -- 3,750 11,250 12,260
XTRA Intermodal 1998 130,570 53,946 -- -- 2,500 11,760
Jeffrey R. Blum......... 2000 216,250 92,301 -- -- 65,000 12,411
Vice President, 1999 185,000 53,335 -- 6,250 11,250 14,250
Planning and 1998 165,000 110,564 -- -- 6,000 14,249
Development
- --------
(1) The restricted stock awards vest one-third on each of the first, second and
third anniversaries of the date of grant.
(2) The amounts shown for each named officer include matching Company 401(k)
contributions and the Company's contribution under its defined contribution
401(k) plan for fiscal year 2000 as follows: Mr. Rubin: $4,800 and $7,611;
Mr. Franz: $4,800 and $7,611; Mr. Soja: $4,800 and $7,611; Mr. Ayers:
$4,375 and $7,456; and Mr. Blum: $4,800 and $7,611.
(3) Mr. Soja resigned from his positions as Vice President and Chief Financial
Officer as of February 23, 2001.
B-11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The table below includes for the individuals named in the Summary
Compensation Table certain information concerning individual grants of stock
options made during fiscal year 2000.
Grant Date
Individual Grants Value
------------------------------------------- ----------
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base Grant Date
Options Employees in Price Expiration Present
Name Granted Fiscal Year ($/SH) Date Value(1)
- ---- ---------- ------------ -------- ---------- ----------
Lewis Rubin.............. 200,000 42% $41.19 11/9/04 $2,892,000
William H. Franz......... 100,000 21% $41.19 11/9/04 1,446,000
Michael J. Soja.......... 65,000 14% $41.19 11/9/04 939,900
Jordan L. Ayers.......... 40,000 8% $41.19 11/9/04 578,400
Jeffrey R. Blum.......... 65,000 14% $41.19 11/9/04 939,900
- --------
(1) This is a hypothetical valuation as of the grant date using a modified
Black-Scholes valuation formula pursuant to Commission regulations and does
not reflect the actual value of the option awards at any given time. The
Black-Scholes model assumed (a) an option term of 5 years, (b) a risk-free
interest rate of 5.8% (the yield on 5-year U.S. Treasury securities), (c) a
standard deviation of stock-return of 26%, and (d) a dividend yield of 0%.
The standard deviation of stock return represents a statistical measure
intended to reflect the anticipated fluctuation of price movements over the
life of the option.
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
The table below includes for the individuals named in the Summary
Compensation Table certain information concerning each exercise of stock
options during fiscal year 2000 and the fiscal year-end value of unexercised
options.
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at Fiscal Year In-The-Money Options at
Acquired on End Fiscal Year End ($)(1)
Exercise Value ------------------------- -------------------------
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------ ----------- ------------- ----------- -------------
Lewis Rubin............. -- -- 241,667 133,333 $309,084 $491,999
William H. Franz........ -- -- 115,833 66,667 136,091 246,001
Michael J. Soja......... -- -- 66,667 43,333 98,147 159,899
Jordan L. Ayers......... 100 $4,660 27,983 26,667 46,687 98,401
Jeffrey R. Blum......... -- -- 54,417 43,333 86,242 159,899
- --------
(1) Based on share price of $44.44, which was the closing price for a share of
the Company Common Stock on September 29, 2000.
B-12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Individual Pension Agreement with Mr. Rubin
On July 1, 1994, the Company entered into an Individual Pension Agreement
with Mr. Rubin pursuant to which the Company will pay Mr. Rubin an annual life
benefit of $100,000 if he continues to serve as Chief Executive Officer of the
Company until age 65. On November 6, 2000, the Company's Board of Directors
approved an amendment to the Individual Pension Agreement to increase the
amount of the annual life benefit to $200,000. In the event of a Change of
Control (as described below), the Company has agreed to pay Mr. Rubin a lump
sum payment equal to the present value of such annual benefit in the event his
employment with the Company is terminated within the two-year period following
the date of the Change of Control. The term "Change of Control" under the
agreement generally includes the following events: (i) a person or group
becomes the beneficial owner of more than 40% of the voting power of the
Company's securities, (ii) a change of control required to be reported under
certain provisions of the Securities and Exchange Act of 1934, (iii) a
consolidation, merger or other reorganization (other than such a transaction
(a) in which the immediately preceding voting power as amended, continues to
represent more than 50% of the voting power thereafter, or (b) in which no
person or group would acquire more than 20% of the voting power), or a sale of
all or substantially all of the assets of the Company or a plan of liquidation,
and (iv) continuing Directors cease to be a majority of the Board of Directors.
In the event Mr. Rubin dies while serving as Chief Executive Officer or after
he becomes entitled to benefits under the agreement, his surviving spouse, if
any, would be entitled to certain survivor benefits. Mr. Rubin would forfeit
all benefits in the event he joins the board of directors or becomes an
executive officer of a competitor of the Company within two years after the
date of termination of his employment with the Company, other than termination
following a Change of Control. The transactions contemplated by the Merger
Agreement would constitute a Change of Control under the terms of the
Individual Pension Agreement. A copy of this agreement has been previously
filed with the Commission and is incorporated by reference herein.
Severance Agreements
On June 18, 1999, the Company entered into amended and restated severance
agreements with Messrs. Rubin, Franz and Blum, providing each of them with
severance benefits upon certain terminations of their employment with the
Company. Such agreements provide that if, within twenty-four months following a
Significant Transaction (as described below), the executive's employment with
the Company is terminated either by the Company (other than for "cause", as
defined in the agreements) or by such executive for "good reason" (as defined
in the agreements), the executive would receive a severance payment equal to
two times the executive's annual base salary (at the rate in effect immediately
prior to the date of termination) and his annualized average bonus amount for
the prior two fiscal years and the portion of any year in which the termination
occurs. In addition, the agreements provide for the immediate vesting of all
bonus awards, stock options, etc. For a period of two years following any such
termination of employment, the executive would be entitled to participate in
all welfare benefit plans (other than disability) provided by the Company. The
term "Significant Transaction" as defined in the agreements generally includes
the following events: (i) a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (or,
in the case of Mr. Franz, XTRA Lease), unless (a) the voting power immediately
prior to such transaction continues to represent 50% or more of the voting
power thereafter, (b) no individual or group would acquire 30% or more of the
voting power, and (c) at least a majority of the members of the board of
directors of the corporation resulting from such transaction were members of
the Board at the time of the execution of the initial agreement or of the
action of the Board providing for such transaction; or (ii) approval by the
stockholders of the Company of a complete liquidation or dissolution of the
Company (or, in the case of Mr. Franz, XTRA Lease, other than a liquidation or
dissolution of such subsidiary into the Company or any subsidiary of the
Company). The severance agreements further provide for a "gross-up" under
which, if amounts paid under such agreements would be subject to a federal
excise tax on "excess parachute payments," the Company will pay such executives
an additional amount of cash so that, after payment of all such taxes by the
employee, the employee will have received the amount he would have received in
the absence of any such
B-13
tax. The transactions contemplated by the Merger Agreement would constitute a
Significant Transaction pursuant to the terms of the severance agreements. A
copy of each of these agreements has previously been filed with the Commission
and is incorporated by reference herein.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee is composed of Messrs. Christodolou (Chairman), Brown
and Solomon. Each of the members of the Audit Committee is independent (as
defined in the New York Stock Exchange's listing standards).
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing financial
reports and other financial information provided by the Company to any
governmental body or the public, the Company's systems of internal controls
regarding finance, accounting, legal compliance and ethics that management and
the Board have established, and the Company's auditing, accounting and
financial processes generally. The Audit Committee annually recommends to the
Board of Directors the appointment of a firm of independent auditors to audit
the financial statements of the Company and meets with such independent
auditors, the Company's internal auditor, the CEO and the principal financial,
accounting, planning and legal personnel of the Company to review the scope and
the results of the annual audit, the amount of audit fees, the Company's
internal accounting controls, the Company's financial statements contained in
the Company's Annual Report to Stockholders and other related matters. A more
detailed description of the functions of the Audit Committee can be found in
the Company's Audit Committee Charter.
The Audit Committee has reviewed and discussed with management the financial
statements for fiscal year 2000 audited by Arthur Andersen LLP, the Company's
independent auditors. The Audit Committee has discussed with Arthur Andersen
LLP various matters related to the financial statements, including those
matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AU 380). The Audit Committee has also received the written
disclosures and the letter from Arthur Andersen LLP required by Independence
Standards Board Standard No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees), and has discussed with Arthur
Andersen LLP its independence. Based upon such review and discussions, the
Audit Committee recommended to the Board of Directors that the audited
financial statements be included in the Company's Annual Report on Form 10-K
for the fiscal year ending September 30, 2000 for filing with the Commission.
Michael N. Christodolou, Chairman
H. William Brown
Martin L. Solomon
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors is responsible for the
administration of the Company's executive compensation program. The Committee
is made up of three Directors who are not employees of the Company. It is
responsible for setting the compensation levels of the Company's Chief
Executive Officer and other senior executives, including the executives named
in the Summary Compensation Table. The Committee is also responsible for the
administration of certain compensation and benefit plans. The Committee met
four times during fiscal year 2000.
Compensation Philosophy
The Committee believes that the Company's executive compensation program
should attract and retain talented executives. The Committee provides its
executives with the opportunity to earn significant compensation if the Company
and the individual meet or exceed challenging performance goals. This strategy
B-14
has helped the Company attract, retain and motivate high quality executives.
The Committee periodically reviews a number of independent compensation surveys
as guidelines to determine competitive pay practices. The survey data is
reviewed directly and is also summarized by independent compensation
consultants. Generally, the survey data used is primarily for transportation-
related companies of similar size to the Company and based in the United
States. However, since the Company's competition for executive talent is not
limited to the transportation industry, compensation data for other companies
of similar size is also considered. The survey data used to assess the
Company's executive compensation includes some companies that are part of the
Dow Jones Transportation Index as well as other transportation and non-
transportation companies.
The income tax deductions of publicly traded companies may be limited to the
extent total compensation for particular executive officers exceeds $1 million
during any year. This deduction limit, however, does not apply to payments
which qualify as "performance based." The Committee has reviewed the
regulations issued by the Internal Revenue Service and will continue to review
the application of these rules to future compensation. However, the Committee
intends to continue basing its executive compensation decisions primarily upon
performance achieved, both corporate and individual, while retaining the right
to make subjective decisions and to award compensation that may or may not meet
all of the Internal Revenue Service's requirements for deductibility. The
Committee believes that the total compensation provided to the Company's
executives is both prudent and competitive. Also, the Committee believes that
the program has helped to successfully focus the Company's executive team on
increasing Company performance and stockholder value.
Base Salaries
Base salaries are determined at the discretion of the Committee based on a
review of competitive market pay practices, performance evaluations and
expected future individual contributions. The Committee uses the median of the
range of base salaries from independent compensation surveys to target the
Company's base salary levels. However, it also considers an individual's unique
position, responsibilities and performance in setting salary levels. In
reviewing individual performances, the Committee considers the views of the
Chief Executive Officer, Mr. Lewis Rubin, with respect to other executive
officers.
During fiscal year 2000, the Committee increased the base salary levels of
senior executives, other than the CEO, on average 15% after the Committee
considered, but did not formally weigh, inflation, corporate performance,
employee performance and competitive conditions.
Annual Incentives
Annual incentives are paid primarily through the Company's Economic Profit
Incentive Plan (the "Economic Profit Plan"). The Economic Profit Plan's
objectives are to enhance commitment to the long-term success of the Company by
linking personal financial rewards to the growth in value of the Company, by
increasing the Company's Economic Profit (as defined below), and to increase
the Company's ability to attract and retain key executives. Under the Economic
Profit Plan, annual incentives are determined by establishing target incentive
awards based on a percentage of base salary. Actual earned bonus awards are
based on corporate performance or divisional performance depending upon the
responsibilities of the participant. Corporate and divisional performance is
measured by the cumulative growth of Economic Profit and then by comparing the
actual Economic Profit against a target Economic Profit as designated by the
Committee. The term "Economic Profit" is defined as after-tax operating profit
(before interest expense), less a capital charge for all capital invested in
the Company or division, as applicable. The term "capital charge" is defined as
the Company's weighted average, after-tax, cost of capital, representing a
blend of the Company's equity and debt capital cost.
Earned bonus awards for corporate executives (other than the CEO, Mr. Franz
and Mr. Ayers) are determined based on Company performance (weighted 100%). The
annual awards for Mr. Franz and Mr. Ayers, each of whom also serves as
divisional president, are determined based on Company performance (weighted
25%), and division performance (weighted 75%). The annual award for the CEO is
based on Company performance (weighted 100%).
B-15
Annual incentive target awards for the CEO and the other executives named in
the Summary Compensation Table range from 30% to 60% of salary. Actual cash
awards may be up to 1.5 times the target awards plus 33% of any positive amount
in the participant's bonus reserve account, an account maintained for each
participant which includes any earned but unpaid bonuses from prior years. This
bonus reserve account may also contain a negative balance from prior years, and
in such cases the negative amount must be offset against any positive reserve
amount. The Committee approved earned bonus awards for the executive officers
named in the Summary Compensation Table, other than the CEO, that averaged 108%
of the fiscal year 2000 targeted award levels. The annual incentive for the CEO
is discussed under the "CEO Compensation" section below.
Long-Term Incentives
From time to time, the Committee has granted stock options and restricted
shares to the Company's executives in order to align their interests with the
interests of stockholders. Since stock options are granted at market price, the
actual value of the stock options is wholly dependent on an increase in the
price of the Company Common Stock. Stock options are considered effective long-
term incentives by the Committee because an executive is rewarded only if the
value of the Company Common Stock increases, thus increasing stockholder value.
In determining grants of stock awards for executives, the Committee has
reviewed competitive data of long-term incentive practices at other
transportation-related companies and companies of similar size to the Company
but in other industries. The Committee also takes into account the level of
past stock compensation grants and the value of those grants in determining
awards for the Company's executives.
On November 6, 2000, the Committee recommended the grant of options covering
180,750 shares of the Company's Common Stock to certain key members of senior
management. The number of stock awards granted was based on the Committee's
review of the individual executive's position and potential within XTRA, and
the level of past stock compensation awards granted to the individual
executive.
CEO Compensation
For fiscal year 2000, Mr. Rubin earned an annual incentive award that was
122% of his fiscal year 2000 target annual incentive. The Committee also
awarded Mr. Rubin a stock option grant of 75,000 shares of Company Common Stock
as part of the November 6, 2000 option awards described above. The awards were
determined by the Committee after considering competitive stock award practices
as well as Mr. Rubin's individual performance and previous stock compensation
awards. In evaluating the CEO's individual performance, the Committee
considered, but did not formally weigh, the financial progress that the Company
has made as measured by the growth of Economic Profit and earnings per share as
well as the factors described above under "Compensation Philosophy".
Martin L. Solomon, Chairman
Michael N. Christodolou
Robert B. Goergen
B-16
PERFORMANCE GRAPH
The graph below compares cumulative total stockholder returns for the
Company for the preceding five fiscal years with the S&P 500 Stock Index and
the Dow Jones Transportation Index. The graph assumes the investment of $100 at
the commencement of the measurement period with dividends reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG XTRA CORPORATION, THE S&P
500 INDEX AND THE DOW JONES TRANSPORTATION AVERAGE INDEX (FISCAL YEAR ENDING
SEPTEMBER 30, 2000)*
[Performance Graph]
9/95 9/96 9/97 9/98 9/99 9/00
------ ------ ------ ------ ------ ------
XTRA CORPORATION...................... 100.00 97.01 132.67 109.72 93.67 104.71
S&P 500............................... 100.00 120.34 169.01 184.30 235.54 266.83
DOW JONES............................. 100.00 107.37 163.91 141.72 157.42 138.35
TRANSPORTATION AVERAGE
- --------
* $100 INVESTED ON 9/30/95 IN STOCK OR INDEX--INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30.
B-17