<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K*
ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-7654
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1997
XTRA Corporation (Exact name of Registrant as specified in its charter)
DELAWARE 06-0954158
(State or other jurisdiction (I.R.S. employer identification number)
of incorporation or organization)
60 STATE STREET (617) 367-5000
BOSTON, MASSACHUSETTS 02109 (Registrant's telephone number)
(Address of principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of exchange on which registered
Common Stock, Par Value $.50 per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: none
Shares Outstanding of the Registrant's Common Stock at November 12, 1997:
15,282,700
Aggregate market value of voting stock held by non-affiliates of the
registrant at November 12, 1997: $775,000,000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K X.
-
Portions of the Registrant's Annual Report to Stockholders for the fiscal year
ended September 30, 1997, of which this Form 10-K is a part, are incorporated
by reference in Parts I, II and IV. Portions of the Registrant's definitive
Proxy Statement for use at the 1998 Annual Meeting of Stockholders are
incorporated by reference in Part III.
*Exhibits to Form 10-K and Parent Company Financial Statements and Schedules
have been included only in copies of the Form 10-K filed with the Securities
and Exchange Commission.
A copy of this Form 10-K, including a list of exhibits and the Parent Company
Financial Statements and Schedules, is available free of charge to stockholders
upon written request to: Vice President and Chief Financial Officer, XTRA
Corporation, 60 State Street, Boston, Massachusetts 02109. In addition, upon
similar request, copies of individual exhibits will be furnished upon payment
of a reasonable fee.
<PAGE>
FORM 10-K TABLE OF CONTENTS
XTRA Corporation and Subsidiaries
<TABLE>
<CAPTION>
Item Page
Part I
<C> <S> <C>
1. Business 3
2. Properties 6
3. Legal proceedings 6
4. Submission of matters to a vote of security holders 6
4A. Executive officers of the registrant 6
Part II
5. Market for the registrant's common equity and related shareholder matters 8
6. Selected financial data 8
7. Management's discussion and analysis of financial condition and results of operations 8
8. Financial statements and supplementary data 8
9. Changes in and disagreements with accountants on accounting and financial disclosure 8
Part III
10. Directors and executive officers of the registrant 9
11. Executive compensation 9
12. Security ownership of certain beneficial owners and management 9
13. Certain relationships and related transactions 9
Part IV
14. Exhibits, financial statement schedule, and reports on Form 8-K 10
Signatures 16
</TABLE>
<PAGE>
PART I.
Item 1. Business
XTRA Corporation (the "Company" or "XTRA") leases, primarily on an operating
basis, freight transportation equipment including over-the-road trailers,
marine containers, intermodal trailers, chassis, and domestic containers. XTRA
leases over-the-road and intermodal equipment throughout North America,
predominantly within the United States, to contract and common carriers,
railroads, and private fleet owners. In addition, the Company leases marine
containers worldwide to steamship lines. Customers lease equipment primarily to
cover cyclical, seasonal, and geographical shortages and as a substitute for
purchasing. The choice of equipment used is influenced by lease rates, terms,
availability, condition, and size of equipment, as well as other factors.
XTRA's equipment utilization, lease rates, and therefore, profitability, are
impacted by the level of economic activity in North America, world trade
activity, the supply of and demand for available equipment, the actions of its
competitors and other factors in the freight transportation industry.
Utilization and profitability are usually seasonally lower in the second and
third fiscal quarters than in the first and fourth fiscal quarters. In general,
the Company's receivable collection experience has been good. However, industry
downturns tend to lengthen the collection period of certain receivables.
Lease Types and Rates
The Company leases its equipment on both a per diem and term basis. Per diem
leases are for an initial period of less than one year and allow the customer
to return the equipment without notice, although some per diem leases limit the
amount and locations of equipment termination. Term leases provide for an
initial period of one year or greater, generally one to five years. Lease rates
depend upon the type of lease, length of term, maintenance provided, and the
type and age of the equipment. Customers are generally responsible for damage
to the equipment and for ordinary maintenance, although full-service leases are
offered on some equipment types.
Equipment Fleet
The Company's equipment fleet has increased through purchases of new equipment
and through fleet acquisitions of other leasing companies. The new equipment,
supplied by a number of manufacturers, is built to the Company's specifications
and reflects industry standards and customers' needs. The Company's fleet size
and net investment includes equipment owned by the Company, equipment leased-in
from third parties under operating and capital leases, and equipment leased to
third parties under finance leases.
3
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The Company's fleet consisted of the following units and net investment at the
end of its last five fiscal years:
<TABLE>
<CAPTION>
Units in thousands
Equipment Fleet/(1)/ 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Over-the-road trailers 78 75 76 69 65
Marine containers 162 152 126 - -
Intermodal trailers 23 24 29 34 33
Chassis 23 24 21 16 15
Domestic containers 10 8 8 8 8
---------------------------------
Total 296 283 260 127 121
---------------------------------
<CAPTION>
Millions of dollars
Equipment Fleet/(1)/ 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Over-the-road trailers $ 718 $ 632 $ 628 $ 508 $ 446
Marine containers 414 419 373 - -
Intermodal trailers 168 197 237 235 201
Chassis 112 119 107 70 63
Domestic containers 41 36 42 47 53
------------------------------------
Net investment $1,453 $1,403 $1,387 $ 860 $ 763
------------------------------------
</TABLE>
/(1)/ For purposes of this presentation, the net investment in equipment leased
to the Company on an operating basis represents the present value of the
remaining lease payments. The net investment in revenue equipment leased
to customers under finance leases as well as equipment owned by the
Company or leased to the Company under capital leases represents the net
carrying value of this equipment. The significant increase in fleet units
and net investment in equipment in 1995 was primarily due to the Company's
acquisition of Matson Leasing Company, Inc. See Note 2 of the Notes to
Consolidated Financial Statements for information relating to
acquisitions.
For information regarding business information by geographic area, see Note 8
of the Notes to Consolidated Financial Statements. For additional information,
including financing and capital expenditures, see Management's Discussion and
Analysis of Financial Condition and Results of Operations. Such information is
incorporated herein by reference.
Over-the-Road Trailers
XTRA's over-the-road fleet of 78,000 units, mostly dry cargo vans, consists
primarily of units 48' and 53' long by 102" wide. This equipment is leased to
common carriers and private fleet owners. Approximately 40% of the trailer
fleet was leased on a term basis at the end of fiscal 1997, with the balance
available for lease on a per diem basis.
Marine Containers
The Company's marine containers are standard, dry cargo 20' and 40' steel
containers leased primarily to steamship lines for transporting freight on
ships worldwide. XTRA's fleet consists of 162,000 units or 226,000 twenty-foot
equivalent units (TEUs), an industry measure of fleet size. Approximately 34%
of XTRA's marine container fleet was leased on a term basis at the end of
fiscal 1997, with the remainder of the fleet available for lease on a per diem
basis. Most per diem leases limit the amount and locations of equipment
termination.
Intermodal Trailers
Intermodal trailers are designed to be carried on rail flatcars, pulled by
tractor over the highway and, to a lesser extent, transported by water carriers
on ships and barges. The Company's intermodal trailer fleet of 23,000 units
consists primarily of units 45' and 48' long by 102" wide. The Company's
intermodal trailers are leased primarily to North American railroads and water
carriers. Approximately 28% of the intermodal trailer fleet was leased on a
term basis at the end of fiscal 1997 with the remainder of the fleet available
for lease on a per diem basis.
4
<PAGE>
Chassis
Chassis are wheeled rectangular frames used to transport containers over the
highway. Marine chassis are generally 20' or 40' in length to accommodate
marine containers. Domestic chassis are generally 48' or 53' in length and
handle domestic containers. XTRA's marine and domestic chassis are used as
transport vehicles for marine and domestic containers which are loaded or
unloaded at shipyards, rail terminals, or consignee locations. The Company's
fleet of 23,000 units consists primarily of marine chassis and is leased to
steamship lines, railroads, and motor carriers. Approximately 62% of the
chassis fleet was leased on a term basis at the end of fiscal 1997 with the
balance available for lease on a per diem basis.
Domestic Containers
Domestic containers are boxes used to transport freight via rail on railcars or
highway on chassis within North America. These containers are a substitute for
intermodal and over-the-road trailers, particularly on long-haul, heavy volume
routes. XTRA's fleet of approximately 10,000 units consists primarily of 48'
long by 102" wide units leased to North American railroads and other domestic
freight carriers. Approximately 69% of the Company's domestic container fleet
was leased on a term lease basis at the end of fiscal 1997, with the balance
available for lease on a per diem basis.
Competition
Leasing transportation equipment is a highly competitive business and is
affected by factors related to the freight transportation market. Lease terms
and lease rates, as well as availability, condition, and size of equipment are
all important factors to the lessee. In addition, various types of
transportation equipment compete for freight movement. Over-the-road trailers,
intermodal trailers, marine and domestic containers, and railroad rolling stock
are all potential vehicles for the movement of freight.
XTRA is one of the two largest North American lessors of over-the-road trailers
with in excess of 25% of the leasing fleet. Its principal competitor has a
similarly sized fleet. Recent estimates place the number of over-the-road
trailers available for lease in North America at approximately 265,000.
At the end of fiscal 1997, the world's marine container leasing fleet is
estimated at approximately 5 million TEUs. XTRA believes it is one of the ten
largest marine container lessors in the world. The two largest lessors account
for approximately half of the leasing market.
The Company believes that the North American intermodal trailer fleet has
decreased slightly over the last five years to approximately 94,000 trailers at
the end of fiscal 1997. Some industry analysts believe that demand will
continue to decrease over the long-term. The Company monitors the size of the
North American fleet relative to current and expected future demand and bases
its trailer acquisition and disposition decisions, in part, on these factors.
XTRA believes it is the second largest North American lessor of intermodal
trailers, with approximately 25% of the leasing fleet.
XTRA believes it is the fifth largest North American chassis lessor with
approximately 8% of the leasing fleet. The Company believes it is the third
largest lessor of domestic containers with approximately 16% of the leasing
fleet.
Locations and Operations
XTRA's North American equipment is leased from equipment pools operated by
Company employees at 95 locations. The marine container operations are managed
by 14 Company offices and 7 agency locations, which utilize 137 independent
depot locations worldwide to store and maintain equipment.
Employees
The Company had 876 employees at September 30, 1997.
5
<PAGE>
Corporate Organization
The Company was organized in 1957. XTRA's corporate management offices are
located at 60 State Street, Boston, Massachusetts 02109-1826 (telephone number
(617) 367-5000).
XTRA, Inc., a wholly-owned direct subsidiary of XTRA Corporation, owns
substantially all of the Company's transportation equipment and conducts the
Company's leasing business through certain of its subsidiaries pursuant to
management service agreements.
Item 2. Properties
The Company maintains 95 facilities for the storage and distribution of its
over-the-road and intermodal equipment throughout North America, occupying 701
acres, of which 390 are owned. These facilities generally occupy 2 to 16 acres.
The marine container business is managed through 14 offices worldwide.
Item 3. Legal Proceedings
The Illinois Environmental Protection Agency has notified the Company of
alleged environmental contamination of XTRA's Fairmont City, Illinois property
which resulted from the prior owner's zinc smelting operations. The Company has
had initial discussions with the successors in interest currently responsible
for the liabilities of the prior owner about participation in an investigation
and cleanup of the facility under the Illinois voluntary remediation program.
Based upon the Company's current understanding of the nature of the
contamination, the Company believes that the resolution of this matter will not
have a material impact on the Company's results of operations, cash flows or
financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to stockholders of the Company during the fourth
quarter of 1997.
Item 4A. Executive Officers of the Registrant
The executive officers of the Company, the age of each, and the period during
which each has served in his present office are as follows:
Lewis Rubin (59) - President and Chief Executive Officer. Mr. Rubin was
President and Chief Executive Officer of Flexi-Van Corporation, a company
engaged in the leasing of intermodal transportation equipment, from 1981 to
1983. He served as President and Chief Executive Officer of Gelco CTI Container
Services, a subsidiary of Gelco Corporation, and as an Executive Vice President
of Gelco Corporation from 1984 to 1988. Mr. Rubin was elected President and
Chief Operating Officer of the Company in 1990. He was elected to his present
position in 1990.
Robert B. Blakeley (37) - Vice President and Controller. Mr. Blakeley joined
the Company in 1984, was promoted to Assistant Controller in 1987 and was
elected Controller and Chief Accounting Officer in 1991. Mr. Blakeley was
elected to his present position in 1996.
Jeffrey R. Blum (45) - Vice President, Administration and Human Resources. Mr.
Blum joined the Company in 1995 as Vice President of Human Resources and was
elected to his current position in 1996. Prior to 1995, Mr. Blum served in
similar capacities at First Winthrop Corporation from 1993 to 1995 and Signal
Capital Corporation prior to 1993.
Michael K. Fox (51) - Vice President, XTRA Intermodal. Mr. Fox joined the
Company in 1981 and has held several managerial positions. He was elected
Divisional Executive Vice President, XTRA Intermodal in 1993. He was elected to
his present position in 1994.
6
<PAGE>
William H. Franz (46) - Vice President, XTRA Lease. 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 to the position of
Divisional Executive Vice President, XTRA Lease in 1993. He was elected to his
present position in 1993.
Frederick M. Gutterson (55) - Vice President, XTRA International. Mr. Gutterson
had been President and Chief Executive Officer of Matson Leasing Company, Inc.
since its inception in 1989. He was elected to his present position in 1995
following the Matson acquisition.
Christopher P. Joyce (36) - Vice President and Treasurer. Mr. Joyce joined the
Company in 1985. He was promoted to Assistant Treasurer in 1991 and was elected
Treasurer in 1993. Mr. Joyce was elected to his present position in 1996.
James R. Lajoie (57) - Vice President, General Counsel and Secretary. Mr.
Lajoie joined the Company as General Counsel in 1981. He was elected Vice
President and General Counsel in 1987 and was elected to his present position
in 1990.
Michael J. Soja (48) - Vice President and Chief Financial Officer. Mr. Soja
joined the Company as Assistant Controller in 1974, was elected Controller in
1978 and Vice President in 1979. He was elected Vice President, Finance and
Administration in 1981 and Vice President, Finance and Treasurer in 1990. Mr.
Soja was elected to his present position in 1990.
All terms of office expire as of the date of the Board of Directors' meeting
following the next Annual Meeting of Stockholders and until their respective
successors are elected and qualified.
7
<PAGE>
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is listed on the New York Stock Exchange and trades
under the symbol "XTR". The approximate number of record holders as of November
12, 1997 was 786. The following table sets forth the range of high and low sale
prices of the Company's Common Stock on the New York Stock Exchange Composite
Tape and dividends declared during fiscal years ended September 30, 1996 and
1997.
<TABLE>
<CAPTION>
Dividends
High Low Declared
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996: First Quarter $44 3/4 $ 41 5/8 $.16
Second Quarter 46 3/4 39 3/4 .18
Third Quarter 47 3/8 44 1/4 .18
Fourth Quarter 45 7/8 40 1/2 .18
1997: First Quarter 47 1/8 40 1/8 .18
Second Quarter 43 3/4 40 1/2 .20
Third Quarter 49 41 1/4 .20
Fourth Quarter 57 1/4 42 .20
</TABLE>
The Company has paid quarterly cash dividends on its Common Stock since
January, 1977. Future dividends will be determined by the Board of Directors
and will be dependent upon the earnings, financial condition, and cash
requirements of the Company and other relevant factors existing at the time.
The Company's sources of funds for the payment of dividends on its capital
stock are advances and dividends from its direct and indirect wholly-owned
subsidiaries, including XTRA, Inc. The primary sources of funds for XTRA, Inc.
are cash flows from operations, advances from its subsidiaries, and external
financing. The Company's loan agreements contain covenants that restrict the
payment of dividends or repurchases of common stock by the Company and certain
loan agreements contain covenants that restrict advances to and payment of
dividends to the Company by its subsidiaries, including XTRA, Inc. Under the
most restrictive provisions of the Company's loan agreements, the repurchase of
common stock and/or the amount of cash dividends which could be paid on the
Company's capital stock was limited to $110 million at September 30, 1997.
Item 6. Selected Financial Data
This information is set forth in the table appearing on page 1 of the Company's
1997 Annual Report, which table is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item appears in the Company's 1997 Annual
Report beginning at page 22 and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
For the Financial Statements and Supplementary Data for XTRA Corporation and
its subsidiaries, see Index to Financial Statements on page 18 of the Company's
1997 Annual Report, which Financial Statements and Supplementary Data are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
8
<PAGE>
PART III.
Item 10. Directors and Executive Officers of the Registrant
(a) Directors - Information with respect to all directors may be found in the
Company's definitive Proxy Statement for the 1998 Annual Meeting of
Stockholders (the "1998 Proxy Statement") under the caption "Information
with Respect to Director Nominees," which is to be filed with the
Securities and Exchange Commission. Such information is incorporated herein
by reference.
(b) Executive Officers - Information with respect to executive officers of the
registrant appears in Item 4A of this Report on Form 10-K.
Item 11. Executive Compensation
This information is contained in the 1998 Proxy Statement under the captions
"Executive Compensation Tables" and "Compensation of Directors." Such
information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is contained in the 1998 Proxy Statement under the captions
"Stock Ownership by Directors and Executive Officers" and "Beneficial Ownership
of More Than Five Percent of Voting Securities." Such information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
This information is contained in the 1998 Proxy Statement under the captions
"Information with Respect to Director Nominees" and "Certain Transactions."
Such information is incorporated herein by reference.
9
<PAGE>
PART IV.
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a) Required exhibits are included only in the Form 10-K filed with the
Securities and Exchange Commission.
(b) The Company filed a Current Report on Form 8-K, dated November 19, 1997,
which disclosed certain financial information for the fiscal fourth quarter
ended September 30, 1997.
(c) For Financial Statements and Schedule, see Index to Financial Statements on
page 18 of the Company's 1997 Annual Report, which Financial Statements and
Schedule are incorporated herein by reference.
<PAGE>
SCHEDULE 1
XTRA CORPORATION
(PARENT COMPANY ONLY)
BALANCE SHEETS
SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
(Millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Assets
- ------
Investment in subsidiary $ 359 $ 344
Advances to subsidiaries 11 -
----- -----
$ 370 $ 344
===== =====
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities
Accrued expenses $ 6 $ -
----- -----
Total liabilities 6 -
Commitments and Contingencies
Stockholders' equity
Preferred Stock, without par value;
total authorized: 3,000,000 shares
Common Stock, par value $.50 per share; authorized:
30,000,000 shares; issued and outstanding;
15,276,600 shares at September 30, 1997
and 15,550,499 at September 30, 1996 8 8
Capital in excess of par value 52 63
Retained earnings 304 273
----- -----
Total stockholders' equity 364 344
----- -----
$ 370 $ 344
===== =====
</TABLE>
The accompanying Notes A, B, and C and the Notes to Consolidated Financial
Statements are an integral part of these financial statements.
<PAGE>
SCHEDULE 1
XTRA CORPORATION
(PARENT COMPANY ONLY)
INCOME STATEMENTS
FOR THE THREE YEARS ENDED
SEPTEMBER 30, 1997
(Millions of dollars except per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Equity in earnings of subsidiaries $ 43 $ 41 $ 57
------ ------ ------
$ 43 $ 41 $ 57
====== ====== ======
</TABLE>
The accompanying Notes A, B, and C and the Notes to Consolidated Financial
Statements are an integral part of these financial statements.
<PAGE>
SCHEDULE 1
XTRA CORPORATION
(PARENT COMPANY ONLY)
STATEMENT OF CASH FLOWS
FOR THE THREE YEARS ENDED
SEPTEMBER 30, 1997
(Millions of dollars)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Cash flows from operations:
Income from operations $ 43 $ 41 $ 57
Deduct non-cash income and expense items:
Equity in earnings of subsidiaries (43) (41) (57)
Add other cash items:
Dividends received from subsidiary 25 57 31
Net change in receivables, other assets,
payables and accrued expenses (1) (1) (2)
------ ------ ------
Total cash provided from operations 24 56 29
Cash flows from financing activities:
Proceeds from exercise of stock options 1 1 2
Repurchase of common stock, net (13) (46) (20)
Dividends paid (12) (11) (11)
------ ------ ------
Total cash provided by financing activities (24) (56) (29)
Net increase (decrease) in cash 0 0 0
Cash at beginning of period 0 0 0
------ ------ ------
Cash at end of period $ 0 $ 0 $ 0
====== ====== ======
</TABLE>
The accompanying Notes A, B, and C and the Notes to Consolidated Financial
Statements are an integral part of these financial statements.
<PAGE>
XTRA CORPORATION
NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS
(A) Summary of Significant Accounting Policies
------------------------------------------
Accounting for Investment in Subsidiary
XTRA Corporation, the Parent Company, recorded its investment in its
subsidiary, XTRA, Inc., at cost plus its equity in the undistributed
earnings of this subsidiary. All administrative and interest expenses
incurred by the Parent Company are allocated to its direct and indirect
wholly-owned subsidiaries.
(B) Capital Stock
-------------
Dividends
XTRA Corporation declared cash dividends of $.78, $.70 and $.62 per share
in the years ended September 30, 1997, 1996, and 1995, respectively. XTRA
Corporation paid out cash dividends to stockholders totaling $12 million,
$11 million, and $11 million during fiscal 1997, 1996, and 1995,
respectively. The principal source of dividends for the Parent Company are
funds advanced from its direct and indirect wholly-owned subsidiaries,
including XTRA, Inc.
Repurchase of Common Stock
The Company's Board of Directors has authorized the repurchase of up to
$200 million of its common stock. The timing of the repurchases, which
could occur over an extended period of time, will depend on price, market
conditions and other factors. As of November 12, 1997, the Company had
repurchased approximately $79 million of common stock.
(C) Debt and Transfers to Subsidiaries
----------------------------------
The Parent Company has guaranteed certain debt of its indirect wholly-owned
subsidiary, including the Revolving Credit Agreement, Series Notes and Term
Loans. (See Note 4 of the Parent Company's consolidated 1997 Annual
Report.)
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of XTRA Corporation:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in XTRA Corporation's Annual Report to
stockholders incorporated by reference in the Company's Annual Report on Form
10-K for the year ended September 30, 1997, and have issued our report thereon
dated November 12, 1997. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed in the index
to financial statements and incorporated by reference in the Company's Annual
Report on Form 10-K for the year ended September 30, 1997, is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 12, 1997
<PAGE>
Signatures
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
XTRA Corporation
(Registrant)
By /s/ Lewis Rubin
-------------------------------------
President and Chief Executive Officer
November 13, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ Robert B. Goergen Chairman of the November 13, 1997
Board of Directors
/s/ Robert M. Gintel Vice Chairman of the November 13, 1997
Board of Directors
/s/ Lewis Rubin President, Chief Executive November 13, 1997
Officer and Director
/s/ Michael J. Soja Vice President November 13, 1997
and Chief Financial Officer
/s/ Robert B. Blakeley Vice President and Controller November 13, 1997
/s/ Michael D. Bills Director November 13, 1997
/s/ H. William Brown Director November 13, 1997
/s/ Herbert C. Knortz Director November 13, 1997
/s/ Francis J. Palamara Director November 13, 1997
/s/ Martin L. Solomon Director November 13, 1997
</TABLE>
<PAGE>
EXHIBIT INDEX
XTRA Corporation Form 10-K
(for fiscal year ended 9-30-97)
Exhibit Item
3.1 Restated Certificate of Incorporation of the Registrant (filed with the
Securities and Exchange Commission as Exhibit 3.1 to Registrant's Annual
Report on Form 10-K for the year ended September 30, 1989, and
incorporated herein by reference).
3.1.1 Certificate of Elimination of Designation, Preference and Rights of
Series A Participating Preferred Stock (filed with the Securities and
Exchange Commission as Exhibit 3.1 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1991, and incorporated herein by
reference).
3.1.2 Certificate of Elimination of Designation, Preference and Rights of
$1.9375 Series B Cumulative Convertible Preferred Stock (filed with the
Securities and Exchange Commission on March 5, 1993 as Exhibit 4.5 to
Registrant's Registration Statement on Form S-3 (file No. 33-59132), and
incorporated herein by reference).
3.1.3 Certificate of Amendment of Restated Certificate of Incorporation (filed
with the Securities and Exchange Commission on March 5, 1993 as Exhibit
4.4 to Registrant's Registration Statement on Form S-3 (file No. 33-
59132), and incorporated herein by reference).
3.1.4 Certificate of Elimination of Designation, Preference and Rights of the
Series C Cumulative Redeemable Exchangeable Preferred Stock (filed with
the Securities and Exchange Commission on July 26, 1994 as Exhibit 4.5 to
Registrant's Registration Statement on Form S-3 (file No. 33-54747), and
incorporated herein by reference).
3.2 Amended and Restated By Laws of the Registrant, as amended through
January 24, 1996 (filed with the Securities and Exchange Commission as
Exhibit 3(b) to Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1995, and incorporated herein by reference).
4.1 Indenture, dated as of February 1, 1989, between XTRA, Inc., the
Registrant and Chemical Bank, and First Supplemental Indenture, dated as
of February 1, 1989, between XTRA, Inc., XTRA Corporation and Chemical
Bank (filed with the Securities and Exchange Commission as Exhibits 4.1
and 4.2, respectively, to Registrant's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1988, and incorporated herein by
reference).
4.1.1 Second Supplemental Indenture, dated as of December 10, 1991, to the
Indenture identified in Exhibit 4.1 above, between XTRA, Inc., the
Registrant and Chemical Bank (filed with the Securities and Exchange
Commission as Exhibit 4.4.1 to Registrant's Annual Report on Form 10-K
for the year ended September 30, 1991, and incorporated herein by
reference).
<PAGE>
4.1.2 Third Supplemental Indenture, dated as of November 1, 1992, to the
Indenture identified in Exhibit 4.1 above, between XTRA, Inc., the
Registrant and Chemical Bank (filed with the Securities and Exchange
Commission as Exhibit 4.2 to Registrant's Quarterly Report on Form 10-Q
for the Quarter ended December 31, 1992, and incorporated herein by
reference).
4.1.3 Fourth Supplemental Indenture, dated as of September 30, 1994, to the
Indenture identified in Exhibit 4.1 above, between XTRA, Inc., the
Registrant and Chemical Bank (filed with the Securities and Exchange
Commission as Exhibit 4.1.3 to Registrant's Annual Report on Form 10-K
for the year ended September 30, 1994, and incorporated herein by
reference).
4.2 Indenture, dated as of August 15, 1994, between XTRA, Inc., the
Registrant and the First National Bank of Boston (filed with the
Securities and Exchange Commission as Exhibits 4.1 to Registrant's
Current Report on Form 8-K dated August 15, 1994, and incorporated herein
by reference).
4.2.1 First Supplemental Indenture, dated as of September 30, 1994, to the
Indenture identified in Exhibit 4.2 above, between XTRA, Inc., the
Registrant and the First National Bank of Boston (filed with the
Securities and Exchange Commission as Exhibit 4.2.1 to Registrant's
Annual Report on Form 10-K for the year ended September 30, 1994, and
incorporated herein by reference).
4.2.2 Second Supplemental Indenture, dated as of May 16, 1997, to the Indenture
identified in Exhibit 4.2 above, between XTRA, Inc., the Registrant and
State Street Bank and Trust Company, filed herewith.
4.2.3 Form of fixed-rate Series C Medium-Term Note (filed with the Securities
and Exchange Commission as Exhibit 4.9 to Registrant's Post-Effective
Amendment No. 1 to Registration Statement on Form S-3 (file No. 33-
65293), and incorporated herein by reference).
4.2.4 Form of floating-rate Series C Medium-Term Note (filed with the
Securities and Exchange Commission as Exhibit 4.10 to Registrant's Post-
Effective Amendment No. 1 to Registration Statement on Form S-3 (file No.
33-65293), and incorporated herein by reference).
Note: Registrant agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of any other instrument with respect to
long-term debt of the registrant and its subsidiaries. Such other
instruments are not filed herewith because no such instrument relates to
outstanding debt in amount greater than 10% of the total assets of the
Registrant and its subsidiaries on a consolidated basis.
4.3 Credit Agreement, dated as of June 30, 1995, among XTRA, Inc., Bank of
America Illinois and Each of the Other Financial Institutions From Time
To Time Parties Thereto, with Bank of America National Trust and Savings
Association as Administrative Agent and The First National Bank of Boston
as Documentation Agent (filed with the Securities and Exchange Commission
as Exhibit 2.2 to Registrant's Current Report on Form 8-K dated July 14,
1995, and incorporated herein by reference).
<PAGE>
4.3.1 Guaranty, dated June 30, 1995 by the Registrant (filed with the
Securities and Exchange Commission as Exhibit 2.3 to Registrant's Current
Report on Form 8-K dated July 14, 1995, and incorporated herein by
reference).
4.3.2 First Amendment, dated as of June 28, 1996, to the Credit Agreement
identified in Exhibit 4.3 above, among Bank of America Illinois and Each
of the Other Financial Institutions From Time To Time Parties Thereto,
with Bank of America National Trust and Savings Association as
Administrative Agent and The First National Bank of Boston as
Documentation Agent (filed with the Securities and Exchange Commission as
Exhibit 4.3.2 to Registrant's Annual Report on Form 10-K for the year
ended September 30, 1996, and incorporated herein by reference).
4.3.3 Second Amendment, dated as of June 19, 1997, to the Credit Agreement
identified in Exhibit 4.3 above, among Bank of America Illinois and Each
of the Other Financial Institutions From Time to Time Parties Thereto,
with Bank of America National Trust and Savings Association as
Administrative Agent and BankBoston, N.A. as Documentation Agent (filed
with the Securities and Exchange Commission as Exhibit 4 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, and
incorporated herein by reference).
10.1 Agreement and Plan of Reorganization, dated as of July 26, 1992, among
Registrant, ST Trailer Corp., Distribution International Corporation
("DI"), Strick Corporation and certain individuals owning approximately
70% of the capital of stock of DI (filed with the Securities and Exchange
Commission as Exhibit 2.1 to Registrant's Current Report on Form 8-K
dated August 4, 1992, and incorporated herein by reference).
10.2 U.S. Fleet Finance Services Agreement dated as of October 1, 1994 between
XTRA, Inc., and XTRA Intermodal, Inc. (filed with the Securities and
Exchange Commission as Exhibit 10.2 to Registrant's Annual Report on Form
10-K for the year ended September 30, 1994, and incorporated herein by
reference).
10.3 U.S. Fleet Finance Services Agreement dated as of October 1, 1994 between
XTRA, Inc., and XTRA Lease Inc. (filed with the Securities and Exchange
Commission as Exhibit 10.3 to Registrant's Annual Report on Form 10-K for
the year ended September 30, 1994, and incorporated herein by reference).
10.4 Fleet Finance Services Agreement dated as of July 1, 1995 between XTRA,
Inc., and XTRA International Ltd. (filed with the Securities and Exchange
Commission as Exhibit 10.4 to Registrant's Annual Report on Form 10-K for
the year ended September 30, 1994, and incorporated herein by reference).
<PAGE>
EXECUTIVE COMPENSATION PLANS
10.5 1991 Stock Option Plan for Non-Employee Directors, as amended through
November 14, 1996 (filed with the Securities and Exchange Commission as
Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1996, and incorporated herein by reference).
10.6 1987 Stock Incentive Plan, as amended through November 16, 1995 (filed
with the Securities and Exchange Commission as Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended December
31, 1995, and incorporated herein by reference).
10.7 Deferred Director Fee Option Plan (filed with the Securities and Exchange
Commission as Exhibit 10.5 to Registrant's Annual Report on Form 10-K for
the year ended September 30, 1993, and incorporated herein by reference).
10.8 Deferred Compensation Plan for Non-Employee Directors, effective January
1, 1994 (filed with the Securities and Exchange Commission as Exhibit
10.6 to Registrant's Annual Report on Form 10-K for the year ended
September 30, 1993, and incorporated herein by reference).
10.9 Deferred Compensation Plan for Senior Executives, effective January 1,
1994 (filed with the Securities and Exchange Commission as Exhibit 10.7
to Registrant's Annual Report on Form 10-K for the year ended September
30, 1993, and incorporated herein by reference).
10.10 Form of Indemnification Agreement entered into between the Registrant and
certain former Directors and certain former and current officers of the
Registrant and its subsidiaries (filed with the Securities and Exchange
Commission on June 11, 1987 as Exhibit 10 to Registrant's Registration
Statement on Form S-3 (file No. 33-14996), and incorporated herein by
reference).
10.11 Agreement, dated as of June 30, 1995, between the Registrant and
Frederick M.Gutterson (filed with the Securities and Exchange Commission
as Exhibit 10.12 to Registrant's Annual Report on Form 10-K for the year
ended September 30, 1996, and incorporated herein by reference).
10.12 Individual Pension Agreement, dated as of July 1, 1994, between the
Registrant and Lewis Rubin (filed with the Securities and Exchange
Commission as Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, and incorporated herein by
reference).
10.13 Economic Profit Incentive Plan, filed herewith.
10.14 Severance Agreement, dated as of December 8, 1997, between the Registrant
and Lewis Rubin, filed herewith.
10.15 Severance Agreement, dated as of December 8, 1997, between the Registrant
and William H. Franz, filed herewith.
10.16 Severance Agreement, dated as of December 8, 1997, between the Registrant
and Michael J. Soja, filed herewith.
<PAGE>
10.17 Severance Agreement, dated as of December 8, 1997, between the Registrant
and Michael K. Fox, filed herewith.
10.18 Agreement, dated as of December 1994, between Matson Leasing Company,
Inc. and Frederick M. Gutterson, assumed by XTRA, Inc. as of June 30,
1995, filed herewith.
10.19 Form of Severance Agreement entered into between the Registrant and
certain officers of the Registrant, filed herewith.
11.1 Statement re: computation of per share earnings.
11.2 Statement re: Calculation of Weighted Average Shares Outstanding.
12.1 Statement re: computation of ratios (XTRA Corporation).
12.2 Statement re: computation of ratios (XTRA, Inc.).
13.1 Five Year Selected Financial Data.
13.2 Management's Discussion and Analysis of Financial Condition and Results
of Operations for the Three Years Ended September 30, 1997 (not covered
by the Report of Independent Public Accountants).
13.3 XTRA Corporation and Subsidiaries Consolidated Financial Statements.
21 Subsidiaries of Registrant.
23 Consent of Independent Public Accountants.
27 Financial Data Schedule.
<PAGE>
Exhibit 4.2.2
Conformed Copy
================================================================================
XTRA, INC.,
Issuer
XTRA CORPORATION,
Guarantor
TO
STATE STREET BANK AND TRUST COMPANY,
Trustee
------------------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of May 16, 1997
-------------------------
Supplemental to the Indenture
Dated as of August 15, 1994
================================================================================
<PAGE>
SEE USE OF DEFINED TERMS BELOW
SECOND SUPPLEMENTAL INDENTURE, dated as of May 16, 1997, among XTRA,
INC., a corporation duly organized and validly existing under the laws of the
State of Maine (herein called the "Company"), having its principal executive
office at c/o X-L-Co., Inc., 60 State Street, Boston, Massachusetts, XTRA
CORPORATION, a corporation duly organized and validly existing under the laws of
the state of Delaware (herein called "XTRA" or the "Guarantor"), having its
principal executive offices at c/o X-L-Co., Inc., 60 State Street, Boston,
Massachusetts, and STATE STREET BANK AND TRUST COMPANY, a trust company
organized and existing under the laws of the Commonwealth of Massachusetts
(herein called the "Trustee"), having its corporate trust office at Two
International Place, Boston, Massachusetts.
RECITALS
WHEREAS, the Company and the Guarantor have entered into an Indenture dated
as of August 15, 1994 (the "Original Indenture") with the Trustee (as successor
in interest to the First National Bank of Boston) to provide for the issuance
from time to time of the Company's unsecured debentures, notes or other
evidences of indebtedness (herein called the "Securities"), to be issued in one
or more series and to provide for the guarantee of the Securities by the
Guarantor (the "Guarantee");
WHEREAS, in September 1995 the Guarantor transferred its properties and
assets substantially as an entirety to XTRA Missouri, Inc. ("XTRA Missouri"), a
wholly-owned subsidiary of the Guarantor;
WHEREAS, the Company, as a result of such transfer, became a wholly-owned
subsidiary of XTRA Missouri, and, accordingly, remained an indirect wholly-owned
subsidiary of the Guarantor;
WHEREAS, the Company, the Guarantor, XTRA Missouri, and the Trustee (as
successor in interest to the First National Bank of Boston) entered into the
First Supplemental Indenture dated as of September 30, 1995 (the "First
Supplemental Indenture" and together with the original Indenture, the
"Indenture"), to provide for the Guarantee of the Securities by XTRA Missouri;
WHEREAS, XTRA Missouri has been merged with and into the Guarantor
effective September 30, 1996 (the "Merger"); and
WHEREAS, there has been filed with the Trustee: (a) an Opinion of Counsel
in accordance with Sections 8.1 and 9.3 of the Indenture; and (b) an Officer's
Certificate in accordance with the provisions of Sections 8.1 and 1.2 of the
Indenture and the parties hereto wish to enter into this Second Supplemental
Indenture to take into consideration the Merger.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree, covenant, represent and warrant as
follows:
Section 1. Definitions in Indenture. Capitalized terms used in this
------------------------
Second Supplemental Indenture and in any certificate or other document executed
by any party in connection herewith shall have the meaning set forth in the
Original Indenture, unless a different meaning is set forth herein, in which
case such terms shall have the meaning set forth herein.
Section 2. Continuance of Obligations and Covenants by the Guarantor. The
---------------------------------------------------------
Guarantor, by its execution hereof, hereby expressly affirms that it shall
remain a Guarantor of the Securities and that it shall punctually perform and
observe every obligation and covenant of the Guarantees and Indenture on the
part of the Guarantor to be performed or observed.
-2-
<PAGE>
Section 3. Modification of Forms of Series C Medium-Term Notes. The forms
---------------------------------------------------
of the Series C Medium-Term Notes (the "Series C Notes") attached to the
resolutions of the Note Committee of the Company effective August 11, 1994 and
the resolutions of the Note Guaranty Committee of XTRA effective August 11, 1994
as exhibits, as amended by the First Supplemental Indenture, are hereby amended
to read in their respective entirety as set forth in the forms of fixed-rate and
floating rate Series C Notes attached as Exhibits 1-A and 1-B to this Second
Supplemental Indenture. The terms of which Exhibits 1-A and 1-B are hereby
incorporated by reference and are made a part of this Second Supplemental
Indenture.
Section 4. Delivery of Notes. Upon execution and delivery of this Second
-----------------
Supplemental Indenture, the Company shall execute and deliver Series C Notes to
the Trustee and the Trustee shall authenticate the Series C Notes and deliver
them to the Holders of the Outstanding Series C Notes upon the direction of the
Company and upon receipt of the Outstanding Series C Notes, which shall
thereupon be canceled and destroyed by the Trustee. Interest on each Outstanding
Series C Note shall accrue from the last Interest Payment Date upon which
interest shall have been paid or duly provided for on the Outstanding Series C
Notes. Prior to delivery by the Trustee of said Notes there shall be filed with
the Trustee: (a) an Opinion of Counsel in accordance with Sections 8.1 and 9.3
of the Original Indenture and (b) an Officers' Certificate in accordance with
the provisions of Sections 1.2 and 8.1 of the Original Indenture.
Section 5. Recitals. The recitals contained in this Second Supplemental
--------
Indenture shall be taken as statements of the Company and the Guarantor, and the
Trustee assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Second Supplemental
Indenture.
Section 6. Incorporation of Indenture. From and after the date hereof the
--------------------------
Original Indenture, as supplemented and amended by the First Supplemental
Indenture and by this Second Supplemental Indenture, shall be read, taken and
construed as one and the same instrument with respect to the Securities.
Section 7. Counterparts. This Second Supplemental Indenture may be
------------
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original but all such counterparts together constitute but one
in the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental
Indenture to be duly executed, and the respective seals to be hereunto affixed
and attested all as of the date(s) set forth below.
XTRA, INC.
Attest: /s/ James R. Lajoie By: /s/ Michael J. Soja
------------------- ----------------------
Title: Assistant Clerk Vice President and Chief
Date: May 12, 1997 Financial Officer
XTRA CORPORATION
Attest: /s/ James R. Lajoie By: /s/ Michael J. Soja
------------------- -------------------
Title: Assistant Clerk Vice President and Chief Financial
Date: May 12, 1997 Officer
STATE STREET BANK AND TRUST COMPANY,
as Trustee
Attest: /s/ Eric Donaghey By: /s/ Henry W. Seemore
------------------------ --------------------
Title: Assistant Vice President Title: Assistant Vice President
Date: May 13, 1997
-4-
<PAGE>
County of Suffolk )
ss:
Commonwealth of Massachusetts )
On the 12th day of May, 1997, before me personally came Michael J. Soja,
to me known, who, being by me duly sworn, did depose and say that he is the Vice
President, Finance and Chief Financial Officer of XTRA CORPORATION, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
/s/ Thomas A. Giacchetto
------------------------
Notary Public
My commission expires: November 10, 2000
-5-
<PAGE>
County of Suffolk )
ss:
Commonwealth of Massachusetts )
On the 12th day of May, 1997, before me personally came Michael J. Soja, to
me known, who, being by me duly sworn, did depose and say that he is the Vice
President and Chief Financial Officer of XTRA, INC., one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
/s/ Thomas A. Giacchetto
------------------------
Notary Public
My commission expires: November 10, 2000
County of Suffolk )
ss:
Commonwealth of Massachusetts )
On the 13th day of May, 1997, before me personally came Henry W. Seemore,
to me known, who, being by me duly sworn, did depose and say that he is,
Assistant Vice President of STATE STREET BANK AND TRUST COMPANY, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
/s/ Stacye M. Junior
--------------------
Notary Public
My commission expires: September 13, 2002
-6-
<PAGE>
EXHIBIT 10.13
XTRA CORPORATION
ECONOMIC PROFIT INCENTIVE PLAN
1. In general; effective date. The objectives of the XTRA Corporation
--------------------------
Economic Profit Incentive Plan set forth herein, as the same may from time to
time be amended (the "Plan"), are to enhance commitment to the long-term success
of XTRA Corporation and its subsidiaries by linking personal financial rewards
to the growth of economic value of the Company, to provide officers of the
Company with an incentive to promote long-term growth in the economic value of
the Company and its subsidiaries, and to increase the Company's ability to
attract and retain key executives. The effective date shall be for the Plan
Year beginning October 1, 1996.
2. Definitions. Unless the context otherwise clearly indicates, the
-----------
following words shall have the following meanings wherever used in the Plan or
in any instrument issued under the Plan:
"Administrator" means the Compensation Committee of the Board of Directors
of the Company.
"Annual Economic Profit Improvement Targets" means, for any Plan Year (the
"current year"), the amount of improvement in Economic Profit from the
immediately preceding Plan year that would be needed to satisfy the requirements
fixed by the Administrator for earning one hundred percent (100%) of the current
year Target Bonus Opportunity.
"Base Salary" means, for any Plan Year, the Participant's base salary from
the Company for such year, exclusive of bonuses, commissions, incentive pay
(including amounts payable under the Plan), allowances and any non-cash
compensation, but determined before reduction for contributions made (on a pre-
tax or after-tax basis) for benefit premiums or 401(k) contributions.
"Board" means the Board of Directors of the Company.
"Bonus Reserve Account" means the memorandum account described at Section
5(e) below.
"Capital" means an amount determined by subtracting total short-term non-
interest bearing liabilities from total assets. This amount shall be adjusted
for the Sinking Fund Depreciation and other adjustments deemed appropriate by
the Administrator.
<PAGE>
"Company" means XTRA Corporation and any corporation or other entity that
assumes the obligations of XTRA Corporation (by operation of law or otherwise)
under the Plan.
"Cost of Capital" (for the Company and each of its operating divisions)
means the weighted average cost of XTRA's debt and equity capital, as determined
by the Administrator and expressed as a percentage, which is noted in Appendix
A.
"Differential Bonus" means the Excess EP Improvement Factor multiplied by
the base salary.
"Economic Profit" or "EP" means, for any Plan Year, the amount (in dollars)
obtained by reducing NOPAT by the product of Capital and the Cost of Capital for
such year, as determined by the Administrator.
"EP Differential" means the difference (positive or negative) between the
actual EP for a Plan Year and the Target EP for that year.
"EP Interval" means the amount of negative or positive EP Differential that
will result in an Incentive Award equal to 0 or 200 percent of Target Bonus
Opportunity, respectively.
"Excess EP Factor" means the product of multiplying the Target Bonus
Opportunity by a fraction, the numerator of which is the EP Differential and the
denominator is the EP Interval.
"Implied Cash Operating Tax Rate" means the cash tax rate that would be
payable had the Company not had a deduction for Interest Expense. Taxes saved
as a result of interest deductibility are excluded here because credit for such
deduction is explicitly given in determining the debit component cost of the
Company's Cost of Capital. See Appendix C.
"Incentive Award" means the award amount determined under Section 5 (c)
subject to adjustment as provided elsewhere in the Plan.
"NOPAT" means an amount (in dollars) equal to the financially reported
operating income (before interest and depreciation) of the Company/Division
during a Plan Year (i) adjusted for a) any item included therein (or omitted
therefrom) which, in the sole determination of the Administrator, represents
items which constitute elements that improve or lower financially reported
earnings of the Company/Division for the Plan year, but do not reflect current
operational results, and b) Sinking Fund Depreciation (ii) reduced by (or
increased for) a provision (or benefit) for the amount of income taxes
attributable to such operating income (as adjusted). Such provision or benefit
for taxes shall be determined by using XTRA Corporation's Implied Cash Operating
Tax Rate.
<PAGE>
"Participant" means an employee of the Company who satisfies the
requirements for eligibility set forth in Section 4.
"Plan" means the XTRA Corporation Economic Profit Incentive Plan, as
amended and in effect from time to time.
"Plan Year" means a fiscal year of the Company.
"Sinking Fund Depreciation" means an alternative form of calculating
depreciation expense which uses cost of the Company's capital to create a
depreciation schedule which depreciates equipment original cost at a rate
equivalent to the yearly principal reduction on a level of an equal life to the
property being depreciated. This method, which has the effect of allocating a
greater amount of depreciation expense to the second half of an asset's useful
life than is the case with financial statement depreciation. This offsets
interest expense which is greater in the first half of an asset's life,
essentially creating a level amount of depreciation and interest expense each
year.
"Target Bonus" means Target Bonus Opportunity multiplied by Base Salary.
"Target Bonus Opportunity" or "Target" means a percentage of the Base
Salary assigned to each Participant that determines the Incentive Award if the
Target Economic Profit is achieved in a Plan Year.
"Target EP" means for any Plan Year, the amount of Economic Profit
designated by the Administrator as the target for measuring performance under
the Plan. Achievement of Target EP will result in an Incentive Award of 100% of
Target Bonus Opportunity.
3. Plan Administration. The Plan shall be administered by the
-------------------
Administrator. The Administrator may establish administrative rules, and shall
determine employee eligibility, and establish the awards to be made under the
Plan and their terms and conditions. The Administrator shall have full
authority to construe and interpret the Plan and any rules and regulations
relating to the Plan and its determinations shall be final and binding upon all
Plan participants.
Each member of the Administrator shall be entitled to rely in good faith
and act upon any report or other information furnished to him or her by any
officer or employee of the Company, by the Company's independent certified
public accountants, or by any consultant, legal counsel, or other professional
retained by the Company to assist in the administration of the Plan. To the
maximum extent permitted by law, no member of the Administrator, nor any person
to whom ministerial duties have been delegated, shall be
<PAGE>
liable to any person for any action taken or omitted in connection with the
interpretation and administration of the Plan. To the maximum extent permitted
by law, the Company shall indemnify the members of the Administrator against any
and all claims, losses, damages, expenses, including any counsel fees and costs,
incurred by them, and any liability, including any amounts paid in settlement
with their approval, arising from their action or failure to act.
4. Eligibility. For each Plan Year, the Administrator shall determine
-----------
those key employees who shall be eligible for participation in the Plan. Such
determination may be made at any time during the Plan Year. In order to
participate and receive an Incentive Award for a Plan Year, an individual must
be an employee of the Company on the first day of the Plan Year of reference;
provided, that the Administrator may allow an otherwise eligible employee to
participate in the Plan and receive a prorated or full award (as the
Administrator may determine) for such Plan Year. In no event shall
participation in the Plan for a Plan Year entitle an individual to participation
with respect to future periods.
5. Incentive Awards.
----------------
(a) Summary. For each Plan Year, the Administrator shall establish
-------
the following: (i) Target EP and EP Interval for the Company and each
operating division of the Company; (ii) Target Bonus Opportunity for each
participant.
(b) Target EP; EP Interval. The Administrator shall establish the
----------------------
Target EP and the EP Interval for each Plan Year prior to the beginning of
the year, but may adjust the Target EP or the EP Interval during a Plan
Year to reflect the impact of extraordinary items (e.g., capital infusions,
acquisitions or divestitures) or significant changes in accounting method
or other significant changes or circumstances that it may deem appropriate
in order to reflect fairly the financial performance that Participants are
reasonably able to affect, consistent with the intent of the Plan to
improve the long-term financial success of the Company.
(c) Calculation of Awards; Basic Rules. The actual Incentive Award
----------------------------------
received by a Participant in a Plan Year depends on whether actual EP is
above, at or below Target EP for the Plan year. If actual EP is at Target
EP, then a Participant will receive an Incentive Award equal to his or her
Target Bonus. If actual EP for a Plan Year results in an EP differential,
then participants will share in the positive and the negative EP
Differential. If Target EP results in a positive EP Differential, a
Participant will earn his or her Target Bonus plus his or her Differential
Bonus. If actual EP is below Target EP, resulting in a negative EP
Differential, the Participant will earn his or her Target Bonus less the
Differential Bonus, and beginning in the Plan Year ended September 30,
1998, if the resulting number is negative, such negative will be applied as
an adjustment to
<PAGE>
the Participant's Bonus Reserve Account.
(d) Incentive Award Determination Weighting. In the case of
---------------------------------------
Participants other than the Chief Executive Officer and corporate staff,
the determination of Incentive Awards as set forth above shall be adjusted
(as designated by the Administrator) to reflect divisional performance
within the Company, in each case by adjusting the incentive components
described in (a) above on a divisional basis, applying such factors as the
Administrator may determine, and then weighting the Company-wide and
divisional results in accordance with the following:
<TABLE>
<CAPTION>
- ------------------------------------------------
Company Divisional
Performance Performance
- ------------------------------------------------
<S> <C> <C>
Division Presidents 25% 75%
- ------------------------------------------------
Division Regional
Vice Presidents 100%
- ------------------------------------------------
Division Staff 100%
- ------------------------------------------------
</TABLE>
(e) Bonus Reserve Account. A Bonus Reserve Account, with a beginning
---------------------
balance of zero, will be set up for each Participant upon his or her first
becoming eligible to participate in the Plan. A Participant's Bonus
Reserve Account balance shall be increased each year for bonuses (Positive
Incentive Awards) earned that year and decreased each year by bonuses paid
that year, and beginning with the Plan Year September 30, 1998, shall also
be reduced by the Participant's negative Incentive Awards accrued that
year. Only one Bonus Reserve Account will be maintained for each
Participant, not distinguishing between Company or Divisional performance
components.
Subject to Section 6, if a Participant becomes ineligible for
participation in the Plan, his or her Bonus Reserve Account will be
eliminated.
(f) Payment of Incentive Awards. Subject to Section 6, a Participant
---------------------------
shall have no rights to an Incentive Award for a Plan Year (or to any
amounts credited to the Participant's Bonus Reserve Account) unless the
Participant is employed by the Company on the date of payment distribution.
All disputes as to payment and calculation of Incentive Awards or payouts
under this Plan shall be referred to the Administrator for final and
binding determination.
<PAGE>
(g) Current Plan Year Incentive Award Payout. For any Plan Year, the
----------------------------------------
total amount available to be paid out to a Participant shall be (i) and
(ii):
(i) The Participant's Incentive Award earned for the Plan Year
(positive or negative, as the case may be) shall be added to the
balance of the Participant's Bonus Reserve Account (positive or
negative, as the case may be), if any. If the result is a positive
number it shall be paid out to the extent it does not exceed 150
percent of the Participant's Target Bonus. No amount shall be payable
under this clause (i) if the resulting amount is a negative number;
(ii) in addition, to amounts paid pursuant to (i) above, the
participant shall be paid 33% of his or her positive Bonus Reserve
Account Balance, if any, which remains after the payment in (i) above.
(h) Illustration of Computation. Appendix A hereto illustrates the
---------------------------
calculation of Incentive Awards under the Plan. In the event of any
discrepancy between Appendix A and the terms of the Plan, however, the
terms of the Plan shall control.
6. Termination of Employment. If a Participant terminates employment for
-------------------------
any reason other than death, total and permanent disability, or normal
retirement, as defined in the XTRA Retirement Plan, prior to the end of a Plan
Year, he or she shall be ineligible to receive any payment under this Plan and
shall forfeit all of his or her Bonus Reserve Account.
If a Participant terminates employment due to death, permanent and total
disability, or normal retirement, as defined in the XTRA Retirement Plan, prior
to the end of a Plan Year, such Participant shall be eligible for a pro rata
Incentive Award for that Plan Year. Payment of any such pro rata award shall be
made at the same time Incentive Awards are paid out to other Participants. If
the Participant has a positive Bonus Reserve Account balance, such balance shall
be paid out at the same time as such pro rata award.
7. Beneficiaries. The beneficiary or beneficiaries of a Participant shall
-------------
be the person or persons (including the estate) designated by the Participant in
writing (in a form acceptable to the Administrator) filed with the
Administrator. In the event of a Participant's death, any payment owed
hereunder with respect to the Participant shall be made to the beneficiary or
beneficiaries so designated, or if there is no designated beneficiary who
survives the Participants, to the Participant's estate. The Participant may
from time to time change the name of the designated beneficiary by notifying the
Administrator of such change in writing (in a form acceptable to the
Administrator).
<PAGE>
8. No Implied Contract of Employment, etc. This Plan shall not be
--------------------------------------
construed to constitute an employment contract between the Company and any
employee. In no event shall the loss of profit or potential profit under any
Incentive Award or any Bonus Reserve Account constitute an element of damages in
any action relating to an individual's termination of employment or otherwise.
Benefits under the Plan shall not be included in the measure of other benefits
offered by the Company (including any tax-qualified plans or welfare benefit
plans and arrangements) except as expressly provided in those plans and
arrangements.
9. Plan Termination and Amendment. The Administrator may terminate or
------------------------------
amend the Plan at any time. In the event of Plan termination, Participants
shall receive any Incentive Awards, including any positive balance then
remaining in the participant's Bonus Reserve Account, to which they are entitled
for Plan Years completed prior to the date of Plan termination as well as a pro
rated bonus for current plan year, depending upon the performance for that Plan
Year. The Administrator may elect to shorten any pending Plan Year and adjust
the EP Target to coincide with the date of Plan termination and to prorate any
Incentive Awards for such shortened Plan Year. Any negative Bonus Account
balance must be offset before paying any amounts due under this section.?
10. Participants' Rights are Unsecured. All payments under the Plan shall
----------------------------------
be from the general funds of the Company. No special or separate fund shall be
established nor other segregation of assets made to assure payment of any
benefit. No Participant or beneficiary or estate shall have any interest in
identifiable property or assets of the Company. The right of a Participant to
receive any Incentive Awards or amounts deferred in his or her Bonus Reserve
Account under this Plan shall be those of a general unsecured creditor against
the general assets of the Company.
11. Miscellaneous.
-------------
(a) The Company shall be entitled to withhold taxes and other required
withholdings from any payments under Plan.
(b) Except as provided at Section 7 above, awards under this Plan may
not be assigned, transferred or disposed of in any way by any Participant
to whom they have been granted, other than by will or the laws of descent
and distribution. Any attempted assignment of a Participant's rights under
the Plan, other than pursuant to Section 7 above, shall be null and void.
(c) The Plan shall be construed and its provisions enforced and
administered in accordance with the laws of the Commonwealth of
Massachusetts.
(d) The Administrator shall be the sole arbiter of the provisions of
this Plan and shall resolve all disputes in its complete discretion.
<PAGE>
Sample Calculation of Economic Profit Incentive Plan Award
The following examples demonstrate potential Incentive Awards assuming certain
Economic Profit targets and results. These examples are for illustrative
purposes only, and are not meant to reflect the size of actual awards which
might be earned or the future performance of the Company.
Example 1: Demonstrating calculation with positive Excess Annual EP amount and
positive Bonus Reserve Account balance.
Assumptions:
- ------------
Average Annual Salary: $100,000
Target Bonus Opportunity: 30% of Average Annual Salary
<TABLE>
<CAPTION>
Bonus Reserve Account Balance from prior years - $14,000
<S> <C>
Corporate:
Economic Profit $14,705,000
Target EP $12,017,000
EP Differential $2,688,000
EP Interval $7,906,000
</TABLE>
<TABLE>
<CAPTION>
Calculation Plan Year
- ------------------------------------------------- -------------------
<S> <C>
Individual Participant Incentive Award Accrued:
Target Bonus Opportunity 30%
Target Bonus $30,000
Excess EP Factor 10.2%
30% ($2,688,000 div. By $7,906,000)
Differential Bonus $10,200
(10.2% x $100,000)
Current Year Incentive Award Accrued $40,200
($30,000 + $10,200)
Bonus Reserve Account Balance from prior years $14,000
Available for Payout $54,200
Current Year Payout up to 150% of Target Bonus $45,000
Available above target (deferred to bonus reserve account) $9,200
Current Year Bonus Reserve Account Payout % 33%
Current year Bonus Reserve Account Payout $3,100
Total Current Year Payout ($45,000 + $3,100) $48,100
Incentive Awards Deferred to Bonus Reserve Account $6,100
($9,200 - $3,100)
</TABLE>
<PAGE>
Example 2: Demonstrating calculation with negative Excess Annual EP amount and
no current Bonus Reserve Account balance
Assumptions:
- -----------
Average Annual Salary: $100,000
Target Bonus Opportunity: 30% of Average Annual Salary
<TABLE>
<CAPTION>
Bonus Reserve Account Balance from prior years - 0
<S> <C>
Corporate:
Economic Profit $ (2,667,000)
Target EP $ 17,531,000
EP Differential $(20,198,000)
EP Interval $ 17,563,000
</TABLE>
<TABLE>
<CAPTION>
Calculation Plan Year
- ------------------------------------------------------------ -------------
<S> <C>
Individual Participant Incentive Award Accrued:
Target Bonus Opportunity 30%
Target Bonus $30,000
Excess EP Factor (34.5%)
30% ($20,198,000 div. By $17,563,000)
Differential Bonus $(34,500)
(34.5)% x $100,000)
Current Year Incentive Award Accrued $(4,500)
($30,000 - ($34,500))
Bonus Reserve Account Balance from prior years 0
Available for Payout 0
Current Year Payout up to 150% of Target 0
Available above target (deferred to bonus reserve account) $(4,500)
Current Year Bonus Reserve Account Payout % 33%
Current year Bonus Reserve Account Payout 0
Total Current Year Payout 0
Incentive Awards Deferred to Bonus Reserve Account $(4,500)
</TABLE>
<PAGE>
EXHIBIT 10.14
XTRA CORPORATION
Severance Agreement
-------------------
AGREEMENT, made this 8th day of December, 1997, by and between Lewis Rubin
("Executive") and XTRA Corporation (the "Company").
WITNESSETH
Executive is a key executive of the Company or one of its subsidiaries,
responsible, in part, for the policy-making functions of the Company and the
overall viability of the Company's business; and
The Company recognizes that the possibility that certain significant
transactions involving the Company may result in the departure or distraction of
management to the detriment of the Company and its shareholders, and
The Company wishes to assure Executive of fair severance should his
employment terminate in specified circumstances following the consummation of
certain significant transactions involving the Company and to assure Executive
of certain other benefits in the event of such transactions.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. If, within the 24-month period (the "Post Significant Transaction Period")
beginning on the date of a Significant Transaction (as defined in Exhibit A
attached hereto and made a part hereof), (i) Executive's employment with the
company is terminated (i) by the Company for any reason other than for
"Cause" (as defined in paragraph 2 below), or (ii) Executive terminates such
employment for Good Reason (as defined in paragraph 4 below):
a. The Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to the sum of
(i) the Executive's annual base salary ("Annual Base Salary") through
the date of such termination of employment, and any earned bonuses for
any completed fiscal period, to the extent not theretofore paid, (ii) a
prorated portion (the "Prorated Bonus Amount") of the award payable
under the Company's Economic Profit Incentive Plan, or any comparable or
successor annual plan or plans in which the Executive is then a
participant (the "Cash Plan"), notwithstanding anything to the contrary
in the Cash Plan, determined by calculating the product of (A) the bonus
payable with respect to the award for the fiscal period in which the
date of termination occurs under the Cash Plan annualizing the Company's
<PAGE>
performance under the plan up to the date of termination by dividing the
Company's performance to the date of termination by the number of full
months in the performance period through the date of termination and
multiplying the result by 12, times (B) a fraction, the numerator of
which is the number of full months in the current fiscal year through
the date of termination of employment, and the denominator of which is
12, and (iii) any compensation, including compensation for the fiscal
year in which the date of termination occurs, previously deferred by the
Executive (together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in the above subsections (i)
through (iii) shall be hereinafter referred to as the "Accrued
Obligations"); and
b. any stock, stock option or cash awards granted to the Executive by the
Company, including any awards under the Company's 1987 Stock Incentive
Plan (or any successor plan), that would have become vested and
exercisable had the Executive continued to be employed by the Company
shall immediately vest and become exercisable in full notwithstanding
any provision to the contrary of such grant and shall remain exercisable
until the later of (i) the latest date on which such grant could have
been exercised had the Executive remained employed by the Company, and
(ii) the date upon which any period during which the Executive has
agreed not to sell the type of securities that may be issuable to such
Executive upon the exercise of such grant shall expire; and
c. the Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to two times the
sum of: (A) the amount of the Executive's Annual Base Salary at the
rate in effect immediately prior to the date of termination, and (B) the
Average Annualized Bonus Amount which shall be calculated by multiplying
by 12 the quotient determined by dividing (i) the sum of the actual cash
bonus earned by the Executive during each of the two fiscal years
immediately preceding the date of termination, plus the Prorated Bonus
Amount, by (ii) 24 plus the number of full months in the period for
which the Prorated Bonus Payment is calculated; and
d. the Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to the amount of
the forfeitable portion of the Executive's accrued benefit under the
Company's qualified 401(k) or other qualified retirement plans; and
e. Executive, together with his dependents, will continue following such
termination of employment to participate fully at the Company's expense
(subject to any required employee contributions at the rate in effect
immediately prior to the date of the Significant Transaction) in all
welfare benefit plans (other than disability insurance), programs,
practices and policies maintained or sponsored by the Company
immediately prior to the Significant Transaction, or
<PAGE>
receive substantially the equivalent coverage (or the full value thereof
in cash) from the Company, until the second anniversary of such
termination or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, provided, however, that
if the Executive becomes re-employed with another employer and is
eligible to receive reasonably comparable medical or other welfare
benefits under another employer provided plan, the Company's obligation
to provide the medical and other welfare benefits described herein shall
cease; and provided further that if Executive's continued participation
is not possible under the terms of such Company plans and programs, the
Company shall instead either arrange to provide Executive with
substantially similar benefits upon comparable terms or pay to the
Executive (within five (5) business days of the date of termination) an
amount equal to the full value thereof in cash; and
f. to the extent not theretofore paid or provided for, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy, practice, contract or agreement
of the Company ("Other Benefits").
Notwithstanding anything herein to the contrary, to the extent that any
payment or benefit provided for herein is required to be paid or vested on
any earlier date under the terms of any plan, agreement or arrangements,
such plan, agreement or arrangement shall control. Further, notwithstanding
anything herein to the contrary, if a Significant Transaction occurs and if
the Executive's employment with the Company is terminated by the Company for
a reason other than Cause prior to the date upon which the Significant
Transaction occurs, and if it can be reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a
Significant Transaction or (ii) otherwise arose in connection with or in
anticipation of a Significant Transaction, then for all purposes of this
Agreement, Executive shall be entitled to the benefits provided in Sections
1(a)-(f) above.
2. Cause, Other Than For Good Reason; Disability.
---------------------------------------------
a. Cause; Other Than for Good Reason. If the Executive's employment shall
---------------------------------
be terminated for Cause (as defined in Section 3 below), or if the
Executive voluntarily terminates employment, excluding a termination for
Good Reason, during the Post Significant Transaction Period, this
Agreement shall terminate without further obligations to the Executive
other than the obligation to pay the Executive (A) his Annual Base
Salary through the date of termination, (B) the amount of any
compensation previously deferred by the Executive, and (C) Other
Benefits, in each case to the extent theretofore unpaid.
<PAGE>
b. Disability. If the Executive's employment is terminated during the Post
----------
Significant Transaction Period by reason of the Executive's Disability,
this Agreement shall terminate without further obligations to the
Executive other than for payment of Accrued Obligations and the timely
payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive in a lump sum in cash within five (5) business
days of the date of termination of employment. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and reasonably
acceptable to the Executive or the Executive's legal representative. If
the Company determines in good faith that the Disability of the
Executive has occurred during the Post Significant Transaction Period,
it may give the Executive written notice of its intention to terminate
the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt
of such notice by the Executive, provided that, within the 30 days of
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties.
In the case of (a) or (b) above, all obligations shall be paid to the
Executive in a lump sum in cash within five (5) business days of date of the
termination of employment or such earlier time as may be required under law.
3. "Cause" means only: (a) commission of a felony or gross neglect of duty by
the Executive which is intended to result in substantial personal enrichment
of the Executive at the expense of the Company, (b) conviction of, or plea
of nolo contendere to, a crime involving moral turpitude, or (c) gross
neglect by the Executive in the performance of his duties to the Company
which results in material injury to the Company, and continues for more than
30 days after written notice given to the Executive pursuant to a two-thirds
vote of all of the members of the Board at a meeting called and held for
such purpose (after reasonable notice to Executive) and at which meeting the
Executive and his counsel were given an opportunity to be heard, such vote
to set forth in reasonable detail the nature of the failure. For purposes
of this definition of Cause, no act or omission shall be considered to have
been "willful" unless it was not in good faith and the Executive had
knowledge at the time that the act or omission was not in the best interest
of the Company. Any act, or failure to act, based on authority given
pursuant to a resolution duly adopted by the Board or upon the instructions
of the Chief Executive Officer or another senior officer of the Company or
based on the advice of counsel of the Company shall be conclusively presumed
to be done, or omitted to be done, by the Executive in good faith and in the
best interest of the Company.
4. Executive shall be deemed to have voluntarily terminated his employment for
Good Reason if the Executive leaves the employ of the Company for any reason
following:
<PAGE>
a. Any action by the Company which results in a material diminution in
Executive's position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive; provided, however, a
sale or transfer of some or all of the business of the Company or any of
its subsidiaries or other reduction in its business or that of its
subsidiaries, or the fact that the Company shall become a subsidiary of
another company or the securities of the Company shall no longer be
publicly traded, shall not constitute "Good Reason" hereunder;
b. Any reduction in the Executive's rate of Annual Base Salary for any
fiscal year to less than 100% of the rate of Annual Base Salary payable
for the completed fiscal year immediately preceding the Significant
Transaction; or
c. Failure of the Company to permit the Executive to participate in all
incentive, retirement, and savings policies and programs, and all
welfare benefit plans, practices and programs (including without
limitation, life, accidental death and travel accident insurance,
medical insurance, dental insurance or disability plans) to the extent
applicable generally at the time to other peer executives of the Company
and its affiliated companies, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive; or
d. The Company requires Executive to be based at any office or location
further than 50 miles from Boston, Massachusetts; or
e. Any failure by the Company to comply with and satisfy Section 7 of this
Agreement.
5. Coordination With Parachute Tax Rules. Payments under Section 1 shall be
-------------------------------------
made without regard to whether the deductibility of such payments (or any
other payments to or for the benefit of Executive) would be limited or
precluded by Internal Revenue Code Section 280G and without regard to
whether such payments (or any other payments) would subject Executive to the
federal excise tax levied on certain "excess parachute payments" under
Internal Revenue Code Section 4999; provided, that if the total of all
--------
payments to or for the benefit of Executive, after reduction for all federal
taxes (including the tax described in Internal Revenue Code Section 4999, if
applicable) with respect to such payments ("Executive's total after-tax
payments"), would be increased by the limitation or elimination of any
payment under Section 1, amounts payable under Section 1 shall be reduced to
the extent, and only to the extent, necessary to maximize Executive's total
after-tax payments. The determination as to whether and to what extent
payments under Section 1 are required to be reduced in accordance with the
preceding sentence shall be made at the Company's expense by Arthur Andersen
LLP or by such other certified public accounting firm, law firm or benefits
consulting firm as the Compensation Committee of the Company's Board of
Directors may designate prior to a
<PAGE>
Change of Control. In the event of any underpayment or overpayment under
Section 1 as determined by Arthur Andersen LLP (or such other firm as may
have been designated in accordance with the preceding sentence), the amount
of such underpayment or overpayment shall forthwith be paid to Executive or
refunded to the Company, as the case may be, with interest at the applicable
Federal rate provided for in Section 7872(f)(2) of the Internal Revenue
Code.
6. The Company agrees (i) to promptly reimburse Executive for any and all legal
fees and related expenses (including, without limitation, stenographer fees,
printing costs, etc.) incurred by him to enforce the provisions of this
Agreement or in contesting or disputing that the termination of his
employment is for Cause or other than for Good Reason (regardless of the
outcome thereof), (ii) to pay the cost of such judicial proceeding, and
(iii) to pay interest to Executive on all amounts owed to Executive under
this Agreement during any period of time that such amounts are withheld
pending judicial proceedings (such interest will be at the base rate as
published from time to time in the eastern edition of the Wall Street
Journal); provided, however, that the Company shall not be required to
reimburse the Executive for such fees, costs and expenses, if a court of
competent jurisdiction shall issue a final order to the effect that the
Executive shall not prevail on any claim relating to this Agreement.
7. If the Company is at any time before, after or in connection with, a
Significant Transaction merged or consolidated into or with any other
corporation or other entity (whether or not the Company is the surviving
entity), or if substantially all of the assets thereof are transferred to
another corporation or other entity, the provisions of this Agreement will
be binding upon and inure to the benefit of the corporation or other entity
resulting from such merger or consolidation or the acquirer of such assets
(the "Successor Entity"), and this paragraph 7 will apply in the event of
any subsequent merger or consolidation or transfer of assets. The Company
will require any such Successor Entity to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any Successor Entity
which assumes and agrees to perform this Agreement by operation of law or
otherwise.
In the event of any merger, consolidation, or sale of assets described
above, nothing contained in this Agreement will detract from or otherwise
limit Executive's right to or privilege of participation in any stock option
or purchase plan or any bonus, profit sharing, pension, group insurance,
hospitalization, or other incentive or benefit plan or arrangement which may
be or become applicable to executives of the entity resulting from such
merger or consolidation or the entity acquiring such assets of the Company.
In the event of any merger, consolidation, or sale of assets described
above, references to the Company in this Agreement shall unless the context
suggests otherwise be deemed to include the entity resulting from such
merger or consolidation or the acquirer of such assets of the Company.
<PAGE>
8. Any termination by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with the last paragraph of Section 13 of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated
and (iii) if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice). The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
"Date of Termination" means (i) if the Executive's employment is terminated
by the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified therein, as
the case may be, and (ii) if the Executive's employment is terminated by the
Company other than for Cause, the Date of Termination shall be the date on
which the Company notifies the Executive of such termination.
9. All payments required to be made by the Company hereunder to, or on behalf
of, Executive or his dependents, beneficiaries, or estate will be subject to
the withholding of such amounts relating to tax and/or other payroll
deductions as may be required by law.
10. There shall be no requirement on the part of the Executive to seek other
employment or otherwise mitigate damages in order to be entitled to the full
amount of any payments and benefits to which Executive is entitled under
this Agreement, and the amount of such payments and benefits shall not be
reduced by any compensation or benefits received by Executive from other
employment, other than with respect to certain welfare benefits as provided
in the proviso to Section 1(e).
11. Nothing contained in this Agreement shall be construed as a contract of
employment between the Company and the Executive, or as a right of the
Executive to continue in the employ of the Company, or as a limitation of
the right of the Company to discharge the Executive with or without Cause;
provided that the Executive shall have the right to receive upon termination
of his employment the payments and benefits provided in this Agreement and
shall not be deemed to have waived any rights he may have either at law or
in equity in respect of such discharge.
12. No amendment, change, or modification of this Agreement may be made except
in writing, signed by both parties.
<PAGE>
13. This Agreement shall terminate on the third anniversary of the date hereof,
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (each such date
hereinafter referred to as a "Renewal Date"), unless previously terminated,
the term of this Agreement shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least sixty days
prior to the Renewal Date the Company shall give notice to the Executive
that the term of this Agreement shall not be so extended. This Agreement
shall not apply to a Significant Transaction which takes place after the
termination of this Agreement.
Payments made by the Company pursuant to this Agreement shall be in lieu of
severance payments, if any, which might otherwise be available to Executive
under any severance plan, policy, program or arrangement generally
applicable to the employees of the Company. If for any reason Executive
receives severance payments (other than under this Agreement) upon the
termination of his employment with the Company, the amount of such payments
shall be deducted from the amount paid under this Agreement. The purpose of
this provision is solely to avert a duplication of benefits; neither this
provision nor the provisions of any other agreement shall be interpreted to
reduce the amount payable to Executive below the amount that would otherwise
have been payable under this Agreement.
The provisions of this Agreement shall be binding upon and shall inure to
the benefit of Executive, his executors, administrators, legal
representatives, and assigns, and the Company and its successors.
The validity, interpretation, and effect of this Agreement shall be governed
by the laws of The Commonwealth of Massachusetts.
The invalidity or unenforceability of any provisions of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
The Company shall have no right of set-off or counterclaims, in respect of
any claim, debt, or obligation, against any payments to Executive, his
dependents, beneficiaries, or estate provided for in this Agreement.
No right or interest to or in any payments shall be assignable by the
Executive. No right, benefit, or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt, or obligation, or
to execution, attachment, levy, or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any
action specified in the immediately preceding sentence shall, to the full
extent permitted by law, be null, void, and of no effect.
<PAGE>
All notices and other communications hereunder shall be in writing and shall
be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive: Lewis Rubin
------------------- 1 Devonshire Place
Apt. #3111
Boston, Massachusetts 02109
If to the Company: XTRA Corporation
----------------- 60 State Street - 11th Floor
Boston, Massachusetts 02109
Attn: Chair, Compensation Committee, and
the General Counsel
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective either on the date of delivery (in the case of delivery by hand),
or three business days after deposit into the mails (in the case of delivery
by mail).
<PAGE>
IN WITNESS WHEREOF, XTRA Corporation and Executive have each caused this
Agreement to be duly executed and delivered as of the date set forth above.
XTRA CORPORATION
By: /s/ Martin L. Solomon
---------------------------------
Name: Martin L. Solomon
Title: Chair, Compensation Committee
/s/ Lewis Rubin
------------------------------------
Lewis Rubin
<PAGE>
EXHIBIT A
Significant Transaction. For the purposes of this Agreement, a "Significant
-----------------------
Transaction" shall mean:
a. Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company in one or a series of transactions (but excluding any
reorganization, merger or consolidation or sale of assets with or to the
Company or any subsidiary of the Company, unless in connection with such
transaction there is also a Significant Transaction involving the
Company) (a "Business Combination"), in each case unless, following such
Business Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the then
outstanding shares of common stock of the Company (the "Company Common
Stock") and the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities" immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior
to such Business Combination of the Outstanding Company Common Stock and
outstanding Company Voting Securities, as the case may be, (ii) no
individual, corporation, partnership, limited liability company, or
other entity, which term shall include a "group" (within the meaning of
section 13(d) of the Securities Exchange Act of 1934 (the "Act"),
excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination, beneficially
owns, directly or indirectly, 30% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from
such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination and (iii)
at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business Combination;
or
b. Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
<PAGE>
EXHIBIT 10.15
XTRA CORPORATION
Severance Agreement
-------------------
AGREEMENT, made this 8th day of December, 1997, by and between William H.
Franz ("Executive") and XTRA Corporation (the "Company").
WITNESSETH
Executive is a key executive of the Company or one of its subsidiaries,
responsible, in part, for the policy-making functions of the Company and the
overall viability of the Company's business; and
The Company recognizes that the possibility that certain significant
transactions involving the Company may result in the departure or distraction of
management to the detriment of the Company and its shareholders, and
The Company wishes to assure Executive of fair severance should his
employment terminate in specified circumstances following the consummation of
certain significant transactions involving the Company and to assure Executive
of certain other benefits in the event of such transactions.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. If, within the 24-month period (the "Post Significant Transaction Period")
beginning on the date of a Significant Transaction (as defined in Exhibit A
attached hereto and made a part hereof), (i) Executive's employment with the
company is terminated (i) by the Company for any reason other than for
"Cause" (as defined in paragraph 2 below), or (ii) Executive terminates such
employment for Good Reason (as defined in paragraph 4 below):
a. The Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to the sum of
(i) the Executive's annual base salary ("Annual Base Salary") through
the date of such termination of employment, and any earned bonuses for
any completed fiscal period, to the extent not theretofore paid, (ii) a
prorated portion (the "Prorated Bonus Amount") of the award payable
under the Company's Economic Profit Incentive Plan, or any comparable or
successor annual plan or plans in which the Executive is then a
participant (the "Cash Plan"), notwithstanding anything to the contrary
in the Cash Plan, determined by calculating the product of (A) the bonus
payable with respect to the award for the fiscal period in which the
date of termination occurs under the Cash Plan annualizing the Company's
<PAGE>
performance under the plan up to the date of termination by dividing the
Company's performance to the date of termination by the number of full
months in the performance period through the date of termination and
multiplying the result by 12, times (B) a fraction, the numerator of
which is the number of full months in the current fiscal year through
the date of termination of employment, and the denominator of which is
12, and (iii) any compensation, including compensation for the fiscal
year in which the date of termination occurs, previously deferred by the
Executive (together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in the above subsections (i)
through (iii) shall be hereinafter referred to as the "Accrued
Obligations"); and
b. any stock, stock option or cash awards granted to the Executive by the
Company, including any awards under the Company's 1987 Stock Incentive
Plan (or any successor plan), that would have become vested and
exercisable had the Executive continued to be employed by the Company
shall immediately vest and become exercisable in full notwithstanding
any provision to the contrary of such grant and shall remain exercisable
until the later of (i) the latest date on which such grant could have
been exercised had the Executive remained employed by the Company, and
(ii) the date upon which any period during which the Executive has
agreed not to sell the type of securities that may be issuable to such
Executive upon the exercise of such grant shall expire; and
c. the Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to two times the
sum of: (A) the amount of the Executive's Annual Base Salary at the
rate in effect immediately prior to the date of termination, and (B) the
Average Annualized Bonus Amount which shall be calculated by multiplying
by 12 the quotient determined by dividing (i) the sum of the actual cash
bonus earned by the Executive during each of the two fiscal years
immediately preceding the date of termination, plus the Prorated Bonus
Amount, by (ii) 24 plus the number of full months in the period for
which the Prorated Bonus Payment is calculated; and
d. the Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to the amount of
the forfeitable portion of the Executive's accrued benefit under the
Company's qualified 401(k) or other qualified retirement plans; and
e. Executive, together with his dependents, will continue following such
termination of employment to participate fully at the Company's expense
(subject to any required employee contributions at the rate in effect
immediately prior to the date of the Significant Transaction) in all
welfare benefit plans (other than disability insurance), programs,
practices and policies maintained or sponsored by the Company
immediately prior to the Significant Transaction, or
<PAGE>
receive substantially the equivalent coverage (or the full value thereof
in cash) from the Company, until the second anniversary of such
termination or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, provided, however, that
if the Executive becomes re-employed with another employer and is
eligible to receive reasonably comparable medical or other welfare
benefits under another employer provided plan, the Company's obligation
to provide the medical and other welfare benefits described herein shall
cease; and provided further that if Executive's continued participation
is not possible under the terms of such Company plans and programs, the
Company shall instead either arrange to provide Executive with
substantially similar benefits upon comparable terms or pay to the
Executive (within five (5) business days of the date of termination) an
amount equal to the full value thereof in cash; and
f. to the extent not theretofore paid or provided for, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy, practice, contract or agreement
of the Company ("Other Benefits").
Notwithstanding anything herein to the contrary, to the extent that any
payment or benefit provided for herein is required to be paid or vested on
any earlier date under the terms of any plan, agreement or arrangements,
such plan, agreement or arrangement shall control. Further, notwithstanding
anything herein to the contrary, if a Significant Transaction occurs and if
the Executive's employment with the Company is terminated by the Company for
a reason other than Cause prior to the date upon which the Significant
Transaction occurs, and if it can be reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a
Significant Transaction or (ii) otherwise arose in connection with or in
anticipation of a Significant Transaction, then for all purposes of this
Agreement, Executive shall be entitled to the benefits provided in Sections
1(a)-(f) above.
2. Cause, Other Than For Good Reason; Disability.
---------------------------------------------
a. Cause; Other Than for Good Reason. If the Executive's employment shall
---------------------------------
be terminated for Cause (as defined in Section 3 below), or if the
Executive voluntarily terminates employment, excluding a termination for
Good Reason, during the Post Significant Transaction Period, this
Agreement shall terminate without further obligations to the Executive
other than the obligation to pay the Executive (A) his Annual Base
Salary through the date of termination, (B) the amount of any
compensation previously deferred by the Executive, and (C) Other
Benefits, in each case to the extent theretofore unpaid.
<PAGE>
b. Disability. If the Executive's employment is terminated during the Post
----------
Significant Transaction Period by reason of the Executive's Disability,
this Agreement shall terminate without further obligations to the
Executive other than for payment of Accrued Obligations and the timely
payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive in a lump sum in cash within five (5) business
days of the date of termination of employment. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and reasonably
acceptable to the Executive or the Executive's legal representative. If
the Company determines in good faith that the Disability of the
Executive has occurred during the Post Significant Transaction Period,
it may give the Executive written notice of its intention to terminate
the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt
of such notice by the Executive, provided that, within the 30 days of
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties.
In the case of (a) or (b) above, all obligations shall be paid to the
Executive in a lump sum in cash within five (5) business days of date of the
termination of employment or such earlier time as may be required under law.
3. "Cause" means only: (a) commission of a felony or gross neglect of duty by
the Executive which is intended to result in substantial personal enrichment
of the Executive at the expense of the Company, (b) conviction of, or plea
of nolo contendere to, a crime involving moral turpitude, or (c) gross
neglect by the Executive in the performance of his duties to the Company
which results in material injury to the Company, and continues for more than
30 days after written notice given to the Executive pursuant to a two-thirds
vote of all of the members of the Board at a meeting called and held for
such purpose (after reasonable notice to Executive) and at which meeting the
Executive and his counsel were given an opportunity to be heard, such vote
to set forth in reasonable detail the nature of the failure. For purposes
of this definition of Cause, no act or omission shall be considered to have
been "willful" unless it was not in good faith and the Executive had
knowledge at the time that the act or omission was not in the best interest
of the Company. Any act, or failure to act, based on authority given
pursuant to a resolution duly adopted by the Board or upon the instructions
of the Chief Executive Officer or another senior officer of the Company or
based on the advice of counsel of the Company shall be conclusively presumed
to be done, or omitted to be done, by the Executive in good faith and in the
best interest of the Company.
4. Executive shall be deemed to have voluntarily terminated his employment for
Good Reason if the Executive leaves the employ of the Company for any reason
following:
<PAGE>
a. Any action by the Company which results in a material diminution in
Executive's position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive; provided, however, a
sale or transfer of some or all of the business of the Company or any of
its subsidiaries or other reduction in its business or that of its
subsidiaries, or the fact that the Company shall become a subsidiary of
another company or the securities of the Company shall no longer be
publicly traded, shall not constitute "Good Reason" hereunder;
b. Any reduction in the Executive's rate of Annual Base Salary for any
fiscal year to less than 100% of the rate of Annual Base Salary payable
for the completed fiscal year immediately preceding the Significant
Transaction; or
c. Failure of the Company to permit the Executive to participate in all
incentive, retirement, and savings policies and programs, and all
welfare benefit plans, practices and programs (including without
limitation, life, accidental death and travel accident insurance,
medical insurance, dental insurance or disability plans) to the extent
applicable generally at the time to other peer executives of the Company
and its affiliated companies, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive; or
d. The Company requires Executive to be based at any office or location
further than 50 miles from St. Louis, Missouri; or
e. Any failure by the Company to comply with and satisfy Section 7 of this
Agreement.
5. Coordination With Parachute Tax Rules. Payments under Section 1 shall be
-------------------------------------
made without regard to whether the deductibility of such payments (or any
other payments to or for the benefit of Executive) would be limited or
precluded by Internal Revenue Code Section 280G and without regard to
whether such payments (or any other payments) would subject Executive to the
federal excise tax levied on certain "excess parachute payments" under
Internal Revenue Code Section 4999; provided, that if the total of all
--------
payments to or for the benefit of Executive, after reduction for all federal
taxes (including the tax described in Internal Revenue Code Section 4999, if
applicable) with respect to such payments ("Executive's total after-tax
payments"), would be increased by the limitation or elimination of any
payment under Section 1, amounts payable under Section 1 shall be reduced to
the extent, and only to the extent, necessary to maximize Executive's total
after-tax payments. The determination as to whether and to what extent
payments under Section 1 are required to be reduced in accordance with the
preceding sentence shall be made at the Company's expense by Arthur Andersen
LLP or by such other certified public accounting firm, law firm or benefits
consulting firm as the Compensation Committee of the Company's Board of
Directors may designate prior to a
<PAGE>
Change of Control. In the event of any underpayment or overpayment under
Section 1 as determined by Arthur Andersen LLP (or such other firm as may
have been designated in accordance with the preceding sentence), the amount
of such underpayment or overpayment shall forthwith be paid to Executive or
refunded to the Company, as the case may be, with interest at the applicable
Federal rate provided for in Section 7872(f)(2) of the Internal Revenue
Code.
6. The Company agrees (i) to promptly reimburse Executive for any and all legal
fees and related expenses (including, without limitation, stenographer fees,
printing costs, etc.) incurred by him to enforce the provisions of this
Agreement or in contesting or disputing that the termination of his
employment is for Cause or other than for Good Reason (regardless of the
outcome thereof), (ii) to pay the cost of such judicial proceeding, and
(iii) to pay interest to Executive on all amounts owed to Executive under
this Agreement during any period of time that such amounts are withheld
pending judicial proceedings (such interest will be at the base rate as
published from time to time in the eastern edition of the Wall Street
Journal); provided, however, that the Company shall not be required to
reimburse the Executive for such fees, costs and expenses, if a court of
competent jurisdiction shall issue a final order to the effect that the
Executive shall not prevail on any claim relating to this Agreement.
7. If the Company is at any time before, after or in connection with, a
Significant Transaction merged or consolidated into or with any other
corporation or other entity (whether or not the Company is the surviving
entity), or if substantially all of the assets thereof are transferred to
another corporation or other entity, the provisions of this Agreement will
be binding upon and inure to the benefit of the corporation or other entity
resulting from such merger or consolidation or the acquirer of such assets
(the "Successor Entity"), and this paragraph 7 will apply in the event of
any subsequent merger or consolidation or transfer of assets. The Company
will require any such Successor Entity to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any Successor Entity
which assumes and agrees to perform this Agreement by operation of law or
otherwise.
In the event of any merger, consolidation, or sale of assets described
above, nothing contained in this Agreement will detract from or otherwise
limit Executive's right to or privilege of participation in any stock option
or purchase plan or any bonus, profit sharing, pension, group insurance,
hospitalization, or other incentive or benefit plan or arrangement which may
be or become applicable to executives of the entity resulting from such
merger or consolidation or the entity acquiring such assets of the Company.
In the event of any merger, consolidation, or sale of assets described
above, references to the Company in this Agreement shall unless the context
suggests otherwise be deemed to include the entity resulting from such
merger or consolidation or the acquirer of such assets of the Company.
<PAGE>
8. Any termination by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with the last paragraph of Section 13 of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated
and (iii) if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice). The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
"Date of Termination" means (i) if the Executive's employment is terminated
by the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified therein, as
the case may be, and (ii) if the Executive's employment is terminated by the
Company other than for Cause, the Date of Termination shall be the date on
which the Company notifies the Executive of such termination.
9. All payments required to be made by the Company hereunder to, or on behalf
of, Executive or his dependents, beneficiaries, or estate will be subject to
the withholding of such amounts relating to tax and/or other payroll
deductions as may be required by law.
10. There shall be no requirement on the part of the Executive to seek other
employment or otherwise mitigate damages in order to be entitled to the full
amount of any payments and benefits to which Executive is entitled under
this Agreement, and the amount of such payments and benefits shall not be
reduced by any compensation or benefits received by Executive from other
employment, other than with respect to certain welfare benefits as provided
in the proviso to Section 1(e).
11. Nothing contained in this Agreement shall be construed as a contract of
employment between the Company and the Executive, or as a right of the
Executive to continue in the employ of the Company, or as a limitation of
the right of the Company to discharge the Executive with or without Cause;
provided that the Executive shall have the right to receive upon termination
of his employment the payments and benefits provided in this Agreement and
shall not be deemed to have waived any rights he may have either at law or
in equity in respect of such discharge.
12. No amendment, change, or modification of this Agreement may be made except
in writing, signed by both parties.
<PAGE>
13. This Agreement shall terminate on the third anniversary of the date hereof,
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (each such date
hereinafter referred to as a "Renewal Date"), unless previously terminated,
the term of this Agreement shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least sixty days
prior to the Renewal Date the Company shall give notice to the Executive
that the term of this Agreement shall not be so extended. This Agreement
shall not apply to a Significant Transaction which takes place after the
termination of this Agreement.
Payments made by the Company pursuant to this Agreement shall be in lieu of
severance payments, if any, which might otherwise be available to Executive
under any severance plan, policy, program or arrangement generally
applicable to the employees of the Company. If for any reason Executive
receives severance payments (other than under this Agreement) upon the
termination of his employment with the Company, the amount of such payments
shall be deducted from the amount paid under this Agreement. The purpose of
this provision is solely to avert a duplication of benefits; neither this
provision nor the provisions of any other agreement shall be interpreted to
reduce the amount payable to Executive below the amount that would otherwise
have been payable under this Agreement.
The provisions of this Agreement shall be binding upon and shall inure to
the benefit of Executive, his executors, administrators, legal
representatives, and assigns, and the Company and its successors.
The validity, interpretation, and effect of this Agreement shall be governed
by the laws of The Commonwealth of Massachusetts.
The invalidity or unenforceability of any provisions of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
The Company shall have no right of set-off or counterclaims, in respect of
any claim, debt, or obligation, against any payments to Executive, his
dependents, beneficiaries, or estate provided for in this Agreement.
No right or interest to or in any payments shall be assignable by the
Executive. No right, benefit, or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt, or obligation, or
to execution, attachment, levy, or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any
action specified in the immediately preceding sentence shall, to the full
extent permitted by law, be null, void, and of no effect.
<PAGE>
All notices and other communications hereunder shall be in writing and shall
be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive: William H. Franz
------------------- 16418 Wilson Farm Drive
Chesterfield, Missouri 63005
If to the Company: XTRA Corporation
----------------- 60 State Street - 11th Floor
Boston, Massachusetts 02109
Attn: Chair, Compensation Committee, and
the General Counsel
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective either on the date of delivery (in the case of delivery by hand),
or three business days after deposit into the mails (in the case of delivery
by mail).
<PAGE>
IN WITNESS WHEREOF, XTRA Corporation and Executive have each caused this
Agreement to be duly executed and delivered as of the date set forth above.
XTRA CORPORATION
By: /s/ Martin L. Solomon
-----------------------------------
Name: Martin L. Solomon
Title: Chair, Compensation Committee
/s/ William H. Franz
--------------------------------------
William H. Franz
<PAGE>
EXHIBIT A
Significant Transaction. For the purposes of this Agreement, a "Significant
-----------------------
Transaction" shall mean:
a. Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company, or XTRA Lease, Inc., in one or a series of transactions (but
excluding any reorganization, merger or consolidation or sale of assets
with or to the Company or any subsidiary of the Company, unless in
connection with such transaction there is also a Significant Transaction
involving the Company) (a "Business Combination"), in each case unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively,
of the then outstanding shares of common stock of the Company (the
"Company Common Stock") and the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities" immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior
to such Business Combination of the Outstanding Company Common Stock and
outstanding Company Voting Securities, as the case may be, (ii) no
individual, corporation, partnership, limited liability company, or
other entity, which term shall include a "group" (within the meaning of
section 13(d) of the Securities Exchange Act of 1934 (the "Act"),
excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination, beneficially
owns, directly or indirectly, 30% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from
such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination and (iii)
at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business Combination;
or
b. Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company or XTRA Lease, Inc., other than a liquidation
or dissolution of XTRA Lease, Inc. into the Company or any subsidiary of
the Company.
<PAGE>
EXHIBIT 10.16
XTRA CORPORATION
Severance Agreement
-------------------
AGREEMENT, made this 8th day of December, 1997, by and between Michael J.
Soja ("Executive") and XTRA Corporation (the "Company").
WITNESSETH
Executive is a key executive of the Company or one of its subsidiaries,
responsible, in part, for the policy-making functions of the Company and the
overall viability of the Company's business; and
The Company recognizes that the possibility that certain significant
transactions involving the Company may result in the departure or distraction of
management to the detriment of the Company and its shareholders, and
The Company wishes to assure Executive of fair severance should his
employment terminate in specified circumstances following the consummation of
certain significant transactions involving the Company and to assure Executive
of certain other benefits in the event of such transactions.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. If, within the 24-month period (the "Post Significant Transaction Period")
beginning on the date of a Significant Transaction (as defined in Exhibit A
attached hereto and made a part hereof), (i) Executive's employment with the
company is terminated (i) by the Company for any reason other than for
"Cause" (as defined in paragraph 2 below), or (ii) Executive terminates such
employment for Good Reason (as defined in paragraph 4 below):
a. The Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to the sum of
(i) the Executive's annual base salary ("Annual Base Salary") through
the date of such termination of employment, and any earned bonuses for
any completed fiscal period, to the extent not theretofore paid, (ii) a
prorated portion (the "Prorated Bonus Amount") of the award payable
under the Company's Economic Profit Incentive Plan, or any comparable or
successor annual plan or plans in which the Executive is then a
participant (the "Cash Plan"), notwithstanding anything to the contrary
in the Cash Plan, determined by calculating the product of (A) the bonus
payable with respect to the award for the fiscal period in which the
date of termination occurs under the Cash Plan annualizing the Company's
<PAGE>
performance under the plan up to the date of termination by dividing the
Company's performance to the date of termination by the number of full
months in the performance period through the date of termination and
multiplying the result by 12, times (B) a fraction, the numerator of
which is the number of full months in the current fiscal year through
the date of termination of employment, and the denominator of which is
12, and (iii) any compensation, including compensation for the fiscal
year in which the date of termination occurs, previously deferred by the
Executive (together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in the above subsections (i)
through (iii) shall be hereinafter referred to as the "Accrued
Obligations"); and
b. any stock, stock option or cash awards granted to the Executive by the
Company, including any awards under the Company's 1987 Stock Incentive
Plan (or any successor plan), that would have become vested and
exercisable had the Executive continued to be employed by the Company
shall immediately vest and become exercisable in full notwithstanding
any provision to the contrary of such grant and shall remain exercisable
until the later of (i) the latest date on which such grant could have
been exercised had the Executive remained employed by the Company, and
(ii) the date upon which any period during which the Executive has
agreed not to sell the type of securities that may be issuable to such
Executive upon the exercise of such grant shall expire; and
c. the Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to two times the
sum of: (A) the amount of the Executive's Annual Base Salary at the
rate in effect immediately prior to the date of termination, and (B) the
Average Annualized Bonus Amount which shall be calculated by multiplying
by 12 the quotient determined by dividing (i) the sum of the actual cash
bonus earned by the Executive during each of the two fiscal years
immediately preceding the date of termination, plus the Prorated Bonus
Amount, by (ii) 24 plus the number of full months in the period for
which the Prorated Bonus Payment is calculated; and
d. the Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to the amount of
the forfeitable portion of the Executive's accrued benefit under the
Company's qualified 401(k) or other qualified retirement plans; and
e. Executive, together with his dependents, will continue following such
termination of employment to participate fully at the Company's expense
(subject to any required employee contributions at the rate in effect
immediately prior to the date of the Significant Transaction) in all
welfare benefit plans (other than disability insurance), programs,
practices and policies maintained or sponsored by the Company
immediately prior to the Significant Transaction, or
<PAGE>
receive substantially the equivalent coverage (or the full value thereof
in cash) from the Company, until the second anniversary of such
termination or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, provided, however, that
if the Executive becomes re-employed with another employer and is
eligible to receive reasonably comparable medical or other welfare
benefits under another employer provided plan, the Company's obligation
to provide the medical and other welfare benefits described herein shall
cease; and provided further that if Executive's continued participation
is not possible under the terms of such Company plans and programs, the
Company shall instead either arrange to provide Executive with
substantially similar benefits upon comparable terms or pay to the
Executive (within five (5) business days of the date of termination) an
amount equal to the full value thereof in cash; and
f. to the extent not theretofore paid or provided for, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy, practice, contract or agreement
of the Company ("Other Benefits").
Notwithstanding anything herein to the contrary, to the extent that any
payment or benefit provided for herein is required to be paid or vested on
any earlier date under the terms of any plan, agreement or arrangements,
such plan, agreement or arrangement shall control. Further, notwithstanding
anything herein to the contrary, if a Significant Transaction occurs and if
the Executive's employment with the Company is terminated by the Company for
a reason other than Cause prior to the date upon which the Significant
Transaction occurs, and if it can be reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a
Significant Transaction or (ii) otherwise arose in connection with or in
anticipation of a Significant Transaction, then for all purposes of this
Agreement, Executive shall be entitled to the benefits provided in Sections
1(a)-(f) above.
2. Cause, Other Than For Good Reason; Disability.
---------------------------------------------
a. Cause; Other Than for Good Reason. If the Executive's employment shall
---------------------------------
be terminated for Cause (as defined in Section 3 below), or if the
Executive voluntarily terminates employment, excluding a termination for
Good Reason, during the Post Significant Transaction Period, this
Agreement shall terminate without further obligations to the Executive
other than the obligation to pay the Executive (A) his Annual Base
Salary through the date of termination, (B) the amount of any
compensation previously deferred by the Executive, and (C) Other
Benefits, in each case to the extent theretofore unpaid.
<PAGE>
b. Disability. If the Executive's employment is terminated during the Post
----------
Significant Transaction Period by reason of the Executive's Disability,
this Agreement shall terminate without further obligations to the
Executive other than for payment of Accrued Obligations and the timely
payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive in a lump sum in cash within five (5) business
days of the date of termination of employment. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and reasonably
acceptable to the Executive or the Executive's legal representative. If
the Company determines in good faith that the Disability of the
Executive has occurred during the Post Significant Transaction Period,
it may give the Executive written notice of its intention to terminate
the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt
of such notice by the Executive, provided that, within the 30 days of
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties.
In the case of (a) or (b) above, all obligations shall be paid to the
Executive in a lump sum in cash within five (5) business days of date of the
termination of employment or such earlier time as may be required under law.
3. "Cause" means only: (a) commission of a felony or gross neglect of duty by
the Executive which is intended to result in substantial personal enrichment
of the Executive at the expense of the Company, (b) conviction of, or plea
of nolo contendere to, a crime involving moral turpitude, or (c) gross
neglect by the Executive in the performance of his duties to the Company
which results in material injury to the Company, and continues for more than
30 days after written notice given to the Executive pursuant to a two-thirds
vote of all of the members of the Board at a meeting called and held for
such purpose (after reasonable notice to Executive) and at which meeting the
Executive and his counsel were given an opportunity to be heard, such vote
to set forth in reasonable detail the nature of the failure. For purposes
of this definition of Cause, no act or omission shall be considered to have
been "willful" unless it was not in good faith and the Executive had
knowledge at the time that the act or omission was not in the best interest
of the Company. Any act, or failure to act, based on authority given
pursuant to a resolution duly adopted by the Board or upon the instructions
of the Chief Executive Officer or another senior officer of the Company or
based on the advice of counsel of the Company shall be conclusively presumed
to be done, or omitted to be done, by the Executive in good faith and in the
best interest of the Company.
4. Executive shall be deemed to have voluntarily terminated his employment for
Good Reason if the Executive leaves the employ of the Company for any reason
following:
<PAGE>
a. Any action by the Company which results in a material diminution in
Executive's position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive; provided, however, a
sale or transfer of some or all of the business of the Company or any of
its subsidiaries or other reduction in its business or that of its
subsidiaries, or the fact that the Company shall become a subsidiary of
another company or the securities of the Company shall no longer be
publicly traded, shall not constitute "Good Reason" hereunder;
b. Any reduction in the Executive's rate of Annual Base Salary for any
fiscal year to less than 100% of the rate of Annual Base Salary payable
for the completed fiscal year immediately preceding the Significant
Transaction; or
c. Failure of the Company to permit the Executive to participate in all
incentive, retirement, and savings policies and programs, and all
welfare benefit plans, practices and programs (including without
limitation, life, accidental death and travel accident insurance,
medical insurance, dental insurance or disability plans) to the extent
applicable generally at the time to other peer executives of the Company
and its affiliated companies, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive; or
d. The Company requires Executive to be based at any office or location
further than 50 miles from Boston, Massachusetts; or
e. Any failure by the Company to comply with and satisfy Section 7 of this
Agreement.
5. Coordination With Parachute Tax Rules. Payments under Section 1 shall be
-------------------------------------
made without regard to whether the deductibility of such payments (or any
other payments to or for the benefit of Executive) would be limited or
precluded by Internal Revenue Code Section 280G and without regard to
whether such payments (or any other payments) would subject Executive to the
federal excise tax levied on certain "excess parachute payments" under
Internal Revenue Code Section 4999; provided, that if the total of all
--------
payments to or for the benefit of Executive, after reduction for all federal
taxes (including the tax described in Internal Revenue Code Section 4999, if
applicable) with respect to such payments ("Executive's total after-tax
payments"), would be increased by the limitation or elimination of any
payment under Section 1, amounts payable under Section 1 shall be reduced to
the extent, and only to the extent, necessary to maximize Executive's total
after-tax payments. The determination as to whether and to what extent
payments under Section 1 are required to be reduced in accordance with the
preceding sentence shall be made at the Company's expense by Arthur Andersen
LLP or by such other certified public accounting firm, law firm or benefits
consulting firm as the Compensation Committee of the Company's Board of
Directors may designate prior to a
<PAGE>
Change of Control. In the event of any underpayment or overpayment under
Section 1 as determined by Arthur Andersen LLP (or such other firm as may
have been designated in accordance with the preceding sentence), the amount
of such underpayment or overpayment shall forthwith be paid to Executive or
refunded to the Company, as the case may be, with interest at the applicable
Federal rate provided for in Section 7872(f)(2) of the Internal Revenue
Code.
6. The Company agrees (i) to promptly reimburse Executive for any and all legal
fees and related expenses (including, without limitation, stenographer fees,
printing costs, etc.) incurred by him to enforce the provisions of this
Agreement or in contesting or disputing that the termination of his
employment is for Cause or other than for Good Reason (regardless of the
outcome thereof), (ii) to pay the cost of such judicial proceeding, and
(iii) to pay interest to Executive on all amounts owed to Executive under
this Agreement during any period of time that such amounts are withheld
pending judicial proceedings (such interest will be at the base rate as
published from time to time in the eastern edition of the Wall Street
Journal); provided, however, that the Company shall not be required to
reimburse the Executive for such fees, costs and expenses, if a court of
competent jurisdiction shall issue a final order to the effect that the
Executive shall not prevail on any claim relating to this Agreement.
7. If the Company is at any time before, after or in connection with, a
Significant Transaction merged or consolidated into or with any other
corporation or other entity (whether or not the Company is the surviving
entity), or if substantially all of the assets thereof are transferred to
another corporation or other entity, the provisions of this Agreement will
be binding upon and inure to the benefit of the corporation or other entity
resulting from such merger or consolidation or the acquirer of such assets
(the "Successor Entity"), and this paragraph 7 will apply in the event of
any subsequent merger or consolidation or transfer of assets. The Company
will require any such Successor Entity to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any Successor Entity
which assumes and agrees to perform this Agreement by operation of law or
otherwise.
In the event of any merger, consolidation, or sale of assets described
above, nothing contained in this Agreement will detract from or otherwise
limit Executive's right to or privilege of participation in any stock option
or purchase plan or any bonus, profit sharing, pension, group insurance,
hospitalization, or other incentive or benefit plan or arrangement which may
be or become applicable to executives of the entity resulting from such
merger or consolidation or the entity acquiring such assets of the Company.
In the event of any merger, consolidation, or sale of assets described
above, references to the Company in this Agreement shall unless the context
suggests otherwise be deemed to include the entity resulting from such
merger or consolidation or the acquirer of such assets of the Company.
<PAGE>
8. Any termination by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with the last paragraph of Section 13 of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated
and (iii) if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice). The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
"Date of Termination" means (i) if the Executive's employment is terminated
by the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified therein, as
the case may be, and (ii) if the Executive's employment is terminated by the
Company other than for Cause, the Date of Termination shall be the date on
which the Company notifies the Executive of such termination.
9. All payments required to be made by the Company hereunder to, or on behalf
of, Executive or his dependents, beneficiaries, or estate will be subject to
the withholding of such amounts relating to tax and/or other payroll
deductions as may be required by law.
10. There shall be no requirement on the part of the Executive to seek other
employment or otherwise mitigate damages in order to be entitled to the full
amount of any payments and benefits to which Executive is entitled under
this Agreement, and the amount of such payments and benefits shall not be
reduced by any compensation or benefits received by Executive from other
employment, other than with respect to certain welfare benefits as provided
in the proviso to Section 1(e).
11. Nothing contained in this Agreement shall be construed as a contract of
employment between the Company and the Executive, or as a right of the
Executive to continue in the employ of the Company, or as a limitation of
the right of the Company to discharge the Executive with or without Cause;
provided that the Executive shall have the right to receive upon termination
of his employment the payments and benefits provided in this Agreement and
shall not be deemed to have waived any rights he may have either at law or
in equity in respect of such discharge.
12. No amendment, change, or modification of this Agreement may be made except
in writing, signed by both parties.
<PAGE>
13. This Agreement shall terminate on the third anniversary of the date hereof,
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (each such date
hereinafter referred to as a "Renewal Date"), unless previously terminated,
the term of this Agreement shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least sixty days
prior to the Renewal Date the Company shall give notice to the Executive
that the term of this Agreement shall not be so extended. This Agreement
shall not apply to a Significant Transaction which takes place after the
termination of this Agreement.
Payments made by the Company pursuant to this Agreement shall be in lieu of
severance payments, if any, which might otherwise be available to Executive
under any severance plan, policy, program or arrangement generally
applicable to the employees of the Company. If for any reason Executive
receives severance payments (other than under this Agreement) upon the
termination of his employment with the Company, the amount of such payments
shall be deducted from the amount paid under this Agreement. The purpose of
this provision is solely to avert a duplication of benefits; neither this
provision nor the provisions of any other agreement shall be interpreted to
reduce the amount payable to Executive below the amount that would otherwise
have been payable under this Agreement.
The provisions of this Agreement shall be binding upon and shall inure to
the benefit of Executive, his executors, administrators, legal
representatives, and assigns, and the Company and its successors.
The validity, interpretation, and effect of this Agreement shall be governed
by the laws of The Commonwealth of Massachusetts.
The invalidity or unenforceability of any provisions of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
The Company shall have no right of set-off or counterclaims, in respect of
any claim, debt, or obligation, against any payments to Executive, his
dependents, beneficiaries, or estate provided for in this Agreement.
No right or interest to or in any payments shall be assignable by the
Executive. No right, benefit, or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt, or obligation, or
to execution, attachment, levy, or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any
action specified in the immediately preceding sentence shall, to the full
extent permitted by law, be null, void, and of no effect.
<PAGE>
All notices and other communications hereunder shall be in writing and shall
be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive: Michael J. Soja
------------------- 34 Musket Lane
Sudbury, Massachusetts 01776
If to the Company: XTRA Corporation
----------------- 60 State Street - 11th Floor
Boston, Massachusetts 02109
Attn: Chair, Compensation Committee,
and the General Counsel
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective either on the date of delivery (in the case of delivery by hand),
or three business days after deposit into the mails (in the case of delivery
by mail).
<PAGE>
IN WITNESS WHEREOF, XTRA Corporation and Executive have each caused this
Agreement to be duly executed and delivered as of the date set forth above.
XTRA CORPORATION
/s/ Martin L. Solomon
By:______________________________
Name: Martin L. Solomon
Title: Chair, Compensation Committee
/s/ Michael J. Soja
________________________________
Michael J. Soja
<PAGE>
EXHIBIT A
Significant Transaction. For the purposes of this Agreement, a "Significant
-----------------------
Transaction" shall mean:
a. Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company in one or a series of transactions (but excluding any
reorganization, merger or consolidation or sale of assets with or to the
Company or any subsidiary of the Company, unless in connection with such
transaction there is also a Significant Transaction involving the
Company) (a "Business Combination"), in each case unless, following such
Business Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the then
outstanding shares of common stock of the Company (the "Company Common
Stock") and the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities" immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior
to such Business Combination of the Outstanding Company Common Stock and
outstanding Company Voting Securities, as the case may be, (ii) no
individual, corporation, partnership, limited liability company, or
other entity, which term shall include a "group" (within the meaning of
section 13(d) of the Securities Exchange Act of 1934 (the "Act"),
excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination, beneficially
owns, directly or indirectly, 30% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from
such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination and (iii)
at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business Combination;
or
b. Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
<PAGE>
EXHIBIT 10.17
XTRA CORPORATION
Severance Agreement
-------------------
AGREEMENT, made this 8th day of December, 1997, by and between Michael K.
Fox ("Executive") and XTRA Corporation (the "Company").
WITNESSETH
Executive is a key executive of the Company or one of its subsidiaries,
responsible, in part, for the policy-making functions of the Company and the
overall viability of the Company's business; and
The Company recognizes that the possibility that certain significant
transactions involving the Company may result in the departure or distraction of
management to the detriment of the Company and its shareholders, and
The Company wishes to assure Executive of fair severance should his
employment terminate in specified circumstances following the consummation of
certain significant transactions involving the Company and to assure Executive
of certain other benefits in the event of such transactions.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. If, within the 24-month period (the "Post Significant Transaction Period")
beginning on the date of a Significant Transaction (as defined in Exhibit A
attached hereto and made a part hereof), (i) Executive's employment with the
company is terminated (i) by the Company for any reason other than for
"Cause" (as defined in paragraph 2 below), or (ii) Executive terminates such
employment for Good Reason (as defined in paragraph 4 below):
a. The Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to the sum of
(i) the Executive's annual base salary ("Annual Base Salary") through
the date of such termination of employment, and any earned bonuses for
any completed fiscal period, to the extent not theretofore paid, (ii) a
prorated portion (the "Prorated Bonus Amount") of the award payable
under the Company's Economic Profit Incentive Plan, or any comparable or
successor annual plan or plans in which the Executive is then a
participant (the "Cash Plan"), notwithstanding anything to the contrary
in the Cash Plan, determined by calculating the product of (A) the bonus
payable with respect to the award for the fiscal period in which the
date of termination occurs under the Cash Plan annualizing the Company's
<PAGE>
performance under the plan up to the date of termination by dividing the
Company's performance to the date of termination by the number of full
months in the performance period through the date of termination and
multiplying the result by 12, times (B) a fraction, the numerator of
which is the number of full months in the current fiscal year through
the date of termination of employment, and the denominator of which is
12, and (iii) any compensation, including compensation for the fiscal
year in which the date of termination occurs, previously deferred by the
Executive (together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in the above subsections (i)
through (iii) shall be hereinafter referred to as the "Accrued
Obligations"); and
b. any stock, stock option or cash awards granted to the Executive by the
Company, including any awards under the Company's 1987 Stock Incentive
Plan (or any successor plan), that would have become vested and
exercisable had the Executive continued to be employed by the Company
shall immediately vest and become exercisable in full notwithstanding
any provision to the contrary of such grant and shall remain exercisable
until the later of (i) the latest date on which such grant could have
been exercised had the Executive remained employed by the Company, and
(ii) the date upon which any period during which the Executive has
agreed not to sell the type of securities that may be issuable to such
Executive upon the exercise of such grant shall expire; and
c. the Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to two times the
sum of: (A) the amount of the Executive's Annual Base Salary at the
rate in effect immediately prior to the date of termination, and (B) the
Average Annualized Bonus Amount which shall be calculated by multiplying
by 12 the quotient determined by dividing (i) the sum of the actual cash
bonus earned by the Executive during each of the two fiscal years
immediately preceding the date of termination, plus the Prorated Bonus
Amount, by (ii) 24 plus the number of full months in the period for
which the Prorated Bonus Payment is calculated; and
d. the Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to the amount of
the forfeitable portion of the Executive's accrued benefit under the
Company's qualified 401(k) or other qualified retirement plans; and
e. Executive, together with his dependents, will continue following such
termination of employment to participate fully at the Company's expense
(subject to any required employee contributions at the rate in effect
immediately prior to the date of the Significant Transaction) in all
welfare benefit plans (other than disability insurance), programs,
practices and policies maintained or sponsored by the Company
immediately prior to the Significant Transaction, or
<PAGE>
receive substantially the equivalent coverage (or the full value thereof
in cash) from the Company, until the second anniversary of such
termination or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, provided, however, that
if the Executive becomes re-employed with another employer and is
eligible to receive reasonably comparable medical or other welfare
benefits under another employer provided plan, the Company's obligation
to provide the medical and other welfare benefits described herein shall
cease; and provided further that if Executive's continued participation
is not possible under the terms of such Company plans and programs, the
Company shall instead either arrange to provide Executive with
substantially similar benefits upon comparable terms or pay to the
Executive (within five (5) business days of the date of termination) an
amount equal to the full value thereof in cash; and
f. to the extent not theretofore paid or provided for, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy, practice, contract or agreement
of the Company ("Other Benefits").
Notwithstanding anything herein to the contrary, to the extent that any
payment or benefit provided for herein is required to be paid or vested on
any earlier date under the terms of any plan, agreement or arrangements,
such plan, agreement or arrangement shall control. Further, notwithstanding
anything herein to the contrary, if a Significant Transaction occurs and if
the Executive's employment with the Company is terminated by the Company for
a reason other than Cause prior to the date upon which the Significant
Transaction occurs, and if it can be reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a
Significant Transaction or (ii) otherwise arose in connection with or in
anticipation of a Significant Transaction, then for all purposes of this
Agreement, Executive shall be entitled to the benefits provided in Sections
1(a)-(f) above.
2. Cause, Other Than For Good Reason; Disability.
---------------------------------------------
a. Cause; Other Than for Good Reason. If the Executive's employment shall
---------------------------------
be terminated for Cause (as defined in Section 3 below), or if the
Executive voluntarily terminates employment, excluding a termination for
Good Reason, during the Post Significant Transaction Period, this
Agreement shall terminate without further obligations to the Executive
other than the obligation to pay the Executive (A) his Annual Base
Salary through the date of termination, (B) the amount of any
compensation previously deferred by the Executive, and (C) Other
Benefits, in each case to the extent theretofore unpaid.
<PAGE>
b. Disability. If the Executive's employment is terminated during the Post
----------
Significant Transaction Period by reason of the Executive's Disability,
this Agreement shall terminate without further obligations to the
Executive other than for payment of Accrued Obligations and the timely
payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive in a lump sum in cash within five (5) business
days of the date of termination of employment. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and reasonably
acceptable to the Executive or the Executive's legal representative. If
the Company determines in good faith that the Disability of the
Executive has occurred during the Post Significant Transaction Period,
it may give the Executive written notice of its intention to terminate
the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt
of such notice by the Executive, provided that, within the 30 days of
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties.
In the case of (a) or (b) above, all obligations shall be paid to the
Executive in a lump sum in cash within five (5) business days of date of the
termination of employment or such earlier time as may be required under law.
3. "Cause" means only: (a) commission of a felony or gross neglect of duty by
the Executive which is intended to result in substantial personal enrichment
of the Executive at the expense of the Company, (b) conviction of, or plea
of nolo contendere to, a crime involving moral turpitude, or (c) gross
neglect by the Executive in the performance of his duties to the Company
which results in material injury to the Company, and continues for more than
30 days after written notice given to the Executive pursuant to a two-thirds
vote of all of the members of the Board at a meeting called and held for
such purpose (after reasonable notice to Executive) and at which meeting the
Executive and his counsel were given an opportunity to be heard, such vote
to set forth in reasonable detail the nature of the failure. For purposes of
this definition of Cause, no act or omission shall be considered to have
been "willful" unless it was not in good faith and the Executive had
knowledge at the time that the act or omission was not in the best interest
of the Company. Any act, or failure to act, based on authority given
pursuant to a resolution duly adopted by the Board or upon the instructions
of the Chief Executive Officer or another senior officer of the Company or
based on the advice of counsel of the Company shall be conclusively presumed
to be done, or omitted to be done, by the Executive in good faith and in the
best interest of the Company.
4. Executive shall be deemed to have voluntarily terminated his employment for
Good Reason if the Executive leaves the employ of the Company for any reason
following:
<PAGE>
a. Any action by the Company which results in a material diminution in
Executive's position, authority, duties or responsibilities immediately
prior to the Significant Transaction, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive; provided, however, a sale or transfer of
some or all of the business of the Company or any of its subsidiaries or
other reduction in its business or that of its subsidiaries, or the fact
that the Company shall become a subsidiary of another company or the
securities of the Company shall no longer be publicly traded, shall not
constitute "Good Reason" hereunder;
b. Any reduction in the Executive's rate of Annual Base Salary for any
fiscal year to less than 100% of the rate of Annual Base Salary payable
for the completed fiscal year immediately preceding the Significant
Transaction; or
c. Failure of the Company to permit the Executive to participate in all
incentive, retirement, and savings policies and programs, and all
welfare benefit plans, practices and programs (including without
limitation, life, accidental death and travel accident insurance,
medical insurance, dental insurance or disability plans) to the extent
applicable generally at the time to other peer executives of the Company
and its affiliated companies, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive; or
d. The Company requires Executive to be based at any office or location
further than 50 miles from Kansas City, Missouri; or
e. Any failure by the Company to comply with and satisfy Section 7 of this
Agreement.
5. If any portion of any payment in the nature of compensation to or for the
benefit of Executive would, but for the application of this Section 5,
constitute a "parachute payment" within the meaning of Section 280G(b)(2) of
the Internal Revenue Code of 1986, as amended (the "Code"), the cash amounts
payable under Section 1 shall be reduced to the extent, but only to the
extent, necessary to assure that no portion of such payments or of any other
payments in the nature of compensation to or for the benefit of Executive
will be treated as a "parachute payment" as so defined. The determination
as to whether and to what extent, if any, cash payments under Section 1 are
required to be reduced in accordance with the preceding sentence shall be
made at the Company's expense by KPMG Peat Marwick LLP, Tax and Regulatory
Group or by such other certified public accounting firm, law firm or
benefits consulting firm as Executive and the Company may mutually agree
(KPMG Peat Marwick LLP or such other firm being hereinafter referred to as
the "Firm").
<PAGE>
Notwithstanding the limitation provided for in this Section 5, the Company
will pay the full amount of the cash payments required under Section 1
hereof within the time period described in said Section 1. The cash payments
required under Section 1 shall be made as a loan to Executive (the "Loan").
Such Loan shall be evidenced by a note substantially in the form of Exhibit
B attached hereto. Upon a Final Determination (as hereinafter defined) that
the amount paid in cash to Executive under Section 1 is required to be
reduced in order to satisfy the limitations of this Section 5, Executive
shall promptly repay that portion of the principal amount of the Loan equal
to the required reduction amount plus interest on such portion at a rate
equal to the rate described in Section 280G(d)(4) of the Code, and the
balance of the Loan shall be immediately and automatically forgiven. Upon a
Final Determination (as hereinafter defined) that no portion of the amount
paid in cash to Executive under Section 1 is required to be reduced under
this Section 5, the entirety of the Loan shall be immediately and
automatically forgiven.
The Firm shall make the determination required by the first sentence of this
Section 5 (the "Preliminary Determination") not later than thirty (30) days
following the date of the Executive's termination of employment and shall
deliver to Executive and the Company a copy of the Preliminary
Determination, together with any supporting documentation. If both the
Company and Executive agree with any Preliminary Determination by the Firm,
such Preliminary Determination shall constitute the Final Determination. If
either the Company or Executive believes that a Preliminary Determination by
the Firm is incorrect for any reason, such party may deliver to the Firm and
the other party any information that the Company or Executive thinks should
be considered by the Firm, within thirty (30) business days following
receipt by Executive and the Company of the Firm's Preliminary
Determination. Within 10 business days following receipt by the Firm of such
information, the Firm shall either confirm its Preliminary Determination or
issue its Alternative Determination which shall constitute the Final
Determination. The Final Determination shall be binding on all parties.
6. The Company agrees (i) to promptly reimburse Executive for any and all legal
fees and related expenses (including, without limitation, stenographer fees,
printing costs, etc.) incurred by him to enforce the provisions of this
Agreement or in contesting or disputing that the termination of his
employment is for Cause or other than for Good Reason (regardless of the
outcome thereof), (ii) to pay the cost of such judicial proceeding, and
(iii) to pay interest to Executive on all amounts owed to Executive under
this Agreement during any period of time that such amounts are withheld
pending judicial proceedings (such interest will be at the base rate as
published from time to time in the eastern edition of the Wall Street
Journal); provided, however, that the Company shall not be required to
reimburse the Executive for such fees, costs and expenses, if a court of
competent jurisdiction shall issue a final order to the effect that the
Executive shall not prevail on any claim relating to this Agreement.
<PAGE>
7. If the Company is at any time before, after or in connection with, a
Significant Transaction merged or consolidated into or with any other
corporation or other entity (whether or not the Company is the surviving
entity), or if substantially all of the assets thereof are transferred to
another corporation or other entity, the provisions of this Agreement will
be binding upon and inure to the benefit of the corporation or other entity
resulting from such merger or consolidation or the acquirer of such assets
(the "Successor Entity"), and this paragraph 7 will apply in the event of
any subsequent merger or consolidation or transfer of assets. The Company
will require any such Successor Entity to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any Successor Entity
which assumes and agrees to perform this Agreement by operation of law or
otherwise.
In the event of any merger, consolidation, or sale of assets described
above, nothing contained in this Agreement will detract from or otherwise
limit Executive's right to or privilege of participation in any stock option
or purchase plan or any bonus, profit sharing, pension, group insurance,
hospitalization, or other incentive or benefit plan or arrangement which may
be or become applicable to executives of the entity resulting from such
merger or consolidation or the entity acquiring such assets of the Company.
In the event of any merger, consolidation, or sale of assets described
above, references to the Company in this Agreement shall unless the context
suggests otherwise be deemed to include the entity resulting from such
merger or consolidation or the acquirer of such assets of the Company.
8. Any termination by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with the last paragraph of Section 13 of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated
and (iii) if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice). The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
"Date of Termination" means (i) if the Executive's employment is terminated
by the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified therein, as
the case may be, and (ii) if
<PAGE>
the Executive's employment is terminated by the Company other than for
Cause, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination.
9. All payments required to be made by the Company hereunder to, or on behalf
of, Executive or his dependents, beneficiaries, or estate will be subject to
the withholding of such amounts relating to tax and/or other payroll
deductions as may be required by law.
10. There shall be no requirement on the part of the Executive to seek other
employment or otherwise mitigate damages in order to be entitled to the full
amount of any payments and benefits to which Executive is entitled under
this Agreement, and the amount of such payments and benefits shall not be
reduced by any compensation or benefits received by Executive from other
employment, other than with respect to certain welfare benefits as provided
in the proviso to Section 1(e).
11. Nothing contained in this Agreement shall be construed as a contract of
employment between the Company and the Executive, or as a right of the
Executive to continue in the employ of the Company, or as a limitation of
the right of the Company to discharge the Executive with or without Cause;
provided that the Executive shall have the right to receive upon termination
of his employment the payments and benefits provided in this Agreement and
shall not be deemed to have waived any rights he may have either at law or
in equity in respect of such discharge.
12. No amendment, change, or modification of this Agreement may be made except
in writing, signed by both parties.
13. This Agreement shall terminate on the third anniversary of the date hereof,
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (each such date
hereinafter referred to as a "Renewal Date"), unless previously terminated,
the term of this Agreement shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least sixty days
prior to the Renewal Date the Company shall give notice to the Executive
that the term of this Agreement shall not be so extended. This Agreement
shall not apply to a Significant Transaction which takes place after the
termination of this Agreement.
Payments made by the Company pursuant to this Agreement shall be in lieu of
severance payments, if any, which might otherwise be available to Executive
under any severance plan, policy, program or arrangement generally
applicable to the employees of the Company. If for any reason Executive
receives severance payments (other than under this Agreement) upon the
termination of his employment with the Company, the amount of such payments
shall be deducted from the amount paid under this Agreement. The purpose of
this provision is solely to avert a duplication of benefits; neither this
provision nor the provisions of any other agreement shall be interpreted to
reduce the amount payable to Executive below the amount that would otherwise
have been payable under this Agreement.
<PAGE>
The provisions of this Agreement shall be binding upon and shall inure to the
benefit of Executive, his executors, administrators, legal representatives, and
assigns, and the Company and its successors.
The validity, interpretation, and effect of this Agreement shall be governed by
the laws of The Commonwealth of Massachusetts.
The invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
The Company shall have no right of set-off or counterclaims, in respect of any
claim, debt, or obligation, against any payments to Executive, his dependents,
beneficiaries, or estate provided for in this Agreement.
No right or interest to or in any payments shall be assignable by the Executive.
No right, benefit, or interest hereunder, shall be subject to anticipation,
alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or
set-off in respect of any claim, debt, or obligation, or to execution,
attachment, levy, or similar process, or assignment by operation of law. Any
attempt, voluntary or involuntary, to effect any action specified in the
immediately preceding sentence shall, to the full extent permitted by law, be
null, void, and of no effect.
All notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Executive: Michael K. Fox
-------------------
4941 Glendale Road
Westwood Hills, Kansas 66205
If to the Company: XTRA Corporation
-----------------
60 State Street - 11th Floor
Boston, Massachusetts 02109
Attn: Chair, Compensation Committee,
and the General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
either on the date of delivery (in the case of delivery by hand), or three
business days after deposit into the mails (in the case of delivery by mail).
<PAGE>
IN WITNESS WHEREOF, XTRA Corporation and Executive have each caused this
Agreement to be duly executed and delivered as of the date set forth above.
XTRA CORPORATION
By: /s/ Martin L. Solomon
----------------------------------------
Name: Martin L. Solomon
Title: Chair, Compensation Committee
/s/ Michael K. Fox
----------------------------------------
Michael K. Fox
<PAGE>
EXHIBIT A
Significant Transaction. For the purposes of this Agreement, a "Significant
-----------------------
Transaction" shall mean:
a. Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company, or XTRA Intermodal, Inc., in one or a series of transactions
(but excluding any reorganization, merger or consolidation or sale of
assets with or to the Company or any subsidiary of the Company, unless
in connection with such transaction there is also a Significant
Transaction involving the Company) (a "Business Combination"), in each
case unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the then outstanding shares of
common stock of the Company (the "Company Common Stock") and the then
outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting
Securities" immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination of
the Outstanding Company Common Stock and outstanding Company Voting
Securities, as the case may be, (ii) no individual, corporation,
partnership, limited liability company, or other entity, which term
shall include a "group" (within the meaning of section 13(d) of the
Securities Exchange Act of 1934 (the "Act"), excluding any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination, beneficially owns, directly or
indirectly, 30% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
b. Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company or XTRA Intermodal, Inc., other than a
liquidation or dissolution of XTRA Intermodal, Inc. into the Company or
any subsidiary of the Company.
<PAGE>
EXHIBIT 10.18
MATSON LEASING COMPANY, INC.
333 Market Street
San Francisco, California 94105
December __, 1994
Mr. Frederick M. Gutterson
128 Tracy Lane
Alamo, CA 94507
Dear Mr. Gutterson:
You currently are employed as President and Chief Executive Officer of
Matson Leasing Company, Inc. (the "Company"), a wholly-owned subsidiary of
Matson Navigation Company, Inc. ("Matson Navigation") which, in turn, is a
wholly-owned subsidiary of Alexander & Baldwin, Inc. ("A&B"). The Company
considers it essential to the best interests of the Company, Matson Navigation
and A&B to encourage your continued employment with the Company. The Company
recognizes that the possibility of a change in control of the Company may exist
and that such possibility and the uncertainty and questions it may raise, may
result in your departure or distraction to the detriment of the Company, Matson
Navigation and A&B.
To persuade you to remain in the employ of the Company and in consideration
of your agreement set forth in Section 2(b) hereof, the Company agrees that you
will receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with the Company is terminated
subsequent to a "change in control of the Company" (as defined in Section 2(a)
hereof) under the circumstances described below.
1. Term and Operation of Agreement. This Agreement shall commence on the
-------------------------------
date hereof and shall continue in effect through December 31, 1996; provided,
however, that commencing on January 1, 1997 and each January 1 thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless not later than September 30 of the preceding year, the Company shall have
given notice that it does not wish to extend this
<PAGE>
Agreement; and provided, further, that notwithstanding any such notice by the
Company not to extend, this Agreement shall continue in effect for a period of
twenty-four (24) months beyond the term provided herein if a "change in control
of the Company" (as defined in Section 2(a) hereof) shall have occurred during
such term. Notwithstanding anything in this Agreement to the contrary, unless a
"change in control of the Company" has previously occurred, this Agreement shall
terminate, and be of no further force or effect, (a) upon the occurrence of a
"change in control" of A&B (within the meaning of Section 2(a) of the agreement
between you and A&B dated August 22, 1991 (the "A&B Severance Agreement")),
provided that the A&B Severance Agreement remains in effect at the time of such
change in control of A&B, (b) in the event that A&B and any of its Affiliates
(as such term is defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), individually or collectively, shall
cease to beneficially own shares of the capital stock of Matson Navigation
having 50% or more of the then existing voting power of Matson Navigation and,
at such time, Matson Navigation shall beneficially own shares of the capital
stock of the Company having 50% or more of the then existing voting power of the
Company, or (c) in the event that A&B shall dispose of all or a substantial
portion of the assets of Matson Navigation (other than a disposition of such
assets to one or more Affiliates of A&B), and such assets which are disposed of
include shares of the capital stock of the Company having 50% or more of the
then existing voting power of the Company.
2. Change in Control. (a) No benefits shall be payable hereunder unless
-----------------
there shall have been a change in control of the Company, as set forth below,
and your employment by the Company shall thereafter have been terminated in
accordance with Section 3 below. For purposes of this Agreement, a "change in
control of the Company" shall have occurred in the event of (i) a sale of the
then outstanding shares of capital stock of the Company having more than 50% of
the then existing voting power of all outstanding securities of the Company,
whether by merger, consolidation or otherwise, (ii) the sale of all or
substantially all of the assets of the Company, and (iii) any other transaction
or course of action engaged in, directly or indirectly, by the Company, Matson
Navigation or A&B that has the substantially
<PAGE>
similar effect of the transactions of the type referred to in clause (i) or (ii)
above. The foregoing notwithstanding, a sale of the Company shall not be deemed
to have occurred (A) by reason of the sale or change in control of A&B, Matson
Navigation or any other corporation or entity that directly or indirectly owns
the Company, (B) so long as A&B or any of its Affiliates, individually or
collectively, own the then outstanding shares of capital stock of the Company
having 50% or more of the then existing voting power of all outstanding
securities of the Company, (C) in the event of the sale of shares of capital
stock of the Company to any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, Matson Navigation or any other
Affiliate of A&B, or (D) in the event of the sale or distribution of shares of
capital stock of the Company to shareholders of A&B, or the sale of assets of
the Company to any corporation or other entity owned, directly or indirectly, by
the shareholders of A&B, in either case in substantially the same proportions as
their ownership of stock in A&B.
(b) For purposes of this Agreement, a "potential change in control of
the Company" shall be deemed to have occurred if (i) A&B, Matson Navigation or
any of their Affiliates enters into an agreement the consummation of which would
result in the occurrence of a change in control of the Company, or (ii) A&B,
Matson Navigation or any of their Affiliates publicly announces an intention to
take or to consider taking actions that if consummated would constitute a change
in control of the Company. You agree that, subject to the terms and condi
tions of this Agreement, in the event of a potential change in control of the
Company, you will not terminate your employment with the Company until the
earliest of (i) a date that is six (6) months from the occurrence of such
potential change in control of the Company, (ii) the termination of your
employment by reason of Disability or Retirement, as defined in Subsection 3(i)
hereof, or (iii) the occurrence of a change in control of the Company.
3 . Termination Following Change in Control. If any of the events
---------------------------------------
described in Section 2(a) hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section 4
hereof upon the subsequent termination of
<PAGE>
your employment during the term of this Agreement unless such termination is (a)
because of your death or Retirement, (b) by the Company for Cause or Disability
or (c) by you other than for Good Reason.
(i) Disability; Retirement. Termination by the Company of your employment
----------------------
based on "Disability" shall mean termination because of your absence from your
duties with the Company on a full-time basis for six consecutive months, as a
result of your incapacity due to physical or mental illness, unless within 30
days after Notice of Termination (as hereinafter defined) is given following
such absence you shall have returned to the full-time performance of your
duties. Termination by the Company or you of your employment based on
"Retirement" shall mean termination in accordance with the Company's retirement
policy, including (at your election, as set forth in writing) early retirement,
generally applicable to its salaried employees or in accordance with any
retirement arrangement established with your written consent with respect to
you.
(ii) Cause. Termination by the Company of your employment for "Cause"
-----
shall mean termination upon (A) the willful and continued failure by you
substantially to perform your duties with the Company (other than any such
failure resulting from your incapacity due to physical or mental illness or such
actual or anticipated failure resulting from your termination for Good Reason),
after a demand for substantial performance is delivered to you by the Board
which specifically identifies the manner in which the Board believes that you
have not substantially performed your duties, or (B) the willful engaging by
you in conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of this paragraph, no act, or failure to
act, on your part shall be considered "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your action or
omission was in the best interest of the Company. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters
<PAGE>
of the entire membership of the Board of Directors of the Company (the "Board")
at a meeting of the Board called and held for the purpose (after reasonable
notice to you and an opportunity for you, together with your counsel, to be
heard before the Board), finding that in the good faith opinion of the Board you
were guilty of conduct set forth above in clauses (A) or (B) of the first
sentence of this paragraph and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your employment
-----------
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, any of the following occurring subsequent
to a change in control of the Company:
(A) a substantial decrease in the nature or status of your
responsibilities and duties from those in effect immediately prior to a
change in control of the Company; or if you shall cease to be a senior
executive officer of the Company;
(B) a reduction by the Company in your base salary as in effect on
the effective date of this Agreement or as the same may be increased from
time to time;
(C) the Company's requiring you to be based anywhere other than the
metropolitan area in which your office is located immediately prior to a
change in control of the Company, except for required travel on the
Company's business to an extent substantially consistent with your present
business travel obligations;
(D) the failure by the Company to provide you with, or include you as
a participant in, any benefit, pension or compensation plan, employee stock
ownership plan, savings and profit sharing plan, stock option plan, life
insurance plan, medical insurance plan or health-and-accident plan
(collectively, the "Benefit Plans") that the Company or its ultimate parent
corporation provides to their re-
<PAGE>
spective executive officers, on a substantially equivalent basis; or the
failure of the Company to provide you with the number of paid vacation days
to which you are entitled on the basis of years of service with the Company
in accordance with the Company's normal vacation policy immediately prior
to a change in control of the Company;
(E) the failure by the Company to obtain the assumption of the
agreement to perform this Agreement by any successor as contemplated in
Section 5 hereof; or
(F) any purported termination of your employment by the Company that
is not effected pursuant to a Notice of Termination satisfying the
requirements of paragraph (iv) below (and, if applicable, paragraph (ii)
above); and for purposes of this Agreement, no such purported termination
shall be effective.
Your right to terminate your employment pursuant to this paragraph shall not be
affected by your incapacity due to physical or mental illness, and your right to
terminate your employment pursuant to this paragraph shall not be limited by
your agreement contained in Section 2(b) hereof.
(iv) Notice of Termination. Any purported termination by the Company
---------------------
pursuant to paragraph (i) or (ii) above or by you pursuant to paragraph (iii)
above shall be communicated by written Notice of Termination to the other party
hereto in accordance with Section 6 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(v) Date of Termination. "Date of Termination" shall mean (A) if your
-------------------
employment is terminated for Disability, 30 days after Notice of Termination is
given (provided that you shall not have returned to the performance of your
duties on a
<PAGE>
full-time basis during such 30-day period), and (B) if your employment is
terminated pursuant to paragraphs (ii) or (iii) above or for any other reason,
the date specified in the Notice of Termination (which, in the case of a
termination pursuant to paragraph (ii) above shall not be less than 30 days, and
in the case of a termination pursuant to paragraph (iii) above shall not be more
than 60 days, from the date such Notice of Termination is given); provided that
if within 30 days after any Notice of Termination is given the party receiving
such Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected); and provided further that
the Date of Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Company shall continue to pay you your full
compensation in effect when the notice of dispute was given (including, but not
limited to, base salary, bonus and incentive compensation), and continue you as
a participant in all compensation, benefit and insurance plans in which you were
participating when the notice of dispute was given, until the dispute is finally
resolved in accordance with this paragraph (v). Amounts paid under this
paragraph (v) are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.
4. Compensation Upon Termination or During Disability.
--------------------------------------------------
(a) During any period that you fail to perform your duties hereunder
as a result of incapacity due to physical or mental illness, you shall continue
to receive your full base salary at the rate then in effect and all
compensation, including under the Benefit Plans, paid
<PAGE>
during the period until this Agreement is terminated pursuant to Section 3(i)
hereof. Thereafter, your benefits shall be determined in accordance with the
Company's long-term disability plan or other insurance programs then in effect
and the Benefit Plans.
(b) If your employment shall be terminated for Cause, the Company
shall pay you your full base salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given and the Company shall have
no further obligation to you under this Agreement.
(c) If your employment by the Company shall be terminated by the
Company other than for Cause, Retirement or Disability or by you for Good
Reason, then you shall be entitled to the benefits provided below:
(i) the Company shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of Termination
is given;
(ii) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance
pay to you, not later than the fifth day following the Date of Termination,
a lump sum severance payment (together with the payments provided in
Subsections 4(c)(iii) and (iv), the "Severance Payments") equal to two
times the sum of (A) your annual base salary at the highest rate in effect
during the year immediately preceding the occurrence of the circumstances
giving rise to the Notice of Termination given in respect thereof, and (3)
the highest annual amount paid to you (or awarded to you, if such amount
has not yet been paid) as bonus compensation during or in respect of any of
the three calendar years preceding the year in which the Date of
Termination occurs;
(iii) notwithstanding any provision of the A&B deferred compensation
plans and arrangements or any deferred compensation plans and arrangements
maintained by the Company (collectively, the "Deferred Compensation
Plans"), the Company shall pay you in one sum in cash not later than the
fifth day following the Date of Termination, the sum of all amounts
<PAGE>
to which you are entitled under the Deferred Compensation Plans whether
upon termination of your employment or otherwise, provided that in
determining the amounts to which you are entitled under the Alexander &
Baldwin, Inc. Excess Benefits Plan and the A&B Supplemental Executive
Retirement Plan, the provisions of said plans relating to a change in
control, not inconsistent with the terms of this Agreement, shall be
applied on the basis that the change in control of the Company did not
provide as a prerequisite to the consummation of the change in control that
the employer responsibilities under said plans are to be assumed by the
successor organization;
(iv) the Company shall pay to you in one sum in cash not later than
the fifth day following the Date of Termination, an amount equal to the sum
of (A) any incentive compensation that has been allocated for the fiscal
year preceding that in which the Date of Termination occurs but has not yet
been paid, and (B) any award under any incentive compensation plans that
has not yet been paid for any period that has closed prior to the Date of
Termination, and (C) a pro rata portion of the aggregate value of all
contingent awards to you for all uncompleted periods under such incentive
compensation plans calculated by multiplying for each such award, (1) a
fraction, the numerator of which shall be the number of full months elapsed
during the period for such award prior to the Date of Termination, and the
denominator of which shall be the total number of months contained in such
period, by (2) the amount of the award that would have been payable to you
following completion of such period at the target level of performance as
described in the applicable plan documents and any applicable worksheets;
and
(v) notwithstanding any other provisions of this Agreement, in the
event that any payment or benefit received or to be received by you in
connection with a change in control of the Company or the termination of
your employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, A&B, any Affiliate
of A&B or any other "Person" (defined for purposes of this Section 4(c)(v)
as such term is
<PAGE>
used in Sections 13(d) and 14(d) of the Exchange Act) whose actions result
in a change in control of the Company or any Person affiliated with the
Company, A&B, or such Person) (all such payments and benefits, including
the Severance Payments, being hereinafter called "Total Payments") would
not be deductible (in whole or part), by the Company, A&B, any Affiliate of
A&B or any other Person making such payment or providing such benefit as a
result of section 28OG of the Internal Revenue Code of 1986, as amended
(the "Code"), then, to the extent necessary to make such portion of the
Total Payments deductible (and after taking into account any reduction in
the Total Payments provided by reason of section 280G of the Code in such
other plan, arrangement or agreement), (A) the cash Severance Payments
shall first be reduced (if necessary, to zero), and (3) all other non-cash
Severance Payments shall next be reduced (if necessary, to zero). For
purposes of this limitation (i) no portion of the Total Payments the
receipt or enjoyment of which you have effectively waived in writing prior
to the Date of Termination shall be taken into account, (ii) no portion of
the Total Payments shall be taken into account that in the opinion of tax
counsel selected by the Company (and reasonably acceptable to you) does not
constitute a "parachute payment" within the meaning of section 280G(b)(2)
of the Code, including by reason of section 280G(b)(4)(A) of the Code,
(iii) the Severance Payments shall be reduced only to the extent necessary
so that the Total Payments (other than those referred to in clauses (i) or
(ii)) in their entirety constitute reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4)(B) of the Code
or are otherwise not subject to disallowance as deductions, in the opinion
of the tax counsel referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Company in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
If it is established pursuant to a final determination of a court or
an Internal Revenue Service proceeding that, notwithstanding the good faith
of you and the Company in applying the terms
<PAGE>
of this Subsection 4(c)(v), the aggregate "parachute payments" paid to you
or for your benefit are in an amount that would result in any portion of
such "parachute payments" not being deductible by reason of section 280G of
the Code, then you shall have an obligation to pay the Company upon demand
an amount equal to the sum of (i) the excess of the aggregate "parachute
payments" paid to you or for your benefit over the aggregate "parachute
payments" that could have been paid to you or for your benefit without any
portion of such "parachute payments" not being deductible by reason of
section 280G of the Code; and (ii) interest on the amount set forth in
clause (i) of this sentence at the rate provided in section 1274(b)(2)(B)
of the Code from the date of your receipt of such excess until the date of
such payment.
(d) Unless you are terminated for Cause, the Company shall maintain
or cause to be maintained in full force and effect, for your continued benefit,
for a period of two years, all health and welfare benefit plans, including life
insurance, health insurance and dental insurance, in which you participated or
were entitled to participate immediately prior to the Date of Termination,
provided that your continued participation is possible under the general terms
and provisions of such plans and programs. In the event that your participation
in any such plan or program is barred, the Company shall arrange to provide you
with benefits substantially similar to those which you are entitled to receive
under such plans and programs. At the end of such two-year period, you will be
entitled to take advantage of any conversion privileges applicable to the
benefits available under any such plans or programs.
(e) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by another employer after
the Date of Termination, or otherwise.
5 . Successors; Binding Agreement. (a) The Company shall require any
-----------------------------
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all
<PAGE>
or substantially all of the business and/or assets of the Company, by agreement
in form and substance satisfactory to you, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled hereunder if you terminated your employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid that executes and
delivers the agreement provided for in this Section 5 or that otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law, or
otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
6. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
<PAGE>
7. Miscellaneous. No provision of this Agreement may be modified, waived
-------------
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by you and the Company. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the time or at any prior or subsequent time. No agreements or representations,
oral or otherwise, expressed or implied, with respect to the subject matter
hereof have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California.
8. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be settled exclusively by arbitration in
San Francisco, California, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
<PAGE>
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
MATSON LEASING COMPANY, INC.
By /s/ J. Donohue
-------------------------
Vice President
Agreed to as of the
day of December, 1994.
- --
/s/ Frederick M. Gutterson
- --------------------------
<PAGE>
EXHIBIT 10.19
XTRA CORPORATION
Severance Agreement
-------------------
AGREEMENT, made this [___] day of December, 1997, by and between
[___________________] ("Executive") and XTRA Corporation (the "Company").
WITNESSETH
Executive is a key executive of the Company or one of its subsidiaries,
responsible, in part, for the policy-making functions of the Company and the
overall viability of the Company's business; and
The Company recognizes that the possibility that certain significant
transactions involving the Company may result in the departure or distraction of
management to the detriment of the Company and its shareholders, and
The Company wishes to assure Executive of fair severance should his
employment terminate in specified circumstances following the consummation of
certain significant transactions involving the Company and to assure Executive
of certain other benefits in the event of such transactions.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. If, within the 24-month period (the "Post Significant Transaction Period")
beginning on the date of a Significant Transaction (as defined in Exhibit A
attached hereto and made a part hereof), (i) Executive's employment with the
company is terminated (i) by the Company for any reason other than for
"Cause" (as defined in paragraph 2 below), or (ii) Executive terminates such
employment for Good Reason (as defined in paragraph 4 below):
a. The Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to the sum of
(i) the Executive's annual base salary ("Annual Base Salary") through
the date of such termination of employment, and any earned bonuses for
any completed fiscal period, to the extent not theretofore paid, (ii) a
prorated portion (the "Prorated Bonus Amount") of the award payable
under the Company's Economic Profit Incentive Plan, or any comparable or
successor annual plan or plans in which the Executive is then a
participant (the "Cash Plan"), notwithstanding anything to the contrary
in the Cash Plan, determined by calculating the product of (A) the bonus
payable with respect to the award for the fiscal period in which the
date of termination occurs under the Cash Plan annualizing the Company's
<PAGE>
performance under the plan up to the date of termination by dividing the
Company's performance to the date of termination by the number of full
months in the performance period through the date of termination and
multiplying the result by 12, times (B) a fraction, the numerator of
which is the number of full months in the current fiscal year through
the date of termination of employment, and the denominator of which is
12, and (iii) any compensation, including compensation for the fiscal
year in which the date of termination occurs, previously deferred by the
Executive (together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in the above subsections (i)
through (iii) shall be hereinafter referred to as the "Accrued
Obligations"); and
b. any stock, stock option or cash awards granted to the Executive by the
Company, including any awards under the Company's 1987 Stock Incentive
Plan (or any successor plan), that would have become vested and
exercisable had the Executive continued to be employed by the Company
shall immediately vest and become exercisable in full notwithstanding
any provision to the contrary of such grant and shall remain exercisable
until the later of (i) the latest date on which such grant could have
been exercised had the Executive remained employed by the Company, and
(ii) the date upon which any period during which the Executive has
agreed not to sell the type of securities that may be issuable to such
Executive upon the exercise of such grant shall expire; and
c. the Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to two times the
sum of: (A) the amount of the Executive's Annual Base Salary at the
rate in effect immediately prior to the date of termination, and (B) the
Average Annualized Bonus Amount which shall be calculated by multiplying
by 12 the quotient determined by dividing (i) the sum of the actual cash
bonus earned by the Executive during each of the two fiscal years
immediately preceding the date of termination, plus the Prorated Bonus
Amount, by (ii) 24 plus the number of full months in the period for
which the Prorated Bonus Payment is calculated; and
d. the Company will pay to Executive within five (5) business days of such
termination of employment a lump-sum cash payment equal to the amount of
the forfeitable portion of the Executive's accrued benefit under the
Company's qualified 401(k) or other qualified retirement plans; and
e. Executive, together with his dependents, will continue following such
termination of employment to participate fully at the Company's expense
(subject to any required employee contributions at the rate in effect
immediately prior to the date of the Significant Transaction) in all
welfare benefit plans (other than disability insurance), programs,
practices and policies maintained or sponsored by the Company
immediately prior to the Significant Transaction, or
<PAGE>
receive substantially the equivalent coverage (or the full value thereof
in cash) from the Company, until the second anniversary of such
termination or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, provided, however, that
if the Executive becomes re-employed with another employer and is
eligible to receive reasonably comparable medical or other welfare
benefits under another employer provided plan, the Company's obligation
to provide the medical and other welfare benefits described herein shall
cease; and provided further that if Executive's continued participation
is not possible under the terms of such Company plans and programs, the
Company shall instead either arrange to provide Executive with
substantially similar benefits upon comparable terms or pay to the
Executive (within five (5) business days of the date of termination) an
amount equal to the full value thereof in cash; and
f. to the extent not theretofore paid or provided for, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy, practice, contract or agreement
of the Company ("Other Benefits").
Notwithstanding anything herein to the contrary, to the extent that any
payment or benefit provided for herein is required to be paid or vested on
any earlier date under the terms of any plan, agreement or arrangements,
such plan, agreement or arrangement shall control. Further, notwithstanding
anything herein to the contrary, if a Significant Transaction occurs and if
the Executive's employment with the Company is terminated by the Company for
a reason other than Cause prior to the date upon which the Significant
Transaction occurs, and if it can be reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a
Significant Transaction or (ii) otherwise arose in connection with or in
anticipation of a Significant Transaction, then for all purposes of this
Agreement, Executive shall be entitled to the benefits provided in Sections
1(a)-(f) above.
2. Cause, Other Than For Good Reason; Disability.
---------------------------------------------
a. Cause; Other Than for Good Reason. If the Executive's employment shall
---------------------------------
be terminated for Cause (as defined in Section 3 below), or if the
Executive voluntarily terminates employment, excluding a termination for
Good Reason, during the Post Significant Transaction Period, this
Agreement shall terminate without further obligations to the Executive
other than the obligation to pay the Executive (A) his Annual Base
Salary through the date of termination, (B) the amount of any
compensation previously deferred by the Executive, and (C) Other
Benefits, in each case to the extent theretofore unpaid.
<PAGE>
b. Disability. If the Executive's employment is terminated during the Post
----------
Significant Transaction Period by reason of the Executive's Disability,
this Agreement shall terminate without further obligations to the
Executive other than for payment of Accrued Obligations and the timely
payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive in a lump sum in cash within five (5) business
days of the date of termination of employment. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and reasonably
acceptable to the Executive or the Executive's legal representative. If
the Company determines in good faith that the Disability of the
Executive has occurred during the Post Significant Transaction Period,
it may give the Executive written notice of its intention to terminate
the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt
of such notice by the Executive, provided that, within the 30 days of
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties.
In the case of (a) or (b) above, all obligations shall be paid to the
Executive in a lump sum in cash within five (5) business days of date of the
termination of employment or such earlier time as may be required under law.
3. "Cause" means only: (a) commission of a felony or gross neglect of duty by
the Executive which is intended to result in substantial personal enrichment
of the Executive at the expense of the Company, (b) conviction of, or plea
of nolo contendere to, a crime involving moral turpitude, or (c) gross
neglect by the Executive in the performance of his duties to the Company
which results in material injury to the Company, and continues for more than
30 days after written notice given to the Executive pursuant to a two-thirds
vote of all of the members of the Board at a meeting called and held for
such purpose (after reasonable notice to Executive) and at which meeting the
Executive and his counsel were given an opportunity to be heard, such vote
to set forth in reasonable detail the nature of the failure. For purposes
of this definition of Cause, no act or omission shall be considered to have
been "willful" unless it was not in good faith and the Executive had
knowledge at the time that the act or omission was not in the best interest
of the Company. Any act, or failure to act, based on authority given
pursuant to a resolution duly adopted by the Board or upon the instructions
of the Chief Executive Officer or another senior officer of the Company or
based on the advice of counsel of the Company shall be conclusively presumed
to be done, or omitted to be done, by the Executive in good faith and in the
best interest of the Company.
4. Executive shall be deemed to have voluntarily terminated his employment for
Good Reason if the Executive leaves the employ of the Company for any reason
following:
<PAGE>
a. Any action by the Company which results in a material diminution in
Executive's position, authority, duties or responsibilities immediately
prior to the Significant Transaction, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive; provided, however, a sale or transfer of
some or all of the business of the Company or any of its subsidiaries or
other reduction in its business or that of its subsidiaries, or the fact
that the Company shall become a subsidiary of another company or the
securities of the Company shall no longer be publicly traded, shall not
constitute "Good Reason" hereunder;
b. Any reduction in the Executive's rate of Annual Base Salary for any
fiscal year to less than 100% of the rate of Annual Base Salary payable
for the completed fiscal year immediately preceding the Significant
Transaction; or
c. Failure of the Company to permit the Executive to participate in all
incentive, retirement, and savings policies and programs, and all
welfare benefit plans, practices and programs (including without
limitation, life, accidental death and travel accident insurance,
medical insurance, dental insurance or disability plans) to the extent
applicable generally at the time to other peer executives of the Company
and its affiliated companies, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive; or
d. The Company requires Executive to be based at any office or location
further than 50 miles from [_________________________]; or
e. Any failure by the Company to comply with and satisfy Section 7 of this
Agreement.
5. If any portion of any payment in the nature of compensation to or for the
benefit of Executive would, but for the application of this Section 5,
constitute a "parachute payment" within the meaning of Section 280G(b)(2) of
the Internal Revenue Code of 1986, as amended (the "Code"), the cash amounts
payable under Section 1 shall be reduced to the extent, but only to the
extent, necessary to assure that no portion of such payments or of any other
payments in the nature of compensation to or for the benefit of Executive
will be treated as a "parachute payment" as so defined. The determination
as to whether and to what extent, if any, cash payments under Section 1 are
required to be reduced in accordance with the preceding sentence shall be
made at the Company's expense by KPMG Peat Marwick LLP, Tax and Regulatory
Group or by such other certified public accounting firm, law firm or
benefits consulting firm as Executive and the Company may mutually agree
(KPMG Peat Marwick LLP or such other firm being hereinafter referred to as
the "Firm").
<PAGE>
Notwithstanding the limitation provided for in this Section 5, the Company
will pay the full amount of the cash payments required under Section 1
hereof within the time period described in said Section 1. The cash
payments required under Section 1 shall be made as a loan to Executive (the
"Loan"). Such Loan shall be evidenced by a note substantially in the form
of Exhibit B attached hereto. Upon a Final Determination (as hereinafter
defined) that the amount paid in cash to Executive under Section 1 is
required to be reduced in order to satisfy the limitations of this Section
5, Executive shall promptly repay that portion of the principal amount of
the Loan equal to the required reduction amount plus interest on such
portion at a rate equal to the rate described in Section 280G(d)(4) of the
Code, and the balance of the Loan shall be immediately and automatically
forgiven. Upon a Final Determination (as hereinafter defined) that no
portion of the amount paid in cash to Executive under Section 1 is required
to be reduced under this Section 5, the entirety of the Loan shall be
immediately and automatically forgiven.
The Firm shall make the determination required by the first sentence of this
Section 5 (the "Preliminary Determination") not later than thirty (30) days
following the date of the Executive's termination of employment and shall
deliver to Executive and the Company a copy of the Preliminary
Determination, together with any supporting documentation. If both the
Company and Executive agree with any Preliminary Determination by the Firm,
such Preliminary Determination shall constitute the Final Determination. If
either the Company or Executive believes that a Preliminary Determination by
the Firm is incorrect for any reason, such party may deliver to the Firm and
the other party any information that the Company or Executive thinks should
be considered by the Firm, within thirty (30) business days following
receipt by Executive and the Company of the Firm's Preliminary
Determination. Within 10 business days following receipt by the Firm of
such information, the Firm shall either confirm its Preliminary
Determination or issue its Alternative Determination which shall constitute
the Final Determination. The Final Determination shall be binding on all
parties.
6. The Company agrees (i) to promptly reimburse Executive for any and all legal
fees and related expenses (including, without limitation, stenographer fees,
printing costs, etc.) incurred by him to enforce the provisions of this
Agreement or in contesting or disputing that the termination of his
employment is for Cause or other than for Good Reason (regardless of the
outcome thereof), (ii) to pay the cost of such judicial proceeding, and
(iii) to pay interest to Executive on all amounts owed to Executive under
this Agreement during any period of time that such amounts are withheld
pending judicial proceedings (such interest will be at the base rate as
published from time to time in the eastern edition of the Wall Street
Journal); provided, however, that the Company shall not be required to
reimburse the Executive for such fees, costs and expenses, if a court of
competent jurisdiction shall issue a final order to the effect that the
Executive shall not prevail on any claim relating to this Agreement.
<PAGE>
7. If the Company is at any time before, after or in connection with, a
Significant Transaction merged or consolidated into or with any other
corporation or other entity (whether or not the Company is the surviving
entity), or if substantially all of the assets thereof are transferred to
another corporation or other entity, the provisions of this Agreement will
be binding upon and inure to the benefit of the corporation or other entity
resulting from such merger or consolidation or the acquirer of such assets
(the "Successor Entity"), and this paragraph 7 will apply in the event of
any subsequent merger or consolidation or transfer of assets. The Company
will require any such Successor Entity to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any Successor Entity
which assumes and agrees to perform this Agreement by operation of law or
otherwise.
In the event of any merger, consolidation, or sale of assets described
above, nothing contained in this Agreement will detract from or otherwise
limit Executive's right to or privilege of participation in any stock option
or purchase plan or any bonus, profit sharing, pension, group insurance,
hospitalization, or other incentive or benefit plan or arrangement which may
be or become applicable to executives of the entity resulting from such
merger or consolidation or the entity acquiring such assets of the Company.
In the event of any merger, consolidation, or sale of assets described
above, references to the Company in this Agreement shall unless the context
suggests otherwise be deemed to include the entity resulting from such
merger or consolidation or the acquirer of such assets of the Company.
8. Any termination by the Company for Cause, or by the Executive for Good
Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with the last paragraph of Section 13 of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated
and (iii) if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice). The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
"Date of Termination" means (i) if the Executive's employment is terminated
by the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified therein, as
the case may be, and (ii) if
<PAGE>
the Executive's employment is terminated by the Company other than for
Cause, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination.
9. All payments required to be made by the Company hereunder to, or on behalf
of, Executive or his dependents, beneficiaries, or estate will be subject to
the withholding of such amounts relating to tax and/or other payroll
deductions as may be required by law.
10. There shall be no requirement on the part of the Executive to seek other
employment or otherwise mitigate damages in order to be entitled to the full
amount of any payments and benefits to which Executive is entitled under
this Agreement, and the amount of such payments and benefits shall not be
reduced by any compensation or benefits received by Executive from other
employment, other than with respect to certain welfare benefits as provided
in the proviso to Section 1(e).
11. Nothing contained in this Agreement shall be construed as a contract of
employment between the Company and the Executive, or as a right of the
Executive to continue in the employ of the Company, or as a limitation of
the right of the Company to discharge the Executive with or without Cause;
provided that the Executive shall have the right to receive upon termination
of his employment the payments and benefits provided in this Agreement and
shall not be deemed to have waived any rights he may have either at law or
in equity in respect of such discharge.
12. No amendment, change, or modification of this Agreement may be made except
in writing, signed by both parties.
13. This Agreement shall terminate on the third anniversary of the date hereof,
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (each such date
hereinafter referred to as a "Renewal Date"), unless previously terminated,
the term of this Agreement shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least sixty days
prior to the Renewal Date the Company shall give notice to the Executive
that the term of this Agreement shall not be so extended. This Agreement
shall not apply to a Significant Transaction which takes place after the
termination of this Agreement.
Payments made by the Company pursuant to this Agreement shall be in lieu of
severance payments, if any, which might otherwise be available to Executive
under any severance plan, policy, program or arrangement generally
applicable to the employees of the Company. If for any reason Executive
receives severance payments (other than under this Agreement) upon the
termination of his employment with the Company, the amount of such payments
shall be deducted from the amount paid under this Agreement. The purpose of
this provision is solely to avert a duplication of benefits; neither this
provision nor the provisions of any other agreement shall be interpreted to
reduce the amount payable to Executive below the amount that would otherwise
have been payable under this Agreement.
<PAGE>
The provisions of this Agreement shall be binding upon and shall inure to
the benefit of Executive, his executors, administrators, legal
representatives, and assigns, and the Company and its successors.
The validity, interpretation, and effect of this Agreement shall be governed
by the laws of The Commonwealth of Massachusetts.
The invalidity or unenforceability of any provisions of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
The Company shall have no right of set-off or counterclaims, in respect of
any claim, debt, or obligation, against any payments to Executive, his
dependents, beneficiaries, or estate provided for in this Agreement.
No right or interest to or in any payments shall be assignable by the
Executive. No right, benefit, or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt, or obligation, or
to execution, attachment, levy, or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any
action specified in the immediately preceding sentence shall, to the full
extent permitted by law, be null, void, and of no effect.
All notices and other communications hereunder shall be in writing and shall
be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive: [_____________________]
------------------- [_____________________]
[_____________________]
If to the Company: XTRA Corporation
----------------- 60 State Street - 11th Floor
Boston, Massachusetts 02109
Attn: Chair, Compensation Committee, and
the General Counsel
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective either on the date of delivery (in the case of delivery by hand),
or three business days after deposit into the mails (in the case of delivery
by mail).
<PAGE>
IN WITNESS WHEREOF, XTRA Corporation and Executive have each caused this
Agreement to be duly executed and delivered as of the date set forth above.
XTRA CORPORATION
By:______________________________
Name: Martin L. Solomon
Title: Chair, Compensation Committee
________________________________
[________________________]
<PAGE>
EXHIBIT A
Significant Transaction. For the purposes of this Agreement, a "Significant
-----------------------
Transaction" shall mean:
a. Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company, or XTRA Intermodal, Inc., in one or a series of transactions
(but excluding any reorganization, merger or consolidation or sale of
assets with or to the Company or any subsidiary of the Company, unless
in connection with such transaction there is also a Significant
Transaction involving the Company) (a "Business Combination"), in each
case unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the then outstanding shares of
common stock of the Company (the "Company Common Stock") and the then
outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting
Securities" immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination of
the Outstanding Company Common Stock and outstanding Company Voting
Securities, as the case may be, (ii) no individual, corporation,
partnership, limited liability company, or other entity, which term
shall include a "group" (within the meaning of section 13(d) of the
Securities Exchange Act of 1934 (the "Act"), excluding any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination, beneficially owns, directly or
indirectly, 30% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
b. Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company or [_______________________], other than a
liquidation or dissolution of [____________________] into the Company or
any subsidiary of the Company.
<PAGE>
EXHIBIT 11.1
XTRA CORPORATION
EARNINGS PER SHARE CALCULATIONS
FOR THE FOUR QUARTERS ENDED SEPTEMBER 30, 1997 AND 1996
(Millions of dollars except per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED:
12/31/96 3/31/97 6/30/97 9/30/97 YTD 1997
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Income $ 13 $ 8 $ 9 $ 13 $ 43
======== ======= ======= ======= ========
Primary EPS:
- -------------------------------------------------
Primary Shares Outstanding (in millions): 15.3 15.3 15.3 15.3 15.3
Primary Earnings Per Share: $ 0.85 $ 0.49 $ 0.56 $ 0.89 $ 2.78
======== ======= ======= ======= ========
Fully Diluted EPS:
- -------------------------------------------------
Fully Diluted Shares Outstanding (in millions): 15.3 15.3 15.3 15.4 15.4
Fully Diluted Earnings Per Share: $ 0.85 $ 0.49 $ 0.56 $ 0.88 $ 2.77
======== ======= ======= ======= ========
QUARTER ENDED:
12/31/95 3/31/96 6/30/96 9/30/96 YTD 1996
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Income $ 14 $ 8 $ 8 $ 11 $ 41
======== ======= ======= ======= ========
Primary EPS:
- -------------------------------------------------
Primary Shares Outstanding (in millions): 16.4 16.1 16.0 15.7 16.1
Primary Earnings Per Share: $ 0.85 $ 0.51 $ 0.49 $ 0.71 $ 2.56
======== ======= ======= ======= ========
Fully Diluted EPS:
- -------------------------------------------------
Fully Diluted Shares Outstanding (in millions): 16.4 16.1 16.0 15.7 16.1
Fully Diluted Earnings Per Share: $ 0.85 $ 0.51 $ 0.49 $ 0.71 $ 2.56
======== ======= ======= ======= ========
</TABLE>
<PAGE>
EXHIBIT 11.2
XTRA CORPORATION
CALCULATION OF WEIGHTED AVERAGE SHARES OUTSTANDING
FOR THE FOUR QUARTERS ENDED SEPTEMBER 30, 1997 AND 1996
(Millions of Shares)
<TABLE>
<CAPTION>
QUARTER ENDED:
12/31/96 3/31/97 6/30/97 9/30/97 YTD 1997
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Computation of Primary Shares Outstanding:
- -------------------------------------------------
Weighted average common shares outstanding 15.3 15.3 15.3 15.3 15.3
Common stock equivalents for primary EPS:
Stock options outstanding - - - - -
-------- ------- ------- ------- --------
Weighted average number of common shares
outstanding (primary) 15.3 15.3 15.3 15.3 15.3
======== ======= ======= ======= ========
Computation of Fully Diluted Shares Outstanding:
- -------------------------------------------------
Weighted average common shares outstanding 15.3 15.3 15.3 15.3 15.3
Common stock equivalents for fully diluted EPS:
Stock options outstanding - - - 0.1 0.1
-------- ------- ------- ------- --------
Weighted average number of common shares
outstanding (fully diluted) 15.3 15.3 15.3 15.4 15.4
======== ======= ======= ======= ========
<CAPTION>
QUARTER ENDED:
12/31/95 3/31/96 6/30/96 9/30/96 YTD 1996
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Computation of Primary Shares Outstanding:
- -------------------------------------------------
Weighted average common shares outstanding 16.4 16.1 16.0 15.7 16.1
Common stock equivalents for primary EPS:
Stock options outstanding - - - - -
-------- ------- ------- ------- --------
Weighted average number of common shares
outstanding (primary) 16.4 16.1 16.0 15.7 16.1
======== ======= ======= ======= ========
Computation of Fully Diluted Shares Outstanding:
- -------------------------------------------------
Weighted average common shares outstanding 16.4 16.1 16.0 15.7 16.1
Common stock equivalents for fully diluted EPS:
Stock options outstanding - - - - -
-------- ------- ------- ------- --------
Weighted average number of common shares
outstanding (fully diluted) 16.4 16.1 16.0 15.7 16.1
======== ======= ======= ======= ========
</TABLE>
<PAGE>
EXHIBIT 12.1
XTRA CORPORATION
STATEMENT OF THE CALCULATION OF EARNINGS TO FIXED CHARGES
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1997
(Millions of dollars)
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
EARNINGS
Income from operations before provision for income taxes $ 71 $ 69 $ 98
Add: Fixed charges (below) 63 66 42
----- ----- -----
$ 134 $ 135 $ 140
===== ===== =====
FIXED CHARGES
Interest expense, including interest portion of rent
expense $ 63 $ 66 $ 42
----- ----- -----
$ 63 $ 66 $ 42
===== ===== =====
Ratio of earnings to fixed charges 2.1 2.0 3.3
===== ===== =====
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, "earnings"
represents income from operations before taxes plus fixed charges. "Fixed
charges" for operations consist of interest on indebtedness and the portion of
rental expense which represents interest.
<PAGE>
EXHIBIT 12.2
XTRA, INC.
STATEMENT OF THE CALCULATION OF EARNINGS TO FIXED CHARGES
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1997
(Millions of dollars)
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
EARNINGS
Income from operations before provision for income taxes $ 71 $ 69 $ 98
Add: Fixed charges (below) 63 66 42
----- ----- -----
$ 134 $ 135 $ 140
===== ===== =====
FIXED CHARGES
Interest expense, including interest portion of rent
expense $ 63 $ 66 $ 42
----- ----- -----
$ 63 $ 66 $ 42
===== ===== =====
Ratio of earnings to fixed charges 2.1 2.0 3.3
===== ===== =====
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, "earnings"
represents income from operations before taxes plus fixed charges. "Fixed
charges" for operations consist of interest on indebtedness and the portion of
rental expense which represents interest.
<PAGE>
Exhibit 13.1
FIVE YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended September 30, 1997 1996 1995 1994 1993
(Millions of dollars except per share amounts)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Revenues $ 435 $ 422 $ 378 $ 355 $ 329
Cash provided from operations 269 272 237 233 196
Capital expenditures (including equipment acquired
under operating leases)/(1)/ 249 210 699 236 410
Income before income taxes 71 69 98 98 72
Net income 43 41 57 58 38/(2)/
Per Share Information
Fully diluted earnings per share $ 2.77 $ 2.56 $ 3.39 $ 3.38 $2.09/(2)/
Dividends declared per share $ .78 $ .70 $ .62 $ .54 $ .46
Financial Position
Total assets $1,585 $1,537 $1,516 $1,005 $ 858
Total debt and redeemable preferred stock 892 892 898 444 388
Total stockholders' equity 360 342 359 331 280
</TABLE>
/(1)/Includes capital expenditures for acquisitions. See Note 2 of the Notes to
Consolidated Financial Statements.
/(2)/Includes the effect of the Revenue Reconciliation Bill of 1993 which raised
the federal corporate tax rate from 34% to 35%. The Company restated the
deferred tax liabilities and assets to reflect the higher rate, recording
additional tax expense of approximately $5 million.
<PAGE>
Exhibit 13.2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE YEARS ENDED SEPTEMBER 30, 1997
(Not covered by Report of Independent Public Accountants)
The discussion below contains certain forward-looking statements relating
to, among other things, estimates of economic and industry conditions,
equipment utilization and capital expenditures. Actual results may vary
from those contained in such forward-looking statements. See "Cautionary
Statements for Purposes of the 'Safe Harbor' Provisions of the Private
Securities Litigation Reform Act of 1995" contained below.
Revenues and Business Conditions
XTRA Corporation leases, primarily on an operating basis, freight
transportation equipment including over-the-road trailers, marine
containers, intermodal trailers, chassis, and domestic containers. XTRA's
equipment utilization, lease rates, and therefore, profitability, are
impacted by the supply of and demand for available equipment, the level of
economic activity in North America, world trade activity, the actions of
its competitors, and other factors in the freight transportation industry.
The discussion and data below are presented on a consolidated basis.
The Company's pretax profits have been cyclical, principally due to the
variability of the Company's revenues and the high percentage of fixed
costs. To moderate this cyclicality, the Company attempts to maintain a
balance between the amount of equipment leased on a per diem and term basis
and maintains a mix of various types of freight transportation equipment
available for lease. The Company has historically maintained a high
proportion of its debt at fixed rates to reduce the impact of fluctuations
in interest rates.
The June 1995 marine container acquisition, in addition to providing a
further diversification of its customer base, has reduced XTRA's dependence
on the North American transportation industry. Although the marine
container business is international, substantially all transactions are
denominated in U.S. dollars. This discussion includes the marine container
operating results for fiscal years 1997 and 1996 and for the three months
ended September 30, 1995. Reference to years in the discussion below refer
to XTRA Corporation's fiscal years (the period from October 1 to
September 30).
Revenues
Revenues are a function of lease rates and working units; the latter
depends on fleet size and equipment utilization. Utilization, the ratio of
revenue-earning units to the total fleet, is derived from billing
information, usage reports and other information from customers,
assumptions based on historical experience, and equipment inventories taken
at Company depots, and is an approximation. Utilization is impacted by the
supply of and demand for available equipment, the level of economic
activity in North America, and world trade activity.
1
<PAGE>
The following table sets forth the Company's average equipment utilization
(dollar weighted by investment in each type of equipment), average fleet
size in units, and average net investment in revenue equipment for the
years ended September 30, 1997, 1996, and 1995. The Company's average fleet
size and net investment includes equipment owned by the Company, equipment
leased-in from third parties under operating and capital leases, and
equipment leased to third parties under finance leases.
<TABLE>
<CAPTION>
Year ended September 30, 1997 1996 1995/(1)/
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
North America:
Utilization 85% 81% 86%
Units 131,000 133,000 129,000
Net investment in equipment (in millions) $996 $1,005 $919
International:
Utilization 79% 81% 90%
Units 157,000 141,000 31,000
Net investment in equipment (in millions) $418 $403 $147
Consolidated:
Utilization 84% 81% 86%
Units 288,000 274,000 160,000
Net investment in equipment (in millions) $1,414 $1,408 $1,066
</TABLE>
/(1)/The Company acquired certain net assets of Matson Leasing Company,
Inc. on June 30, 1995. The 1995 figures shown here are annual
averages. 1995 fourth quarter average International utilization was
90%, fleet size was 125,000 units, and net investment in equipment was
$367 million. 1995 fourth quarter average Consolidated dollar-weighted
utilization was 84%, fleet size was 256,000 units, and net investment
in equipment was $1,357 million.
Overall 1996 revenues increased by 12% to $422 million from $378 million in
1995, principally due to the inclusion of the marine container business for
the full fiscal year versus one quarter of the year in 1995, partially
offset by lower revenues generated from the Company's domestic business,
primarily intermodal trailers. The domestic transportation industry did not
experience the moderate growth seen in the domestic economy in 1996. The
decrease in utilization of the Company's domestic transportation equipment
to 81% in 1996 from 86% in 1995 reflected reduced freight levels and
increased industry-wide equipment supply. The over-supply of domestic
transportation equipment was due to the record level of industry purchases
in 1994 and 1995. In 1996, industry purchases of equipment were reduced
considerably. Lower growth in freight demand, particularly in the Far East,
affected worldwide growth of marine container usage. An increase in the
supply of marine containers resulting from substantial industry-wide
purchases also reduced utilization of leased containers. XTRA's marine
container utilization declined to average 81% for 1996 from 90% in 1995.
The significant increase in average net investment in equipment in 1996 was
primarily attributable to the acquisition of the marine container business
in late 1995.
Revenues increased 3% or $13 million to $435 million in 1997, primarily due
to improvement in the North American businesses. The Company's overall
average equipment utilization increased by 3%.
In 1997, XTRA's North American revenues increased 3% or $12 million due to
higher equipment utilization and improving lease rates. The Company's North
American utilization began improving during the second half of 1996 and
continued into 1997. Utilization averaged 85% in 1997, as compared to 81%
in 1996. Lower industry-wide capital spending and increasing demand, as
reflected in improving intermodal loadings and truck tonnage, positively
impacted the supply/demand balance during 1997. The 2,000 unit decrease in
fleet size was primarily due to reductions in the intermodal trailer fleet,
offset by additions to the over-the-road trailer fleet.
2
<PAGE>
XTRA's 1997 International revenues increased 2% or $1 million, primarily
due to a larger fleet size and an increase in the number of working units
in the second half of 1997, offset by a lower average effective lease rate.
More balanced world-wide trade resulted in more efficient use of equipment
by shippers, hence lower usage of leased containers. In 1996, substantial
industry-wide purchases had increased the supply of marine containers.
XTRA's marine container utilization declined to average 79% in 1997 from
81% in 1996. The industry over-capacity and sluggish demand for leased
marine containers continue to exert pressure on container lease rates. The
Company's average international fleet size increased to 157,000 units in
1997 from 141,000 units in 1996 as a result of modest capital spending.
In 1997, industry container purchases were down considerably versus 1996.
In the third quarter of 1997, XTRA's international utilization improved
over the comparable prior year period for the first time in seven quarters.
This improvement continued into the fourth quarter of 1997. While industry
over-capacity and rate deterioration continue to be a problem, XTRA remains
cautiously optimistic about the longer term prospects of this business
segment.
Operating Expenses
Depreciation expense increased 25% or $29 million in 1996 due to the
addition of the marine container fleet for the full fiscal year as well as
an increase in the over-the-road fleet. In 1997, depreciation expense
increased 2% or $3 million mainly due to a larger fleet.
In 1996, rental equipment operating expenses increased 15% or $13 million
due to the inclusion of the marine container business for the full fiscal
year. In 1997, rental equipment operating expenses increased 8% or
$8 million due to higher storage and repositioning costs associated with
more idle marine containers, as well as increased facility costs.
In 1996, selling and administrative expenses increased 20% or $6 million
due to the marine container business included for the full fiscal year. In
1997, selling and administrative expenses increased 8% or $3 million.
Approximately half of the increase was due to an increase in bad debt
expense.
Interest Expense
Interest expense is a function of the amount of average net debt
outstanding (long-term debt less cash) and average interest rates. The
following table sets forth total average net debt outstanding and interest
expense as a percentage of total average net debt outstanding.
<TABLE>
<CAPTION>
Year ended September 30, 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average net debt outstanding (millions of dollars) $882 $906 $518
Interest expense as a percentage of average net debt outstanding 7.1% 7.3% 8.0%
</TABLE>
In 1996, interest expense increased 60% or $25 million due primarily to an
increase in average net debt outstanding. In 1997, interest expense
decreased 5% or $3 million, due to a decrease in average net debt
outstanding, as well as a decrease in the average effective interest rate.
Income Before Provision for Income Taxes
In 1996, pretax earnings decreased 29% or $29 million primarily due to
lower domestic equipment utilization and as a result of the Company's high
percentage of fixed costs. Pretax earnings in 1997 increased 3% or
$2 million due primarily to improving utilization.
Provision for Income Taxes
The Company's effective income tax rate was approximately 42%, 41%, and 40%
in 1995, 1996, and 1997, respectively. For additional information regarding
the provision for income taxes, see Notes 1 and 5 of the Notes to
Consolidated Financial Statements.
3
<PAGE>
Financial Liquidity and Capital Resources
Significant capital investment is required by the Company's leasing
operations, not only for growth but also for replacement of units retired
from service. However, during periods of slower economic growth or excess
equipment supplies, capital expenditures may be curtailed until demand for
transportation equipment increases.
The following table sets forth capital expenditures by equipment type,
including units acquired by acquisition, units purchased, and units leased-
in from third parties under operating leases. The capital expenditures for
1998 represent XTRA's commitments for 1998 as of November 12, 1997.
<TABLE>
<CAPTION>
(Millions of dollars) 1998 1997 1996 1995
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Over-the-road trailers $14 $193 $100 $204
Marine containers 9 30 79 379
Intermodal trailers - - 2 50
Chassis - 2 22 46
Domestic containers - 18 2 1
Other 1 6 5 19
---------------------------------
Total $24 $249 $210 $699
---------------------------------
</TABLE>
The Company recognizes the importance of managing capital spending as
essential to maintaining the quality of its fleet. The Company increases
its fleet by purchasing new and used equipment and by acquiring equipment
from other leasing companies. 1995 capital expenditures included
$360 million in equipment acquired from Matson Leasing Company, Inc. In
1996, capital expenditures decreased to $210 million in response to weak
industry conditions in both the domestic and international businesses. In
1997, capital expenditures increased to $249 million as XTRA purchased
over-the-road trailers to respond to current and anticipated strong future
market demand. As of November 12, 1997, XTRA's committed capital
expenditures for 1998 amounted to $24 million. The Company may increase
capital spending in 1998 if conditions warrant. Actual capital expenditures
for 1998 will depend on the Company's assessment of business conditions.
During the three years ended September 30, 1997, the Company generated
$778 million of cash flow from operations. During this same period, XTRA
invested $1,156 million in property and equipment including acquisitions,
paid dividends of $34 million, repurchased $74 million of common stock net
of stock options exercised, and increased net debt (debt less cash)
outstanding by $486 million.
Although some level of future capital spending can be financed internally,
the ability to fund expenditures above that level will depend upon the
availability of external financing.
In addition to cash flow from operations, XTRA generally has available to
it a variety of external means to finance future growth of its leasing
equipment fleet. The Company's external financing options include a
combination of medium-term and long-term borrowings in the public debt
market, a revolving credit agreement, intermediate and long-term financing
from banks and institutional investors, and lease financing. The Company
has registered with the Securities and Exchange Commission $604 million of
securities consisting of Preferred Stock and Common Stock of the Company
and Senior and Subordinated Debt Securities of its subsidiary XTRA, Inc.,
fully and unconditionally guaranteed by XTRA Corporation (see Note 4 of
Notes to Consolidated Financial Statements). As of November 12, 1997, XTRA,
Inc. has $532 million available for future issuance under this Shelf
Registration. As of November 12, 1997, the Company had $144 million of
unused committed credit available under its $300 million Revolving Credit
Agreement. The Company's access to external financing will depend upon
prevailing market conditions and the Company's credit ratings. There can be
no assurance that XTRA will be able to borrow funds in
4
<PAGE>
those markets at attractive rates or with covenants that are not more
restrictive than the current debt covenants. The Company also has potential
access to external funds through the issuance of capital stock. XTRA deems
its sources of financing adequate to meet projected needs.
The Company's source of funds for the payment of dividends on its capital
stock are advances and dividends from its direct and indirect wholly-owned
subsidiaries, including XTRA, Inc. The primary sources of funds for XTRA,
Inc. are cash flows from operations, external financing, and advances from
its subsidiaries. Several of the Company's loan agreements contain
covenants that restrict the payment of dividends or repurchases of common
stock by the Company. In addition, certain loan agreements contain
covenants that restrict advances to and the payment of dividends to the
Company by its subsidiaries, including XTRA, Inc. Under the most
restrictive provisions of the Company's loan agreements, the repurchase of
common stock and/or the amount of cash dividends which could be paid on the
Company's capital stock was limited to $110 million at September 30, 1997.
For additional information regarding debt, see Note 4 of the Notes to
Consolidated Financial Statements.
The Company has authorized the repurchase of up to $200 million of XTRA's
common stock. The timing of the repurchases, which could occur over an
extended period of time, will depend on price, market conditions, and other
factors. As of November 12, 1997, the Company had repurchased $79 million
of common stock under this authorization.
Year 2000
The Company does not expect to incur significant costs during the next two
to three years to address the impact of the "Year 2000 problem" on its
information systems. The "Year 2000 problem," which is common to most
corporations, concerns the inability of information systems, primarily
computer software programs, to properly recognize and process date
sensitive information as the year 2000 approaches. The Company has
completed an assessment of the majority of its systems and is in the
process of developing a specific workplan to address this issue. The
Company currently believes it will be able to modify or replace its
affected systems in time to minimize any detrimental effects on operations.
The Company expects that the costs it will incur to ensure its systems are
Year 2000 compliant will not be material to the Company's results of
operations, liquidity, or consolidated financial position.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations and letter to our shareholders contain certain
forward-looking statements, including estimates of economic and industry
conditions, equipment utilization, and capital expenditures. In addition,
the Company may occasionally make forward-looking statements and estimates
such as forecasts and projections of the Company's future performance or
statements of management's plans and objectives. These forward-looking
statements may be contained in, among other things, SEC filings and press
releases made by the Company and in oral statements made by the officers of
the Company. Actual results could differ materially from those contained in
such forward-looking statements. Therefore, no assurances can be given that
the results in such forward-looking statements will be achieved. Important
factors that could cause the Company's actual results to differ from those
contained in such forward-looking statements include, among others, the
factors mentioned below. An additional risk factor is the Company's ability
to address the "Year 2000 problem" in a timely and efficient manner.
Variable Revenues and Fixed Operating Expenses
The Company's revenues, which are based on lease rates, utilization, and
supply of and demand for equipment, are variable due to their dependence on
the level of domestic and international economic activity, as well as
changing industry levels of equipment supply. In addition, the Company has
a high percentage of fixed operating expenses,
5
<PAGE>
which include depreciation, a portion of rental equipment operating
expenses, and selling and administrative expenses. As a result, the
Company's pretax profits are cyclical. If domestic or global economic
activity remains slow or if an oversupply of industry equipment exists,
operating margins may be adversely affected. See below for further
discussion.
Lease Rates
Lease rates depend on the type of lease, length of term, maintenance
provided, and the type and age of the equipment. Future lease rates may
increase or decrease depending on competition, economic conditions, and
other factors.
Utilization
Utilization is the ratio of revenue earning units to the total fleet.
Utilization is directly impacted by the level of economic activity in North
America, world trade activity, the supply of and demand for available
equipment, the actions of competitors, and other factors in the freight
transportation industry.
Supply of Equipment
New equipment, supplied by a number of manufacturers, is built to the
Company's specifications and reflects industry standards and customer
needs. There is often a considerable amount of time between when an order
is placed and when the equipment is delivered. In addition, it is difficult
to accurately predict demand for the Company's equipment in future periods.
As a result, the Company's performance in a given period may be adversely
affected either because of its inability to quickly increase fleet size
because of extended back orders, to take advantage of unexpectedly strong
demand, or to quickly reduce fleet size in order to react to reduced
demand.
Demand
Demand for equipment is affected by economic factors, equipment supply, and
shifting traffic trends in the industry. A softening domestic or
international economy may result in lower levels of freight shipments.
Shifting traffic trends in the industry, such as truckers competing more
aggressively, may divert some intermodal freight to over-the-road. Other
items affecting demand which may impact leasing needs can include severe
adverse weather conditions such as floods or snow storms or strikes by
transportation unions.
Operating Expenses
The Company's operating expenses consist of a high percentage of fixed
costs and thus profitability can change as revenues fluctuate due to
increases and decreases in utilization and/or lease rates. The fixed costs
include depreciation, a portion of rental equipment operating expenses, and
selling and administrative expenses. As a result, income from operations
can be cyclical. If revenues decline in any period, operating margins may
change from those reported in prior periods due to the fixed nature of a
significant portion of the Company's expenses.
Capital Needs
The acquisition of new equipment, both for growth as well as replacement of
older equipment, requires significant capital. In addition, over the past
several years, the Company has grown its fleet through acquisitions of
other companies such as Strick Lease and Matson Leasing Company, Inc.,
requiring additional capital. While the Company generally has had available
a variety of sources to finance such expenditures and acquisitions at
favorable rates or terms, the availability of such capital depends heavily
upon prevailing market conditions, the Company's capital structure, and its
credit ratings. No assurances can be given that financing will continue to
be available at attractive rates or with covenants that are not more
restrictive than the Company's current debt covenants.
Interest Rates
Over the past several years, interest rates have remained at relatively low
levels. Due to the Company's heavy dependence upon external financing to
fund its capital needs and acquisitions, the level of interest rates
directly affects the Company's profitability. The Company attempts to
moderate the effect of changing interest rates by maintaining a
6
<PAGE>
high percentage of its debt with fixed rates. An increase in interest rates
or a downgrade in the Company's debt ratings would adversely impact the
cost of new borrowings, thereby adversely affecting its profitability.
Foreign Exchange Rates
A portion of the Company's business is transacted in local currencies. As a
result, the Company's financial results are subject to foreign exchange
rate fluctuations.
Acquisitions
Over the past years, the Company has used acquisitions of fleets operated
by other companies to help grow its business. In order for the Company to
take advantage of favorable acquisition opportunities as they are
presented, it may be necessary for the Company to significantly increase
its debt leverage ratio which could adversely affect its credit ratings.
Also, the ability of the Company to take advantage of acquisition
opportunities will depend on the availability of capital. See financial
liquidity and capital resources above for discussion.
Consolidations of the Company's Customer Base
Consolidations through mergers or acquisitions of the Company's customer
base, including railroad or steamship lines, may result in reduced demand
for leased equipment.
7
<PAGE>
Exhibit 13.3
INDEX TO FINANCIAL STATEMENTS
XTRA Corporation and Subsidiaries
(Information required by Part II, Items 7 and 8 and Part IV, Item 14 of Form
10-K)
<TABLE>
<CAPTION>
Financial Statements Page
<S> <C>
Consolidated balance sheets - September 30, 1997 and 1996 2
Consolidated income statements for the three years ended September 30, 1997 3
Consolidated statements of cash flows for the three years ended September 30, 1997 4
Unaudited quarterly condensed consolidated income statements for the years ended
September 30, 1997 and 1996 5
Consolidated statements of stockholders' equity for the three years ended September 30, 1997 6
Notes to consolidated financial statements 7
Report of independent public accountants 18
</TABLE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
XTRA Corporation and Subsidiaries
<TABLE>
<CAPTION>
September 30, 1997 1996
(Millions of dollars except per share and share amounts)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Property and equipment at cost
Revenue equipment and other $2,112 $1,977
Accumulated depreciation (658) (570)
------------------------
Net property and equipment 1,454 1,407
------------------------
Cash 4 8
Trade receivables, net 65 52
Lease contracts receivable 43 42
Other assets 19 28
------------------------
$1,585 $1,537
------------------------
Liabilities and Stockholders' Equity
Liabilities
Debt $ 892 $ 892
Deferred income taxes 252 227
Accounts payable and accrued expenses 81 76
------------------------
Total liabilities 1,225 1,195
------------------------
Commitments and contingencies (Note 6)
Stockholders' equity
Preferred Stock, without par value; total authorized: 3,000,000 shares
Common Stock, par value $.50 per share; authorized:
30,000,000 shares; issued and outstanding:
15,276,600 shares at September 30, 1997;
15,550,499 shares at September 30, 1996 8 8
Capital in excess of par value 52 64
Retained earnings 304 273
Cumulative translation adjustment (4) (3)
------------------------
Total stockholders' equity 360 342
------------------------
$1,585 $1,537
------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
CONSOLIDATED INCOME STATEMENTS
XTRA Corporation and Subsidiaries
<TABLE>
<CAPTION>
For the year ended September 30, 1997 1996 1995
(Millions of dollars except per share amounts)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 435 $ 422 $ 378
Operating expenses
Depreciation on rental equipment 149 146 117
Rental equipment operating expense 109 101 88
Selling and administrative expense 43 40 34
---------------------------------------
301 287 239
---------------------------------------
Operating income 134 135 139
Interest expense 63 66 41
---------------------------------------
Income before provision for income taxes 71 69 98
Provision for income taxes 28 28 41
---------------------------------------
Net income $ 43 $ 41 $ 57
---------------------------------------
Earnings per fully diluted common share $2.77 $2.56 $3.39
Weighted average number of fully diluted common and
common equivalent shares outstanding (in millions) 15.4 16.1 16.9
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
XTRA Corporation and Subsidiaries
<TABLE>
<CAPTION>
For the year ended September 30, 1997 1996 1995
(Millions of dollars)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operations
Net Income $ 43 $ 41 $ 57
Add non-cash income and expense items:
Depreciation and amortization, net 148 146 111
Deferred income taxes, net 26 31 30
Bad debt expense 5 3 4
Add other cash items:
Net change in receivables, other assets,
payables and accrued expenses (7) 2 (12)
Cash receipts on lease contracts receivable 21 18 19
Recovery of property and equipment net book value 33 31 28
---------------------------------------
Total cash provided from operations 269 272 237
---------------------------------------
Cash used for investment activities
Additions to property and equipment (249) (205) (339)
Acquisition of certain net assets of Matson Leasing Co., Inc. - (5) (358)
---------------------------------------
Total cash used for investment activities (249) (210) (697)
---------------------------------------
Cash flows from financing activities
Borrowings of debt 72 247 493
Payments of debt (72) (252) (41)
Net proceeds from exercise of stock options 1 1 2
Repurchase of common stock (13) (45) (20)
Dividends paid (12) (11) (11)
---------------------------------------
Total cash provided by (used for) financing activities (24) (60) 423
---------------------------------------
Net increase (decrease) in cash (4) 2 (37)
Cash at beginning of year 8 6 43
---------------------------------------
Cash at end of year $ 4 $ 8 $ 6
---------------------------------------
Total interest paid $ 59 $ 52 $ 35
Total income taxes paid (refunded) $ (5) $ (2) $ 17
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
UNAUDITED QUARTERLY CONDENSED CONSOLIDATED INCOME STATEMENTS
XTRA Corporation and Subsidiaries
<TABLE>
<CAPTION>
For the four quarters ended September 30, 1997 and 1996 First Second Third Fourth
(Millions of dollars except per share amounts) Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------
1997
<S> <C> <C> <C> <C>
Revenues $ 111 $ 102 $ 105 $ 117
Expenses/(1)/ 89 89 91 95
---------------------------------------------------
Income before income taxes 22 13 14 22
Provision for income taxes 9 5 5 9
---------------------------------------------------
Net income $ 13 $ 8 $ 9 $ 13
---------------------------------------------------
Earnings per fully diluted common share $ .85 $ .49 $ .56 $ .88
Weighted average number of fully diluted common
shares outstanding (in millions) 15.3 15.3 15.3 15.4
1996
Revenues $ 112 $ 101 $ 101 $ 108
Expenses/(1)/ 89 87 88 89
---------------------------------------------------
Income before income taxes 23 14 13 19
Provision for income taxes 9 6 5 8
---------------------------------------------------
Net income $ 14 $ 8 $ 8 $ 11
---------------------------------------------------
Earnings per fully diluted common share $ .85 $ .51 $ .49 $ .71
Weighted average number of fully diluted common
shares outstanding (in millions) 16.4 16.1 16.0 15.7
/(1)/Includes operating and interest expenses.
</TABLE>
5
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
XTRA Corporation and Subsidiaries
<TABLE>
<CAPTION>
Common Capital in
Stock Excess Cumulative
For the three years ended September 30, 1997 $.50 Par of Par Retained Translation
(Millions of dollars) Value Value Earnings Adjustment
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at September 30, 1994 $8 $126 $197 $ -
Net income - - 57 -
Common stock cash dividends declared at $.62 per share - - (11) -
Options exercised and related tax benefits - 2 - -
Repurchase of common stock - (20) - -
Translation adjustment - - - -
----------------------------------------------------
Balance at September 30, 1995 8 108 243 -
Net income - - 41 -
Common stock cash dividends declared at $.70 per share - - (11) -
Options exercised and related tax benefits - 1 - -
Repurchase of common stock - (45) - -
Translation adjustment - - - (3)
----------------------------------------------------
Balance at September 30, 1996 8 64 273 (3)
Net income - - 43 -
Common stock cash dividends declared at $.78 per share - - (12) -
Options exercised and related tax benefits - 1 - -
Repurchase of common stock - (13) - -
Translation adjustment - - - (1)
----------------------------------------------------
Balance at September 30, 1997 $8 $ 52 $304 $(4)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
XTRA Corporation and Subsidiaries
(1) Summary of Significant Accounting Policies
Nature of Operations
XTRA Corporation leases, primarily on an operating basis, freight
transportation equipment including over-the-road trailers, marine
containers, intermodal trailers, chassis, and domestic containers. XTRA
leases over-the-road and intermodal equipment throughout North America,
predominantly within the United States, to contract and common
carriers, railroads, and private fleet owners. In addition, the Company
leases marine containers worldwide to steamship lines.
Principles of Consolidation
The consolidated financial statements include the accounts of XTRA
Corporation and its wholly-owned subsidiaries ("the Company"). All
material intercompany accounts and transactions have been eliminated.
Certain amounts in the prior year financial statements have been
reclassified to be consistent with the current year's presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
Provisions for income taxes recognize the tax effect of all revenue and
expense transactions as well as any change during the period in
deferred tax assets and liabilities. The effects of changes in tax
rates and laws on deferred tax assets and liabilities are reflected in
net income in the period in which such changes are enacted.
Leases
The Company records the majority of its leases using the operating
method of accounting. Full-payout or near full-payout leases are
accounted for under the finance method.
Depreciation
The Company provides for depreciation by using the straight-line method
to amortize the cost of property and equipment to its estimated
residual value over its estimated useful life. Revenue equipment is
depreciated using estimated useful lives of 10 to 20 years. In
addition, the Company reviews the condition and types of its revenue
equipment to determine if any permanent impairment has occurred.
When equipment is sold or retired, its cost and accumulated
depreciation are removed from the balance sheet, and any gain or loss
is included in revenues. Revenue equipment with an original cost of
approximately $89 million, which has reached the end of its estimated
useful life, remains in service and is included in Revenue Equipment at
September 30, 1997.
Repair and Maintenance
Repair and maintenance expenses are charged to operating expenses when
incurred and amounted to $29 million, $27 million, and $26 million in
1997, 1996, and 1995, respectively.
7
<PAGE>
Earnings per Share
The computation of earnings per common share is based on net income
divided by the weighted average number of outstanding common shares and
common share equivalents.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share," which is effective for financial
statements issued for periods ending after December 15, 1997. SFAS 128
supersedes Accounting Principles Board Opinion No. 15 (APB 15) and
establishes new standards for the presentation of earnings per share.
Primary earnings per share will be replaced with "Basic Earnings Per
Share" and fully diluted earnings per share will be replaced with
"Diluted Earnings Per Share." Under SFAS 128, "Basic Earnings Per
Share" excludes dilution and is computed by dividing income available
to common stockholders by weighted average shares outstanding. "Diluted
Earnings Per Share" reflects the effect of all other outstanding common
stock equivalents under the treasury stock method and is computed
similarly to fully diluted earnings per share according to APB 15. Had
the Company adopted SFAS 128, fiscal 1997 Basic Earnings Per Share
would have been $2.79 per share and $2.78 for Diluted Earnings Per
Share compared to $2.78 and $2.77 per share for primary and fully
diluted earnings per share, respectively. There would have been no
change in fiscal 1996 earnings per share. Fiscal year 1995 Basic
Earnings Per Share would have been $3.40 per share and $3.39 for
Diluted Earnings Per Share compared to $3.39 per share for primary and
fully diluted earnings per share.
Foreign Currency Translation
The Company translates the assets and liabilities of its foreign
operations at the exchange rates in effect at year-end. Revenues and
expenses are translated using average exchange rates in effect during
the year. Gains and losses from foreign currency translation are
credited or charged to cumulative translation adjustment included in
stockholders' equity in the accompanying Consolidated Balance Sheets.
The gains or losses from translation of certain intercompany
liabilities of the Company's North American businesses are included in
operating expenses.
(2) Acquisitions
On June 30, 1995, the Company acquired certain net assets of Matson
Leasing Company, Inc., a major lessor of marine container equipment
which at that time operated a rental fleet of approximately 170,000
twenty-foot equivalent units. Total consideration for the assets
approximated $360 million in cash. The transaction was accounted for as
a purchase.
The unaudited pro forma condensed consolidated income statement of the
Company, as if Matson Leasing Company, Inc. had been acquired on
October 1, 1994 is as follows:
<TABLE>
<CAPTION>
For the twelve months ended September 30, 1995
(Millions of dollars except per share data)
-----------------------------------------------------------------------
<S> <C>
Revenues $ 432
Net income 61
Earnings per fully diluted common share $3.59
</TABLE>
(3) Equipment Leases
The Company uses the operating method of accounting for the majority of
its equipment leases. Under this method, revenue is recognized in the
month earned based on the terms of the lease contract, and the
equipment is depreciated to its estimated residual value over its
estimated useful life.
The finance method of accounting is used for revenue equipment leased
to customers on a full-payout basis at lease inception. Under this
method, finance lease income, the difference between the total lease
receivable and the net book value less the unguaranteed residual value
of the related equipment, is deferred and amortized as revenue over the
lease term using the interest method, which provides a level rate of
return on the net investment in the lease.
8
<PAGE>
The following schedule summarizes the future minimum rental receipts on
operating and finance leases by year as of September 30, 1997:
<TABLE>
<CAPTION>
Operating Finance
(Millions of dollars) Leases Leases
----------------------------------------------------------------------
<S> <C> <C>
1998 $126 $ 19
1999 69 15
2000 48 10
2001 31 6
2002 18 2
2003 and thereafter 15 1
-------------------
Total $307 $ 53
-------------------
</TABLE>
The components of the net investment in finance leases as of
September 30, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
(Millions of dollars) 1997 1996
----------------------------------------------------------------------
<S> <C> <C>
Minimum lease payments receivable $ 53 $ 51
Add: estimated unguaranteed residual values 7 8
-------------------
60 59
Less: deferred finance lease income (17) (17)
-------------------
Lease contracts receivable, net $ 43 $ 42
-------------------
</TABLE>
(4) Debt
<TABLE>
<CAPTION>
Debt as of September 30, 1997 and 1996 consisted of the following:
(Millions of dollars) 1997 1996
----------------------------------------------------------------------
<S> <C> <C>
Unsecured financing
Medium-term Notes $703 $661
Revolving Credit Agreement 161 160
-------------------
Total unsecured financing 864 821
Total secured financing 28 71
-------------------
Total debt 892 892
Less: current portion (57) (56)
-------------------
Long-term debt $835 $836
-------------------
</TABLE>
The $703 million of Medium-term Notes have a weighted average interest
rate of 7.1% and maturities from fiscal 1998 to 2012. At September 30,
1997, $532 million remained available under the shelf registration for
future debt issuance. The weighted average interest rates incurred were
7.0%, 7.1%, and 7.6% during 1997, 1996, and 1995, respectively.
The Company's Revolving Credit Agreement has bank commitments of
$300 million at September 30, 1997 and a revolving period maturity date
of June 30, 1999. Pricing on the Revolving Credit Agreement is
dependent on the Company's credit ratings and is based on a fixed
spread over the London Interbank Offered Rate (LIBOR). The Company pays
a facility fee on any unused commitment in the facility.
Unless the Company requests and the banks approve a renewal or
extension of the agreement, borrowings outstanding on the revolving
period maturity date will be converted to a five year term loan payable
in equal quarterly installments with a final term maturity of June 30,
2004.
9
<PAGE>
The Company borrows on a short-term basis by issuing commercial paper
and using uncommitted lines of credit. Short-term borrowings are back-
stopped by the unused borrowing capacity under the Revolving Credit
Agreement. They have therefore been classified as Revolving Credit
Agreement borrowings. At September 30, 1997 and September 30, 1996,
such borrowings constituted all Revolving Credit Agreement borrowings
and at September 30, 1997, have a weighted average interest rate of
5.8%. The weighted average interest rates incurred under the Revolving
Credit Agreement, consisting primarily of short-term borrowings, were
5.7%, 5.8%, and 6.0% during 1997, 1996, and 1995, respectively. At
September 30, 1997, $139 million of unused commitment was available.
The secured financing at September 30, 1997, consisting of capital
lease obligations, has a weighted average interest rate of 9.0% and is
payable in installments through 2001. The weighted average interest
rates incurred under the secured financing were 10.0%, 9.4%, and 9.3%
during 1997, 1996, and 1995, respectively.
Revenue equipment recorded on the consolidated balance sheets related
to secured financing was as follows at September 30, 1997 and 1996:
<TABLE>
<CAPTION>
(Millions of dollars) 1997 1996
----------------------------------------------------------------------
<S> <C> <C>
Revenue equipment $ 61 $141
Accumulated depreciation (28) (63)
-------------------
Net secured equipment $ 33 $ 78
-------------------
</TABLE>
Assuming the Company were to convert the Revolving Credit Agreement to
a term loan on its revolving period maturity date, the amount of
minimum maturities of all debt during each of the next five fiscal
years and thereafter would be as follows:
<TABLE>
<CAPTION>
Minimum
(Millions of dollars) Debt Maturities
----------------------------------------------------------------------
<S> <C>
1998 $ 57
1999 74
2000 107
2001 105
2002 104
2003 and thereafter 445
----
Total payments and maturities $892
----
</TABLE>
The Company's loan agreements contain minimum debt service tests and
restrictive covenants including restrictions on the amount of debt in
relation to revenue equipment and stockholders' equity and limitations
on secured borrowings. The Company's loan agreements contain covenants
that restrict the payment of dividends or repurchases of common stock
by the Company. In addition, certain loan agreements contain covenants
that restrict advances to and the payment of dividends to the Company
by its subsidiaries, including XTRA, Inc. Under the most restrictive
provisions of the Company's loan agreements, the repurchase of common
stock and/or the amount of cash dividends which could be paid on the
Company's capital stock was limited to $110 million at September 30,
1997.
10
<PAGE>
(5) Income Taxes
The components of the provision for income taxes for 1997, 1996, and
1995 are as follows:
<TABLE>
<CAPTION>
(Millions of dollars) 1997 1996 1995
-----------------------------------------------------------------------
Current tax provision
<S> <C> <C> <C>
Federal $ 1 $ (4) $ 8
State 1 1 3
----------------------------
Current tax provision 2 (3) 11
----------------------------
Deferred tax provision
Federal 22 25 23
State 4 6 7
----------------------------
Deferred tax provision 26 31 30
----------------------------
Provision for income taxes $28 $ 28 $ 41
----------------------------
</TABLE>
The provision differs from income taxes currently payable because
certain items of income and expense are recognized in different periods
for financial statement purposes than for tax return purposes.
The reasons for the difference between the statutory U.S. Federal
income tax rates and the Company's effective income tax rates for 1997,
1996, and 1995 are as follows:
<TABLE>
<CAPTION>
Percent of Pretax Income 1997 1996 1995
-----------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 35% 35% 35%
Increase in taxes resulting from:
State taxes and other 5 6 7
----------------------------
Effective income tax rate 40% 41% 42%
----------------------------
</TABLE>
The components of the net deferred tax liability as of September 30,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
(Millions of dollars) 1997 1996
-----------------------------------------------------------------------
<S> <C> <C>
Assets
Capital lease obligations $ 15 $ 24
Investment tax credits 3 3
Alternative minimum tax credits 20 18
Other 16 17
-----------------
Total deferred tax assets $ 54 $ 62
-----------------
Liabilities
Revenue equipment $286 $264
Other 20 25
-----------------
Total deferred tax liabilities 306 289
-----------------
Net deferred tax liability $252 $227
-----------------
</TABLE>
11
<PAGE>
The Company estimates that after filing its fiscal 1997 tax return, it
will have $3 million of investment tax credit carryforwards available
to reduce future federal income tax liabilities. The investment tax
credit carryforwards expire beginning in 2000. The Company also
estimates that after filing its fiscal 1997 tax return, it will have
$20 million of alternative minimum tax credit carryforwards available
to reduce future federal income tax liabilities. The benefit of both
tax credit carryforwards has been recorded in the Company's financial
statements. The Company has not recognized a valuation allowance for
deferred tax assets.
(6) Commitments and Contingencies
The Company has no revenue equipment leased in under operating leases
at September 30, 1997.
The Company's offices and certain facilities are occupied under leases
expiring at various dates. At September 30, 1997, the Company's lease
commitments under the non-cancelable portion of these leases for the
next five years and in total thereafter were as follows:
<TABLE>
<CAPTION>
Total Lease
(Millions of dollars) Commitments
-----------------------------------------------------------------------
<S> <C>
1998 $ 6
1999 5
2000 4
2001 3
2002 2
2003 and thereafter 6
---
Total $26
---
</TABLE>
Rental equipment lease financing expense amounted to $1 million,
$1 million, and $2 million in 1997, 1996, and 1995, respectively, which
is included in the income statement under the caption "Depreciation on
rental equipment." Other rental expense amounted to $6 million,
$5 million, and $4 million in 1997, 1996, and 1995, respectively.
As of November 12, 1997, the Company had committed capital expenditures
of $24 million, principally for revenue equipment in fiscal 1998.
The Illinois Environmental Protection Agency has notified the Company
of alleged environmental contamination of XTRA's Fairmont City,
Illinois property which resulted from the prior owner's zinc smelting
operations. The Company has had initial discussions with the successors
in interest currently responsible for the liabilities of the prior
owner about participation in an investigation and cleanup of the
facility under the Illinois voluntary remediation program. Based upon
the Company's current understanding of the nature of the contamination,
the Company believes that the resolution of this matter will not have a
material impact on the Company's results of operations, cash flows, or
financial condition.
(7) Retirement Plans
The Company provides retirement benefits to substantially all of its
employees through a qualified and funded defined contribution
retirement plan. The Company's yearly profit sharing cash contributions
are discretionary and the retirement trust fund's assets are
administered by a trustee. The Company's contributions include an
employee-matching contribution to a 401(k) plan and a profit sharing
contribution and are based on a specified percentage of employee
qualified compensation. Participants are entitled to their vested
portion of the retirement assets upon termination of employment. The
Company recorded defined contribution pension expense of $2 million
each year in 1997, 1996, and 1995.
12
<PAGE>
(8) Business Information
The Company leases transportation equipment throughout North America
and internationally. The over-the-road and intermodal equipment is
leased throughout North America and the marine containers are moved
between countries in international commerce. Information about the
business of the Company by geographic area is presented in the table
below.
<TABLE>
<CAPTION>
(Millions of dollars) 1997 1996 1995
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
North America $ 359 $ 347 $ 358
International 76 75 20
----------------------------------------------
$ 435 $ 422 $ 378
----------------------------------------------
Operating Income:
North America $ 121 $ 115 $ 131
International 13 20 8
----------------------------------------------
$ 134 $ 135 $ 139
----------------------------------------------
Identifiable Assets:
North America $1,150 $1,100 $1,126
International 435 437 390
----------------------------------------------
$1,585 $1,537 $1,516
</TABLE>
(9) Common Stock
Repurchase of Common Stock
The Company has authorized the repurchase of up to $200 million of its
common stock. The timing of the repurchases, which could occur over an
extended period of time, will depend on price, market conditions, and
other factors. As of November 12, 1997, the Company repurchased $79
million of common stock.
1987 Stock Incentive Plan
The 1987 Stock Incentive Plan authorizes the issuance of 1,150,000
shares of common stock under the plan. The plan allows the Company to
grant awards to key employees including restricted stock awards, stock
options, and stock appreciation rights, subject primarily to the
requirement of continuing employment. The awards under this plan are
available for grant over a period of ten years from the date on which
the plan was adopted, but grants may vest beyond the ten year period.
Stock options issued by the Company are exercisable at a future time as
specified by the Company and generally expire from five to ten years
from the date of grant. The exercise price of stock options may not be
less than the fair market value of the common stock at the date of
grant.
1991 Stock Option Plan for Non-Employee Directors
The 1991 Stock Option Plan for Non-Employee Directors authorizes the
granting of options for a maximum of 100,000 shares. The option price
per share is equal to the fair market value of the common stock on the
date of grant. The term of each option is five years and options become
exercisable one year after the date of grant.
The XTRA Corporation Deferred Director Fee Option Plan
The Deferred Director Fee Option Plan allows a non-employee director to
elect to receive, in lieu of his annual retainer fee and/or board and
committee meeting fees, a non-qualified stock option. 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 director's fees by the exercise price.
13
<PAGE>
Accounting for Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued
Statement of Accounting Standards Number 123 (SFAS 123), "Accounting
for Stock-Based Compensation," which sets forth a fair-value-based
method of recognizing stock-based compensation expense. As permitted by
SFAS 123, the Company has elected to continue to apply APB No. 25,
"Accounting for Stock Issued to Employees," to account for its stock-
based compensation plans.
Had the compensation cost for these plans been determined according to
SFAS 123, the Company's net income and earnings per share would have
been the following pro forma amounts:
<TABLE>
<CAPTION>
(Millions of dollars, except per share amounts) 1997 1996
-----------------------------------------------------------------------
<S> <C> <C>
Net Income: As reported $43 $41
Pro forma $41 $41
Fully-diluted EPS: As reported $2.77 $2.56
Pro forma $2.70 $2.55
</TABLE>
For purposes of the pro forma disclosure, the fair value of each option
is estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------------------------------------
<S> <C> <C>
Volatility 20.1% 22.9%
Risk-free interest rate 5.8% 6.3%
Dividend yield 1.8% 1.6%
Expected life of options 3 years 3 years
</TABLE>
The weighted average grant date fair value of options granted during
1997 and 1996 was $9.32 and $9.35 per share, respectively, for shares
granted under the 1987 Stock Incentive Plan. For shares granted under
the 1991 Stock Option Plan for Non-Employee Directors, the weighted
average grant date fair value of options granted during 1997 and 1996
was $8.29 and $8.83 per share, respectively. The weighted average grant
date fair value of options granted during 1997 and 1996 for the shares
granted under the Deferred Director Fee Option Plan was $4.02 and
$4.40, respectively.
Because the SFAS 123 method of accounting has not been applied to
options granted prior to October 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years.
14
<PAGE>
The following table summarizes the stock option transactions pursuant
to the Company's stock incentive and stock option plans for the three-
year period ended September 30, 1997:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
(000s) Per Share ($)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at September 30, 1994: 249 $29.74
Granted 501 49.73
Exercised (78) 11.50
Forfeited (6) 45.86
---
Options outstanding at September 30, 1995: 666 46.71
Granted 21 41.08
Exercised (36) 14.43
Forfeited (11) 47.96
---
Options outstanding at September 30, 1996: 640 48.27
Granted 262 50.05
Exercised (30) 34.95
Forfeited (64) 50.04
---
Options outstanding at September 30, 1997: 808 49.21
---
Exercisable options at September 30, 1997: 547 50.78
Shares available for grant at September 30, 1997: 85
</TABLE>
The following table summarizes information about stock options
outstanding at September 30, 1997:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
---------------------------------------- -------------------------
Weighted
Number Average Weighted Number Weighted
Outstanding Remaining Average Exercisable Average
at 9/30/97 Contractual Exercise at 9/30/97 Exercise
Range of exercise prices (000s) Life Price (000s) Price
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$20.75 to 25.31 5 3.1 years $22.45 4 $22.63
$36.12 to 56.94 803 3.0 years 49.37 543 50.98
-------------------------------- -----------------
Total 808 3.0 years $49.21 547 $50.78
-------------------------------- -----------------
</TABLE>
15
<PAGE>
(10) Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument:
Cash and Short-term Investments
The carrying amount approximates fair value because of the short
maturity of those instruments.
Debt
The fair value of the Company's fixed rate debt is estimated based on
the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining
maturities. The fair value of the Company's floating rate debt is its
carrying amount.
The carrying amounts and estimated fair values of the Company's
financial instruments are as follows:
<TABLE>
<CAPTION>
For the two years ended September 30, 1997 Carrying Fair
(Millions of dollars) Amount Value
----------------------------------------------------------------------------------------------
<S> <C> <C>
1997
Cash and short-term investments $ 4 $ 4
Debt 892 917
1996
Cash and short-term investments $ 8 $ 8
Debt 892 877
</TABLE>
(11) Allowance for Doubtful Accounts
The allowance for doubtful accounts as of September 30, 1997, 1996,
and 1995 consists of the following:
<TABLE>
<CAPTION>
For the year ended September 30, 1997 1996 1995
(Millions of dollars)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $13 $16 $11
Additions charged to operating expenses 5 3 5
Deductions/(1)/ (4) (6) (3)
Other/(2)/ - - 3
---------------------------------------------
Balance at end of year $14 $13 $16
---------------------------------------------
</TABLE>
/(1)/Amounts charged against reserves, net of recoveries.
/(2)/Includes the addition of reserves for accounts receivable related
to acquisitions.
16
<PAGE>
(12) Selected Financial Data of Significant Subsidiaries
The condensed consolidated data for XTRA, Inc., a wholly-owned
subsidiary of XTRA Corporation, included in the consolidated financial
information of the Company, is summarized below:
<TABLE>
<CAPTION>
For the three years ended September 30, 1997 1996 1995
(Millions of dollars)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Statement Data
Revenues $ 435 $ 422 $ 378
Income before provision for income taxes 71 69 98
Net income 43 41 57
Selected Balance Sheet Data
Receivables, net $ 108 $ 94 $ 91
Net property and equipment 1,454 1,407 1,395
Other assets 23 35 27
---------------------------------------
Total assets $1,585 $1,536 $1,513
---------------------------------------
Debt $ 892 $ 892 $ 898
Deferred income taxes 252 227 194
Other liabilities 86 76 69
---------------------------------------
Total liabilities 1,230 1,195 1,161
Stockholders' equity 355 341 352
---------------------------------------
Total liabilities and stockholders' equity $1,585 $1,536 $1,513
---------------------------------------
</TABLE>
17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of XTRA Corporation:
We have audited the accompanying consolidated balance sheets of XTRA
Corporation (a Delaware corporation) and subsidiaries as of
September 30, 1997 and 1996, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three years
in the period ended September 30, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of XTRA
Corporation and subsidiaries as of September 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the three
years in the period ending September 30, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 12, 1997
18
<PAGE>
Parent and Subsidiaries*
<TABLE>
<CAPTION>
Name State or Province of Incorporation
---------------------------------------------------------------------------------------------
<S> <C>
XTRA Corporation Delaware
Subsidiary of XTRA Corporation
XTRA, Inc. Maine
Subsidiaries of XTRA, Inc.
XTRA Intermodal, Inc. Delaware
XTRA International Ltd. Delaware
XTRA Mexicana, S.A. de C.V. Mexico
Distribution International Corporation Delaware
Subsidiaries of Distribution International Corporation
Strick Canada Limited Ontario
XTRA Lease, Inc. Delaware
*Certain inactive subsidiaries have been omitted.
</TABLE>
19
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report, incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statements on Form S-8 (No. 33-41360, No. 33-
57609, No. 33-57607, No. 33-45564, and No. 333-27783) and on Form S-3 (No. 33-
54747 and No. 33-65293).
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
December 17, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 4,000,000
<SECURITIES> 0
<RECEIVABLES> 79,000,000
<ALLOWANCES> 14,000,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,112,000,000
<DEPRECIATION> 658,000,000
<TOTAL-ASSETS> 1,585,000,000
<CURRENT-LIABILITIES> 0
<BONDS> 892,000,000
0
0
<COMMON> 8,000,000
<OTHER-SE> 352,000,000
<TOTAL-LIABILITY-AND-EQUITY> 1,585,000,000
<SALES> 0
<TOTAL-REVENUES> 435,000,000
<CGS> 0
<TOTAL-COSTS> 301,000,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,000,000
<INCOME-PRETAX> 71,000,000
<INCOME-TAX> 28,000,000
<INCOME-CONTINUING> 43,000,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,000,000
<EPS-PRIMARY> 2.78
<EPS-DILUTED> 2.77
</TABLE>
