<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
XTRA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------
DELAWARE 7513 06-0954158
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NUMBER)
OF INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
(617) 367-5000
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL J. SOJA
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
XTRA CORPORATION
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
(617) 367-5000
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPIES TO:
DAVID A. FINE, ESQ. DAVID J. FRIEDMAN, ESQ.
ROPES & GRAY SKADDEN, ARPS, SLATE, MEAGHER & FLOM
ONE INTERNATIONAL PLACE LLP
BOSTON, MASSACHUSETTS 02110-2624 919 THIRD AVENUE
(617) 951-7000 NEW YORK, NY 10022
(212) 735-3000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and the
other conditions to the merger of Wheels MergerCo LLC with and into XTRA
Corporation (the "Merger") set forth in the Recapitalization Merger Agreement
(as described in the Proxy Statement/Prospectus included herein) are satisfied
or waived.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF OFFERING MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO PRICE PER AGGREGATE REGISTRATION
REGISTERED BE REGISTERED SHARE OFFERING PRICE FEE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, ($.50 par
value per share)(1)... 500,000 $65.00 $32,500,000 $9,035.00(2)
- -----------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) This Registration Statement relates to shares of Common Stock of the
Registrant to be retained by holders of the Registrant's Common Stock in
the proposed merger of Wheels MergerCo LLC with and into the Registrant,
with the Registrant continuing as the surviving corporation in the merger
(the "Merger").
(2) Pursuant to Rule 457(b) under the Securities Act of 1933, as amended, and
Section 14(g) of the Securities Exchange Act of 1934, as amended, and Rule
0-11 thereunder, the total registration fee of $9,035.00 is offset by the
filing fee of $193,348.00 paid on July 24, 1998 by the Registrant in
connection with a Schedule 14A filing of preliminary proxy materials.
Accordingly, no fee is payable in connection with the filing of this
Registration Statement.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE. IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
60 STATE STREET
BOSTON, MA 02109
, 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of XTRA Corporation (the "Company"), which will be held at
the offices of Ropes & Gray, One International Place, 36th Floor, Boston,
Massachusetts, on November 27, 1998, at 10:00 a.m., local time.
At the Special Meeting, stockholders of the Company will be asked to
consider and vote upon a proposal to approve and adopt an Agreement and Plan
of Merger and Recapitalization, dated as of June 18, 1998, as amended and
restated as of July 31, 1998 (the "Recapitalization Merger Agreement"),
between the Company and Wheels MergerCo LLC, a newly organized Delaware
limited liability company ("MergerCo") formed solely for the purpose of
consummating the transactions contemplated by the Recapitalization Merger
Agreement by (i) Apollo Management IV, L.P., on behalf of its managed funds
("Apollo"), and (ii) Atlas Capital Partners LLC ("Atlas"), an affiliate of
Interpool, Inc. ("Interpool") (collectively, together with Apollo, the
"Investors"), and to approve the transactions contemplated by the
Recapitalization Merger Agreement. If stockholders of the Company approve and
adopt the Recapitalization Merger Agreement and the transactions contemplated
thereby, and such transactions are consummated, MergerCo will be merged with
and into the Company (the "Merger"), with the Company as the surviving
corporation. The Recapitalization Merger Agreement provides, among other
things, that the owner of each share of common stock, par value $.50 per
share, of the Company (the "Company Common Stock") issued and outstanding
immediately prior to the effective time of the Merger (other than shares of
Company Common Stock owned by the Company or any subsidiary of the Company,
which will be canceled and retired, and other than shares of Company Common
Stock subject to appraisal rights) can elect either to receive $65.00 in cash
(the "Cash Consideration") for that share or to retain that share, with cash
to be paid in lieu of fractional shares of Company Common Stock. This election
is subject to proration so that upon consummation of the Merger, the existing
holders of the Company Common Stock will retain 500,000 shares of the Company
Common Stock (the "Retained Shares," constituting approximately 3% of shares
currently outstanding and 10% of the Company Common Stock after the Merger)
and will receive $65.00 per share in cash for the balance of the Company
Common Stock (approximately 97% of shares currently outstanding)
(collectively, together with cash paid in lieu of fractional shares, the
"Merger Consideration"). Pursuant to the Merger, the interests of MergerCo,
all of which are owned by the Investors, will be converted into 4,500,000
shares of Company Common Stock, which will represent 90% of the outstanding
Company Common Stock after the Merger.
Consummation of the Merger is subject to certain conditions, including the
obtaining of certain financing. The Company expects that, assuming the Merger
occurred as of June 30, 1998, approximately $1.270 billion of funds will be
required to (i) finance the payment of the Merger Consideration, (ii) cash out
Company Stock Options (as defined in the enclosed Proxy Statement/Prospectus),
(iii) repay Company indebtedness, and (iv) pay the fees and expenses expected
to be incurred in connection with the Merger. It is contemplated that, at the
effective time of the Merger (the "Effective Time"), the Company will
concurrently enter into (i) a bank credit facility (the "Senior Facilities")
and (ii) a $500 million unsecured bridge loan financing (the "Bridge Loan").
See "THE MERGER--Merger Financing" in the enclosed Proxy Statement/Prospectus.
At the time of execution of the Recapitalization Merger Agreement, MergerCo
received a commitment letter (the "Commitment Letter") from Chase Securities
Inc. ("CSI"), The Chase Manhattan Bank ("Chase") and Credit Suisse First
Boston ("CSFB" and, with CSI and Chase, the "Lenders") to provide the Senior
Facilities and, if necessary, the Bridge Loan (the Senior Facilities and the
Bridge Loan, collectively, the "Credit Facilities"). The commitment is subject
to various conditions.
<PAGE>
The Company has been advised by CSI and Chase that they have informed
MergerCo that, in view of current market conditions, they would exercise their
right under the Commitment Letter to change the pricing, terms, and structure
of the financing. In addition, Apollo, on behalf of MergerCo, recently
indicated to the Company that in view of current market conditions it does not
believe that MergerCo would be able to obtain the financing necessary to
consummate the Merger. The Commitment Letter will terminate in accordance with
its terms on November 30, 1998 if no amounts have been funded thereunder. The
Recapitalization Merger Agreement provides that if the transaction is not
consummated on or prior to November 30, 1998, either MergerCo or the Company
will be able to terminate the transaction, to the extent that the terminating
party is not in breach of the agreement. In light of current circumstances,
including, without limitation, the notice from Apollo and the position
expressed by CSI and Chase, there can be no assurances that the Merger will be
consummated. See, "THE MERGER--Recent Developments; Material Uncertainty of
Consummating the Merger," "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER
AGREEMENT--Conditions to Consummation of the Merger," and "--Termination" in
the enclosed Proxy Statement/Prospectus.
The Company has not received any firm proposals from the Investors to
restructure or renegotiate the transaction and there can be no assurances that
the Company will receive any such proposals. In the event that the Company
does receive a proposal from the Investors to renegotiate or restructure the
transaction and the Board of Directors accepts such a proposal, if there is a
change in the terms of the Merger Financing that would have a material effect
on the pro forma financial statements contained in the Proxy
Statement/Prospectus, or if there are any material changes affecting the
rights of stockholders, the Company will mail to stockholders a revised Proxy
Statement/Prospectus reflecting the terms and conditions of the revised
transaction and resolicit proxies.
Pursuant to the Recapitalization Merger Agreement, the parties have agreed
to use all reasonable efforts to take all actions necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by the Recapitalization Merger Agreement.
Accordingly, although there can be no assurances that the Merger will be
consummated, the Company is proceeding to take the actions required to close
the Merger, including the mailing of this Proxy Statement/Prospectus and
obtaining stockholder approval of the Merger at the Special Meeting. See "THE
MERGER--Recent Developments; Material Uncertainty of Consummating the Merger"
in the enclosed Proxy Statement/Prospectus.
At the Special Meeting, stockholders of the Company also will be asked to
consider and vote upon a proposal to approve the 1998 XTRA Corporation Stock
Option and Incentive Award Plan (the "Stock Option Plan"), which provides
among other things, for the issuance of up to a maximum of 250,000 shares of
Company Common Stock thereunder to selected officers, employees and
independent contractors pursuant to stock options and various incentive awards
granted thereunder. Detailed information concerning the proposed Merger and
the Stock Option Plan is set forth in the accompanying Proxy
Statement/Prospectus, which you are urged to read carefully. Copies of the
Recapitalization Merger Agreement and the Stock Option Plan are included as
Annex A and Annex D, respectively, to the Proxy Statement/Prospectus.
Approval and adoption of the Recapitalization Merger Agreement requires the
affirmative vote of a majority of the outstanding shares of Company Common
Stock held by stockholders of record at the close of business on November 2,
1998 (the "Record Date"). Approval of the Stock Option Plan requires the
affirmative vote of a majority of shares present and entitled to vote at the
Special Meeting. Tiger Management L.L.C. ("Tiger") and Trinity I Fund, L.P.
("Trinity") beneficially owned (through certain investment funds (the
"Funds")), as of the Record Date, 6,664,300 shares of Company Common Stock,
representing approximately 43.5% of the outstanding shares of the Company
Common Stock entitled to vote at the Special Meeting. Tiger and Trinity have
caused the Funds to irrevocably agree, pursuant to voting agreements with
MergerCo dated as of June 18, 1998 (the "Voting Agreements"), to vote all the
shares held by them in favor of the approval and adoption of the
Recapitalization Merger Agreement and the transactions contemplated thereby. A
form of the Voting Agreements entered into by the Funds is included as Annex B
to the Proxy Statement/Prospectus.
Holders of Company Common Stock will be entitled to appraisal rights under
Delaware law in connection with the Merger, as described in the Proxy
Statement/Prospectus.
<PAGE>
Stockholders are encouraged to review the "RISK FACTORS" section in the
enclosed Proxy Statement for a discussion of certain factors that should be
considered in connection with the Merger. The Company anticipates that it will
be able to, and if so able intends to, delist the Company Common Stock from
the New York Stock Exchange upon or following the Merger, and it is the
Company's intention that following the Merger the Retained Shares will not be
listed on any national securities exchange or quoted on the NASDAQ Stock
Market Inc.'s National Market. Such delisting is likely to have a material
adverse effect on the trading market for and liquidity of the Retained Shares
and may have a material adverse effect on the market value of the Retained
Shares.
THE BOARD OF DIRECTORS HAS APPROVED THE RECAPITALIZATION MERGER AGREEMENT
AND THE VOTING AGREEMENTS AND DETERMINED THAT THE RECAPITALIZATION MERGER
AGREEMENT, THE VOTING AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE
FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS, AND
RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE RECAPITALIZATION
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. In reaching such
determination and recommendation, the Board considered, among other things,
the opinion of Goldman, Sachs & Co. ("Goldman Sachs"), who served as the
Company's financial advisor with respect to such transactions, that the Merger
Consideration to be received by the holders of the Company Common Stock
pursuant to the Recapitalization Merger Agreement is fair, from a financial
point of view, to such holders. Goldman Sachs's opinion is included as Annex C
to the Proxy Statement/Prospectus. You are urged to read the opinion in its
entirety for further information with respect to the assumptions made, matters
considered and limitations on the review undertaken by Goldman Sachs in
connection with the opinion. Certain members of the Board of Directors have
certain interests in the Merger that are in addition to, and may conflict
with, their interests as stockholders and the interests of other stockholders
of the Company. See "THE MERGER--Interests of Certain Persons in the Merger."
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING,
WHETHER OR NOT YOU PLAN TO ATTEND PERSONALLY. TO ENSURE THAT YOUR SHARES ARE
REPRESENTED AT THE SPECIAL MEETING, YOU SHOULD COMPLETE AND SIGN THE ENCLOSED
PROXY CARD AND RETURN IT AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
NO ACTION IS REQUIRED AT THIS TIME FOR STOCKHOLDERS TO ELECT THE CASH
CONSIDERATION. UNLESS STOCKHOLDERS MAKE AN AFFIRMATIVE ELECTION TO RECEIVE THE
RETAINED SHARES IN ACCORDANCE WITH THE ENCLOSED FORM OF ELECTION, THEY WILL BE
DEEMED TO HAVE ELECTED THE CASH CONSIDERATION. STOCKHOLDERS ELECTING THE CASH
CONSIDERATION SHOULD NOT RETURN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A
LETTER OF TRANSMITTAL, AND THEN ONLY IN ACCORDANCE WITH THE INSTRUCTIONS
CONTAINED THEREIN. STOCKHOLDERS ELECTING THE RETAINED SHARES SHOULD RETURN
THEIR STOCK CERTIFICATES TOGETHER WITH THE ENCLOSED FORM OF ELECTION PURSUANT
TO THE INSTRUCTIONS CONTAINED IN SUCH FORM OF ELECTION.
Yours very truly,
Robert B. Goergen
Chairman of the Board
<PAGE>
60 STATE STREET
BOSTON, MA 02109
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 27, 1998
----------------
To the Stockholders of XTRA Corporation:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (including any
adjournments or postponements thereof, the "Special Meeting") of XTRA
Corporation, a Delaware corporation (the "Company"), will be held at the
offices of Ropes & Gray, One International Place, 36th Floor, Boston,
Massachusetts, on November 27, 1998, at 10:00 a.m., local time, for the
following purposes, which are more fully described in the accompanying Proxy
Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger and Recapitalization, dated as of June 18, 1998, as
amended and restated as of July 31, 1998 (the "Recapitalization Merger
Agreement"), between the Company and Wheels MergerCo LLC, a newly organized
Delaware limited liability company ("MergerCo") formed solely for the
purpose of consummating the transactions contemplated by the
Recapitalization Merger Agreement by (i) Apollo Management IV, L.P., on
behalf of its managed funds ("Apollo"), and (ii) Atlas Capital Partners LLC
("Atlas"), an affiliate of Interpool, Inc. ("Interpool") (collectively,
together with Apollo, the "Investors"), and to approve the transactions
contemplated by the Recapitalization Merger Agreement.
The Recapitalization Merger Agreement provides, among other things, that
MergerCo will be merged with and into the Company (the "Merger"), with the
Company as the surviving corporation, and that the owner of each share of
common stock, par value $.50 per share, of the Company (the "Company Common
Stock") issued and outstanding immediately prior to the effective time of
the Merger (other than shares of Company Common Stock owned by the Company
or any subsidiary of the Company, which will be canceled and retired, and
other than shares of Company Common Stock subject to appraisal rights) can
elect either to receive $65.00 in cash (the "Cash Consideration") for that
share or to retain that share, with cash to be paid in lieu of fractional
shares of Company Common Stock. This election is subject to proration so
that upon consummation of the Merger, the existing holders of the Company
Common Stock will retain 500,000 shares of Company Common Stock (the
"Retained Shares") and will receive $65.00 per share in cash for the
balance of the Company Common Stock (collectively, together with cash paid
in lieu of fractional shares, the "Merger Consideration").
2. To consider and vote upon a proposal to approve and adopt the 1998
XTRA Corporation Stock Option and Incentive Award Plan (the "Stock Option
Plan").
3. To transact such other business as may properly come before the
Special Meeting.
Approval and adoption of the Recapitalization Merger Agreement requires the
affirmative vote of a majority of the outstanding shares of Company Common
Stock held by stockholders of record at the close of business on November 2,
1998 (the "Record Date"). Approval of the Stock Option Plan requires the
affirmative vote of a majority of shares present and entitled to vote at the
Special Meeting. Tiger Management L.L.C. ("Tiger") and Trinity I Fund, L.P.
("Trinity") beneficially owned (through certain investment entities (the
"Funds")), as of the Record Date, 6,664,300 shares of Company Common Stock
representing approximately 43.5% of the outstanding shares of the Company
Common Stock entitled to vote at the Special Meeting. Tiger and Trinity
<PAGE>
have caused the Funds to irrevocably agree, pursuant to voting agreements with
MergerCo dated as of June 18, 1998, to vote all the shares held by them in
favor of the approval and adoption of the Recapitalization Merger Agreement
and the transactions contemplated thereby.
Only stockholders of record at the close of business on the Record Date are
entitled to notice of, and to vote at, the Special Meeting. A complete list of
stockholders entitled to vote at the Special Meeting will be available for
examination, for proper purposes, during regular business hours at the offices
of Ropes & Gray, One International Place, Boston, Massachusetts, during the 10
days immediately prior to the Special Meeting.
The accompanying Proxy Statement/Prospectus describes the Recapitalization
Merger Agreement, the Merger and the actions to be taken in connection with
the Merger. To ensure that your vote will be counted, please complete, date
and sign the enclosed proxy card and return it promptly in the enclosed
postage-paid envelope, whether or not you plan to attend the Special Meeting.
Shares of Company Common Stock represented by all properly executed proxies
received in time for the Special Meeting will be voted in the manner specified
in the proxies relating thereto. Proxies that do not contain any instruction
to vote for or against or to abstain from voting on a particular matter will
be voted in favor of such matter.
In connection with the proposed Merger, appraisal rights will be available
to those stockholders of the Company who meet and comply with the requirements
of Section 262 of the General Corporation Law of the State of Delaware (the
"DGCL"), a copy of which is included as Annex D to the Proxy
Statement/Prospectus. Reference is made to the section entitled "STOCKHOLDERS'
APPRAISAL RIGHTS" in the Proxy Statement/Prospectus for a discussion of the
procedures to be followed in asserting appraisal rights under Section 262 of
the DGCL in connection with the proposed Merger.
YOUR VOTE IS IMPORTANT REGARDLESS OF HOW MANY SHARES OF COMPANY COMMON STOCK
YOU OWN. REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME
PRIOR TO ITS EXERCISE. IF YOU ARE PRESENT AT THE SPECIAL MEETING OR ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF, YOU MAY REVOKE YOUR PROXY AND VOTE
PERSONALLY ON THE MATTERS PROPERLY BROUGHT BEFORE THE SPECIAL MEETING.
NO ACTION IS REQUIRED AT THIS TIME FOR STOCKHOLDERS TO ELECT THE CASH
CONSIDERATION. UNLESS STOCKHOLDERS MAKE AN AFFIRMATIVE ELECTION TO RECEIVE THE
RETAINED SHARES IN ACCORDANCE WITH THE ENCLOSED FORM OF ELECTION, THEY WILL BE
DEEMED TO HAVE ELECTED THE CASH CONSIDERATION. STOCKHOLDERS ELECTING THE CASH
CONSIDERATION SHOULD NOT RETURN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A
LETTER OF TRANSMITTAL, AND THEN ONLY IN ACCORDANCE WITH THE INSTRUCTIONS
CONTAINED THEREIN. STOCKHOLDERS ELECTING THE RETAINED SHARES SHOULD RETURN
THEIR STOCK CERTIFICATES TOGETHER WITH THE ENCLOSED FORM OF ELECTION PURSUANT
TO THE INSTRUCTIONS CONTAINED IN SUCH FORM OF ELECTION.
IF YOU HAVE ANY QUESTIONS OR REQUIRE ADDITIONAL MATERIAL, PLEASE CONTACT
BOSTON EQUISERVE AT (800) 736-3001.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas A. Giacchetto
Secretary
Boston, MA
November , 1998
<PAGE>
----------------
PROXY STATEMENT/PROSPECTUS
----------------
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 27, 1998
This Proxy Statement/Prospectus is being furnished to holders of common
stock, par value $0.50 per share (the "Company Common Stock"), of XTRA
Corporation, a Delaware corporation (the "Company" or "XTRA"), in connection
with the solicitation of proxies by the Board of Directors of the Company (the
"Board of Directors" or the "Board") for use at a Special Meeting of
Stockholders, which will be held at the offices of Ropes & Gray, One
International Place, 36th Floor, Boston, Massachusetts, on November 27, 1998,
at 10:00 a.m., local time, and at any adjournments or postponements thereof
(the "Special Meeting"). At the Special Meeting, the holders of the Company
Common Stock will consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger and Recapitalization, dated as of June 18, 1998,
as amended and restated as of July 31, 1998 (the "Recapitalization Merger
Agreement"), between the Company and Wheels MergerCo LLC, a newly organized
Delaware limited liability company ("MergerCo") formed solely for the purpose
of consummating the transactions contemplated by the Recapitalization Merger
Agreement by (i) Apollo Management IV, L.P., on behalf of its managed funds
("Apollo"), and (ii) Atlas Capital Partners LLC ("Atlas"), an affiliate of
Interpool, Inc. ("Interpool") (collectively, together with Apollo, the
"Investors"), and to approve the transactions contemplated by the
Recapitalization Merger Agreement.
The Recapitalization Merger Agreement provides, among other things, that
MergerCo will be merged with and into the Company (the "Merger"), with the
Company as the surviving corporation (the "Surviving Corporation"), and that
the owner of each outstanding share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (as defined in "THE
MERGER--The Effective Time of the Merger") (other than shares of Company
Common Stock owned by the Company or any subsidiary of the Company, which will
be canceled and retired, and other than shares of Company Common Stock subject
to appraisal rights) can elect either to receive $65.00 in cash (the "Cash
Consideration") for that share or to retain that share, with cash to be paid
in lieu of fractional shares of Company Common Stock. This election is subject
to proration so that upon consummation of the Merger, the existing holders of
the Company Common Stock will retain 500,000 shares of the Company Common
Stock (the "Retained Shares," constituting approximately 3% of shares of
Company Common Stock currently outstanding and 10% of the Company Common Stock
outstanding after the Merger) and will receive $65.00 per share in cash for
the balance of the Company Common Stock (approximately 97% of shares of
Company Common Stock currently outstanding) (collectively, together with cash
paid in lieu of fractional shares, the "Merger Consideration"). Pursuant to
the Merger, the interests in MergerCo (the "MergerCo Interests"), all of which
are owned by the Investors, and which were acquired in connection with the
formation of MergerCo in consideration for their agreement to contribute $292
million in equity to MergerCo, will be converted into 4,500,000 shares of
Company Common Stock, which will represent 90% of the outstanding Company
Common Stock after the Merger. A copy of the Recapitalization Merger Agreement
is included as Annex A to this Proxy Statement/Prospectus. The summaries of
the Recapitalization Merger Agreement set forth in this Proxy
Statement/Prospectus do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, the text of the Recapitalization
Merger Agreement.
This Proxy Statement/Prospectus also constitutes a prospectus of the Company
with respect to the 500,000 shares of Company Common Stock to be retained by
stockholders in the Merger.
Approval and adoption of the Recapitalization Merger Agreement requires the
affirmative vote of a majority of the outstanding shares of Company Common
Stock held by stockholders of record at the close of business on November 2,
1998 (the "Record Date"). Tiger Management L.L.C. ("Tiger") and Trinity I
Fund, L.P. ("Trinity") beneficially owned (through certain investment funds
(the "Funds")), as of the Record Date, 6,664,300 shares of Company Common
Stock representing approximately 43.5% of the outstanding shares of the
Company Common Stock entitled to vote at the Special Meeting (the "Subject
Shares"). Tiger and Trinity
<PAGE>
have caused the Funds to irrevocably agree, pursuant to voting agreements with
MergerCo dated as of June 18, 1998 (the "Voting Agreements"), to vote all the
shares held by them in favor of the approval and adoption of the
Recapitalization Merger Agreement and the transactions contemplated thereby.
The form of the Voting Agreements entered into by the Funds is included as
Annex B to this Proxy Statement/Prospectus.
The Board of Directors has approved the Recapitalization Merger Agreement
and the Voting Agreements and determined that the Recapitalization Merger
Agreement, the Voting Agreements and the transactions contemplated thereby are
fair to and in the best interests of the Company's stockholders, and
recommends that you vote FOR approval and adoption of the Recapitalization
Merger Agreement and the transactions contemplated thereby. In reaching such
determination and recommendation, the Board considered, among other things,
the opinion of Goldman, Sachs & Co. ("Goldman Sachs"), who served as the
Company's financial advisor with respect to such transactions, that the Merger
Consideration to be received by the holders of the Company Common Stock
pursuant to the Recapitalization Merger Agreement is fair, from a financial
point of view, to such holders. Goldman Sachs' opinion is included as Annex C
to this Proxy Statement/Prospectus. You are urged to read the opinion in its
entirety for further information with respect to the assumptions made, matters
considered and limitations on the review undertaken by Goldman Sachs in
connection with the opinion. See "THE MERGER--Recommendation of the Board of
Directors; Reasons for the Merger." Certain members of the Board of Directors
have certain interests in the Merger that are in addition to, and may conflict
with, their interests as stockholders and the interests of other stockholders
of the Company. See "THE MERGER--Interests of Certain Persons in the Merger."
Consummation of the Merger is subject to certain conditions, including the
obtaining of certain financing. The Company expects that, assuming the Merger
occurred as of June 30, 1998, approximately $1.270 billion of funds will be
required to (i) finance the payment of the Merger Consideration, (ii) cash out
Company Stock Options, (iii) repay Company indebtedness, and (iv) pay the fees
and expenses expected to be incurred in connection with the Merger. It is
contemplated that, at the Effective Time, the Company will concurrently enter
into (i) a bank credit facility (the "Senior Facilities") and (ii) a $500
million unsecured bridge loan financing (the "Bridge Loan"). See "THE MERGER--
Merger Financing."
At the time of execution of the Recapitalization Merger Agreement, MergerCo
received a commitment letter (the "Commitment Letter") from Chase Securities
Inc. ("CSI"), The Chase Manhattan Bank ("Chase") and Credit Suisse First
Boston ("CSFB" and, with CSI and Chase, the "Lenders") to provide the Senior
Facilities and, if necessary, the Bridge Loan (the Senior Facilities and the
Bridge Loan, collectively, the "Credit Facilities"). The commitment is subject
to various conditions.
The Company has been advised by CSI and Chase that they have informed
MergerCo that, in view of current market conditions, they would exercise their
right under the Commitment Letter to change the pricing, terms, and structure
of the financing. In addition, Apollo, on behalf of MergerCo, recently
indicated to the Company that in view of current market conditions it does not
believe that MergerCo would be able to obtain the financing necessary to
consummate the Merger. The Commitment Letter will terminate in accordance with
its terms on November 30, 1998 if no amounts have been funded thereunder. The
Recapitalization Merger Agreement provides that if the transaction is not
consummated on or prior to November 30, 1998, either MergerCo or the Company
will be able to terminate the transaction, to the extent that the terminating
party is not in breach of the agreement. In light of current circumstances,
including, without limitation, the notice from Apollo and the position
expressed by CSI and Chase, there can be no assurances that the Merger will be
consummated. See "THE MERGER--Recent Developments; Material Uncertainty of
Consummating the Merger," "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER
AGREEMENT--Conditions to Consummation of the Merger," and "--Termination."
The Company has not received any firm proposals from the Investors to
restructure or renegotiate the transaction and there can be no assurances that
the Company will receive any such proposals. In the event that the Company
does receive a proposal from the Investors to renegotiate or restructure the
transaction and the Board of Directors accepts such a proposal, if there is a
change in the terms of the Merger Financing that would have a material effect
on the pro forma financial statements contained in the Proxy
Statement/Prospectus, or if there are any material changes affecting the
rights of stockholders, the Company will mail to stockholders a revised Proxy
Statement/Prospectus reflecting the terms and conditions of the revised
transaction and resolicit proxies.
Pursuant to the Recapitalization Merger Agreement, the parties have agreed
to use all reasonable efforts to take all actions necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by the Recapitalization Merger Agreement.
Accordingly, although there can be no
2
<PAGE>
assurances that the Merger will be consummated, the Company is proceeding to
take the actions required to close the Merger, including the mailing of this
Proxy Statement/Prospectus and obtaining stockholder approval of the Merger at
the Special Meeting. See "THE MERGER--Recent Developments; Material
Uncertainty of Consummating the Merger."
At the Special Meeting, the stockholders of the Company are also being asked
to approve the 1998 XTRA Corporation Stock Option and Incentive Award Plan
(the "Stock Option Plan"). The Stock Option Plan provides for the issuance of
up to a maximum of 250,000 shares of Company Common Stock thereunder to
selected officers, employees and independent contractors pursuant to stock
options and various incentive awards granted thereunder. A copy of the Stock
Option Plan is attached as Annex D to this Proxy Statement/Prospectus. The
Board of Directors has approved the Stock Option Plan subject to its approval
by the Company's stockholders. Approval of the Stock Option Plan requires the
affirmative vote of a majority of shares present and entitled to vote at the
Special Meeting.
The Company Common Stock is listed for trading on the New York Stock
Exchange (the "NYSE") under the symbol "XTR." On June 18, 1998, the last
trading day before public announcement of the execution of the
Recapitalization Merger Agreement, the last sale price of the Company Common
Stock as reported on the NYSE was $46 1/16 per share. On October 28, 1998, the
most recent practicable date prior to the first mailing of this Proxy
Statement/Prospectus, the last sale price of the Company Common Stock as
reported on the NYSE was $40 1/2 per share. Stockholders of the Company should
obtain current market quotations for the Common Stock.
The Company anticipates that it will be able to, and if so able intends to,
delist the Common Stock from the NYSE upon or following the Merger, and it is
the Company's intention that following the Merger the Retained Shares will not
be listed on any national securities exchange or quoted on the NASDAQ Stock
Market Inc.'s National Market. Such delisting is likely to have a material
adverse effect on the trading market for and liquidity of, and may have a
material adverse effect on the market value of, Retained Shares. See "RISK
FACTORS--Delisting; Illiquidity of Company Common Stock." In addition,
following the consummation of the Merger, the Company Common Stock may be
eligible for deregistration under the Exchange Act, and if so eligible, the
Company intends to apply for deregistration. See "RISK FACTORS--Termination of
SEC Reporting."
Independently from the transactions contemplated by the Recapitalization
Merger Agreement, the Company presently intends to split the Company Common
Stock following the Effective Time of the Merger on a six and one-half for one
basis, in order to increase the number of shares available and enhance their
use in connection with the Company's employee benefit programs. The stock
split will be effected by means of a stock dividend of five and one-half
shares of Company Common Stock for each share of Company Common Stock
outstanding, with cash being paid in lieu of the issuance of any fractional
shares. Accordingly, all numbers contained in this Proxy Statement/Prospectus
as to the amount of authorized shares, issued and outstanding shares, and
shares held by any person or entity after the Effective Time should be
adjusted on such basis.
This Proxy Statement/Prospectus, the accompanying form of proxy and the
other enclosed documents are first being mailed to stockholders of the Company
on or about November , 1998.
SEE "RISK FACTORS" BEGINNING ON PAGE 21 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS OF COMPANY COMMON STOCK IN CONNECTION
WITH THEIR CONSIDERATION OF THE MERGER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR MERGERCO. THE DELIVERY OF THIS PROXY
STATEMENT SHALL NOT IMPLY THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET
FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
The date of this Proxy Statement/Prospectus is November , 1998.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION...................................................... 7
FORWARD-LOOKING STATEMENTS................................................. 8
SUMMARY.................................................................... 9
The Company.............................................................. 9
The Special Meeting...................................................... 9
The Merger............................................................... 11
Selected Historical Financial Data....................................... 21
Selected Unaudited Pro Forma Financial Data.............................. 22
MARKET PRICE DATA AND DIVIDENDS............................................ 23
RISK FACTORS............................................................... 24
Control by the Investors................................................. 24
Delisting; Illiquidity of Company Common Stock........................... 24
Termination of SEC Reporting............................................. 25
Substantial Leverage..................................................... 25
Restrictive Debt Covenants............................................... 25
Fraudulent Transfer Considerations....................................... 26
Shares Eligible for Future Sale; Effect on Prevailing Market Prices...... 27
Proration Relating to Common Stock....................................... 27
Discontinuation of Dividends............................................. 27
Variable Revenues and Operating Results.................................. 27
Availability of New Equipment............................................ 28
Competition.............................................................. 28
Customer Consolidation; Reduced Customer Base............................ 28
Sufficiency of Committed Financing....................................... 28
Difficulty in Executing Post-Merger Business Strategy.................... 28
Forecasts; Limits of Reliability......................................... 29
THE SPECIAL MEETING........................................................ 30
Matters to be Considered................................................. 30
Required Vote............................................................ 30
Voting and Revocation of Proxies......................................... 30
Record Date; Stock Entitled to Vote; Quorum.............................. 31
Solicitation of Proxies.................................................. 31
THE MERGER................................................................. 33
Background of the Merger................................................. 33
Recommendation of the Board of Directors; Reasons for the Merger......... 37
Recent Developments; Material Uncertainty of Consummating the Merger..... 39
Opinion of the Company's Financial Advisor............................... 40
Certain Forecasts; Limits of Reliability................................. 43
Merger Consideration..................................................... 44
Effective Time of the Merger............................................. 44
Retained Share Election; Retained Share Election Procedure............... 45
Fractional Shares........................................................ 46
Procedures for Exchange of Certificates.................................. 46
Material Federal Income Tax Consequences................................. 47
Anticipated Accounting Treatment......................................... 51
Effect on Stock Options and Employee Benefit Matters..................... 51
Interests of Certain Persons in the Merger............................... 52
Delisting; Deregistration................................................ 57
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Resale of Company Common Stock Following the Merger.................... 57
Minority Stockholder Interests Following the Merger.................... 57
Merger Financing....................................................... 57
Conversion of MergerCo Interests....................................... 61
STOCKHOLDERS' APPRAISAL RIGHTS........................................... 62
MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER AGREEMENT............. 65
The Merger............................................................. 65
Proration.............................................................. 65
Representations and Warranties......................................... 67
Certain Pre-Closing Covenants.......................................... 68
Limitation on Solicitations............................................ 69
Board of Directors and Officers of the Company Following the Merger.... 70
Stock and Employee Benefit Plans....................................... 71
Access to Information.................................................. 72
Cooperation and Reasonable Best Efforts................................ 72
Indemnification and Insurance.......................................... 73
Additional Agreements.................................................. 74
Conditions to Consummation of the Merger............................... 74
Termination............................................................ 76
Amendment and Waiver................................................... 77
Expenses and Certain Required Payments................................. 77
CERTAIN RELATED AGREEMENTS............................................... 79
Voting Agreements...................................................... 79
Employment Agreements.................................................. 80
Registration Rights Agreement.......................................... 80
Shareholders' Agreement................................................ 81
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................... 82
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA.......................... 83
PRO FORMA CAPITALIZATION................................................. 93
1998 XTRA CORPORATION STOCK OPTION AND INCENTIVE AWARD PLAN.............. 94
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS........................................................... 98
Nine Months Ended June 30, 1998 Versus the Nine Months Ended June 30,
1997.................................................................. 99
Three Years Ended September 30, 1997................................... 101
Financial Liquidity and Capital Resources.............................. 103
Year 2000.............................................................. 104
New Accounting Pronouncements.......................................... 105
THE COMPANY.............................................................. 106
General................................................................ 106
The Transportation Leasing Industry.................................... 106
Company Strengths...................................................... 107
Post-Merger Business Strategy.......................................... 108
Lease Types and Rates.................................................. 109
Utilization............................................................ 109
Equipment Fleet........................................................ 110
Description of Operating Divisions..................................... 111
XTRA Lease............................................................. 111
XTRA Intermodal........................................................ 113
XTRA International..................................................... 115
Facilities............................................................. 116
Information Systems.................................................... 116
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Suppliers............................................................ 116
Employees............................................................ 116
Environmental Matters................................................ 117
Regulation........................................................... 117
Legal Proceedings.................................................... 117
MANAGEMENT.............................................................. 118
Directors and Executive Officers..................................... 118
Executive Compensation and Related Information....................... 121
Compensation of Directors............................................ 127
Certain Transactions................................................. 128
DESCRIPTION OF CAPITAL STOCK............................................ 129
General.............................................................. 129
Following the Merger................................................. 129
Certain Other Provisions of the Certificate of Incorporation......... 129
Special Meetings of Stockholders..................................... 130
Stockholder Action by Written Consent................................ 130
Advance Notice Requirement for Stockholder Proposals and Director
Nominations......................................................... 130
Indemnity............................................................ 130
Shares Reserved for Issuance......................................... 130
Exchange Agent....................................................... 130
Listing.............................................................. 131
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......... 131
MERGERCO AND THE INVESTORS.............................................. 132
REGULATORY APPROVALS.................................................... 133
Antitrust............................................................ 133
Other................................................................ 133
INDEPENDENT PUBLIC ACCOUNTANTS.......................................... 133
STOCKHOLDER PROPOSALS................................................... 133
LEGAL MATTERS........................................................... 134
OTHER MATTERS........................................................... 134
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.............................. F-1
REPORT OF INDEPENDENT ACCOUNTANTS....................................... F-2
FINANCIAL STATEMENTS.................................................... F-3
ANNEX A Agreement and Plan of Merger and Recapitalization dated as of
June 18, 1998, as amended and restated as of July 31, 1998, by
and between Wheels MergerCo LLC and XTRA Corporation........... A-1
ANNEX B Form of Voting Agreements dated as of June 18, 1998 by and
between Wheels MergerCo LLC and each of Jaguar Fund N.V., Lion
L.P., Portfolio J Investors, L.P., Puma, and Tiger ............ B-1
ANNEX C Fairness Opinion from Goldman, Sachs & Co. dated June 18,
1998........................................................... C-1
ANNEX D 1998 XTRA Corporation Stock Option and Incentive Award Plan.... D-1
ANNEX E Delaware Appraisal Statute (Section 262 of the General
Corporation Law of the State of Delaware)...................... E-1
</TABLE>
6
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN AS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS,
IN CONNECTION WITH THE MERGER, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR MERGERCO. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES TO WHICH IT
RELATES IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission" or the "SEC"). Reports,
proxy statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the web site (http://www.sec.gov)
maintained by the Commission; and may be available for inspection and copying
at the regional offices of the Commission located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates.
All information contained in this Proxy Statement/Prospectus concerning
MergerCo and the Investors has been supplied by MergerCo and has not been
independently verified by the Company. Except as otherwise indicated, all
other information contained in this Proxy Statement/Prospectus has been
supplied by the Company.
This Proxy Statement/Prospectus constitutes a prospectus of the Company
filed with the Commission as part of a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Proxy Statement/Prospectus omits certain information
contained in the Registration Statement and the exhibits thereto. Reference is
made to the Registration Statement and related exhibits for further
information with respect to the Company and the retention of Company Common
Stock. Any statement herein concerning the provision of any document is not
necessarily complete, and in each instance reference is made to the copy of
the document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission.
7
<PAGE>
FORWARD-LOOKING STATEMENTS
This Proxy Statement/Prospectus includes "forward-looking statements" within
the meaning of various provisions of the Private Securities Litigation Reform
Act of 1995. All statements, other than statements of historical facts,
included in this Proxy Statement/Prospectus that address activities, events or
developments that the Company expects or anticipates will or may occur in the
future, including the financial projections described under "THE MERGER--
Certain Forecasts; Limits of Reliability," future capital expenditures
(including the amount and nature thereof), business strategy and measures to
implement strategy, including any changes to operations, competitive
strengths, goals, expansion and growth of the Company's and its subsidiaries'
business and operations, plans, references to future success and other such
matters are forward-looking statements. These statements are based on certain
assumptions and analyses made by the Company in light of its experience and
its perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results and developments will conform
with the Company's expectations and predictions is subject to a number of
risks and uncertainties, including, but not limited to: (1) the significant
considerations discussed in this Proxy Statement/Prospectus, (2) the
variability of the Company's revenues and the high percentage of fixed
operating expenses, (3) the effect of competition, economic conditions and
other factors on lease rates, (4) the impact of economic activity in North
America, world trade activity and other factors affecting utilization, (5) the
availability of new equipment and the inability of the Company to quickly
adjust its fleet size to adjust for sudden changes in demand, (6) the effect
of economic and other factors on demand for equipment, (7) the availability of
capital, (8) the effect of changes in interest rates and foreign exchange
rates, (9) possible reduced demand for equipment due to consolidation of the
Company's customer base, (10) other factors which might be described from time
to time in the Company's filings with the Commission, and (11) other factors
which are beyond the control of the Company and its subsidiaries.
Consequently, all of the forward-looking statements made in this Proxy
Statement/Prospectus are qualified by these cautionary statements, and there
can be no assurance that the actual results or developments anticipated by the
Company will be realized or, even if substantially realized, that they will
have the expected consequences to or effects on the Company and its
subsidiaries or their business or operations. Because of the foregoing and
other factors, recent trends should not be considered reliable indicators of
future financial results.
8
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus. The summary does not purport to be complete and is
qualified in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement/Prospectus and the Annexes hereto.
Stockholders of the Company are urged to read this Proxy Statement/Prospectus
and the Annexes hereto in their entirety.
FOR A DISCUSSION OF CERTAIN IMPORTANT FACTORS THAT SHOULD BE CONSIDERED BY
HOLDERS OF COMPANY COMMON STOCK IN CONNECTION WITH THEIR CONSIDERATION OF THE
MERGER, INCLUDING CERTAIN RISKS RELATED TO CONTINUING TO HOLD COMPANY COMMON
STOCK, SEE "RISK FACTORS."
THE COMPANY
The Company is a leading global transportation equipment lessor with
operations in the highway, domestic intermodal and marine container markets.
The Company manages a diverse fleet of approximately 300,000 units,
constituting a net investment of approximately $1.4 billion, consisting of: (i)
over-the-road ("OTR") trailers; (ii) intermodal equipment, including intermodal
(or "piggyback") trailers, chassis and domestic containers; and (iii) marine
containers.
In North America, XTRA believes that it is the second largest operating
lessor of OTR trailers; the second largest operating lessor of intermodal
trailers; the third largest operating lessor of domestic containers; and the
fifth largest operating lessor of chassis. XTRA also believes that it is the
eighth largest lessor of marine containers world-wide. The Company believes
that its extensive operating network and effective fleet management provide a
competitive advantage by enabling it to offer timely and diverse equipment
availability, flexible drop-off points and varied lease terms.
The Company leases its equipment fleet to over 15,000 customers including
trucking companies, railroads, steamship lines and private trucking fleet
owners in North America, Europe and Asia. The Company has had long-standing
relationships with many of its customers, including J.B. Hunt Transport
Services, Inc., RyderSystem, Inc., CSX Corporation, Norfolk Southern
Corporation, Wal-Mart Stores, Inc., the United Parcel Service of America, Inc.
and the United States Postal Service.
For the five-year period ended September 30, 1997, revenues, operating
income, net income and EBITDA grew at compound annual growth rates of 16.5%,
15.4%, 9.5% and 18.2%, respectively. This growth was generated primarily
through adding new equipment and through fleet acquisitions of other leasing
companies combined with maintaining consistent utilization levels.
The principal executive offices of the Company are located at 60 State
Street, Boston, Massachusetts 02109 and the telephone number at such address is
(617) 367-5000.
THE SPECIAL MEETING
TIME AND PLACE; RECORD DATE
The Special Meeting will be held at 10:00 a.m., local time, on November 27,
1998 at the offices of Ropes & Gray, One International Place, 36th Floor,
Boston, Massachusetts. Stockholders of record of the Company at the close of
business on November 2, 1998 will be entitled to notice of, and to vote at, the
Special Meeting. The
9
<PAGE>
date of the first mailing of this Proxy Statement/Prospectus to stockholders of
the Company is on or about November 4, 1998. At the close of business on the
Record Date, there were 15,372,903 shares of Company Common Stock outstanding
and entitled to vote.
MATTERS TO BE CONSIDERED
The purpose of the Special Meeting is for the Company's stockholders to
consider and vote upon (i) a proposal to approve and adopt the Recapitalization
Merger Agreement and the transactions contemplated thereby (the "Merger
Proposal"), pursuant to which MergerCo will merge with and into the Company,
the stockholders of the Company will receive the consideration described under
"--Effect of the Merger" and "THE MERGER--Merger Consideration," and the
holders of MergerCo Interests will receive 4,500,000 shares of Company Common
Stock, which will represent 90% of the shares of Company Common Stock
outstanding after giving effect to the Merger, (ii) a proposal to approve the
Stock Option Plan which provides for the issuance of up to a maximum of 250,000
shares of Company Common Stock pursuant to stock options and incentive awards
which may be granted thereunder to officers, employees and independent
contractors of the Company, and (iii) to transact such other business as may
properly come before the Special Meeting.
REQUIRED VOTE; QUORUM
Approval and adoption of the Recapitalization Merger Agreement requires the
affirmative vote of a majority of the issued and outstanding shares of Company
Common Stock held by stockholders of record as of the close of business on the
Record Date. As of the Record Date, Tiger and Trinity beneficially owned,
through the Funds, shares of Company Common Stock representing approximately
43.5% of the outstanding shares of the Company Common Stock entitled to vote at
the Special Meeting. Tiger and Trinity have caused the Funds to irrevocably
agree, pursuant to the Voting Agreements, to vote all the shares held by them
in favor of the approval and adoption of the Recapitalization Merger Agreement
and the transactions contemplated thereby. See "THE SPECIAL MEETING--Required
Vote" and "THE MERGER--Interests of Certain Persons in the Merger" and "CERTAIN
RELATED AGREEMENTS--Voting Agreements."
Approval of the Stock Option Plan requires the affirmative vote of a majority
of shares present and entitled to vote at the Special Meeting.
The presence, in person or by proxy, of the holders of the outstanding shares
of Company Common Stock representing a majority of the shares entitled to vote
at the Special Meeting will constitute a quorum.
VOTING OF PROXY
Shares of Company Common Stock that are entitled to vote and are represented
by a properly executed proxy signed and received in time for the Special
Meeting will be voted in the manner specified thereon. Proxies that do not
contain any instruction to vote for or against or to abstain from voting on a
particular matter will be voted in favor of such matter. See "THE SPECIAL
MEETING--Voting and Revocation of Proxies."
It is not expected that any matters other than the Merger Proposal and
approval of the Stock Option Plan will be brought before stockholders at the
Special Meeting. If other matters are properly presented, however, the persons
named as proxies will vote in accordance with their best judgment with respect
to such matters, unless authority to do so is withheld in the proxy.
ADJOURNMENTS; REVOCABILITY OF PROXIES
If the Special Meeting is adjourned, for whatever reason, the approval of the
Merger Proposal and approval of the Stock Option Plan shall be considered and
voted upon by stockholders at the subsequent, reconvened meeting, if any.
10
<PAGE>
A stockholder may revoke a proxy at any time prior to its exercise (i) by
attending the Special Meeting and voting in person (although attendance at the
Special Meeting will not in and of itself constitute revocation of a proxy),
(ii) by giving notice of revocation at the Special Meeting or (iii) by
delivering (a) a written notice of revocation or (b) a duly executed proxy
bearing a date later than the proxy previously executed, to the Secretary of
the Company at 60 State Street, Boston, Massachusetts 02109. Unless revoked in
one of the manners set forth above, proxies in the form enclosed will be voted
at the Special Meeting in accordance with the stockholder's instructions.
SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of proxies and the cost of
printing and mailing this Proxy Statement/Prospectus. In addition to
solicitation by mail, the directors, officers and employees of the Company may
solicit proxies from stockholders of the Company by telephone, telegram or
personal interview. Such directors, officers and employees will not be
additionally compensated for any such solicitation but may be reimbursed for
reasonable out-of-pocket expenses in connection therewith. Arrangements will
also be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial
owners of shares held of record by such persons and the Company will reimburse
such custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses in connection therewith.
The Company has retained Morrow & Co., Inc. for an estimated fee of $4,000,
plus reimbursement of reasonable out-of-pocket expenses, to aid in the
solicitation of proxies from the stockholders. The fees of Morrow & Co., Inc.
will be paid by the Company. If you have any questions or require additional
material, please call John Ferguson at (212) 754-8000.
NO ACTION IS REQUIRED AT THIS TIME FOR STOCKHOLDERS TO ELECT THE CASH
CONSIDERATION. UNLESS STOCKHOLDERS MAKE AN AFFIRMATIVE ELECTION TO RECEIVE THE
RETAINED SHARES IN ACCORDANCE WITH THE ENCLOSED FORM OF ELECTION (THE "FORM OF
ELECTION"), THEY WILL BE DEEMED TO HAVE ELECTED THE CASH CONSIDERATION.
STOCKHOLDERS ELECTING THE CASH CONSIDERATION SHOULD NOT RETURN THEIR STOCK
CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL, AND THEN ONLY IN
ACCORDANCE WITH THE INSTRUCTIONS CONTAINED THEREIN. STOCKHOLDERS ELECTING THE
RETAINED SHARES SHOULD RETURN THEIR STOCK CERTIFICATES TOGETHER WITH THE
ENCLOSED FORM OF ELECTION PURSUANT TO THE INSTRUCTIONS CONTAINED IN SUCH FORM
OF ELECTION. SEE "THE MERGER--RETAINED SHARE ELECTION; RETAINED SHARE ELECTION
PROCEDURE," AND--PROCEDURES FOR EXCHANGE OF CERTIFICATES" FOR INSTRUCTIONS ON
EXCHANGING STOCK CERTIFICATES FOR CASH CONSIDERATION AND ELECTING THE RETAINED
SHARES.
THE MERGER
EFFECT OF THE MERGER
At the Effective Time, MergerCo will be merged with and into the Company and
the Company will continue as the Surviving Corporation following the Merger.
The owner of each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of Company Common
Stock owned by the Company or any subsidiary of the Company, which will be
canceled and retired, and other than shares of Company Common Stock subject to
appraisal rights) can elect either to receive $65.00 in cash for that share or
to retain that share, with cash to be paid in lieu of fractional shares of
Company Common Stock. This election is subject to proration so that upon
consummation of the Merger, the existing holders of the Company Common Stock
will retain 500,000 shares of Company Common Stock (approximately 3% of shares
of Company Common Stock currently outstanding and 10% of the Company Common
Stock outstanding after the Merger) and will receive $65.00 per share in cash
for the balance of the Company Common Stock (approximately 97% of shares
11
<PAGE>
currently outstanding), with cash paid in lieu of fractional shares. See "THE
MERGER--Retained Share Election; Retained Share Election Procedure," "--
Fractional Shares," and "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER
AGREEMENT--Proration." Each stockholder of the Company may receive the Cash
Consideration with respect to some of the stockholder's shares of Company
Common Stock and Retained Shares with respect to other shares of Company Common
Stock.
In addition, upon consummation of the Merger, the MergerCo Interests will be
converted into 4,500,000 shares of Company Common Stock. As a result of the
Merger, the holders of MergerCo Interests immediately prior to the Merger will
hold 90% of the shares of Company Common Stock to be outstanding after the
Merger. See "THE MERGER--Interests of Certain Persons in the Merger."
RECOMMENDATION OF THE BOARD OF DIRECTORS
On June 18, 1998, the Board of Directors (with the exception of Robert B.
Goergen, who was not present at the time the vote was taken, but who indicated
his support for the Merger by phone on June 18, 1998, prior to the meeting)
unanimously (i) determined that the Recapitalization Merger Agreement and the
transactions contemplated thereby and the Voting Agreements are fair to and in
the best interests of the Company's stockholders and (ii) resolved to recommend
that the Company's stockholders approve and adopt the Recapitalization Merger
Agreement and the transactions contemplated thereby. In reaching such
determination and recommendation, the directors considered a number of factors.
See "THE MERGER--Background of the Merger" and "--Recommendation of the Board
of Directors; Reasons for the Merger." Certain members of the Board of
Directors have certain interests in the Merger that are in addition to, and may
conflict with, their interests as stockholders and the interests of other
stockholders of the Company. See "THE MERGER--Interests of Certain Persons in
the Merger."
RECENT DEVELOPMENTS; MATERIAL UNCERTAINTY OF CONSUMMATING THE MERGER
The Company has been advised by CSI and Chase that they have informed
MergerCo that, in view of current market conditions, they would exercise their
right under the Commitment Letter to change the pricing, terms, and structure
of the financing. In addition, Apollo, on behalf of MergerCo, recently
indicated to the Company that in view of current market conditions it does not
believe that MergerCo would be able to obtain the financing necessary to
consummate the Merger. In light of current circumstances, including, without
limitation, the notice from Apollo and the position expressed by CSI and Chase,
there can be no assurances that the Merger will be consummated. See "THE
MERGER--Recent Developments; Material Uncertainty of Consummating the Merger,"
"MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER AGREEMENT--Conditions to
Consummation of the Merger," and "--Termination."
The Company has not received any firm proposals from the Investors to
restructure or renegotiate the transaction and there can be no assurances that
the Company will receive any such proposals. In the event that the Company does
receive a proposal from the Investors to renegotiate or restructure the
transaction and the Board of Directors accepts such a proposal, if there is a
change in the terms of the Merger Financing that would have a material effect
on the pro forma financial statements contained in the Proxy
Statement/Prospectus, or if there are any material changes affecting the rights
of stockholders, the Company will mail to stockholders a revised Proxy
Statement/Prospectus reflecting the terms and conditions of the revised
transaction and resolicit proxies.
Pursuant to the Recapitalization Merger Agreement, the parties have agreed to
use all reasonable efforts to take all actions necessary, proper or advisable
to consummate and make effective as promptly as practicable the transactions
contemplated by the Recapitalization Merger Agreement. Accordingly, although
there can be no assurances that the Merger will be consummated, the Company is
proceeding to take the actions required to close the Merger, including the
mailing of this Proxy Statement/Prospectus and obtaining stockholder approval
of the Merger at the Special Meeting. See "THE MERGER--Recent Developments;
Material Uncertainty of Consummating the Merger."
12
<PAGE>
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
On June 18, 1998, Goldman Sachs delivered its written opinion to the
Company's Board of Directors that, as of the date of such opinion, the Merger
Consideration to be received by the holders of the Company Common Stock
pursuant to the Recapitalization Merger Agreement was fair, from a financial
point of view, to such holders. For purposes of its opinion, Goldman Sachs
assumed that the holders of Company Common Stock would receive $65 per share in
cash for approximately 97% of their Company Common Stock and retain the balance
of such Company Common Stock and such opinion does not address the fairness to
any holders who, as a result of a stock election made by such holders, receive
cash for less than 97% of their Company Common Stock.
The full text of the written opinion of Goldman Sachs, which sets forth
assumptions made, matters considered and limitations on the review undertaken
in connection with the opinion, is attached hereto as Annex C and is
incorporated herein by reference. The opinion of Goldman Sachs referred to
herein does not constitute a recommendation as to how any holder of the Company
Common Stock should vote with respect to the transaction or what election any
such holder should make in connection with the Merger. HOLDERS OF THE COMPANY
COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. SEE
"THE MERGER--Opinion of the Company's Financial Advisor."
RETAINED SHARE ELECTION; RETAINED SHARE ELECTION PROCEDURE
Record holders of shares of Company Common Stock will be entitled to make an
unconditional election (a "Retained Share Election") on or prior to the
Election Date (as defined below), to retain and receive shares of Company
Common Stock with respect to their respective shares so elected. Holders of
Company Common Stock making the Retained Share Election and electing to retain
shares of Company Common Stock must properly complete and sign the Form of
Election, and such Form of Election, together with all certificates
representing shares of Company Common Stock duly endorsed in blank or otherwise
in form acceptable for transfer on the books of the Company (or by appropriate
guarantee of delivery, as set forth in such Form of Election), must be received
by Boston Equiserve (the "Exchange Agent") at one of the addresses listed on
the Form of Election by 5:00 p.m., eastern standard time, on November 25, 1998
(the "Election Date") and must not be withdrawn. See "THE MERGER--Retained
Share Election; Retained Share Election Procedure."
FRACTIONAL SHARES
Fractional shares of Company Common Stock will not be issued in the Merger.
Holders of Company Common Stock who elect to retain shares and who would
otherwise have been entitled to retain a fraction of a Retained Share (after
taking into account all shares of Company Common Stock delivered by such
holder) shall receive in lieu thereof a cash payment (without interest) equal
to such fraction multiplied by $65.00.
CONDITIONS TO THE MERGER
The obligations of the Company and MergerCo to consummate the Merger are
subject to various conditions, including, without limitation, obtaining
requisite stockholder approval, the termination or expiration of the relevant
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") (see "REGULATORY APPROVALS--Antitrust"), the absence
of any injunction or other legal restraint or prohibition preventing the
consummation of the Merger or making the such consummation illegal, and the
receipt by the Board of Directors of the Company and the managers of MergerCo
(the "Managers") of a letter as to the solvency of the Company and its
subsidiaries after the Merger.
MergerCo's obligation to effect the Merger is further subject to, among other
things, (i) MergerCo and the Company receiving the proceeds of financing on the
terms and conditions set forth in the commitment letters provided to MergerCo
at the time of entering into the Recapitalization Merger Agreement or upon
terms and
13
<PAGE>
conditions which are substantially equivalent thereto and, to the extent not
set forth therein, on terms and conditions which are reasonably satisfactory to
MergerCo, (ii) MergerCo being reasonably satisfied that the Merger will be
recorded as a recapitalization for financial reporting purposes, (iii) there
being no suit, action or proceeding by any federal, foreign, state or
provincial governmental or regulatory authority ("Governmental Entity") (or any
suit, action or proceeding by any other person which has a reasonable
likelihood of success) (a) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by the
Recapitalization Merger Agreement or the Voting Agreements, or seeking to
obtain from MergerCo, the Company or any of their respective subsidiaries of
affiliates, any damages that are material to any such party (taken as a whole
in the case of the Company and its subsidiaries) (b) seeking to prohibit or
limit the ownership or operations by MergerCo or the Investors of the Company
of any material portion of the business or assets of the Company and its
subsidiaries taken as a whole, (c) seeking to impose limitations on the ability
of the Investors to acquire or hold, or exercise full rights of ownership of,
any shares of Company Common Stock, including, without limitation, the right to
vote the Company Common Stock on all matters properly presented to the
stockholders of the Company or (d) seeking to prohibit MergerCo or any of its
affiliates from effectively controlling, in any material respect or any
material portion of the business, properties, assets or operations of the
Company and its subsidiaries taken as a whole. See "THE MERGER--Recent
Developments; Material Uncertainty of Consummating the Merger" "MATERIAL
PROVISIONS OF THE RECAPITALIZATION MERGER AGREEMENT--Conditions to Consummation
of the Merger" and "REGULATORY APPROVALS."
REGULATORY APPROVALS
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger may not be consummated until notification
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division"), and
the applicable waiting period has expired or been terminated. The Investors and
the Company have filed Notification and Report Forms under the HSR Act with the
FTC and the Antitrust Division, and on August 13, 1998, the waiting period was
terminated. No foreign regulatory filings are required in connection with the
consummation of the Merger. See "REGULATORY APPROVALS."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
For United States Federal income tax purposes, stockholders who receive the
Cash Consideration in exchange for all or a portion of their shares of Company
Common Stock pursuant to the Merger will be treated as selling a portion of
such shares to the Investors and having a portion of such shares redeemed by
the Company; both types of transactions--sale of shares and redemption of
shares--will be taxable to the stockholders. Depending on each stockholder's
particular circumstances, stockholders may recognize a capital gain or loss
and/or ordinary dividend income with respect to the receipt of such cash. See
"THE MERGER--Material Federal Income Tax Consequences."
TREATMENT OF COMPANY STOCK OPTIONS
The Recapitalization Merger Agreement provides that, except as otherwise may
be agreed to by the Company, with the consent of MergerCo, and employees
identified by MergerCo prior to the Effective Time, each outstanding Company
Stock Option (as defined under "THE MERGER--Effect on Stock Options and
Employee Benefit Matters") granted under the Company's Option Plans (as defined
under "THE MERGER--Effect on Stock Options and Employee Benefit Matters") will
be canceled by the Company and terminated, and each holder of a Company Stock
Option who executes an agreement acknowledging the cancellation of such Company
Stock Option, whether or not then exercisable, shall be entitled to receive as
soon as practicable after the Effective Time from the Company in consideration
for such cancellation an amount in cash (less applicable withholding taxes, but
without interest) equal to the product of (i) the number of shares of Company
Common
14
<PAGE>
Stock previously subject to such Company Stock Option, multiplied by (ii) the
positive excess, if any, of $65.00 over the exercise price per share of the
shares of Company Common Stock previously subject to such Company Stock Option.
Pursuant to the Recapitalization Merger Agreement, the Company has agreed that
prior to the Effective Time it shall take all steps necessary or appropriate
under the Option Plans to effect the foregoing as of the Effective Time. A
limited number of key executive officers who wish to continue their employment
with the Company following the Merger will also have the option to retain an
indirect equity interest in the Company by electing to receive stock units in
lieu of the cash payment described above for the cancellation of Company Stock
Options and thereby defer taxes on the amounts that would otherwise have been
received. In the event that a key executive officer elects to receive stock
units, the Company will establish a book account for the purpose of crediting
each such employee with that number of stock units having a value equal to the
amount of consideration such employee would have received had his or her
Company Stock Options been cashed out in full at the Effective Time. See "THE
MERGER--Effect on Stock Options and Employee Benefit Matters."
The Recapitalization Merger Agreement also provides that the Company will
take all necessary action prior to the Effective Time to terminate the
Company's Employee Stock Purchase Plan as of the Effective Time. It is
anticipated that following the Effective Time, no holder of a Company Stock
Option nor any participant in any of the Option Plans will have any right
thereunder to acquire equity securities of the Company pursuant thereto
following the Merger and will be entitled to receive only the amount described
in the preceding paragraph. See "THE MERGER--Effect on Stock Options and
Employee Benefit Matters."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Company's management and the Board of Directors have
certain interests in the Merger that are in addition to, and may conflict with,
their interests as stockholders and the interests of other stockholders of the
Company. The Board of Directors was aware of these interests and considered
them in addition to certain other matters (described under "THE MERGER--
Background of the Merger" and "--Recommendation of the Board of Directors;
Reasons for the Merger") in approving the Recapitalization Merger Agreement and
the transactions contemplated thereby.
Pursuant to severance and certain other agreements entered into with certain
executives of the Company, such executives will be entitled to certain payments
if their employment is terminated other than for "cause" or "good reason"
following the consummation of the Merger. See "THE MERGER--Interests of Certain
Persons in the Merger." The Recapitalization Merger Agreement provides that the
officers of MergerCo will be the officers of the Company following the Merger
and, in connection therewith, it is expected that the employment of Mr. Lewis
Rubin, the President and Chief Executive Officer of the Company, Michael J.
Soja, Vice President and Chief Financial Officer of the Company, and, in the
event that the Company's marine container business is managed by a third party
or sold, Frederick M. Gutterson, Vice President, XTRA International, will be
terminated. In such event, such persons will be entitled to the payment of such
severance benefits. See "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER
AGREEMENT--Board of Directors and Officers of the Company following the
Merger."
Pursuant to the Recapitalization Merger Agreement, except as discussed above,
Company Stock Options (as defined under "THE MERGER--Effect on Stock Options
and Employee Benefit Matters") held by directors, officers and employees of the
Company will be canceled and such holders, upon acknowledgment of the holder of
such cancellation, will be entitled to receive an amount in cash (less
applicable withholding taxes, but without interest) equal to the product of (i)
the number of shares of Company Common Stock previously subject to such Company
Stock Options multiplied by (ii) the positive excess, if any, of $65.00 over
the exercise price per share (see above, "Treatment of Company Stock Options").
Pursuant to the Recapitalization Merger Agreement, the Company has agreed to,
to the fullest extent permitted under applicable law or under the Company's
Certificate of Incorporation or By-laws and regardless
15
<PAGE>
of whether the Merger becomes effective, indemnify and hold harmless, and,
after the Effective Time, the Surviving Corporation will, to the fullest extent
permitted under applicable law, indemnify and hold harmless, each present and
former director, officer or employee of the Company or any of its subsidiaries
(collectively, the "Indemnified Parties") against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation whether civil, criminal,
administrative, or investigative (x) arising out of or pertaining to the
transactions contemplated by the Recapitalization Merger Agreement or (y)
otherwise with respect to any acts or omissions occurring at or prior to the
Effective Time, to the same extent as provided in the Company's Restated
Certificate of Incorporation, as amended (the "Company Certificate of
Incorporation"), or By-laws or any applicable existing indemnification
agreement, including certain individual indemnification agreements entered into
by the Company and its directors and officers. In addition, the
Recapitalization Merger Agreement provides that for a period of six years after
the Effective Time, subject to certain conditions, the Surviving Corporation
will maintain in effect, if available, directors' and officers' liability
insurance covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy on terms comparable to, or
better than, those then applicable to directors and officers of the Company.
See "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER AGREEMENT--
Indemnification and Insurance."
The Recapitalization Merger Agreement provides that, on or prior to the
Effective Time, the Company, at the request of MergerCo, will enter into a
management agreement with Apollo (or an affiliate thereof) pursuant to which
the Company will agree to pay an annual management fee of $1 million and agree
to continue to receive financial advisory services from Apollo and its
designees on an ongoing basis with compensation to be determined, all on terms
reasonably satisfactory to MergerCo. If the Merger is consummated in accordance
with the Recapitalization Merger Agreement, then the Surviving Corporation
following the Merger shall pay to Apollo or any designee, on the closing date
of the Merger, a fee of $12.5 million in cash, for arranging the transactions
contemplated by the Recapitalization Merger Agreement (including the financing
thereof). See "THE MERGER--Interests of Certain Persons in the Merger."
Prior to the Effective Time, the Company will enter into a Registration
Rights Agreement (as defined in "RISK FACTORS--Shares Eligible for Future Sale;
Effect on Prevailing Market Prices") with the Investors which will provide,
among other things, that the Investors may require the Company to register
their shares of Company Common Stock under the Securities Act.
MERGER FINANCING
The Company expects that, assuming the Merger occurred as of June 30, 1998,
approximately $1.27 billion of funds will be required to (i) finance the
payment of the Merger Consideration (excluding Retained Shares), (ii) cash out
Company Stock Options, (iii) repay Company indebtedness, and (iv) pay the fees
and expenses expected to be incurred in connection with the Merger. It is
contemplated that, at the Effective Time, the Company will concurrently enter
into (i) the Senior Facilities consisting of a $625 million term facility and a
$250 million revolving facility, and (ii) a subordinated facility (the
"Subordinated Facility") consisting of an issuance of $500 million senior
subordinated notes (the "Senior Subordinated Notes") or the $500 million Bridge
loan that would be anticipated to be replaced with debt securities
substantially similar to the Senior Subordinated Notes as soon as practicable
after the Effective Time (the Senior Facilities and the Subordinated Facility,
collectively, the "Merger Financing"). See "THE MERGER--Merger Financing."
16
<PAGE>
The approximate sources of funds in connection with the Merger are set forth
in the following table, assuming the Merger occurred as of June 30, 1998.
SOURCES AND USES OF FUNDS
(MILLIONS OF DOLLARS)
SOURCES:
<TABLE>
<S> <C>
Senior Facilities(1)................................................. $ 478
Bridge Loan.......................................................... 500
Equity(2)............................................................ 292
------
Total Sources...................................................... $1,270
------
USES:
Cash Consideration(3)................................................ $ 967
Cash settlement of stock options..................................... 12
Refinancing of indebtedness(4)....................................... 215
Fees and expenses.................................................... 76
------
Total Uses......................................................... $1,270
======
</TABLE>
- --------
(1) An additional $147 million will be available on a delayed-draw basis under
the term facility and $250 million will be available under the revolving
facility, in each case, after the Effective Time.
(2) Equity represents cash to be contributed to MergerCo by the Investors;
excludes equity of $33 million retained by existing holders of Company
Common Stock.
(3) Comprised of $967 million payment for the repurchase of 14.9 million shares
of Company Common Stock at $65.00 per share.
(4) Reflects refinancing of Company's existing credit facilities and
repurchasing of Series B Medium Term Notes. The Company's Series C Medium
Term Notes and its capitalized lease obligations will remain outstanding
after the Merger. The Company intends, prior to Closing, to offer to
repurchase the Series B Medium Term Notes and to seek the consent of the
noteholders to the deletion of certain covenants contained therein. If the
Company is not successful in obtaining the consent of a sufficient number
of noteholders to modify the terms thereof or determines for any reason not
to proceed with the repurchase, the Company intends to defease such notes
and to establish a debt defeasance fund in connection therewith. See "PRO
FORMA CAPITALIZATION."
At the time of execution of the Recapitalization Merger Agreement, MergerCo
received the Commitment Letter from CSI, Chase and CSFB to provide the Credit
Facilities. The commitment is subject to various conditions. See "THE MERGER--
Merger Financing."
The Company has been advised by CSI and Chase that they have informed
MergerCo that, in view of current market conditions, they would exercise their
right under the Commitment Letter to change the pricing, terms, and structure
of the financing. In addition, Apollo, on behalf of MergerCo, recently
indicated to the Company that in view of current market conditions it does not
believe that MergerCo would be able to obtain the financing necessary to
consummate the Merger. The Commitment Letter will terminate in accordance with
its terms on November 30, 1998 if no amounts have been funded thereunder. The
Recapitalization Merger Agreement provides that if the transaction is not
consummated on or prior to November 30, 1998, either MergerCo or the Company
will be able to terminate the transaction, to the extent that the terminating
party is not in breach of the agreement. In light of current circumstances,
including, without limitation, the notice from Apollo and the position
expressed by CSI and Chase, there can be no assurances that the Merger will be
consummated. See "THE MERGER--Recent Developments; Material Uncertainty of
Consummating the Merger," "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER
AGREEMENT--Conditions to Consummation of the Merger," and "--Termination."
17
<PAGE>
MARKET PRICE DATA AND DIVIDENDS
The Company Common Stock is listed for trading on the NYSE under the symbol
"XTR." On June 18, 1998, the last trading day before public announcement of the
execution of the Recapitalization Merger Agreement, the last sale price of the
Company Common Stock as reported on the NYSE was $46 1/16 per share. On October
28, 1998, the most recent practicable date prior to the first mailing of this
Proxy Statement/Prospectus, the last sale price of the Company Common Stock as
reported on the NYSE was $40 1/2 per share. For additional information
concerning historical market prices of the Company Common Stock, see "MARKET
PRICE DATA AND DIVIDENDS."
STOCKHOLDERS' APPRAISAL RIGHTS
In connection with the Merger, stockholders of the Company will be entitled
to demand appraisal rights in respect of their shares of Company Common Stock
under Section 262 ("Section 262") of the General Corporation Law of the State
of Delaware (the "DGCL"), subject to the satisfaction by such stockholders of
the conditions for appraisal rights pursuant to Section 262, including the
requirement that the stockholder (i) deliver to the Company, prior to the vote
being taken on the Merger at the Special Meeting, written notice of his or her
intent to demand payment for his or her shares of Company Common Stock if the
Merger is effected and (ii) not vote in favor of the Merger. The full text of
Section 262 is included as Annex D to this Proxy Statement/Prospectus. See
"STOCKHOLDERS' APPRAISAL RIGHTS" and Annex D.
TERMINATION OF THE RECAPITALIZATION MERGER AGREEMENT
The Recapitalization Merger Agreement may be terminated at any time prior to
the Effective Time notwithstanding approval thereof by the stockholders of the
Company or equityholders of MergerCo: (i) by mutual written consent duly
authorized by the Board of Directors of the Company and the Managers of
MergerCo; (ii) by either MergerCo or the Company, (a) if any Governmental
Entity has issued an order, decree, ruling or taken any other action (which
order, decree, ruling or other action the parties to the Recapitalization
Merger Agreement will use their respective reasonable efforts to lift), in each
case permanently restraining, enjoining or otherwise prohibiting the Merger or
transactions contemplated by the Recapitalization Merger Agreement or
prohibiting MergerCo to acquire or hold or exercise rights of ownership of the
Company Common Stock (including under the Voting Agreements) and such order,
decree, ruling or other action shall have become final and non-appealable, or
(b) if the Merger shall not have been consummated on or before November 30,
1998, provided that the right to terminate the Recapitalization Merger
Agreement for such cause will not be available to the party whose action or
failure to act caused or resulted in the failure of the Merger to occur on or
before such date and such action or failure to act constituted a breach of the
Recapitalization Merger Agreement, (iii) by MergerCo, if (a) any required
approval of the stockholders of the Company shall not have been obtained by
reason of the failure to obtain the required vote upon a vote held at a duly
held meeting of stockholders or at any adjournment thereof, or (b) if the
Company shall have (1) withdrawn, modified or amended in any respect adverse to
MergerCo its approval or recommendation of the Recapitalization Merger
Agreement or any of the transactions contemplated by the Recapitalization
Merger Agreement, (2) failed to include in the Proxy Statement mailed to its
stockholders such recommendation, (3) recommended any Acquisition Proposal (as
defined under "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER AGREEMENT--
Limitation on Solicitations") from a person other than MergerCo or any of its
affiliates or (4) resolved to do any of the foregoing, (iv) by the Company if
prior to receipt of the required approval of stockholders of the Company, the
Board of Directors approves an Acquisition Proposal on terms which the Board of
Directors has determined in good faith (a) to be more favorable to the Company
and its stockholders than the transactions contemplated by the Recapitalization
Merger Agreement and (b) based upon the advice of its outside counsel, that
failing to approve such Acquisition Proposal and terminate the Recapitalization
Merger Agreement would constitute a breach of the fiduciary duties of the Board
of Directors of the Company under applicable law; provided that the termination
for such cause will not be permissible unless and until (1) the Company shall
have provided
18
<PAGE>
MergerCo prior written notice at least three business days prior to such
termination that the Board of Directors of the Company has authorized and
intends to effect the termination of the Recapitalization Merger Agreement for
such cause, (2) the Company shall otherwise be in compliance in all material
respects with its obligations under the Recapitalization Merger Agreement, and
(3) on or prior to such termination the Company shall have paid to MergerCo the
Termination Fee (as defined under "MATERIAL PROVISIONS OF THE RECAPITALIZATION
MERGER AGREEMENT--Expenses and Certain Required Payments"), or (v) by MergerCo,
if the Company shall have breached its representations and warranties or the
agreements and covenants to be performed by it and such breach is incapable of
being cured or not cured within 20 days of receipt of written notice thereof
from MergerCo. See "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER
AGREEMENT--Termination" and "--Expenses and Certain Required Payments" and
"CERTAIN RELATED AGREEMENTS--Voting Agreement."
The Company will be obligated to pay the Investors a termination fee of $35
million, plus reimbursement of all reasonable out-of-pocket expenses and fees
up to $5 million, in the event the Recapitalization Merger Agreement is
terminated in any of the following manners: (a) by MergerCo if holders of a
majority of the outstanding Company Common Stock fail to approve the Merger,
(b) by MergerCo if the Company shall have (1) withdrawn, modified or amended in
any respect adverse to MergerCo its approval or recommendation of the
Recapitalization Merger Agreement or any of the transactions contemplated by
the Recapitalization Merger Agreement, (2) failed to include in the Proxy
Statement mailed to its stockholders such recommendation, (3) recommended any
Acquisition Proposal from a person other than MergerCo or any of its affiliates
or (4) resolved to do any of the foregoing, (c) by the Company if prior to
receipt of the Company Stockholder Approval (as defined under "THE SPECIAL
MEETING--Required Vote"), the Board of Directors approves any transaction
relating to an Acquisition Proposal on terms which the Board of Directors has
determined in good faith (1) to be more favorable to the Company and its
stockholders than the transactions contemplated by the Recapitalization Merger
Agreement and (2) based upon the advice of its outside counsel, that failing to
approve such Acquisition Proposal and terminate the Recapitalization Merger
Agreement would constitute a breach of the fiduciary duties of the Board of
Directors of the Company under applicable law, or (d) by MergerCo, if the
Company shall have breached its representations and warranties or the
agreements and covenants to be performed by it and such breach is incapable of
being cured or not cured within 20 days of receipt of written notice thereof
from MergerCo, provided, that in the case of the foregoing (a) or (d), an
Acquisition Proposal shall have been publicly announced or publicly known prior
thereto.
CERTAIN RELATED AGREEMENTS
Voting Agreements. In connection with the Merger, MergerCo has entered into
the Voting Agreements with the Funds which are affiliated with Tiger and
Trinity, pursuant to which Tiger and Trinity have, among other things, caused
the Funds to irrevocably agree (i) to vote all the Subject Shares in favor of
the Merger, (ii) to vote the Subject Shares against competing proposals, and
(iii) not to sell or transfer any of the Subject Shares prior to the
termination of the Voting Agreements. See "CERTAIN RELATED AGREEMENTS--Voting
Agreements."
In addition, pursuant to the Voting Agreements, the Funds have granted to
MergerCo a proxy to vote the Subject Shares in favor of the Merger, which proxy
is irrevocable during the term of the Voting Agreements and coupled with an
interest. The Funds have also agreed to waive any rights of appraisal available
in the Merger and to take or refrain from taking certain other actions.
The covenants and agreements contained in the Voting Agreements with respect
to the Subject Shares shall terminate, no party shall have any rights or
obligations thereunder and the Voting Agreements shall become null and void and
have no further effect, except as otherwise provided herein, immediately
following the earliest to occur of (i) the Effective Time or (ii) the
termination of the Recapitalization Merger Agreement pursuant to its terms. See
"CERTAIN RELATED AGREEMENTS--Voting Agreements."
19
<PAGE>
MERGERCO AND THE INVESTORS
MergerCo was formed to effect the transactions contemplated by the
Recapitalization Merger Agreement and the Voting Agreements and has not engaged
in any activities other than those incident to its formation and such
transactions. All of the MergerCo Interests are owned by the Investors and
certain other private investment funds which are affiliated with the Investors.
The principal executive offices of MergerCo are located at 2 Manhattanville
Road, Purchase, New York 10577.
20
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected financial data for the Company for
each of the fiscal years in the five-year period ended September 30, 1997 and
for the nine-month periods ended June 30, 1998 and 1997, respectively. The
selected financial data for each of the fiscal years in the five-year period
ended September 30, 1997 have been derived from the Company's audited financial
statements. The selected financial data for the nine months ended June 30, 1998
and 1997 have been derived from the Company's unaudited interim financial
statements, which in the opinion of management include all adjustments,
consisting only of normal recurring adjustments, which the Company considers
necessary for a fair presentation of the financial position and results of
operations of the Company for these periods. Operating results for the nine
months ended June 30, 1998 are not necessarily indicative of the results that
may be expected for the full year. The following data should be read in
conjunction with the Company's Consolidated Financial Statements and the notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
----- ------ ------ ------ ------ -------- --------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $ 329 $ 355 $ 378 $ 422 $ 435 $ 318 $ 342
OPERATING EXPENSES:
Depreciation in rental
equipment.............. 94 98 116 146 149 110 113
Rental equipment lease
financing.............. 14 7 2 -- -- -- --
Rental equipment
operating expenses..... 78 87 86 101 109 80 83
Selling and
administrative
expenses............... 32 31 35 40 43 32 33
----- ------ ------ ------ ------ -------- --------
Operating income........ 111 132 139 135 134 96 113
Interest expense........ 39 34 41 66 63 47 44
----- ------ ------ ------ ------ -------- --------
Pretax income........... 72 98 98 69 71 49 69
Provision for income
taxes.................. 34 41 41 28 28 20 28
----- ------ ------ ------ ------ -------- --------
Net income.............. $ 38 $ 57 $ 57 $ 41 $ 43 $ 29 $ 41
===== ====== ====== ====== ====== ======== ========
EARNINGS PER COMMON
SHARE:
Basic................... $2.18 $ 3.41 $ 3.40 $ 2.56 $ 2.79 $ 1.90 $ 2.69
Diluted................. 2.09 3.38 3.39 2.56 2.78 1.90 2.68
OTHER FINANCIAL DATA:
Ratio of earnings to
fixed charges(1)....... 2.6x 3.7x 3.3x 2.0x 2.1x 2.0x 2.6x
Cash provided from
operations............. $ 196 $ 233 $ 237 $ 272 $ 269 $ 181 $ 211
Cash used for investment
activities............. (161) (245) (697) (210) (249) (182) (129)
Cash provided by (used
in) financing
activities............. (36) (46) 423 (60) (24) -- (79)
Depreciation and
amortization........... 94 99 111 146 148 110 113
EBITDA(2)............... 203 230 249 280 281 204 225
BALANCE SHEET DATA:
Total assets............ $ 858 $1,005 $1,523 $1,537 $1,585 $ 1,571 $ 1,558
Total debt.............. 359 444 898 892 892 913 818
Stockholders' equity.... 280 331 359 342 360 348 392
</TABLE>
- --------
(1) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes plus fixed charges.
Fixed charges consist of interest expense on all obligations, amortization
of deferred financing costs and one-third of the rental expense on
operating leases, representing that portion of rental expense deemed by the
Company to be attributable to interest.
(2) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization (other than the amortization of deferred financing costs which
are included in interest expense). While EBITDA is not intended to
represent cash flow from operations as defined by generally accepted
accounting principles ("GAAP") and should not be considered as an indicator
of operating performance or an alternative to cash flow (as measured by
GAAP) as a measure of liquidity, it is included herein to provide
additional information with respect to the ability of the Company to meet
its future debt service, capital expenditures and working capital
requirements. The Company's measure of EBITDA may not be comparable to
similarly titled measures of other companies.
21
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The following table sets forth selected unaudited pro forma financial data of
the Company, as adjusted to give effect to the Merger, which have been derived
from, and should be read in conjunction with, the Unaudited Pro Forma Financial
Statements, including the notes thereto, appearing elsewhere in the Proxy
Statement/Prospectus. The pro forma financial statements have been prepared
assuming the Bridge Loan is taken down, given the current market conditions for
high yield securities such as the Senior Subordinated Notes. The pro forma
financial statements also reflect the financial terms for such Bridge Loan and
the Senior Facilities which are currently enumerated in the Commitment Letter.
MergerCo has informed the Company that, based on current market conditions and
after having reviewed the matter with CSFB and CSI, it does not believe that it
is presently feasible to place the Senior Subordinated Notes on terms
reasonably satisfactory to MergerCo. However, if the Senior Subordinated Notes
were to be placed, the interest rate borne by the Notes, in all likelihood,
would be higher than that to be borne by the Bridge Loan. In the event that the
Senior Subordinated Notes are placed with a higher interest rate, the pro forma
loss would be greater than that currently presented in the pro forma financial
statements. See "UNAUDITED PRO FORMA FINANCIAL STATEMENTS." The selected pro
forma financial data are presented for illustrative purposes only and are not
necessarily indicative of the operating results or financial position that
would have occurred if the Merger and Merger Financing had been consummated on
the dates indicated, nor are they necessarily indicative of future operating
results or financial position.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
YEAR ENDED -----------------
SEPTEMBER 30, 1997 1997 1998
------------------ -------- --------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................................ $435 $ 318 $ 342
OPERATING EXPENSES:
Depreciation on rental equipment........ 149 110 113
Rental equipment operating expenses .... 109 80 83
Selling and administrative expense...... 45 33 34
---- -------- --------
Operating income........................ $133 $ 95 $ 112
OTHER FINANCIAL DATA:
Depreciation and amortization........... 152 112 116
Capital expenditures.................... 249 182 129
Interest expense(1)..................... 147 110 107
Ratio of earnings to fixed charges...... 0.9x 0.8x 1.0x
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------
<S> <C>
BALANCE SHEET DATA:
Total assets...................................................... $1,587
Total debt........................................................ 1,565
Stockholders' deficit............................................. (314)
</TABLE>
- --------
(1) Excludes amortization of deferred financing costs. See "UNAUDITED PRO FORMA
FINANCIAL STATEMENTS."
22
<PAGE>
MARKET PRICE DATA AND DIVIDENDS
The Company Common Stock is listed on the NYSE and trades under the symbol
"XTR." The approximate number of record holders as of October 27, 1998 was
729. The following table sets forth the range of high and low sale prices of
the Company Common Stock on the NYSE Composite Tape and dividends declared
during fiscal years ended September 30, 1996, 1997 and 1998.
<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW DECLARED
----- ---- ---------
<C> <S> <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
1998: First Quarter..................... 60 50 .20
Second Quarter.................... 66 1/16 57 3/4 .22
Third Quarter..................... 64 13/16 45 1/2 .22
Fourth Quarter ................... 62 7/8 46 5/16 --
First Quarter (through October 28,
1999: 1998)............................. 46 3/4 37 1/2 --
</TABLE>
On June 18, 1998 the last trading day before public announcement of the
Recapitalization Merger Agreement, the last sale price of the Company Common
Stock as reported on the NYSE was $46 1/16 per share.
On October 28, 1998, the most recent practicable date prior to the mailing
of this Proxy Statement/Prospectus, the last sale price of the Company Common
Stock as reported on the NYSE was $40 1/2 per share.
The Company paid quarterly cash dividends on the Company Common Stock from
January 1977 through the third quarter of 1998. The Company agreed in the
Recapitalization Merger Agreement not to pay dividends on the Company Common
Stock pending consummation of the Merger. Following the Merger, the Company
intends to retain earnings of the Company for working capital, repayment of
indebtedness, capital expenditures and general corporate purposes. No
dividends on shares of Company Common Stock are presently contemplated to be
made following the Merger. See "RISK FACTORS--Discontinuation of Dividends."
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 Company 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 Company Common Stock and/or the amount of cash dividends which
could be paid on the Company's capital stock was limited to $153 million at
June 30, 1998. The Company has agreed in the Recapitalization Merger Agreement
not to repurchase any shares of Company Common Stock pending consummation of
the Merger.
STOCKHOLDERS OF THE COMPANY SHOULD OBTAIN CURRENT MARKET QUOTATIONS FOR
COMPANY COMMON STOCK.
23
<PAGE>
RISK FACTORS
The Company's stockholders should consider carefully the factors set forth
below as well as the other information set forth in this Proxy
Statement/Prospectus in evaluating whether to retain shares of Company Common
Stock and/or vote in favor of the Recapitalization Merger Agreement and the
Merger.
THE TRANSACTION
CONTROL BY THE INVESTORS
Upon completion of the Merger, 90% of the outstanding shares of Company
Common Stock will be held by the Investors. Accordingly, the Investors will
control the Company and have the power to elect all of its directors, appoint
new management and approve any action requiring the approval of the holders of
Company Common Stock, including adopting amendments to the Company's
Certificate of Incorporation and approving mergers or sales of all or
substantially all of the Company's assets. The directors elected by the
Investors will have the authority to effect decisions affecting the capital
structure of the Company, including the issuance of additional capital stock,
the implementation of stock repurchase programs and the declaration of
dividends. See "--Substantial Leverage."
The Investors will have the ability to obtain a change-in-control premium on
the sale of their shares, which premium may not be available to the Company's
public stockholders. In addition, the existence of a controlling stockholder
of the Company may have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from seeking to acquire, a
majority of the outstanding Company Common Stock. A third party would be
required to negotiate any such transaction with the Investors and the
interests of the Investors may be different from the interests of other
Company stockholders.
DELISTING; ILLIQUIDITY OF COMPANY COMMON STOCK; REDUCED PUBLIC FLOAT
The Company anticipates that it will be able to, and if so able, intends to,
delist the Company Common Stock from the NYSE upon or following the Merger,
and it is the Company's intention that following the Merger the Retained
Shares will not be listed on any national securities exchange or quoted on the
NASDAQ Stock Market Inc.'s National Market. Such delisting is likely to have a
material adverse effect on the trading market for and liquidity, and may have
a material adverse effect on the market value of, Retained Shares, even if the
Company continues to be a reporting company under the Exchange Act and
continues to file periodic reports (including annual and quarterly reports)
required to be filed thereunder.
Upon any such delisting, shares of the Company Common Stock would trade, if
at all, only in the over-the-counter market. Although prices in respect of
trades may be published by the National Association of Securities Dealers,
Inc. on its electronic bulletin board and "pink sheets," quotes for such
shares would not be as readily available; accordingly, it is anticipated that
following the Merger, the Company Common Stock will trade much less frequently
than the Company Common Stock traded prior to the Merger, which may have a
material adverse effect on the market value of the Retained Shares. See "THE
MERGER--Delisting; Deregistration."
There also will be substantially fewer shares of Company Common Stock held
by the public holders of Company Common Stock after the Effective Time than
prior to the Effective Time. This reduced market capitalization could cause
the market price of the shares of Company Common Stock to be subject to
significant fluctuations. In addition, following the Effective Time, factors
such as announcements by the Company of variations in its quarterly financial
results, analysts' estimates of the Company's financial results, industry-wide
results, changes in economic conditions, competitive developments, sales of
substantial blocks of the securities of the Company by the holders thereof,
and the issuance of stock in connection with future financings or corporate
transactions among other things, could cause dilution to the public holders of
Company Common Stock and cause the market price of the Company's shares to
fluctuate significantly. See "MARKET PRICE DATA AND DIVIDENDS."
24
<PAGE>
TERMINATION OF SEC REPORTING
If, as a result of the Merger, shares of Company Common Stock are held by
fewer than 300 stockholders of record, the Company may deregister the Company
Common Stock under the Exchange Act. If the Company Common Stock is so
deregistered, the Company will not be required to comply with the proxy or
periodic reporting requirements of the Exchange Act and does not plan to
provide any reports or information to public stockholders other than pursuant
to the right of such stockholders to inspect the books and records of the
Company as required by the DGCL. As a result, the information available to
stockholders on the business and financial condition of the Company would be
reduced, which could have a material adverse effect on the value of the
Company Common Stock. The Company may be required to file with the Commission
and distribute to holders of any Senior Subordinated Notes issued in
connection with the Merger Financing, to the extent required pursuant to the
terms of any instruments governing such Notes, copies of the financial
information that would have been contained in annual reports and quarterly
reports, including management's discussion and analysis of financial condition
and results of operations, that the Company would have been required to file
with the Commission pursuant to the Exchange Act. However, even if so
required, the Company will remain subject to such reporting obligations only
until such notes are repaid, or, by their terms, no longer require the Company
to be subject to such reporting obligations.
SUBSTANTIAL LEVERAGE
As of June 30, 1998, after giving pro forma effect to the Merger and the
Merger Financing and the application of the net proceeds therefrom, the
Company would have had (i) $1.565 billion of consolidated indebtedness and
(ii) a stockholders' deficit of $314 million because the Cash Consideration to
be paid to the Company's stockholders and all of the expenses relating to the
Merger will be charged to earnings and stockholders' equity.
The degree to which the Company will be leveraged may have important
consequences for the Company, including that: (i) the ability of the Company
to obtain additional financing for acquisitions, working capital, capital
expenditures or other purposes, if necessary, may be impaired or such
financing may not be on terms favorable to the Company due, in part, to the
likely loss of the Company's investment grade credit ratings; (ii) a
substantial portion of the Company's cash flow will be used to pay the
Company's interest expense, which will reduce the funds that would otherwise
be available to the Company for its operations, capital expenditures and
future business opportunities; (iii) a substantial decrease in net operating
cash flows or an increase in expenses of the Company could make it difficult
for the Company to meet its debt service requirements and force it to modify
its operations; (iv) the Company may be more highly leveraged than its
competitors which may place it at a competitive disadvantage; and (v) the
Company's high degree of leverage may make it more vulnerable to a downturn in
its business or the economy generally. Any inability of the Company to service
its indebtedness or obtain additional financing, as needed, would have a
material adverse effect on the Company. A significant portion of the
indebtedness to be incurred by the Company to finance the Merger will bear
interest at variable rates. Any increase in the interest rates on the
Company's indebtedness will reduce funds available to the Company for its
operations and future business opportunities and will exacerbate the
consequences of the Company's leveraged capital structure. In addition, the
substantial leverage will have a negative effect on the Company's net income
and ratio of earnings to fixed charges. See "THE MERGER--Merger Financing" and
"UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA."
RESTRICTIVE DEBT COVENANTS
In connection with consummating the transactions contemplated by the
Recapitalization Merger Agreement, the Borrower (as defined in "THE MERGER--
Merger Financing") will enter into the Merger Financing to, among other
things, (i) finance the payment of the Merger Consideration, (ii) cash out
Company Stock Options, (iii) repay Company indebtedness, (iv) pay the fees and
expenses incurred in connection with the Merger and (v) raise funds for
general corporate purposes. The credit agreement to be entered into as part of
the Merger Financing (the "Credit Agreement") is expected to contain a number
of significant covenants of the Borrower
25
<PAGE>
and its subsidiaries, including, without limitation, restrictions on (i)
indebtedness, (ii) liens, (iii) guarantee obligations, (iv) mergers,
acquisitions and other business combinations, (v) sales of assets, (vi)
dividends and other payments in respect of capital stock, (vii) capital
expenditures, (viii) investments, loans and advances, (ix) optional payment or
modification of certain debt of the Borrower, (x) transactions with affiliates
and (xi) various financial covenants. The indebtedness outstanding under the
Credit Agreement will be guaranteed by each of the Borrower's domestic
subsidiaries and will be secured by a first priority lien on substantially all
of the properties and assets of the Borrower and its subsidiaries (excluding
capital stock), now owned or acquired later. In addition, under the Credit
Agreement, the Borrower will also be required to comply with financial
covenants with respect to (i) a maximum leverage ratio; (ii) a balance sheet
test; (iii) a minimum interest coverage ratio; and (iv) a minimum fixed charge
coverage ratio. If the Borrower were unable to borrow under the Credit
Agreement due to a default, it would be left without sufficient liquidity.
In addition, the Bridge Loan anticipated to be issued as part of the Merger
Financing, or alternatively, the indenture (the "Indenture") governing the
Senior Subordinated Notes, is expected to contain certain covenants that will
restrict, among other things, the ability of the Borrower and its subsidiaries
to (i) incur additional indebtedness, (ii) pay dividends or make certain other
restricted payments, (iii) incur liens, (iv) apply net proceeds from certain
asset sales, (v) merge or consolidate with any other person, or sell, assign,
transfer, lease, convey or otherwise dispose of substantially all of the
assets of the Borrower, (vi) enter into certain transactions with affiliates,
or (vii) incur other senior subordinated indebtedness. See "THE MERGER--Merger
Financing."
FRAUDULENT TRANSFER CONSIDERATIONS
The payment of the cash portion of the Merger Consideration to holders of
Company Common Stock pursuant to the Merger, as well as any cash paid in lieu
of fractional shares, may be subject to review under federal or state
fraudulent transfer laws in the event the Company is the subject of a
bankruptcy filing. Under such laws, if a court in a lawsuit by a creditor or a
representative of creditors of the Company, such as a trustee in bankruptcy,
were to find that, at the time of, or after giving effect to the Merger and
the related transactions including the financing of such transactions, the
Company (i) was insolvent or rendered insolvent thereby, (ii) was engaged in a
business or transaction for which its remaining assets constituted an
unreasonably small amount of capital, (iii) intended to incur, or believed
that it would incur, debts beyond its ability to pay as they matured, or (iv)
intended to hinder, delay or defraud current or future creditors and, in the
case of clauses (i), (ii) and (iii), that the Company did not receive
reasonably equivalent value or fair consideration in the Merger, such court
could void all or a part of the payment of the cash received by the
stockholders in the Merger and require that the stockholders, including
stockholders exercising appraisal rights, return all or a portion of such
consideration to the Company or to a fund for the benefit of its creditors. If
a court were to find that the Company came within any of clauses (i) through
(iv) above, the Company, or its creditors or the trustee in bankruptcy, could
seek to avoid the grant of security interests to the lenders under Senior
Facilities. This would result in an event of default with respect to
indebtedness incurred under such facilities which, under the terms of such
indebtedness (subject to applicable law), would allow the lenders to terminate
their obligations thereunder and to accelerate repayment of such indebtedness.
Any default in the Senior Facilities could result in a cross-default in other
debt instruments of the Company.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the jurisdiction which is being applied. Generally, a company
would be considered insolvent for purposes of the foregoing if (i) the sum of
such company's debts including contingent liabilities is greater than all such
company's property at a fair valuation, (ii) the present fair saleable value
of such company's assets is less than the amount that will be required to pay
its probable liability on its existing debts as they become absolute and
matured or (iii) the company incurred obligations beyond its ability to pay as
such obligations become due. There can be no assurance as to the standards a
court would use to determine whether the Company was solvent at the relevant
time.
In the course of its deliberations concerning the Recapitalization Merger
Agreement, the Board of the Company was advised of the fraudulent conveyance
risks and the relevant legal principles set forth above. It is a
26
<PAGE>
condition to consummation of the Merger that the Company receive a solvency
opinion. Based upon its discussions with its advisors and financing sources,
the Company fully anticipates receiving such a solvency opinion. However, such
solvency opinion would not be binding on a court and there can be no assurance
that a court could not determine that the Company was insolvent at the time of
or after giving effect to the Merger.
SHARES ELIGIBLE FOR FUTURE SALE; EFFECT ON PREVAILING MARKET PRICES;
All shares issued to the Investors in the Merger will be "restricted stock"
as that term is defined in Rule 144 under the Securities Act, and initially
will not be freely saleable in the public market without registration under
the Securities Act. Subject to applicable law and certain restrictions agreed
to in a certain shareholders' agreement to which the Investors are a party
(the "Shareholders' Agreement"), the Investors could sell any or all of the
shares of Company Common Stock owned by them from time to time for any reason.
Following the Effective Time, pursuant to a Registration Rights Agreement, to
be dated as of the Effective Time (the "Registration Rights Agreement"), to be
entered into by the Company, Apollo Investment Fund IV, L.P., Apollo Overseas
Partners IV, L.P., Interpool, and Atlas, the Investors will be entitled to
certain demand rights to require the Company file a registration statement
under the Securities Act for the sale of their Company Common Stock and will
also be entitled to include their Company Common Stock in certain registration
statements filed for the benefit of the Company. Sales of substantial amounts
of Company Common Stock or the availability of such shares for sale could
adversely affect prevailing market prices.
PRORATION RELATING TO COMMON STOCK
As described herein, the election of record holders of Company Common Stock
to retain Retained Shares or to receive the Cash Consideration pursuant to the
Merger is subject to certain proration procedures set forth in the
Recapitalization Merger Agreement. Accordingly, if the Merger is consummated,
stockholders will not necessarily receive the type of consideration specified
in their respective elections. See "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT--Proration."
DISCONTINUATION OF DIVIDENDS
It is anticipated that following the Effective Time (as defined in "THE
MERGER--The Effective Time of the Merger"), the terms of any debt instruments
to be entered into in connection with financing the transactions contemplated
by the Recapitalization Merger Agreement will prohibit or otherwise restrict
the future payment of dividends by the Company. No dividends on shares of
Company Common Stock are presently contemplated to be made following the
Merger. In addition, the Company is expected to have a stockholders' deficit
following the consummation of the Merger. See "UNAUDITED PRO FORMA FINANCIAL
STATEMENTS." Under applicable Delaware law, the Company is able to pay
dividends on its stock only in limited circumstances at a time when it has a
stockholders' deficit. As a result, until the Company has a stockholders'
surplus, the Company would be unlikely to be in a position to pay dividends
even if the terms of the debt instruments allowed for the payment of
dividends.
THE COMPANY
VARIABLE REVENUES AND OPERATING RESULTS
The Company's revenues may vary significantly from period to period while a
high percentage of its operating costs are fixed. As a result of the
variability of the Company's revenues and the Company's limited ability to
reduce its fixed operating costs, the Company's profitability may be cyclical
and subject to significant fluctuation from period-to-period. The Company's
revenues are a function of lease rates and working units; the latter depends
on fleet size and equipment utilization (the ratio of revenue earning
equipment to the total fleet). Some of the factors which affect lease rates
and working units are competition, economic conditions and world trade
activity, the supply and demand for available equipment, aggressive purchasing
of equipment by the Company's customers and competitors leading to an excess
supply of equipment and reduced lease rates and
27
<PAGE>
utilization, shifting traffic trends in the industry, severe adverse weather
conditions, strikes by transportation unions and other factors in the freight
transportation industry. The Company's fixed costs include depreciation, a
portion of rental equipment operating expenses and selling and administrative
expenses.
AVAILABILITY OF NEW EQUIPMENT
New equipment is built to the Company's specifications and reflects industry
standards and customer needs. The Company obtains new equipment from a number
of manufacturers. Certain of these manufacturers have consolidated and, in the
process, eliminated manufacturing facilities. These manufacturers are, in turn
dependent on the prompt delivery and supply of the components required to
assemble the trailers, chassis and containers. Historically delivery times
have varied from three to fifteen months from when the order is placed, and
there can be no assurance that equipment will be available at the times or of
the types needed by the Company. 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 because of
its inability to quickly increase fleet size because of extended back orders
to take advantage of unexpectedly strong demand.
COMPETITION
Leasing transportation equipment is a highly competitive business and is
affected by factors related to the transportation market. Lease terms and
lease rates, as well as availability, condition and size of equipment and
customer service are all important factors to the lessee. The Company has many
competitors, some of which have leasing fleets that are larger in size than
the Company's leasing fleet and some of which have greater resources. 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.
CUSTOMER CONSOLIDATION; REDUCED CUSTOMER BASE
Certain industries in which the Company competes, including trucking and
shipping, are in the process of consolidation. As a result of this
consolidation, the Company's customers may be better able to manage their
equipment requirements and may seek increased efficiencies through direct
ownership of equipment. In such event, the ratio of leased equipment to owned
equipment may decrease, which could reduce the overall market for the
Company's services.
SUFFICIENCY OF COMMITTED FINANCING
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, Inc. and Matson Leasing Company, Inc.,
requiring additional capital. The Company plans to continue to pursue
acquisition opportunities. Historically, the Company generally has had
available a variety of sources to finance such expenditures and acquisitions
at favorable rates and terms. However, the availability of such capital
depends heavily upon prevailing market conditions, the Company's capital
structure, and its credit ratings. In connection with the Merger, the Company
will become substantially more leveraged and will be subject to significant
operating restrictions under the terms of the instruments governing its
indebtedness. See "--Substantial Leverage" and "--Restrictive Debt Covenants."
The Company's leverage and restrictive covenants in its financing agreements
will limit the amount that the Company may borrow and may limit the Company's
available financing sources as well as the rates and terms on which the
Company may obtain financing. No assurances can be given that the Company will
be able to obtain sufficient financing on terms that are acceptable to it to
fund its operations and capital expenditures or to enable the Company to take
advantage of favorable acquisition opportunities.
DIFFICULTY IN EXECUTING POST-MERGER BUSINESS STRATEGY
The Company's ability to implement its post-Merger business strategy will
depend on numerous factors, many of which are beyond the control of the
Company. Factors such as increased competition, or an economic
28
<PAGE>
downturn, may offset any improved operating results that are attributable to
such a strategy. After the Effective Time, the Company's management may decide
to alter or discontinue certain parts of the post-Merger business strategy
described herein and may adopt alternative or additional strategies. In
addition, there can be no assurance that such a strategy, if implemented, will
be successful or will improve operating results. See "THE COMPANY--Business
Strategy."
FORECASTS; LIMITS OF RELIABILITY
The forecasts set forth under the "THE MERGER--Certain Forecasts; Limits of
Reliability," while presented with numerical specificity, are based upon a
number of estimates and assumptions which, though considered reasonable by the
Company, are inherently subject to significant business, economic and
competitive uncertainties and contingencies, including those set forth herein
under "RISK FACTORS," all of which are difficult to predict and many of which
are beyond the control of the Company, and upon assumptions with respect to
future business strategies and decisions which are subject to change. The
forecasts were not prepared with a view toward compliance with published
guidelines of the Commission, the American Institute of Certified Public
Accountants, any regulatory or professional agency or body or generally
accepted accounting principles. Moreover, Arthur Andersen LLP, the Company's
independent public accountants, has not compiled, examined or performed any
procedures regarding the forecasts and accordingly, does not express any
opinion or any other form of assurance with respect thereto, and assumes no
responsibility for and disclaims any association with the forecasts. While the
Company believes the forecasts are based upon reasonable assumptions and
estimates, actual results will vary and such variations may be material.
Forecasts; Limits of Reliability are necessarily speculative in nature, and it
is usually the case that one or more of the assumptions underlying the
forecasts will not materialize. The Company prepared these estimates in
February through April 1998 and the Company does not intend to update or
revise the forecasts to reflect events or circumstances after the date thereof
or to reflect the occurrence of unanticipated events. Stockholders are
cautioned not to place undue reliance on any of the forecasts included herein.
See "THE MERGER--Certain Forecasts; Limits of Reliability."
29
<PAGE>
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED
The purpose of the Special Meeting is to consider and vote upon the Merger
Proposal and the Stock Option Plan. If the Recapitalization Merger Agreement
and the transactions contemplated thereby are approved by the stockholders of
the Company, MergerCo will merge with and into the Company and 14,872,903 of
the 15,372,903 shares of Company Common Stock outstanding as of the close of
business on the Record Date will be converted into the right to receive $65.00
per share in cash. Existing stockholders will retain the remaining 500,000
shares of Company Common Stock, with cash to be paid in lieu of fractional
shares. If the Merger is approved and consummated, all of the MergerCo
Interests issued and outstanding immediately prior to the Effective Time will
be converted into 4,500,000 shares of Company Common Stock. As a result of the
Merger, the holders of MergerCo Interests immediately prior to the Merger will
hold 90% of the shares of Company Common Stock expected to be outstanding
after the Merger. See "THE MERGER" and "MATERIAL PROVISIONS OF THE
RECAPITALIZATION MERGER AGREEMENT."
THE BOARD OF DIRECTORS (WITH THE EXCEPTION OF ROBERT B. GOERGEN, WHO WAS NOT
PRESENT AT THE TIME THE VOTE WAS TAKEN, BUT WHO INDICATED HIS SUPPORT FOR THE
MERGER BY PHONE ON JUNE 18, 1998, PRIOR TO THE MEETING) HAS UNANIMOUSLY
APPROVED THE RECAPITALIZATION MERGER AGREEMENT AND RECOMMENDS A VOTE FOR
APPROVAL OF THE RECAPITALIZATION MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER. CERTAIN MEMBERS OF THE BOARD OF
DIRECTORS HAVE CERTAIN INTERESTS IN THE MERGER THAT ARE IN ADDITION TO, AND
MAY CONFLICT WITH, THEIR INTERESTS AS STOCKHOLDERS AND THE INTERESTS OF OTHER
STOCKHOLDERS OF THE COMPANY. SEE "THE MERGER--INTERESTS OF CERTAIN PERSONS IN
THE MERGER."
In addition to consideration of the Merger Proposal and the Stock Option
Plan, stockholders will be asked to transact any other business properly
brought before the Special Meeting. The Board of Directors of the Company is
not presently aware of any such other business.
REQUIRED VOTE
Approval and adoption of the Recapitalization Merger Agreement requires the
affirmative vote of a majority of the outstanding shares of Company Common
Stock held by stockholders of record as of the close of business on the Record
Date (the "Company Stockholder Approval"). As of the Record Date, Tiger and
Trinity beneficially owned, through the Funds, 6,664,300 shares of Company
Common Stock representing approximately 43.5% of the outstanding shares of the
Company Common Stock entitled to vote at the Special Meeting. Tiger and
Trinity have caused the Funds to irrevocably agree, pursuant to the Voting
Agreements, to vote all the shares held by them in favor of the approval and
adoption of the Recapitalization Merger Agreement and the transactions
contemplated thereby. Approval of the Stock Option Plan requires the
affirmative vote of a majority of shares present and entitled to vote at the
Special Meeting.
VOTING AND REVOCATION OF PROXIES
Shares of Company Common Stock that are entitled to vote and are represented
by a proxy properly signed and received at or prior to the Special Meeting,
unless subsequently properly revoked, will be voted in accordance with the
instructions indicated thereon. If a proxy is signed and returned without
indicating any voting instructions, shares of Company Common Stock represented
by such proxy will be voted FOR the Merger Proposal and the Stock Option Plan.
The Board of Directors is not currently aware of any business to be acted upon
at the Special Meeting other than as described herein. If, however, other
matters are properly brought before the Special Meeting, the persons appointed
as proxies will have the discretion to vote or act thereon in accordance with
their best judgment, unless authority to do so is withheld in the proxy. The
persons appointed as proxies may not exercise their discretionary voting
authority to vote any such proxy in favor of any adjournments or postponements
of the Special Meeting if instruction is given to vote against the approval of
the Recapitalization Merger Agreement.
30
<PAGE>
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before the shares represented by such proxy are voted at
the Special Meeting by (i) attending and voting in person at the Special
Meeting, (ii) giving notice of revocation of the proxy at the Special Meeting
or (iii) delivering to the Secretary of the Company (a) a written notice of
revocation or (b) a duly executed proxy relating to the same shares and
matters to be considered at the Special Meeting, bearing a date later than the
proxy previously executed. Attendance at the Special Meeting will not in and
of itself constitute a revocation of a proxy. All written notices of
revocation and other communications with respect to revocation of proxies
should be addressed to the Company at 60 State Street, Boston, Massachusetts
02109, Attention: Secretary, and must be received before the taking of the
vote at the Special Meeting.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of Company Common Stock at the close of business on the Record
Date, November 2, 1998, will be entitled to receive notice of and to vote at
the Special Meeting. At the close of business on the Record Date, the Company
had issued and outstanding and entitled to vote 15,372,903 shares of Company
Common Stock.
The presence in person or by proxy of the outstanding shares of Company
Common Stock representing a majority of the shares entitled to vote is
necessary to constitute a quorum for the transaction of business. Abstentions
will be counted as present for the purposes of determining whether a quorum is
present.
Because the required vote of the stockholders on the Recapitalization Merger
Agreement and the Merger is based upon the total number of outstanding shares
of Company Common Stock, the failure to submit a proxy card (or to vote in
person at the Special Meeting) or the abstention from voting by a stockholder
(including broker non-votes) will have the same effect as an "against vote"
with respect to approval and adoption of the Recapitalization Merger Agreement
and the Merger. Because the required vote of the stockholders on the Stock
Option Plan is based upon the total number of shares of Company Common Stock
present and entitled to vote, any abstention with respect to the approval of
the Stock Option Plan will have the effect of an "against vote" with respect
to such proposal, while a broker nonvote will not affect the outcome of the
vote on the Stock Option Plan. Proxies delivered to the Company's Secretary
that do not contain any instruction to vote for or against the particular
matter will be voted in favor of such matter.
If a quorum is not obtained, or if fewer shares of Company Common Stock are
voted in favor of approval and adoption of the Recapitalization Merger
Agreement and Merger than the number required for approval, it is expected
that the Special Meeting will be postponed or adjourned for the purpose of
allowing additional time for soliciting and obtaining additional proxies or
votes, and, at any subsequent reconvening of the Special Meeting, all proxies
will be voted in the same manner as such proxies would have been voted at the
original convening of the Special Meeting, except for any proxies which have
theretofore effectively been revoked or withdrawn.
SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of proxies and the cost
of printing and mailing this Proxy Statement/Prospectus. In addition to
solicitation by mail, the directors, officers and employees of the Company may
solicit proxies from stockholders of the Company by telephone, telegram or by
personal interview. Such directors, officers and employees will not be
additionally compensated for any such solicitation but may be reimbursed for
reasonable out-of-pocket expenses in connection therewith. Arrangements will
also be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial
owners of shares held of record by such persons and the Company will reimburse
such custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses in connection therewith.
The Company has retained Morrow & Co., Inc. for an estimated fee of $4,000,
plus reimbursement of reasonable out-of-pocket expenses, to aid in the
solicitation of proxies from the holders of the Company Common Stock. The fees
of Morrow & Co., Inc. will be paid by the Company. If you have any questions
or require additional material, please call John Ferguson at (212) 754-8000.
31
<PAGE>
NO ACTION IS REQUIRED AT THIS TIME FOR STOCKHOLDERS TO ELECT THE CASH
CONSIDERATION. UNLESS STOCKHOLDERS MAKE AN AFFIRMATIVE ELECTION TO RECEIVE THE
RETAINED SHARES IN ACCORDANCE WITH THE ENCLOSED FORM OF ELECTION, THEY WILL BE
DEEMED TO HAVE ELECTED THE CASH CONSIDERATION. STOCKHOLDERS ELECTING THE CASH
CONSIDERATION SHOULD NOT RETURN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A
LETTER OF TRANSMITTAL, AND THEN ONLY IN ACCORDANCE WITH THE INSTRUCTIONS
CONTAINED THEREIN. STOCKHOLDERS ELECTING THE RETAINED SHARES SHOULD RETURN
THEIR STOCK CERTIFICATES TOGETHER WITH THE ENCLOSED FORM OF ELECTION PURSUANT
TO THE INSTRUCTIONS CONTAINED IN SUCH FORM OF ELECTION. SEE "THE MERGER--
RETAINED SHARE ELECTION; RETAINED SHARE ELECTION PROCEDURE," AND "--PROCEDURES
FOR EXCHANGE OF CERTIFICATES" FOR INSTRUCTIONS ON EXCHANGING STOCK
CERTIFICATES FOR CASH CONSIDERATION AND ELECTING THE RETAINED SHARES.
32
<PAGE>
THE MERGER
BACKGROUND OF THE MERGER
On March 15, 1990, an opposing slate of directors nominated by a committee
of the Company's stockholders was elected to replace the then-current Board of
Directors. Over the course of the next year, the Board of Directors
implemented a program designed to increase stockholder value. Among other
actions implemented by the Board was the termination of the Company's Rights
Agreement in order to eliminate obstacles to acquisition proposals.
In October 1993, Tiger, on behalf of certain investment funds managed by
Tiger, filed a Schedule 13G with the Securities and Exchange Commission
disclosing that Tiger had acquired approximately 11.5% of the outstanding
shares of the Company Common Stock. In August 1994, Tiger filed a Schedule 13D
in which it disclosed that it had further increased its ownership position in
the Company to approximately 20.5%, but continued to indicate that it had
acquired the additional shares for investment purposes.
Beginning in October 1994, the Board of Directors considered a three-part
approach for improving stockholder value, consisting of continued investment
in the existing business, including product line extensions, pursuit of
external growth opportunities and institution of a stock repurchase program.
Conversations with Tiger during the fall of 1994 indicated that Tiger viewed a
stock repurchase program as a program which would enhance shareholder value.
The Executive Committee of the Board and the full Board of Directors
considered implementation of a stock repurchase program at various meetings
between October and December 1994 as a means of enhancing stockholder value
and to provide a source of liquidity for the Company's stockholders.
On January 6, 1995, Lewis Rubin, President of the Company, and Robert
Goergen, Chairman of the Board, met with Julian Robertson, the majority owner
of Tiger, to discuss opportunities to enhance XTRA stockholder value and
provide a source of liquidity to its stockholders. Mr. Robertson indicated
that Tiger was an advocate of significant share repurchases and was
considering having conversations with other parties regarding a possible sale
of the Company. On January 9, 1995, Robert Goergen had a meeting with Mr.
Robertson at which a possible sale of the Company was again noted by Mr.
Robertson. Mr. Rubin had a subsequent telephone conversation with Thomas
Macauley, an employee of Tiger, who mentioned the possibility of instituting a
significant stock buy-back program as an alternative to a sale of the Company.
On January 11, 1995, Tiger filed an amendment to the Schedule 13D disclosing
that it had increased its ownership to approximately 23% of the outstanding
shares of the Company Common Stock. In the Schedule 13D, Tiger indicated in
its filing that it had held discussions from time to time with the Company's
management regarding the Company and means of enhancing stockholder value.
Tiger also stated that as part of its ongoing review of its investment in the
shares of Company Common Stock, it was currently exploring and may explore
from time to time in the future a variety of alternatives to enhance
stockholder value, including such extraordinary transactions as a merger or a
sale of the Company.
On January 26, 1995, the Board of Directors authorized a stock repurchase
program of up to $100 million. In connection with the repurchase program, Mr.
Goergen indicated that the Company's plan to continue to improve stockholder
value included three key elements: continued growth of the Company's existing
business, external growth opportunities and timely stock repurchases.
In additional Schedule 13D amendments through May 1995, Tiger disclosed that
it had further increased its ownership position in the Company to 32.3%. In
November 1995, Mr. Goergen and Robert Gintel, Vice Chairman of the Board met
with Mr. Robertson and Mr. Griffin, the President of Tiger. Messrs. Goergen
and Gintel indicated that if Tiger was interested, the Board would consider
nominating a designee of Tiger to the Board. In July 1997, Tiger indicated to
the Company that it would like a member of Tiger to be elected as a director
of the Company. Accordingly, on August 5, 1997, Michael D. Bills, a Senior
Managing Director of Tiger, was appointed to the Board of Directors of the
Company.
33
<PAGE>
On July 18, 1997, Trinity, an investment fund affiliated with members of the
Bass family of Texas (together with individual members of the Bass family and
others (collectively, the "Trinity Group")), filed a Schedule 13D with the
Commission disclosing that the Trinity Group had acquired approximately 10% of
the outstanding Company Common Stock. The Trinity Group indicated that it held
its shares of Company Common Stock for investment purposes but that it had,
and expected to continue to have, discussions with management of the Company
concerning various operational and financial aspects of the Company's
business, including discussions with management and other stockholders of the
Company concerning various ways of maximizing long-term stockholder value.
Prior to July 18, 1997, the Company's management had met with representatives
of Trinity by phone and in person to discuss the Company's business in a
manner typical of its discussions with other stockholders. The Nominating
Committee of the Board of the Company also met with Mr. Christodolou of
Trinity and recommended his election to the Board. On January 29, 1998, Mr.
Christodolou was appointed to the Board of Directors of the Company.
In order to further consider appropriate means to enhance stockholder value,
on May 1, 1997, the Company engaged Corporate Decisions, Inc. ("CDI"), a
management consulting firm, to undertake a corporate strategic study of the
Company. CDI did an extensive review of each of the Company's businesses,
their strategies and market positions, and assessed the opportunities to
enhance stockholder value presented by each separate product line. CDI's
summary report indicated that the Company's opportunities to increase value
were principally in continued growth of the over-the-road leasing sector,
expansion into less capital-intensive areas of the transportation business,
and given the relatively small market share of the international marine-
container leasing operation, either significant growth or a sale of that
division. Barring significant and prompt progress on those strategic
initiatives, CDI felt that the Company should be sold to maximize stockholder
value. The final CDI findings (the "CDI Report") were presented to the
Executive Committee on September 29, 1997 and to the Board of Directors on
September 30, 1997.
On December 18, 1997, the Board authorized Mr. Rubin to obtain proposals
from investment banking firms regarding a possible sale of all or a portion of
the Company.
On January 29, 1998, Mr. Rubin presented to the Board of Directors a
response to the CDI Report which concluded and recommended that the best way
to improve stockholder value was to engage an investment banking firm to
explore the potential sale of the Company. After reviewing the proposals
received from investment banking firms, the Executive Committee authorized Mr.
Rubin to negotiate a contract with Goldman Sachs.
After discussing the alternative approaches to enhancing stockholder value,
the Board authorized Mr. Rubin to explore with various investment banking
firms the potential sale of all or a portion of the Company. In early March
1998, the Company engaged Goldman Sachs to advise the Company in connection
with potential strategic alternatives, including the possible sale of all or a
portion of the Company and authorized Goldman Sachs to inquire, on a
confidential basis, whether selected companies or firms might be interested in
pursuing a transaction with the Company.
During February and March 1998, management of the Company held various
meetings with representatives of Goldman Sachs, and Goldman Sachs began the
process of gathering information on the level of interest of various third
parties in pursuing a possible transaction with the Company.
During March and April 1998, Goldman Sachs contacted approximately 35
potential strategic buyers who operate in the Company's business or in related
businesses and approximately 27 potential financial buyers to determine their
interest in receiving non-public information concerning the Company so that
they could more fully evaluate the Company. Twenty-six of those parties
contacted, including Apollo, executed customary confidentiality agreements in
order to receive non-public information for evaluation purposes.
During April 1998, the Company's management provided certain of these
parties with non-public information. Five of the parties who executed
confidentiality agreements requested further meetings with
34
<PAGE>
management. In the course of these meetings, members of the Company's
management made clear to each potential buyer management's desire to seek a
transaction that was in the best interest of the Company's stockholders.
Certain potential transaction partners asked whether they would have the
opportunity to negotiate arrangements with members of the Company's management
in order to insure management's participation in a transaction. In response,
the Company's management stated that they would remain flexible and do
whatever was in the best interest of the Company and its stockholders, but
that no substantive discussions regarding arrangements for management's
retention or participation could take place until such time, if any, as all of
the material terms of a definitive transaction were agreed upon. Management's
position in part was determined by the Board's direction that all qualified
third parties be given a meaningful opportunity to participate so that the
best possible transaction for the Company's stockholders could be achieved.
On April 27, 1998, four parties, including Apollo, submitted written non-
binding indications of interest to engage in an acquisition transaction with
the Company and were invited to participate in a more detailed due diligence
process. Of the four parties submitting indicative bids, three, including
Apollo, were financial buyers of the type frequently referred to as "leveraged
buy-out firms". Certain of the financial buyers indicated that they might be
interested in structuring a transaction in a manner to qualify as a
recapitalization for accounting purposes, with existing stockholders to retain
a small equity stake in the Company, and contemplating the incurrence by the
Company of a substantial amount of indebtedness. Each such firm indicated that
the range of value in its proposal was very preliminary, and was subject to
completion of its due diligence investigations of the Company, and revision or
complete withdrawal for any reason. A fifth party subsequently requested that
it be permitted to participate in the due diligence process even though it did
not submit a written indication of interest.
On April 30, 1998, the Board met to review the status of the discussions
with third parties and the indications of interest received. Goldman Sachs
reviewed the process that management, at the direction of the Board of
Directors, had commenced with the assistance of Goldman Sachs. At that
meeting, Goldman Sachs presented a description of the indications of interest
received, including stated price ranges, form of consideration, sources of
financing, any proposed relationships with management and employees, due
diligence requirements, closing issues and other terms. In the course of its
deliberations, the Board was advised by Ropes & Gray, legal counsel to the
Company and the Board, and considered its fiduciary duties to the Company and
its stockholders, including the duties of care and loyalty. Following these
presentations, the Board discussed the appropriate long-term strategy for the
Company. The Board, upon consultation with Ropes & Gray and Goldman Sachs,
concluded that the levels of interest indicated by the potential transaction
partners warranted further investigation so that the Board could make a fully
informed decision as to the appropriate long-term strategy for the Company,
including whether or not the Company should pursue a transaction involving a
change of control with a third party at that time. As a result, the Company's
management and its advisors were instructed to continue the process of
soliciting binding proposals from the parties that had expressed interest in
pursuing such a transaction (including the fifth party referred to above).
Between May 13, 1998 and June 4, 1998, each of the five parties conducted
its due diligence investigation of the Company. In addition, the Company's
management made formal presentations to each of the five parties concerning
the operations and financial condition of the Company.
On June 8, 1998, at the request of the Company, Goldman Sachs delivered a
draft merger agreement that had been prepared by the Company and its legal
counsel to each of the five interested parties, together with instructions
that the Company expected such parties to submit a binding written proposal by
5:00 p.m. on June 15, 1998, together with a marked copy of the draft agreement
indicating the changes such parties would require prior to executing the
agreement. Management and Goldman Sachs, pursuant to the Board's instructions,
communicated to each party that any bids were expected to include the terms of
all relevant financing commitments, as the Board was interested only in
transaction proposals with respect to transactions for which there would be a
relatively high level of certainty of completion.
On June 15, 1998, Goldman Sachs received, on behalf of the Company, three
written proposals and one oral proposal. The values of the per-share cash
consideration contained in the proposals ranged up to $61.00.
35
<PAGE>
The proposal submitted by Apollo (the "Apollo Proposal") contemplated a merger
with an entity to be formed by Apollo and Interpool that would qualify as a
recapitalization for accounting purposes and in which the Company's
stockholders would, subject to proration, be able to elect to receive, with
respect to each share of Company Common Stock, $61.00 in cash or one retained
share of Company Common Stock such that the existing stockholders would retain
10% of the shares to be outstanding following the Merger. The amount of
Retained Shares was required by the Investors based upon the Investors' desire
to have existing stockholders retain an equity interest in the Company
consistent with the Merger being a recapitalization. The Apollo Proposal
included detailed financing commitments covering all aspects of the financing
that would be required in connection with such proposal.
On June 16, 1998, the Executive Committee of the Board of Directors met to
review the proposals received by the Company. At that meeting, Goldman Sachs
reviewed the solicitation process that management, at the direction of the
Board of Directors, had commenced with the assistance of Goldman Sachs and
Ropes & Gray. Goldman Sachs presented a detailed summary of the terms
contained in each of the proposals received, including the stated price
ranges, the form of consideration, sources of financing, transaction
structure, any proposed relationship with management of the Company, due
diligence requirements, closing conditions provisions, and other terms. Legal
counsel discussed the fiduciary and other Delaware law issues involved in the
transactions of the types proposed.
After further discussion and analysis, Mr. Bills indicated that he did not
believe that Tiger would support the Apollo Proposal unless the offer was
increased to $65.00 per share acquired by the Investors. On that basis and at
that price, the Executive Committee authorized management, Goldman Sachs and
Ropes & Gray to negotiate an agreement with Apollo and Interpool for
presentation to the full Board of Directors.
On the morning of June 17, 1998, representatives of Goldman Sachs, at the
direction of the Executive Committee, contacted Apollo and requested that
Apollo increase its offer to $65.00 per share acquired by the Investors. In
addition, Apollo was asked to consider certain modifications to some of the
contractual provisions that Apollo had included with its formal proposal,
including that: (i) any eligible Company employee who is employed at the
Effective Time would be entitled to a normal retirement fund contribution for
the Company's fiscal year; and (ii) any Company employee who participates in
the Incentive Plan (as defined in "THE MERGER--Effect on Stock Options and
Employee Benefit Matters") who is employed at the Effective Time would receive
a bonus (or prorated portion thereof) for the Company's fiscal year ended
September 30, 1998. Later that day, a representative of Apollo contacted
Goldman Sachs to inform them that Apollo would increase its offer to $65.00
per share acquired by the Investors.
Later on June 17, 1998, representatives of Apollo met with Michael J. Soja,
Vice President and Chief Financial Officer of the Company, together with
Apollo's and the Company's legal counsel, as well as Goldman Sachs, to
negotiate the substantive terms of a merger agreement submitted by Apollo in
connection with its bid. These negotiations proceeded through the evening of
June 18, 1998.
At a meeting on the evening of June 18, 1998, the Board received
presentations from Ropes & Gray and Goldman Sachs and evaluated whether or not
the Company should enter into the proposed merger with the Investors. Goldman
Sachs reviewed financial and comparative analyses with respect to the proposed
transaction. Ropes & Gray reviewed the legal standards applicable to its
review of the proposed transaction, including the duties of care and loyalty
owed to the Company and its stockholders and also reviewed for the Board the
regulatory process that would apply to the transaction. In addition, Ropes &
Gray reviewed in detail the terms of the Recapitalization Merger Agreement
negotiated with Apollo and Interpool, including the requirement that the
Company pay a termination fee in the event the Merger Agreement is terminated
in certain circumstances. Legal counsel explained that the amount of the
termination fee had been negotiated on an arms length basis in relation to the
size of the transaction and that the amount of the termination fee was
consistent with termination fees payable in similar transactions. In the
course of its deliberations, the Board was advised of and considered the
fraudulent conveyance risks and the relevant legal principles set forth under
"RISK FACTORS--Fraudulent Conveyance Risks". In order to protect the Company
and its stockholders from such risks, the Board sought advice from its
advisors and was informed that the consummation of the Merger was conditioned
upon the Board and the Company receiving a solvency opinion from an
independent expert as to the solvency of the Company after giving effect to
the transaction.
36
<PAGE>
At this meeting, Goldman Sachs advised the Board that it was prepared to
render an opinion to the Board to the effect that, as of that date, the Merger
Consideration to be received by the holders of Company Common Stock pursuant
to the Recapitalization Merger Agreement was fair, from a financial point of
view, to such holders. The full text of the written opinion of Goldman Sachs,
which sets forth assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion, is attached hereto as
Annex C and is incorporated herein by reference. At the conclusion of the
meeting, the Board determined that the Merger was fair to and in the best
interest of the Company and its stockholders and, by unanimous vote of those
present and voting (with the exception of Robert B. Goergen, who was not
present at the time the vote was taken, but who indicated his support for the
Merger by phone on June 18, 1998, prior to the meeting), approved and adopted
the Recapitalization Merger Agreement and the transactions contemplated
thereby. Early the next morning, the parties executed the Recapitalization
Merger Agreement.
RECOMMENDATION OF THE BOARD OF DIRECTORS; REASONS FOR THE MERGER
At its meeting on June 18, 1998, by unanimous vote of those present and
voting (with the exception of Robert B. Goergen, who was not present at the
time the vote was taken, but who indicated his support for the Merger by phone
on June 18, 1998, prior to the meeting), the Board of Directors approved and
adopted the Recapitalization Merger Agreement and the transactions
contemplated thereby and recommended that the Company's stockholders approve
the Recapitalization Merger Agreement. The recommendation by the Board that
holders of Company Common Stock approve and adopt the Recapitalization Merger
Agreement is not, and should not be considered to be, a recommendation that
stockholders elect to retain or, alternatively, that stockholders do not elect
to retain, shares of Company Common Stock held by them in the Merger.
The decision of the Board to approve, and recommend adoption and approval by
the holders of Company Common Stock of, the Recapitalization Merger Agreement,
was the result of a considered and deliberate process, conducted by the Board
over a five-month period, to seek the greatest possible value for the holders
of Company Common Stock. In the course of reaching its decision to approve the
Recapitalization Merger Agreement and the Merger, the Board consulted with the
Company's investment banker and legal counsel and considered the following
factors:
(a) that the consideration to be paid and shares of Company Common Stock
retained in the Merger, valued at $65.00 per share, represents a premium
for Company Common Stock of approximately 41% over the closing price of $46
1/16 per share of Company Common Stock on June 18, 1998, the trading date
preceding the announcement of the proposed Merger. The Board of Directors
considered that shares of Company Common Stock had traded below $50.00 per
share for a significant period of time and for as low as $39 3/4 during the
preceding two years, meaning that the Merger offered a premium to
stockholders compared to recent historical price levels of Company Common
Stock;
(b) the Company's business, financial condition, results of operations,
business strategy and prospects, as well as the uncertainties associated
with those prospects;
(c) a balancing of the risks and benefits of the other strategic
alternatives available to the Company, including continuing as an
independent entity. In this regard, the Board of Directors considered the
opportunities available to the Company for increasing stockholder value as
set forth in the CDI Report. Of the strategic alternatives available to the
Company, the Merger was determined by the Board of Directors to be the
alternative which would yield the best results for the stockholders of the
Company from a financial point of view;
(d) the written opinion of Goldman Sachs to the effect that, based upon
and subject to various considerations (and the analyses presented to the
Board of Directors of the Company underlying such opinion) set forth in
such opinion dated June 18, 1998, that the Merger Consideration to be
received by the holders of the Company Common Stock pursuant to the
Recapitalization Merger Agreement is fair, from a financial point of view,
to such holders. Although the opinion of Goldman Sachs was based upon an
assumption that the holders will receive cash for approximately 97% of the
shares and retain the balance of such shares, the Board considered that, as
a worst case scenario, if the Company's stockholders were
37
<PAGE>
to determine (in general) that they did not wish to retain shares of
Company Common Stock, each of such stockholders would be guaranteed to
receive cash for 97% of his or her shares under the Merger and could be
forced (through the pro ration mechanics) to retain only a relatively
immaterial amount of equity. At the same time, the Board considered that to
the extent stockholders wished to retain an equity interest in the Company,
the ability to retain even a small number of shares, together with the
possibility of retaining a larger percentage of equity (assuming other
stockholders in general did not elect to retain their entire equity
interest) was a desirable alternative. In general, the Board placed
relatively little weight on the retained equity component of the
consideration being offered;
(e) the Board's desire to enable the stockholders of the Company to
achieve liquidity with respect to substantially all of their investment in
the Company at a fair price and the Board's conclusion that the Merger of
the Company was the best way to achieve such liquidity in the foreseeable
future;
(f) the Board's view that the terms of the Recapitalization Merger
Agreement, as reviewed by the Board with the legal advice of Ropes & Gray
and the financial advice of Goldman Sachs, is advisable and fair to the
Company and the holders of the Company Common Stock because it provides the
Company and the stockholders with flexibility to accept, under certain
circumstances, a third-party proposal and to terminate the Recapitalization
Merger Agreement. The Board considered that the proposed termination fee
represented approximately 3 1/2% of the Merger Consideration, an amount
which was consistent with the amounts payable in other similar
transactions. (See "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER
AGREEMENT--Termination");
(g) the terms and conditions of the Recapitalization Merger Agreement and
related matters, including closing conditions, termination rights, the
cash-out of Company stock options and MergerCo and the Investor's
representations and warranties, all of which were the product of arm's-
length negotiations;
(h) the fees and expenses to be paid to an affiliate of Apollo (or its
designee), respectively, including in addition to the reimbursement of out-
of-pocket expenses, (i) a fee of $12.5 million for arranging the
transactions contemplated by the Recapitalization Merger Agreement
(including the financing thereof) and (ii) an annual fee of $1 million for
providing financial advisory and other management services after
consummation of the Merger;
(i) the terms and conditions of the Voting Agreements, pursuant to which,
among other things, the Funds, owning approximately 43.5% of the issued and
outstanding shares of Company Common Stock, have agreed to vote, and have
granted a related proxy to vote their shares of Company Common Stock, in
favor of the Recapitalization Merger Agreement and the Merger;
(j) that the proposed structure of the Merger treats all stockholders
equally by giving all stockholders the opportunity to receive cash for
their shares or to retain shares (subject to proration) of Company Common
Stock (with the exception that if the stockholders of the Company elect to
retain more than 500,000 shares, in the aggregate, of Company Common Stock,
a stockholder owning 33 or fewer shares may not be able to retain any
shares after proration is applied, as fractional shares of Company Common
Stock will not be issued in the Merger);
(k) that the Apollo Proposal represented the most attractive proposal
resulting from a considered and deliberate sale process conducted by the
Board, with the assistance of Goldman Sachs and management, to maximize
stockholder value; and
(l) the fact that the Recapitalization Merger Agreement requires the
Merger to be submitted to the stockholders for approval, which allows for
an informed vote of the stockholders on the merits of the transaction
without requiring a tender of shares or other potentially coercive
transactions and the fact that the Recapitalization Merger Agreement
provides that it may be terminated by the Company if approval of the
holders of a majority of the outstanding Company Common Stock is not
received.
In addition to the foregoing, the Board considered certain negative factors
of the Merger to the Company and the stockholders, including the following:
(a) that recently the Company Common Stock had traded at a level slightly
higher than the Merger Consideration and that the per share transaction
premium was negative 1.5% based on the all time high
38
<PAGE>
price of the Company Common Stock which occurred on March 16, 1998. (see
"MARKET PRICE DATA AND DIVIDENDS"),
(b) the reduced liquidity, following the Merger, of the Company Common
Stock to be retained by the stockholders, it being noted that with the
availability of only 500,000 Retained Shares in the aggregate and the
limited liquidity for such shares, stockholders may have difficulty selling
the Company Common Stock or obtaining prices equivalent to those that would
exist in a more liquid market; See "RISK FACTORS - Delisting; Illiquidity
of Company Common Stock; Reduced Public Float"; and
(c) the various transaction-related risks that are more fully described
under "RISK FACTORS."
The foregoing discussion of the information and factors discussed by the
Board of Directors is not meant to be exhaustive, but includes all material
factors considered by the Board. While the Board of Directors considered such
factors, it did not quantify or attach any particular weight to such factors,
and individual members of the Board may have placed different emphasis on
particular positive or negative factors in reaching their determination that
the Merger is in the best interest of the stockholders.
If the holders of the Company Common Stock do not approve and adopt the
Recapitalization Merger Agreement, or if the Merger is not consummated for any
other reason, the Board expects to continue to operate the Company as an
ongoing business.
The Board has determined that the Recapitalization Merger Agreement and the
Merger are advisable and fair to and in the best interests of the Company and
its stockholders and has approved the Recapitalization Merger Agreement and
the Merger. Accordingly, the Board recommends that stockholders vote FOR
approval and adoption of the Recapitalization Merger Agreement and the Merger.
See "THE SPECIAL MEETING--Matters to be Considered." Certain members of the
Board of Directors have certain interests in the Merger that are in addition
to, and may conflict with, their interests as stockholders and the interests
of other stockholders of the Company. See "-- Interests of Certain Persons in
the Merger."
RECENT DEVELOPMENTS; MATERIAL UNCERTAINTY OF CONSUMMATING THE MERGER
The Company has been advised by CSI and Chase that they have informed
MergerCo that, in view of current market conditions, they would exercise their
right under the Commitment Letter to change the pricing, terms, and structure
of the financing. In addition, Apollo, on behalf of MergerCo, recently
indicated to the Company that in view of current market conditions it does not
believe that MergerCo would be able to obtain the financing necessary to
consummate the Merger. In light of current circumstances, including, without
limitation, the notice from Apollo and the position expressed by CSI and
Chase, there can be no assurances that the Merger will be consummated. See "--
Recent Developments; Material Uncertainty of Consummating the Merger,"
"MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER AGREEMENT--Conditions to
Consummation of the Merger," and "--Termination."
The Company has not received any firm proposals from the Investors to
restructure or renegotiate the transaction and there can be no assurances that
the Company will receive any such proposals. In the event that the Company
does receive a proposal from the Investors to renegotiate or restructure the
transaction and the Board of Directors accepts such a proposal, if there is a
change in the terms of the Merger Financing that would have a material effect
on the pro forma financial statements contained in the Proxy
Statement/Prospectus, or if there are any material changes affecting the
rights of stockholders, the Company will mail to stockholders a revised Proxy
Statement/Prospectus reflecting the terms and conditions of the revised
transaction and resolicit proxies.
Pursuant to the Recapitalization Merger Agreement, the parties have agreed
to use all reasonable efforts to take all actions necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by the Recapitalization Merger Agreement.
Accordingly, although there can be no assurances that the Merger will be
consummated, the Company is proceeding to take the actions required to close
the Merger, including the mailing of this Proxy Statement/Prospectus and
obtaining stockholder approval of the Merger at the Special Meeting.
39
<PAGE>
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
On June 18, 1998, Goldman Sachs delivered its written opinion to the
Company's Board that, as of the date of such opinion, the Merger Consideration
to be received by the holders of Company Common Stock pursuant to the
Recapitalization Merger Agreement was fair, from a financial point of view, to
such holders.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED JUNE 18, 1998,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS ANNEX
C TO THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF
THE COMPANY COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS
ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things,
(i) the Recapitalization Merger Agreement; (ii) the Voting Agreements; (iii)
the Annual Reports on Form 10-K of the Company for the five fiscal years ended
September 30, 1997; (iv) Quarterly Reports on Form 10-Q of the Company for the
quarters ended December 31, 1997 and March 31, 1998; (v) certain other
communications from the Company to its stockholders; and (vi) certain internal
financial analyses and forecasts for the Company prepared by its management
without giving effect to the Merger. Goldman Sachs also held discussions with
members of the senior management of the Company regarding its past and current
business operations, financial condition and future prospects. In addition,
Goldman Sachs reviewed the reported price and trading activity for the Company
Common Stock, reviewed the financial terms of certain recent business
combinations in the equipment leasing industry specifically and other
industries generally, and performed such other studies and analyses as it
considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. In that regard, Goldman
Sachs assumed with the Company's consent that the financial forecasts provided
to it and discussed with it with respect to the Company were reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of the Company. Goldman Sachs also assumed with
the Company's consent that the Merger will be treated as a recapitalization in
accordance with generally accepted accounting principles. Goldman Sachs did
not make an independent evaluation or appraisal with respect to the assets and
liabilities of the Company or concerning the solvency or fair value of the
Company for any state law or federal bankruptcy law purposes, and Goldman
Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs
did not express any opinion on the prices at which the Company Common Stock
are likely to trade following the consummation of the Merger, which may vary
depending upon, among other factors, changes in business, market or general
economic conditions, liquidity and other factors that generally influence the
price of securities. Goldman Sachs' advisory services and the opinion referred
to herein were provided for the information and assistance of the Company's
Board in connection with its consideration of the transaction contemplated by
the Recapitalization Merger Agreement and such opinion does not constitute a
recommendation as to how any holder of the Company Common Stock should vote
with respect to such transaction or what election any such holder should make
in connection with the Merger.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its written opinion to the
Company's Board on June 18, 1998.
(i) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the Company Common Stock. Such
review included Goldman Sachs' presentation of the volume of shares traded
at specific prices and the total volume of the Company Common Stock traded
as a percentage of the Company Common Stock outstanding during the period
June 17, 1996 to June 17, 1998. Based on daily trading prices, such
presentation indicated a low range of $40.00 to $41.99 and a high range of
$64.00 to $65.99, and a weighted average market price of $48.33 per share,
with the volume of the Company Common Stock traded in such period amounting
to 93.0% of the total Company Common Stock outstanding.
40
<PAGE>
Goldman Sachs' analysis indicated that, for the Company Common Stock, the
per share transaction premium was (a) 43.6% on June 11, 1997 (i.e., the day
on which Tiger publicly announced that it had initiated discussions with
the Company regarding representation on the Company's Board), (b) 39.2% on
June 17, 1998 (i.e., the day before the definitive Recapitalization Merger
Agreement was signed), (c) 34.5% based on a two-year weighted average share
price, and (d) negative 1.5% based on the all time high price of the
Company Common Stock, which occurred on March 16, 1998.
(ii) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information, ratios and public market multiples relating
to the Company to corresponding financial information, ratios and public
market multiples for six publicly traded corporations which primarily
provide operating leases and related services (the "Operating Lessor
Companies") and six publicly traded commercial finance corporations (the
"Commercial Finance Companies" and, together with the Operating Lessor
Companies, the "Selected Companies"). The Operating Lessor Companies
consisted of Ryder System Inc., GATX Corporation, Rollins Truck Leasing
Corp., Electro Rent Corporation, Interpool and McGrath Rentcorp. The
Commercial Finance Companies consisted of The CIT Group, Inc., The FINOVA
Group Inc., Comdisco, Inc., Heller Financial, Inc., Financial Federal Corp.
and DVI, Inc. The Selected Companies were chosen because they are publicly
traded companies with operations that, for purposes of analysis, may be
considered similar to certain operations of the Company.
Goldman Sachs calculated and compared various financial multiples and
ratios for the Company and the Selected Companies based on the closing
market prices of their common stock as of June 17, 1998 and publicly
available financial information as of March 31, 1998. (The multiples and
ratios for Electro Rent Corporation and Financial Federal Corp. were based
on publicly available financial information as of February 28, 1998 and
January 31, 1998, respectively.) Goldman Sachs' analysis of price/earnings
("P/E") ratios for the Selected Companies (based on calendarized median
estimates provided by Institutional Brokers Estimate System ("IBES"))
indicated for the Operating Lessor Companies and the Commercial Finance
Companies, median 1997 P/E ratios of 14.7x and 20.2x, respectively,
estimated median 1998 P/E ratios of 13.9x and 17.1x, respectively, and
estimated median 1999 P/E ratios of 12.3x and 14.5x, respectively, compared
to 1997, estimated 1998 and estimated 1999 P/E ratios of 15.1x, 12.6x and
11.7x, respectively, for the Company.
Goldman Sachs considered for the Selected Companies levered market
capitalization as a multiple of latest twelve months ("LTM") earnings
before interest, taxes, depreciation and amortization ("EBITDA"). Such
analysis indicated median levered multiples of LTM EBITDA of 5.7x and
13.7x, respectively, for the Operating Lessor Companies and the Commercial
Finance Companies, compared to a levered multiple of LTM EBITDA of 5.1x for
the Company.
Goldman Sachs also considered for the Operating Lessor Companies and the
Commercial Finance Companies, (a) median IBES long term growth rates of 12%
and 16%, respectively, compared to an IBES long term growth rate of 11% for
the Company; (b) median price multiples of book value of 2.8x and 2.2x,
respectively, compared to a price multiple of book value of 1.9x for the
Company; (c) median debt to equity ratios of 2.4x and 5.6x, respectively,
compared to a debt to equity ratio of 2.1x for the Company; and (d) median
1997 return on equity ("ROE") of 15% and 12%, respectively, compared to a
ROE of 12% for the Company.
(iii) Analysis at Various Prices. Goldman Sachs calculated various
multiples for the Company over a range of prices per share of Company
Common Stock ranging from $62.91 to $65.00. The range of values was chosen
in order to demonstrate the relative effect on transaction multiples if a
holder were to ascribe various values to the Company Common Stock to be
retained following the Merger, from a value of zero (reflecting a value of
total equity consideration of $62.91) (i.e. approximately 97% of the cash
portion of the Merger Consideration) to $65.00 per retained share (the
value implied by the Merger Consideration). Given that a small portion of
the Company Common Stock will be retained following the Merger and that the
value of such retained stock is likely to fluctuate, the purpose of such
analysis was to determine the transaction multiples derived from the
analysis if a holder were to ascribe no value to the Company
41
<PAGE>
Common Stock to be retained following the Merger. At total consideration
for equity of $65 per share, (a) unlevered multiples of net income (based
on actual historical results or calendarized IBES estimates, as applicable)
ranged from 16.4x to 19.8x for LTM ended March 31, 1998 through 1999, (b)
unlevered multiples of the Company's management's calendarized net income
estimates were 16.7x and 13.6x, respectively, in 1998 and 1999, (c) levered
multiples of EBITDA (based on actual historical results or calendarized
projections, as applicable, by the Company's management) ranged from 5.3x
to 6.1x for the years 1997 through 1999, and (d) the unlevered multiple of
book value as of March 31, 1998 was 2.6x.
(iv) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to twelve transactions in the equipment leasing
industry since January 1994 that have closed or are still pending (the
"Selected Acquisitions"). Goldman Sachs selected the Selected Acquisitions
because they involved transactions in the equipment leasing industry;
specifically the following transactions: United Rentals/US Rentals;
Investor Group/Universal Hospital Services; Atlas Copco/Prime Service;
Scotsman Holdings/Cypress/Keystone; HFS/PHH; Questor Partners Fund/Ryder
Consumer Truck Rental; General Electric Capital Corporation/Penske Truck
Leasing; XTRA Corporation/Matson Leasing--Container Leasing Business;
Penske Truck Leasing/Leaseaway Transportation Corporation; MEDIQ Inc./KCI
Medical Services (certain assets); American Home Patient Inc./Health Star
Medical Inc.; and AT&T Capital Corporation/Avis Leasing. Such analysis
indicated that for the Selected Acquisitions, (a) aggregate consideration
as a multiple of LTM net income ranged from 5.8x to 38.3x, as compared to
19.8x for the Company, (b) levered aggregate consideration as a multiple of
LTM EBITDA ranged from 3.1x to 8.9x, as compared to 6.1x for the Company,
and (c) aggregate consideration as a multiple of book value ranged from
1.3x to 4.8x, as compared to 2.6x for the Company.
(v) Discounted Cash Flow Analysis. Goldman Sachs performed a discounted
cash flow analysis for the Company using the Company's management's
estimates for the years 1998-2001. Goldman Sachs calculated a net present
value of free cash flows using discount rates ranging from 12.5% to 20.0%
and a terminal value in 2001 based on 2001 estimated EBITDA multiples
ranging from 5.0x to 6.5x. Such analysis indicated implied per share values
ranging from $36.74 to $83.09 for the Company Common Stock.
Goldman Sachs also performed a sensitivity analysis for the years 1998-2001
to consider the impact of variances in free cash flows and/or EBITDA on
implied per share values of the Company Common Stock. Based on a variance
range of negative 10.0% to positive 10.0%, a terminal value in 2001 based on
2001 estimated EBITDA multiples ranging from 5.0x to 6.5x and a discount rate
of 15.0%, the sensitivity analysis indicated implied per share values ranging
from $38.24 to $87.42 for the Company Common Stock.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying Goldman Sachs' opinion. In arriving at its fairness
determination, Goldman Sachs considered the results of all such analyses
without attributing relative weights to any analysis or factor considered by
it. No company or transaction used in the above analyses as a comparison is
directly comparable to the Company or the contemplated transaction. The
analyses were prepared for purposes of Goldman Sachs' providing its opinion to
the Company's Board as to the fairness from a financial point of view of the
Merger Consideration to be received by the holders of the Company Common Stock
pursuant to the Recapitalization Merger Agreement and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly
more or less favorable than suggested by such analyses. Because such analyses
are inherently subject to uncertainty, being based upon numerous factors or
events beyond the control of the parties or their respective advisors, none of
the Company, Goldman Sachs or any other person assumes responsibility if
future results are materially different from those forecast. As described
above, Goldman Sachs' opinion to the Company's Board was one of many factors
taken into consideration by the Company's Board in making its determination to
approve the Recapitalization Merger Agreement. The foregoing summary does not
purport to be a complete
42
<PAGE>
description of the analysis performed by Goldman Sachs and is qualified by
reference to the written opinion of Goldman Sachs set forth in Annex C hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with the Company having provided certain investment banking services
to the Company from time to time, including having acted as manager of various
medium-term notes issuances (for which Goldman Sachs has received an aggregate
compensation of $125,000 over the past two years) and having acted as the
Company's financial advisor in connection with, and having participated in
certain of the negotiations leading to, the Recapitalization Merger Agreement.
The Company selected Goldman Sachs as its financial advisor because it is a
nationally recognized investment banking firm that has substantial experience
in transactions similar to the Merger.
Pursuant to a letter agreement dated March 12, 1998 (the "Engagement
Letter"), the Company engaged Goldman Sachs to act as its financial advisor in
connection with the contemplated transaction. Pursuant to the terms of the
Engagement Letter, the Company has agreed to pay Goldman Sachs upon
consummation of the Merger a transaction fee of 0.625% of the aggregate equity
consideration, as described in the Engagement Letter, paid in the transaction.
Based on the number of shares of Company Common Stock outstanding as of the
close of business on the Record Date, and the number of options anticipated to
be outstanding as of the date the Merger is consummated, the Company will pay
Goldman Sachs a transaction fee of approximately $6.3 million. The Company has
agreed to reimburse Goldman Sachs for its reasonable out-of-pocket expenses,
including attorney's fees, and to indemnify Goldman Sachs against certain
liabilities, including certain liabilities under the federal securities laws.
The Company has represented in the Recapitalization Merger Agreement that the
aggregate fees payable to Goldman Sachs in connection with the Merger will not
be in excess of $6.5 million.
CERTAIN FORECASTS; LIMITS OF RELIABILITY
In connection with the evaluation by certain third parties, including
Apollo, of a possible transaction involving the Company, the Company prepared
certain nonpublic estimates reflecting management's views as to the possible
future performance of the Company over the four fiscal years ending in fiscal
2001. These estimates were based upon assumptions which management believed to
be reasonable at the time. These estimates are described below because such
information was provided to the Investors. The Company prepared these
estimates in February through April 1998 and the Company has not updated, and
undertakes no responsibility to update, these estimates.
The key assumptions used in preparing the forecasts for the fiscal years
ended September 30, 2001 include: (i) an estimated utilization rate of 87% in
each year; (ii) billing rates for the Company's over-the-road fleets
increasing by 1% to 3% per year; (iii) billing rates for the remainder of the
Company's equipment remaining flat at 1997 levels; (iv) XTRA's fleet size
increasing as a result of capital spending for new equipment during this four-
year period; (v) rental equipment operating expenses decreasing as a
percentage of revenue during the period from 23% in 1998 to 22% in 2001; and
(vi) selling and administrative expenses increasing by approximately 3% per
year. This information was provided to the Investors on a confidential basis.
A summary of these estimates (collectively, the "Company Estimates") is
provided in the following table:
<TABLE>
<CAPTION>
1998 1999 2000 2001
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Revenue Growth vs. prior year.................... 6% 8% 9% 10%
Operating Income Growth vs. prior year............... 16% 11% 14% 15%
Net Income (millions)................................ $57 $70 $86 $105
</TABLE>
THE COMPANY ESTIMATES ARE INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS SOLELY
BECAUSE SUCH INFORMATION WAS PROVIDED TO THE INVESTORS. THE COMPANY ESTIMATES
WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE
43
<PAGE>
WITH PUBLISHED GUIDELINES ESTABLISHED BY THE COMMISSION OR THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS. THESE
ESTIMATES HAVE NOT BEEN UPDATED BY THE COMPANY AND THE COMPANY UNDERTAKES NO
OBLIGATION TO UPDATE SUCH ESTIMATES. IN ADDITION, BECAUSE THE COMPANY
ESTIMATES ARE INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES BEYOND THE COMPANY'S CONTROL, THERE CAN BE NO
ASSURANCE THAT THE COMPANY ESTIMATES WILL BE REALIZED; ACTUAL RESULTS MAY BE
HIGHER OR LOWER THAN THOSE ESTIMATED. SEE "RISK FACTORS." NEITHER THE
COMPANY'S AUDITORS NOR ANY OTHER INDEPENDENT ACCOUNTANTS HAVE COMPILED,
EXAMINED OR PERFORMED ANY PROCEDURES WITH RESPECT TO THE COMPANY ESTIMATES,
NOR HAVE THEY EXPRESSED ANY OPINION OR ANY OTHER FORM OF ASSURANCE ON SUCH
INFORMATION OR ITS ACHIEVEABILITY, AND ASSUME NO RESPONSIBILITY FOR, AND
DISCLAIM ANY ASSOCIATION WITH, THE FOREGOING PROSPECTIVE FINANCIAL
INFORMATION.
The Company Estimates do not give effect to the Merger or any post-merger
business strategy and should be read together with the Company's Consolidated
Financial Statements, "RISK FACTORS" and "UNAUDITED PRO FORMA FINANCIAL
STATEMENTS" contained herein.
MERGER CONSIDERATION
Subject to certain provisions as described herein with respect to
cancellation of shares of Company Common Stock owned by the Company or any
subsidiary of the Company, and with respect to shares subject to appraisal
rights, (i) each issued and outstanding share of Company Common Stock (other
than shares with respect to which a Retained Share election is made) will be
converted, subject to proration, into the right to receive in cash from the
Company following the Merger an amount equal to the Cash Consideration of
$65.00 in cash, and (ii) each issued and outstanding share of Company Common
Stock with respect to which an election to retain Company Common Stock has
been made and not withdrawn in accordance with the Recapitalization Merger
Agreement will be converted, subject to proration, into the right to receive
one Retained Share, with cash to be paid in lieu of fractional shares of
Company Common Stock. Upon consummation of the Merger, the existing holders of
the Company Common Stock will retain 500,000 shares of the Company Common
Stock (approximately 3% of shares of Company Common Stock currently
outstanding and 10% of the Company Common Stock outstanding after the Merger)
and will receive $65.00 per share in cash for the balance of the Company
Common Stock (approximately 97% of shares of Company Common Stock currently
outstanding), with cash paid in lieu of fractional shares. See "CERTAIN
PROVISIONS OF THE MERGER AGREEMENT--Proration." With respect to certain risks
related to retaining Company Common Stock, see "RISK FACTORS."
In addition, upon consummation of the Merger, all of the MergerCo Interests
issued and outstanding immediately prior to the Effective Time will be
converted into 4,500,000 shares of Company Common Stock (representing 90% of
the shares of Company Common Stock outstanding after the Effective Time of the
Merger).
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of the Certificate of
Merger, as contemplated by the Delaware Limited Liability Company Act
("DLLCA") and the DGCL (the "Certificate of Merger"), together with any
required related certificates, with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, the DLLCA and the DGCL (the time of such filing or
such later time as is specified in the Certificate of Merger being the
"Effective Time"). The filing of the Certificate of Merger will occur as
promptly as practicable after the satisfaction or waiver of the conditions to
the Merger. Subject to certain limitations, the Recapitalization Merger
Agreement may be terminated by MergerCo or the Company if, among other
reasons, the Merger has not been consummated on or before November 30, 1998.
See "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER AGREEMENT--Conditions
to Consummation of the Merger" and "--Termination."
44
<PAGE>
RETAINED SHARE ELECTION; RETAINED SHARE ELECTION PROCEDURE
Record holders of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of Company Common
Stock owned by the Company or any subsidiary of the Company, which will be
canceled and retired, and other than shares of Company Common Stock subject to
appraisal rights) can elect to receive a Retained Share for that share, with
cash to be paid in lieu of fractional shares of Company Common Stock. Such
election is subject to proration so that upon consummation of the Merger,
500,000 shares of Company Common Stock (approximately 3% of the currently
outstanding shares) will be retained by existing stockholders and the balance
will be exchanged for cash. See "MATERIAL PROVISIONS OF THE RECAPITALIZATION
MERGER AGREEMENT--Proration."
The Form of Election enclosed with this Proxy Statement is to be used by
each record holder of shares of Company Common Stock who elects to express a
desire to retain the shares of Company Common Stock held by such holder. The
Company will use its best efforts to make the Forms of Election available to
all persons who become holders of shares of Company Common Stock during the
period between the Record Date and the Election Date, with a copy of the Proxy
Statement. Any such holder's election shall have been properly made only if
the Exchange Agent shall have received at its designated office, by 5:00 p.m.,
eastern standard time on the Election Date, a Form of Election properly
completed and signed and accompanied by certificates for the shares of Company
Common Stock to which such Form of Election relates, duly endorsed in blank or
otherwise in a form acceptable for transfer on the books of the Company (or by
an appropriate guarantee of delivery of such certificates as set forth in such
Form of Election from a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States, provided such certificates are in fact delivered to the
Exchange Agent within three NYSE trading days after the date of execution of
such guarantee of delivery).
Any Form of Election may be revoked by the holder submitting it to the
Exchange Agent only by written notice received by the Exchange Agent (i) prior
to 5:00 p.m., eastern standard time on the Election Date or (ii) after the
Election Date, if (and to the extent that) the Exchange Agent is legally
required to permit revocations and the Effective Time shall not have occurred
prior to such date. In addition, all Forms of Election shall automatically be
revoked if the Exchange Agent is notified in writing by MergerCo and the
Company that the Merger has been abandoned. If a Form of Election is revoked,
the certificate or certificates (or guaranties of delivery, as appropriate)
for the Company Common Stock to which such Form of Election relates shall be
promptly returned to the stockholder submitting the same to the Exchange
Agent.
The determination of the Exchange Agent shall be binding with respect to
whether or not elections have been properly made or revoked pursuant to the
Recapitalization Merger Agreement and when elections and revocations were
received by it. If the Exchange Agent determines that any election to retain
shares of Company Common Stock was not properly made, such shares shall be
treated by the Exchange Agent as shares for which no election was received,
and such shares shall be retained or converted in accordance with Section 2.1
and 2.3 of the Recapitalization Merger Agreement. The Exchange Agent shall
also make all computations as to the allocation and the proration contemplated
by the Recapitalization Merger Agreement, and any such computation shall be
conclusive and binding on the holders of Company Common Stock. The Exchange
Agent may, with the mutual agreement of MergerCo and the Company, make such
rules as are consistent with the Recapitalization Merger Agreement for the
implementation of the elections provided for therein as shall be necessary or
desirable fully to effect such elections.
NO ACTION IS REQUIRED AT THIS TIME FOR STOCKHOLDERS TO ELECT THE CASH
CONSIDERATION. UNLESS STOCKHOLDERS MAKE AN AFFIRMATIVE ELECTION TO RECEIVE THE
RETAINED SHARES IN ACCORDANCE WITH THE ENCLOSED FORM OF ELECTION, THEY WILL BE
DEEMED TO HAVE ELECTED THE CASH CONSIDERATION. STOCKHOLDERS ELECTING THE CASH
CONSIDERATION SHOULD NOT RETURN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A
LETTER OF TRANSMITTAL, AND THEN ONLY IN ACCORDANCE WITH THE INSTRUCTIONS
CONTAINED THEREIN. STOCKHOLDERS ELECTING THE RETAINED SHARES
45
<PAGE>
SHOULD RETURN THEIR STOCK CERTIFICATES TOGETHER WITH THE ENCLOSED FORM OF
ELECTION PURSUANT TO THE INSTRUCTIONS CONTAINED IN SUCH FORM OF ELECTION. SEE
"THE MERGER--RETAINED SHARE ELECTION; RETAINED SHARE ELECTION PROCEDURE,"
AND--PROCEDURES FOR EXCHANGE OF CERTIFICATES" FOR INSTRUCTIONS ON EXCHANGING
STOCK CERTIFICATES FOR CASH CONSIDERATION AND ELECTING THE RETAINED SHARES.
FRACTIONAL SHARES
No certificates or scrip representing fractional shares of retained Company
Common Stock will be issued pursuant to a Retained Share Election in
connection with the Merger, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of the
Company after the Merger. Notwithstanding any other provision of the
Recapitalization Merger Agreement, each record holder of shares of Company
Common Stock exchanged pursuant to a Retained Share Election in connection
with the Merger who would otherwise have been entitled to receive a fractional
share of retained Company Common Stock (after taking into account all shares
of Company Common Stock delivered by such holder) will receive, in lieu
thereof a cash payment (without interest) equal to such fraction multiplied by
$65.00.
PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion of shares of Company Common Stock (other than shares subject
to appraisal rights) into the right to receive cash or the right to retain
shares of Company Common Stock following the Merger will occur at the
Effective Time.
Promptly after the Effective Time, the Exchange Agent will send a letter of
transmittal to each holder of Company Common Stock (other than holders of
Company Common Stock making a Retained Share Election who have properly
submitted Forms of Election and share certificates to the Exchange Agent). The
letter of transmittal will contain instructions with respect to the surrender
of certificates representing shares of Company Common Stock in exchange for
cash and, under certain circumstances, certificates representing shares of
Company Common Stock to be retained in the Merger, or the amount of cash in
lieu of any fractional interest in a share of Company Common Stock for which
the shares represented by the certificates so surrendered are exchangeable
pursuant to the Recapitalization Merger Agreement.
EXCEPT FOR COMPANY COMMON STOCK CERTIFICATES SURRENDERED WITH A FORM OF
ELECTION AS DESCRIBED ABOVE UNDER "--RETAINED SHARE ELECTION; RETAINED SHARE
ELECTION PROCEDURE," STOCKHOLDERS OF THE COMPANY SHOULD NOT FORWARD STOCK
CERTIFICATES TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED THE LETTER OF
TRANSMITTAL, AND THEN ONLY IN ACCORDANCE WITH THE TERMS THEREOF.
As soon as practicable after the Effective Time, each holder of an
outstanding certificate or certificates at such time which prior thereto
represented shares of Company Common Stock shall, upon surrender to the
Exchange Agent of such certificate or certificates and acceptance thereof by
the Exchange Agent, be entitled to the amount of cash, if any, into which the
number of shares of Company Common Stock previously represented by such
certificate or certificates surrendered shall have been converted pursuant to
the Recapitalization Merger Agreement and a certificate or certificates
representing the number of full shares of Company Common Stock, if any, to be
retained by the holder thereof pursuant to the Recapitalization Merger
Agreement. The Exchange Agent will accept such certificates upon compliance
with such reasonable terms and conditions as the Exchange Agent may impose to
effect an orderly exchange thereof in accordance with normal exchange
practices. After the Effective Time, there will be no further transfer on the
records of the Company or its Exchange Agent of certificates representing
shares of Company Common Stock which have been converted, in whole or in part,
pursuant to the Recapitalization Merger Agreement into the right to receive
cash, and if such certificates are presented to the Company for transfer, they
will be canceled against delivery of cash and, if appropriate, certificates
for Retained Shares. Until surrendered as contemplated by the Recapitalization
Merger Agreement, each certificate for shares of Company Common Stock will be
deemed at any time after the Effective Time to
46
<PAGE>
represent only the right to receive the Merger Consideration as provided by
the Recapitalization Merger Agreement. No interest will be paid or will accrue
on any cash payable as consideration in the Merger or in lieu of any
fractional shares of retained Company Common Stock.
No dividends or other distributions with respect to Company Common Stock
with a record date after the Effective Time will be paid to the holder of any
unsurrendered certificate for shares of Company Common Stock with respect to
the shares of Company Common Stock represented thereby, and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to the
Recapitalization Merger Agreement until the surrender of such certificate in
accordance with the Recapitalization Merger Agreement. Subject to the effect
of applicable laws, following surrender of any such certificate, there shall
be paid to the holder of the certificate representing whole shares of Company
Common Stock issued in exchange therefor, without interest, at the time of
such surrender the amount of any cash payable in lieu of a fractional share of
Company Common Stock to which such holder is entitled pursuant to the
Recapitalization Merger Agreement.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion constitutes the opinion of Ropes & Gray as to the
material United States federal income tax considerations generally applicable
to Company stockholders in connection with the Merger. The tax treatment
described herein may vary depending upon each stockholder's particular
circumstances and tax position. Certain stockholders (including insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
foreign corporations, persons who are not citizens or residents of the United
States, stockholders who do not hold their Company Common Stock as capital
assets and stockholders who have acquired their existing Company Common Stock
upon the exercise of options or otherwise as compensation) may be subject to
special rules not discussed below. No ruling from the Internal Revenue Service
("IRS") will be applied for with respect to the federal income tax
consequences discussed herein and, accordingly, there can be no assurance that
the IRS will agree with the conclusions stated herein. The discussion below is
based upon the provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations, rulings, and judicial decisions thereunder as
of the date hereof, and such authorities may be repealed, revoked or modified
so as to result in federal income tax consequences different from those
discussed below. Furthermore, certain conclusions as to the tax effect on
stockholders are not free from doubt. In addition, this discussion does not
consider the effect of any applicable foreign, state, local or other tax laws.
EACH STOCKHOLDER SHOULD CONSULT THE STOCKHOLDER'S OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY FOREIGN, STATE, LOCAL OR OTHER TAX LAWS.
Characterization of the Merger for Federal Income Tax Purposes. In the
opinion of Ropes & Gray, for federal income tax purposes, MergerCo should be
disregarded as a transitory entity, and the Merger of MergerCo with and into
the Company should be treated as two separate transactions: a sale of a
portion of a tendering stockholder's Company Common Stock to the Investors and
a redemption of a portion of the stockholder's Company Common Stock by the
Company. These two transactions are referred to below respectively as the
"Deemed Sale" and the "Redemption."
Because there is no definitive authority directly on point, it is unclear
how the allocation of the Cash Consideration between the Deemed Sale and the
Redemption should be determined. It is also unclear how each stockholder's
basis in the Company Common Stock should be allocated between the Deemed Sale
and the Redemption. The Company intends to take the position that the
percentage of a stockholder's Company Common Stock disposed of by the
stockholder pursuant to the Merger that will be treated as sold to the
Investors in the Deemed Sale will be the percentage of such Company Common
Stock equal to (i) the amount contributed to MergerCo by the Investors in
exchange for MergerCo Interests divided by (ii) the aggregate amount of cash
paid to stockholders pursuant to the Merger. The amount of the total cash
proceeds allocable to the Redemption is equal to the balance of the cash
proceeds received in the Merger. The IRS could, however, adopt a different
approach (e.g., a percentage equal to (i) the increase in debt of the Company
divided by (ii) the aggregate amount
47
<PAGE>
of cash paid to stockholders pursuant to the Merger, or otherwise) in
determining the portion, if any, of a stockholder's Company Common Stock that
is treated as redeemed by the Company, which could have an impact if the
Redemption is treated as a dividend, as described below, by decreasing (or
increasing) the dividend on the Redemption and increasing (or decreasing) the
gain (or loss) on the Deemed Sale.
Stockholders Receiving Cash. As described more fully below, the federal
income tax consequences of the Merger with respect to a particular stockholder
will depend upon, among other things, (i) whether the stockholder received any
cash proceeds pursuant to the Merger, (ii) the extent to which the stockholder
is deemed to have sold its Company Common Stock to the Investors in the Deemed
Sale or is deemed to have had its Company Common Stock redeemed by the Company
in the Redemption and (iii) whether the Redemption of the stockholder's
Company Common Stock by the Company will qualify as a sale or exchange under
section 302 of the Code. First, to the extent that a stockholder is considered
to have sold Company Common Stock to the Investors in the Deemed Sale, such
stockholder will recognize either capital gain or loss (assuming the Company
Common Stock is held by such stockholder as a capital asset) equal to the
difference between the amount realized on the Deemed Sale of Company Common
Stock to the Investors (i.e., the cash proceeds properly allocated to such
sale) and the stockholder's adjusted tax basis in such Company Common Stock.
Second, a stockholder also will recognize either capital gain or loss
(assuming the Company Common Stock is held by such stockholder as a capital
asset) equal to the difference between the cash proceeds allocable to the
Redemption of such stockholder's Company Common Stock and the stockholder's
adjusted tax basis in such Company Common Stock, to the extent such Redemption
is treated as a sale or exchange under section 302 of the Code with respect to
such stockholder. To the extent a stockholder recognizes capital gain or loss
in either the Deemed Sale or Redemption, such capital gain or loss will be
long-term capital gain or loss if the stockholder has held its Company Common
Stock as a capital asset for more than one year.
Under section 302 of the Code, the Redemption of Company Common Stock will,
as a general rule, be treated as a sale or exchange if such Redemption (a) is
"substantially disproportionate" with respect to the stockholder, (b) results
in a "complete redemption" of the stockholder's interest in the Company or (c)
is "not essentially equivalent to a dividend" with respect to the stockholder.
In determining whether any of these section 302 tests is satisfied,
stockholders must take into account not only the Company Common Stock that
they actually own, but also any Company Common Stock they are deemed to own
under the constructive ownership rules set forth in section 318 of the Code.
Pursuant to these constructive ownership rules, a stockholder is, in general,
deemed to constructively own any Company Common Stock that is owned by certain
related individuals or entities and any Company Common Stock that the
stockholder has the right to acquire by exercise of an option or by conversion
or exchange of a security.
The Redemption of a stockholder's Company Common Stock will be
"substantially disproportionate" with respect to such stockholder if, among
other things, the percentage of Company Common Stock actually and
constructively owned by such stockholder immediately following the Merger is
less than 80% of the percentage of Company Common Stock actually and
constructively owned by such stockholder immediately prior to the Merger.
Stockholders should consult their own tax advisors with respect to the
application of the "substantially disproportionate" test to their particular
facts and circumstances.
The Redemption of a stockholder's Company Common Stock will result in a
"complete redemption" of a stockholder's interest in the Company if (a) all
the Company Common Stock actually owned by the stockholder is redeemed or sold
pursuant to the Merger and (b) all the Company Common Stock constructively
owned by the stockholder is redeemed or sold pursuant to the Merger or the
stockholder is eligible to waive, and does effectively waive in accordance
with section 302(c) of the Code, attribution of all Company Common Stock which
otherwise would be considered to be constructively owned by such stockholder.
Stockholders in this position should consult their tax advisors as to the
availability of such waiver.
Even if the Redemption of a stockholder's Company Common Stock fails to
satisfy the "substantially disproportionate" test or the "complete redemption"
test described above, the Redemption of a stockholder's
48
<PAGE>
Company Common Stock may nevertheless satisfy the "not essentially equivalent
to a dividend" test if the Redemption of Company Common Stock results in a
"meaningful reduction" in such stockholder's proportionate interest in the
Company. Whether the receipt of cash by a stockholder will be considered "not
essentially equivalent to a dividend" will depend upon such stockholder's
facts and circumstances. In certain circumstances, even a small reduction in a
stockholder's proportionate equity interest may satisfy this test. For
example, the IRS has indicated in a published ruling that a 3.3% reduction in
the proportionate equity interest of a small (substantially less than 1%)
stockholder in a publicly held corporation who exercises no control over
corporate affairs constitutes such a "meaningful reduction." Stockholders
should consult with their own tax advisors as to the application of this test
in their particular circumstances.
If a stockholder cannot satisfy any of the three tests described above, the
Redemption will not be treated as a sale or exchange under section 302 of the
Code with respect to such stockholder. Accordingly, to the extent the Company
has sufficient current and/or accumulated earnings and profits, such
stockholder will be treated as having received a dividend which will be
includible in gross income (and treated as ordinary income) in an amount equal
to the cash received in the Redemption. Cash received by the stockholders in
the Redemption in excess of the Company's current and accumulated earnings and
profits properly allocated to the distribution (other than cash received in
lieu of fractional shares of Company Common Stock) would be treated first as a
tax-free return of capital and then as capital gain.
In the case of a stockholder that is a corporation, the amount treated as a
dividend may be eligible for the dividends-received deduction. The dividends-
received deduction is subject to certain limitations, and may not be available
if the corporate stockholder does not satisfy certain holding period
requirements with respect to the Company Common Stock or if the Company Common
Stock is treated as "debt-financed portfolio stock." Additionally, if a
dividends-received deduction is available, the dividend may be treated as an
"extraordinary dividend," in which case a corporate stockholder's adjusted tax
basis in the Company Common Stock would be reduced, but not below zero, by the
amount of the nontaxed portion of such dividend. Any amount of the nontaxed
portion of the dividend in excess of the corporate stockholder's adjusted tax
basis in the Company Common Stock generally will be treated as gain from the
sale or exchange of the Company Common Stock for the taxable year in which the
extraordinary dividend is received. Corporate stockholders are urged to
consult their own tax advisors as to the effect of the "extraordinary
dividend" rules.
Stockholders Retaining Company Common Stock and Receiving No Cash. The
Merger will have no federal income tax consequences for stockholders who
retain their Company Common Stock and receive no cash pursuant to the Merger.
Accordingly, a stockholder will not recognize any gain or loss on any Retained
Shares.
Stockholders Retaining a Portion of Their Company Common Stock and Receiving
Cash. To the extent that a stockholder receives cash for some portion of its
Company Common Stock and retains some Company Common Stock, the tax treatment
of the stockholder's receipt of such cash will be the same as set forth above
under "--Stockholders Receiving Cash." As described above under "--
Stockholders Retaining Company Common Stock and Receiving No Cash," the Merger
will have no tax consequences to a stockholder to the extent such stockholder
retains Company Common Stock. However, as described more fully above under "--
Stockholders Receiving Cash," a stockholder's retention of Company Common
Stock may, under certain circumstances, cause the cash received by such
stockholder pursuant to the Redemption to be treated as a dividend for federal
income tax purposes.
Information Reporting and Backup Withholding. The Company must report
annually to the IRS and to each stockholder the amount of dividends paid, or
deemed to be paid, to such stockholder and the backup withholding tax, if any,
withheld with respect to such dividends.
A stockholder may be subject to backup withholding at a rate of 31% with
respect to cash received pursuant to the Merger. In general, backup
withholding will apply only if a stockholder fails to comply with certain
identification procedures or fails to properly report payments of interest and
dividends. Backup withholding will not apply to certain exempt recipients,
such as corporations and tax-exempt organizations. Backup withholding
49
<PAGE>
is not an additional tax and may be claimed as a credit against the federal
income tax liability of a stockholder provided that the required information
is furnished to the IRS.
Foreign Stockholders--Withholding. The following is a general discussion of
certain United States federal income tax consequences of the Merger to foreign
stockholders. For this purpose, a foreign stockholder is any person who, for
federal income tax purposes, is not (i) a citizen or resident of the United
States, (ii) a corporation or partnership created or organized in the United
States or under the laws of the United States or of any political subdivision
thereof, (iii) an estate whose income is includible in gross income for United
States federal income tax purposes regardless of its source or (iv) a trust
whose administration is subject to the primary supervision of a United States
court and which has one or more United States fiduciaries who have authority
to control substantial decisions of the trust.
In the case of any foreign stockholder, the Exchange Agent will withhold 30%
of the amount of cash received by such stockholder in the Redemption in order
to satisfy certain withholding requirements, unless such foreign stockholder
proves in a manner satisfactory to the Company and the Exchange Agent that
either (i) the cash received in the Redemption will qualify for treatment as
proceeds of a sale or exchange of Company Common Stock, rather than as a
dividend, for federal income tax purposes, in which case no withholding will
be required, (ii) the foreign stockholder is eligible for a reduced tax treaty
rate with respect to dividend income, in which case the Exchange Agent will
withhold at the reduced treaty rate or (iii) no United States withholding is
otherwise required.
The Company must report annually to the IRS and to each foreign stockholder
the amount of dividends, if any, paid, or deemed to be paid, to such
stockholder pursuant to the Redemption and the withholding tax, if any,
withheld with respect to such dividends. Copies of these information returns
also may be made available to the tax authorities in the country in which a
foreign stockholder resides under the provisions of an applicable income tax
treaty. Foreign stockholders should consult their own tax advisors regarding
the application of these withholding rules.
Backup withholding generally will not apply to dividends, if any, paid, or
deemed to be paid, to a foreign stockholder pursuant to the Redemption at an
address outside the United States (unless the payor has knowledge that the
payee is a United States person).
Payment of the proceeds of a sale of Company Common Stock by or through a
United States office of a broker is subject to both backup withholding and
information reporting unless the beneficial owner certifies under penalties of
perjury that it is a foreign stockholder and the payor does not have actual
knowledge that such owner is a United States person, or otherwise establishes
an exemption. In general, backup withholding and information reporting will
not apply to a payment of the proceeds of a sale of Company Common Stock by or
through a foreign office of a broker. If, however, such broker is, for United
States federal income tax purposes, a United States person, a controlled
foreign corporation, or a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the
United States, such payments will not be subject to backup withholding but
will be subject to information reporting, unless (1) such broker has
documentary evidence in its records that the beneficial owner is a foreign
holder and certain other conditions are met, or (2) the beneficial owner
otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against the holder's United States federal income tax
liability provided the required information is furnished to the IRS.
THOUGH THE FOREGOING ARE THE MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS GENERALLY APPLICABLE TO THE MERGER, THE DISCUSSION DOES NOT
ADDRESS EVERY FEDERAL INCOME TAX CONCERN WHICH MAY BE APPLICABLE TO A
PARTICULAR STOCKHOLDER. EACH STOCKHOLDER IS URGED TO CONSULT SUCH
STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES TO SUCH
STOCKHOLDER, IN THE LIGHT OF HIS OR HER PARTICULAR CIRCUMSTANCES, OF THE
DISPOSITION OF COMPANY COMMON STOCK PURSUANT TO THE MERGER.
50
<PAGE>
ANTICIPATED ACCOUNTING TREATMENT
The parties intend for the Merger to be accounted for as a recapitalization.
Accordingly, the historical basis of the Company's assets and liabilities will
not be impacted by the transaction. See "UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL DATA" and "PRO FORMA CAPITALIZATION."
EFFECT ON STOCK OPTIONS AND EMPLOYEE BENEFIT MATTERS
The Recapitalization Merger Agreement provides that, except as may be agreed
to by the Company, with the consent of MergerCo, and employees identified by
MergerCo prior to the Effective Time, outstanding options to acquire Company
Common Stock ("Company Stock Options") which are outstanding as of the date of
the Recapitalization Merger Agreement and which were granted to employees,
former employees or directors under the Company's 1987 Stock Incentive Plan,
1997 Stock Incentive Plan, 1991 Stock Option Plan for Non-Employee Directors
and Deferred Director Fee Option Plan (the "Option Plans"), whether or not
then exercisable, will be canceled by the Company and terminated, and each
holder of a Company Stock Option who executes an agreement acknowledging the
cancellation of such Company Stock Option, whether or not then exercisable,
shall be entitled to receive as soon as practicable after the Effective Time
from the Company in consideration for such cancellation an amount in cash
(less applicable withholding taxes, but without interest) equal to the product
of (i) the number of shares of Company Common Stock previously subject to such
Company Stock Option, multiplied by (ii) the positive excess, if any, of
$65.00 over the exercise price per share of the shares of Company Common Stock
previously subject to such Company Stock Option. Pursuant to the
Recapitalization Merger Agreement, the Company has agreed that prior to the
Effective Time it will take all steps necessary or appropriate under the
Option Plans to effect the foregoing as of the Effective Time and to take all
necessary actions required to properly withhold and remit to the proper taxing
authorities all income, employment and other taxes required by applicable law
to be withheld from the payment of such cash amounts. A limited number of key
executive officers who wish to continue their employment with the Company
following the Merger may also have the option to retain an indirect equity
interest in the Company by electing to receive stock units in lieu of the cash
payment described above for the cancellation of Company Stock Options and
thereby defer taxes on the amounts that would otherwise have been received. In
the event that a key executive officer elects to receive stock units, the
Company will establish a book account for the purpose of crediting each such
employee with that number of stock units equal to (i) the product of (a) the
excess, if any, of (1) $65 over (2) the exercise price of such option,
multiplied by (b) the number of shares subject to the portion of such option
that is to be deferred, divided by (ii) $65. During the deferral period, the
accounts will be credited with dividends that become payable with respect to
an equivalent number of shares of Company Common Stock during such period. At
the end of the deferral period, such employee may elect to convert each such
unit into (A) either (x) one share of Company Common Stock or (y) an amount in
cash equal to the fair market value of one share of Company Common Stock as of
such date, plus (B) the aggregate amount of cash dividends paid with respect
to a share of Company Common Stock during the deferral period. The length of
the deferral period will be determined at the discretion of each participating
employee. As of the date of this Proxy Statement/Prospectus, only William
Franz, Vice President, XTRA Lease, has been offered this alternative treatment
with respect to options to purchase approximately 78,400 shares, based on an
average weighted exercise price of $52.25 for his options. Other employees who
have not yet been identified may also be offered this treatment. Mr. Franz has
yet to elect to receive such treatment.
Pursuant to the Recapitalization Merger Agreement, the Company has agreed
that it will take all necessary action prior to the Effective Time to
terminate the Company's Employee Stock Purchase Plan as of the Effective Time.
It is anticipated that the Option Plans will terminate as of the Effective
Time, and that following the Effective Time no holder of a Company Stock
Option nor any participant in an Option Plan will have any right thereunder to
acquire equity securities of the Company following the Merger and will be
entitled to receive only the amount described in the preceding paragraph.
The Recapitalization Merger Agreement provides that the Surviving
Corporation will honor, following the Effective Time, the terms of the
Economic Incentive Plan (the "Incentive Plan") as in effect on the date of the
Recapitalization Merger Agreement, with respect to all bonuses payable with
respect to fiscal year 1998, except
51
<PAGE>
that, notwithstanding anything to the contrary in the Incentive Plan,
termination of employment by the Company following the Effective Time will not
affect an employee's entitlement to receive the full or a pro rated portion of
his/her bonus based on the number of days in fiscal 1998 during which such
employee was employed by the Company. Pursuant to the Recapitalization Merger
Agreement, prior to the Effective Time, the Company may amend the Incentive
Plan to be consistent with the terms of the preceding sentence.
Pursuant to the Recapitalization Merger Agreement, following the Effective
Time, the Surviving Corporation will make a profit-sharing contribution to the
Company's 401(k) Savings and Retirement Plan (the "Savings Plan") as described
in Article VI of such plan with respect to the plan year ended September 30,
1998 at a level consistent with recent past practice, such contribution to be
allocated among all otherwise eligible active participants in the Savings Plan
who are employed by the Company or any of its subsidiaries as of the Effective
Time or whose employment is terminated by the Company or its subsidiaries
during such plan year on or after attainment of age 65 or because of death or
"physical or mental disability" (as defined in the Savings Plan) in proportion
to their relative Compensation (as defined in the Savings Plan) for such plan
year and regardless of whether such employees are employed on the last day of
such plan year. Also, Savings Plan participants employed by the Company's
International, Intermodal or Corporate divisions whose employment is
terminated (other than for cause) or constructively terminated within one year
following the Effective Time will have a fully vested benefit. Prior to the
Effective Time, notwithstanding anything to the contrary in the
Recapitalization Merger Agreement, the Company may amend the Savings Plan
consistent with the foregoing; provided that the Company shall provide
MergerCo with an opportunity to review and comment on any such amendment.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Company's management and the Board of Directors have
certain interests in the Merger that are in addition to, and may conflict
with, their interests as stockholders and the interests of other stockholders
of the Company. The Board of Directors was aware of these interests and
considered them in addition to certain other matters (described under "--
Background of the Merger" and "--Recommendation of the Board of Directors;
Reasons for the Merger") in approving the Recapitalization Merger Agreement
and the transactions contemplated thereby.
Security Ownership. As of the date of this Proxy Statement/Prospectus, non-
employee directors of the Company own an aggregate of 105,852 shares of
Company Common Stock and, as shareholders of the Company, Company Stock
Options to purchase an aggregate of 42,702 shares of Common Stock, all of
which will be cashed out in the Merger in the manner set forth under "--Effect
on Stock Options and Employee Benefit Matters." See "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT." As of the date of this Proxy
Statement/Prospectus, executive officers and employee directors of the Company
own an aggregate of 62,006 shares of Company Common Stock (approximately .4
percent of the outstanding shares of Company Common Stock), as to which they
will receive the same Merger Consideration and have the right to make the same
election with respect to such shares of Company Common Stock described under
"THE MERGER-- Retained Share Election; Retained Share Election Procedure," and
as shareholders of the Company, Company Stock Options to purchase an aggregate
of 627,250 shares of Company Common Stock, which will be cashed out in the
Merger in the manner described under "THE MERGER--Effect on Stock Options and
Employee Benefit Matters." See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT."
The Stock Option Plans. Certain executive officers and directors of the
Company have previously received Company Stock Options pursuant to the Option
Plans. Notwithstanding the vesting schedule otherwise applicable to such
Company Stock Options, as a result of the Merger, all such Company Stock
Options will become fully vested. The Recapitalization Merger Agreement
provides that, except as otherwise may be agreed to by the Company, with the
consent of MergerCo, with respect to employees of the Company identified by
MergerCo prior to the Effective Time, Company Stock Options, which are
outstanding as of the date of the Recapitalization Merger Agreement will be
canceled by the Company and terminated, and each holder thereof who executes
an
52
<PAGE>
agreement acknowledging the cancellation of such Company Stock Option, whether
or not then exercisable, will be entitled to receive as soon as practicable
after the Effective Time from the Company in consideration for such
cancellation an amount in cash (less applicable withholding taxes, but without
interest) equal to the product of (x) the number of shares of Company Common
Stock previously subject to such Company Stock Option, multiplied by (y) the
positive excess, if any, of $65.00 over the per share exercise price of such
option. A limited number of key executive officers who wish to continue their
employment with the Company following the Merger will have the option to
retain an indirect equity interest in the Company by electing to receive stock
units in lieu of the cash payment described above for the cancellation of
Company Stock Options. As of the date of this Proxy Statement/Prospectus, no
such key employee has elected to receive such stock units (see "--Effect on
Stock Options and Employee Benefit Matters").
The following table shows, for each of the executive officers and directors
of the Company, (i) the number of shares of Company Common Stock subject to
Company Stock Options granted to such individual since September 30, 1997,
(ii) the total number of outstanding shares of Company Common Stock subject to
Company Stock Options held by such individual as of the date of this Proxy
Statement/Prospectus and (iii) the aggregate value of all the Company Stock
Options held by such individual as of the date of this Proxy
Statement/Prospectus. The value of each Company Stock Option was calculated by
subtracting the exercise price per share of such option from $65.00. Each
executive officer or director who acknowledges the cancellation of the Company
Stock Options as described above will receive a cash payment in respect of
such options equal to the amount set forth in the "Total Value of Options"
column (less applicable withholding taxes but without interest).
<TABLE>
<CAPTION>
SHARES SUBJECT TOTAL
TO OPTIONS NUMBER OF TOTAL
GRANTED SHARES SUBJECT VALUE OF
NAME SINCE 9/30/97 TO OPTIONS OPTIONS
---- -------------- -------------- ----------
<S> <C> <C> <C>
Lewis Rubin........................ -- 255,000 $3,560,238
Robert B. Blakeley................. 2,500 27,500 419,119
Jeffrey R. Blum ................... 6,000 14,000 263,875
Michael K. Fox..................... 6,000 56,000 852,175
William H. Franz................... -- 100,000 1,275,219
Thomas A. Giacchetto............... 3,000 3,750 45,937
Frederick M. Gutterson............. -- 66,250 1,063,047
Christopher P. Joyce............... 2,500 23,500 361,314
Michael J. Soja.................... -- 81,250 1,124,047
Michael D. Bills................... 1,000 5,000 77,250
H. William Brown................... 1,000 6,000 117,875
Michael N. Christodolou............ 5,552 5,552 46,889
Robert M. Gintel................... 1,000 4,000 65,810
Robert B. Goergen.................. 1,000 4,000 65,810
Herbert C. Knortz.................. 1,000 4,000 65,810
Francis J. Palamara................ 1,000 4,000 65,810
Martin L. Solomon.................. 1,653 10,150 318,083
</TABLE>
See also "MANAGEMENT--Executive Compensation and Related Information."
Payments Under Severance Agreements. In December 1997, the Company entered
into severance agreements (the "Severance Agreements") with Messrs. Rubin,
Franz, Soja and Fox, providing each of them with severance benefits upon
certain terminations of their employment with the Company. Such Severance
Agreements provide that if, within twenty-four months following a Significant
Transaction (as defined below), the executive's employment with the Company is
terminated either by the Company other than for "cause," or by such executive
for "good reason" (as each term is defined in the Severance Agreements), the
executive will be entitled to receive a prorated bonus for the year of
termination plus a severance payment equal to two times the sum of (i) the
executive's annual base salary (at the rate in effect immediately prior to the
date of termination) and (ii) his annualized average bonus amount for the
prior two fiscal years and the portion of any year in which
53
<PAGE>
the termination occurs. In addition, the Severance Agreements provide for the
immediate vesting of all stock, stock option or cash awards granted to the
executive, the extended exercisability of awards, and continued participation
for the two-year period following such termination in all welfare benefit
plans (other than disability) provided by the Company immediately prior to the
Significant Transaction. Further, the executive will be entitled to receive a
lump-sum cash payment in an amount equal to the forfeitable portion, if any,
of the executive's accrued benefit under the Company's tax-qualified
retirement plans. In the case of Mr. Fox's Severance Agreement, cash payments
under the Severance Agreement are required to be reduced to the extent
necessary to assure that no portion of the payments in the nature of
compensation to or for the benefit of Mr. Fox would constitute a "parachute
payment" under Section 280G of the Code. In the case of the Severance
Agreements of Messrs. Rubin, Franz and Soja, payments will be reduced only if
such reduction would result in a greater after-tax benefit to the executive.
The term Significant Transaction as defined in the Severance Agreements
generally includes the following events: (i) consummation of a reorganization,
merger or consolidation or sale or other disposition of all or substantially
all of the assets of the Company (or, in the case of Mr. Franz and Mr. Fox, of
the Company's subsidiaries, XTRA Lease and XTRA Intermodal, respectively),
unless (a) all or substantially all of the beneficial owners, respectively, of
the Company Common Stock and the outstanding voting securities of the Company
immediately prior to such transaction continue to own, directly or indirectly,
more than 50% of, respectively, the then outstanding common stock and combined
voting power of the resulting corporation in substantially the same
proportions as their ownership immediately prior to such transaction, (b) no
person or group beneficially owns, directly or indirectly, 30% or more of the
then outstanding shares of common stock or the combined voting power of the
resulting corporation (except to the extent that such ownership existed prior
to such transaction) and (c) at least a majority of the members of the board
of directors of the resulting corporation were members of the Board of
Directors at the time of the execution of the initial agreement, or of the
action of the Board, providing for such transaction; or (ii) approval by the
stockholders of the Company of a complete liquidation or dissolution of the
Company (or, in the case of Mr. Franz and Mr. Fox, the applicable subsidiary,
other than a liquidation or dissolution of such subsidiary into the Company or
any subsidiary of the Company). Consummation of the Merger will constitute a
"Significant Transaction" for purposes of the Severance Agreements. The
Recapitalization Merger Agreement provides that the officers of MergerCo will
be the officers of the Company following the Merger and, in connection
therewith, it is expected that the employment of Mr. Lewis Rubin, the
President and Chief Executive Officer of the Company, Michael J. Soja, Vice
President and Chief Financial Officer of the Company, and, in the event that
the Company's marine container business is managed by a third party or sold,
Frederick M. Gutterson, Vice President, XTRA International, will be
terminated. In such event, such persons will be entitled to the payment of
such severance benefits.
On June 30, 1995, the Company acquired a marine container fleet of
approximately 170,000 twenty-foot equivalent units from Matson Leasing
Company, Inc. ("Matson"). In connection with this acquisition, Mr. Gutterson
was party to an agreement (the "Gutterson Severance Agreement"), assumed by
the Company, that provides Mr. Gutterson with certain severance benefits upon
certain terminations of his employment with the Company. The Gutterson
Severance Agreement provides that if, prior to December 31, 1998, Mr.
Gutterson's employment with the Company is terminated either by the Company
other than for "cause" or by Mr. Gutterson for "good reason" (as each term is
defined in the agreement), he would receive, in addition to salary and bonus
earned in respect of the year in which such termination occurs, a severance
payment equal to certain pro-rated bonus payments plus two times the sum of
(i) his annual base salary (at the highest rate in effect during the year
immediately prior to the date of termination) and (ii) the highest annual
bonus compensation paid (or awarded, if not yet paid) in respect of the three
calendar years prior to the year in which such termination occurs. In
addition, for a period of two years following any such termination of
employment, Mr. Gutterson would be entitled to participate in all health and
welfare benefit plans provided by the Company. Cash payments under the
Gutterson Severance Agreement are required to be reduced to the extent
necessary to assure that no portion of the payments or benefits to be received
by Mr. Gutterson in connection with a change in control of the Company would
constitute a "parachute payment" under Section 280G of the Code.
Assuming that such executives would be terminated on October 1, 1998 cash
payments which would be made to Messrs. Rubin, Franz, Soja, Fox and Gutterson
are approximately $1,967,000, $926,000, $687,000, $596,000, and $1,680,000,
respectively.
54
<PAGE>
Agreement with Mr. Rubin. On July 1, 1994, the Company entered into an
Individual Pension Agreement with Mr. Rubin pursuant to which the Company will
pay Mr. Rubin an annual life benefit of $100,000 commencing on the first day
of the month following the later of (i) the day on which Mr. Rubin attains age
65 or (ii) the day Mr. Rubin's employment with the Company terminates. The
Individual Pension Agreement provides that, in the event of a change of
control, as defined in the Individual Pension Agreement, the Company will pay
Mr. Rubin a lump sum payment (approximately $773,000) equal to the present
value of such annual benefit in the event his employment with the Company is
terminated within the two year period following the date of the change of
control. A change of control as defined in the Individual Pension Agreement
generally includes the following events: (i) a person, as defined, becomes the
beneficial owner of more than 40% of the voting power of the Company's then
outstanding securities, (ii) a change of control of a kind required to be
reported under Item 6(e) of Schedule 14A of Regulation 14A under the Exchange
Act, (iii) a consolidation, merger or other reorganization to which the
Company is a party or which the stockholders approve (other than such
transactions (a) in which the voting securities of the Company outstanding
immediately prior thereto continue to represent more than 50% of the combined
voting power of the Company or such surviving entity outstanding immediately
thereafter, or (b) in which no person acquires more than 20% of the combined
voting power of the Company's then outstanding securities), a sale of all or
substantially all assets, or a plan of liquidation, and (iv) individuals who,
as of the date of the Individual Pension Agreement, constituted the Board of
Directors or who joined the Board of Directors thereafter with the approval of
a majority of the Board of Directors cease to be a majority of the Board of
Directors. In the event Mr. Rubin dies while serving as Chief Executive
Officer or after he becomes entitled to benefits under the Individual Pension
Agreement, his surviving spouse, if any, would be entitled to certain survivor
benefits. Mr. Rubin would forfeit all benefits in the event he joins the board
of directors or becomes an executive officer of a competitor of the Company
within two years after the date of termination of his employment with the
Company, except in the event such termination of employment occurs after a
change of control as defined. Consummation of the Merger will constitute a
"change of control" for purposes of Mr. Rubin's Individual Pension Agreement
and, accordingly, in the event Mr. Rubin is no longer employed by the Company
following the Merger, the benefits under the Severance Agreement and Mr.
Rubin's Individual Pension Agreement will be payable.
Board Retirement Plan. In November 1996, the Compensation Committee
discussed and approved, after consultation with KPMG Peat Marwick, the
Company's compensation consultant, a proposal to the effect that any outgoing
or retiring Directors from the Company's Board would receive the normal
monthly retainer in effect at the time of their departure for a period of time
equal to (i) the number of years served on the Company's Board or (ii) ten
years, whichever is shorter, provided such Directors had served as a Director
of the Company for a period of at least five years and had reached the age of
65 at the time of their departure from the Board.
The names and gross payments due such directors as of September 30, 1998
under the Board Retirement Plan are as follows: Mr. Russell Duncan, a former
director - $86,625; Mr. Knortz - $165,750; Mr. Palamara - $159,250; and Mr.
Gintel - $170,034.
55
<PAGE>
The following table shows the merger consideration, payment in respect of
stock options, severance payments assuming termination of employment (see "--
Effect on Stock Options and Employee Benefit Matters") and payments in respect
of certain retirement plans for each of the current directors and named
executive officers of the Company:
<TABLE>
<CAPTION>
VALUE OF VALUE OF
CASH MERGER VALUE OF SEVERANCE RETIREMENT
NAME CONSIDERATION/1/ OPTIONS/2/ PAYMENTS/3/ BENEFITS/4/ TOTAL
---- ---------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Lewis Rubin............. $ 3,008,872 $3,560,238 $1,967,000 $ 773,000 $ 9,309,110
Michael K. Fox.......... - 852,175 596,000 - 1,448,175
William H. Franz........ - 1,275,219 926,000 - 2,201,219
Frederick M. Gutterson.. - 1,063,047 1,680,000 - 2,743,047
Michael J. Soja......... 900,606 1,124,047 687,000 - 2,711,653
Michael D. Bills........ - 77,250 - - 77,250
H. William Brown........ - 117,875 - - 117,875
Michael N.
Christodolou........... - 46,889 - - 46,889
Robert M. Gintel........ 1,261,000 65,810 - 132,940/5/ 1,459,750
Robert B. Goergen....... 2,638,769 65,810 - - 2,704,579
Herbert C. Knortz....... 428,740 65,810 - 129,591/5/ 624,141
Francis J. Palamara..... 428,740 65,810 - 125,653/5/ 620,203
Martin L. Solomon....... 1,916,720 318,083 - - 2,234,803
----------------------------------------------------------------
TOTAL $10,583,447 $8,698,063 $5,856,000 $1,161,184 $26,298,694
----------------------------------------------------------------
----------------------------------------------------------------
</TABLE>
- --------
1 Assumes that each director and named executive officer receives cash for
97% of the shares beneficially owned and does not reflect the value of
retained shares.
/2 /See "--The Stock Option Plans."
/3 /See "--Payments Under Severance Agreements."
/4 /See "--Agreement with Mr. Rubin" and "--Board Retirement Plan."
5 Numbers represent present value at September 30, 1998 calculated using a
discount rate of 6%.
Indemnification and Insurance. The Recapitalization Merger Agreement
provides that the Company will, to the fullest extent permitted under
applicable law or under the Company's Certificate of Incorporation or By-Laws
and regardless of whether the Merger becomes effective, indemnify and hold
harmless, and, after the Effective Time, the Surviving Corporation shall, to
the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer or employee of the Company
or any of its subsidiaries against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, arising out of or pertaining to the transactions contemplated
by the Recapitalization Merger Agreement or otherwise with respect to any acts
or omissions occurring at or prior to the Effective Time, to the same extent
as provided in the Company's Certificate of Incorporation or By-Laws or
certain indemnification agreements. Currently, the Company indemnifies
directors and officers to the fullest extent permitted by law with respect to
any claims or proceedings relating to or arising out of their service as an
officer or director. Directors and officers have the right to be paid by the
Company for expenses incurred in defending any such claim or proceeding in
advance of its final disposition.
In addition, the Recapitalization Merger Agreement provides that for a
period of at least six years after the Effective Time, subject to certain
conditions (see "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER
AGREEMENT--Indemnification and Insurance"), the Company has agreed to maintain
in effect directors' and officers' liability insurance covering those persons
who are currently covered by the Company's directors' and officers' liability
insurance policy, with terms comparable to, or better than, those applicable
to directors and officers of the Company as of the date of the
Recapitalization Merger Agreement.
The Investors. On or prior to the Effective Time, the Company, at the
request of MergerCo, shall enter into a management agreement with Apollo
Management IV, L.P. (or an affiliate thereof) pursuant to which the Company
shall agree to pay an annual management fee of $1 million and agree to
continue to receive financial advisory services from Apollo and its designees
on an ongoing basis with compensation to be determined, all on terms
reasonably satisfactory to MergerCo. If the Merger shall be consummated in
accordance with the
56
<PAGE>
Recapitalization Merger Agreement, then the Surviving Corporation following
the Merger shall pay to Apollo or any designee, on the closing date of the
Merger, a fee of $12.5 million in cash, for arranging the transactions
contemplated by the Recapitalization Merger Agreement (including the financing
thereof). Prior to the Effective Time, the Company will enter into the
Registration Rights Agreement with the Investors which will provide, among
other things, that the Investors may require the Company to register their
shares of Company Common Stock under the Securities Act.
DELISTING; DEREGISTRATION
The Company anticipates that it will be able to, and if so able intends to,
delist the Common Stock from the NYSE upon or following the Merger, and it is
the Company's intention that following the Merger the Retained Shares will not
be listed on any national securities exchange or quoted on the NASDAQ Stock
Market Inc.'s National Market. Such delisting is likely to have a material
adverse effect on the trading market for and liquidity of, and may have a
material adverse effect on the market value of, Retained Shares. See "RISK
FACTORS--Delisting; Illiquidity of Company Common Stock." In addition,
following the consummation of the Merger, the Company Common Stock may be
eligible for deregistration under the Exchange Act, and if so eligible, the
Company may apply for deregistration. See "RISK FACTORS--Termination of SEC
Reporting."
RESALE OF COMPANY COMMON STOCK FOLLOWING THE MERGER
The Company Common Stock to be retained in connection with the Merger will
be freely transferable, except that shares retained by any stockholder who is
deemed to be an "affiliate" (as defined under the Securities Act, and
generally including, without limitation, directors, certain executive officers
and beneficial owners of 10% or more of a class of capital stock) of the
Company for purposes of Rule 145 under the Securities Act will not be
transferable except in compliance with the Securities Act. This Proxy
Statement/Prospectus does not cover sales of Company Common Stock retained by
any person who may be deemed to be an affiliate of the Company.
MINORITY STOCKHOLDER INTERESTS FOLLOWING THE MERGER
The Investors have no current intention to engage in any transaction which
would result in existing holders, who will be minority stockholders of the
Surviving Corporation, being forced out of their ownership of Company Common
Stock and the Investors do not presently foresee the likelihood of such a
transaction in the future other than as a result of a transaction involving
the Company Common Stock owned by all stockholders of the Company.
MERGER FINANCING
The approximate sources and uses of funds in connection with the Merger are
set forth in the following table, assuming the Merger occurred as of June 30,
1998.
SOURCES AND USES OF FUNDS
(MILLIONS OF DOLLARS)
<TABLE>
<S> <C>
Sources:
Senior Facilities (1)................................................. $ 478
Bridge Loan........................................................... 500
Equity (2)............................................................ 292
------
Total Sources....................................................... $1,270
------
Uses:
Cash Consideration (3)................................................ $ 967
Cash settlement of stock options...................................... 12
Refinancing of indebtedness (4)....................................... 215
Fees and expenses..................................................... 76
------
Total Uses.......................................................... $1,270
======
</TABLE>
57
<PAGE>
- --------
(1) An additional $147 million will be available on a delayed-draw basis under
the term facility and $250 million will be available under the revolving
facility, in each case, after the Effective Time.
(2) Equity represents cash to be contributed to MergerCo by the Investors;
excludes $33 million of equity retained by existing holders of Company
Common Stock.
(3) Comprised of $967 million payment for the repurchase of 14.9 million
shares of Company Common Stock at $65.00 per share.
(4) Reflects refinancing of Company's existing credit facilities and
repurchasing of Series B Medium Term Notes. The Company's Series C Medium
Term Notes and its capitalized lease obligations will remain outstanding
after the Merger. The Company intends, prior to Closing, to offer to
repurchase the Series B Medium Term Notes and to seek the consent of the
noteholders to the deletion of certain covenants contained therein. If the
Company is not successful in obtaining the consent of a sufficient number
of noteholders to modify the terms thereof or determines for any reason
not to proceed with the repurchase, the Company intends to defease such
notes and to set up a defeasance fund in connection therewith. See "PRO
FORMA CAPITALIZATION."
The total amount of funds required by MergerCo to consummate the Merger and
to pay related expenses is approximately $1.270 billion.
The Company and MergerCo will finance the Merger and repay Company
indebtedness from the following sources: (a) $292 million in equity comprised
of equity issued to the Investors, excluding equity retained by existing
holders of Company Common Stock (b) $478 million from the Senior Facilities of
XTRA, Inc., a wholly owned subsidiary of the Company (the "Borrower")
comprised of term loan facilities aggregating $625 million (the "Term
Facility"), of which $478 million will initially be funded, and a $250 million
revolving credit facility (the "Revolving Facility"), which will initially be
unfunded, and (c) the Bridge Loan in the amount of up to $500 million as
interim financing to the sale of the Senior Subordinated Notes for cash
proceeds of $500 million. The Borrower's Series C Medium Term Notes in the
aggregate principal amount of $583 million and approximately $20 million of
capitalized lease obligations of the Borrower will remain outstanding after
the Merger. The Revolving Facility will also be used to finance the continuing
operations of the Borrower and its subsidiaries after the Merger.
At the time of execution of the Recapitalization Merger Agreement, MergerCo
received the Commitment Letter from CSI, Chase and CSFB to provide the Credit
Facilities. The commitment is subject to various conditions. See "--Recent
Developments; Material Uncertainty of Consummating the Merger."
The Senior Facilities are expected to consist of (i) the $625 million Term
Facility, consisting of a (a) $250 million tranche A multi-draw term loan
("Tranche A"), (b) $200 million tranche B term loan ("Tranche B") and (c) $175
million tranche C term loan ("Tranche C"); and (ii) the $250 million Revolving
Facility. Chase will act as administrative agent for the syndicate of lenders
providing the Senior Facilities and CSFB will act as syndication agent for
such facility. CSFB will act as administrative agent for the syndicate of
lenders providing the Subordinated Facility and Chase will act as syndication
agent for such facility. It is anticipated that the full proceeds of the
Subordinated Facility, together with a portion of the proceeds of the Senior
Facilities, will be used to finance the Merger and to pay related fees and
expenses. In addition, the Senior Facilities would be used for working capital
and general corporate purposes of the Borrower and its subsidiaries.
The Revolving Facility is expected to include a sub-limit for the issuance
of letters of credit. Borrowings made under the Revolving Facility will bear
interest at an annual rate equal to, at the Borrower's option, a Eurodollar
Rate plus an applicable margin ranging from 1.25% to 2.25%, which applicable
margin adjusts based on various tests of the Borrower's financial performance,
or the Prime Rate plus an applicable margin ranging from 0.25% to 1.25%. The
"Prime Rate" is a fluctuating interest rate equal to the higher of (i) the
rate of interest announced publicly by Chase as its prime rate, (ii) the
secondary market rate for three-month certificates of deposit plus 1.0% and
(iii) a rate equal to 1/2 of 1% per annum above the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers. Eurodollar Rate interest
will be payable in arrears at the end of the applicable interest period, or
quarterly, if earlier. Eurodollar Rate borrowings are available in 1-, 2-, 3-
or 6-month interest periods. The Revolving Facility matures in six (6) years.
58
<PAGE>
The Term Facility is expected to bear interest at the rates, and will
amortize and mature at the times specified in the following table:
<TABLE>
<CAPTION>
FACILITY MATURITY DATE AMORTIZATION INTEREST RATE
- -------- ------------- ------------------- -------------
<S> <C> <C> <C> <C>
Eurodollar Rate + applicable
Tranche A............... 6 years year 1-0% margin (ranging from
year 2-0% 1.25% to 2.25%) -or-
Prime Rate + applicable margin
year 3-0% (ranging from 0.25% to 1.25%)
year 4-20%
year 5-30%
year 6-50%
Eurodollar Rate + applicable
Tranche B............... 7 years year 1-6: $1 million per year margin (ranging from
year 7: $194 million 1.75% to 2.50%) -or-
Prime Rate + applicable margin
(ranging from 0.75% to 1.50%)
Eurodollar Rate + applicable
Tranche C............... 8 1/2 years year 1-7: $1 million per year margin (ranging from
year 8-8 1/2: $167.9 million 2.00% to 2.75%) -or-
Prime Rate + applicable margin
(ranging from 1.00% to 1.75%)
</TABLE>
Tranche A loans are expected to be available for drawing until the third
anniversary of the closing date after the Merger (the "Closing Date"). No more
than $100 million of Tranche A loans are expected to be borrowed on the
Closing Date. Tranche B and Tranche C will be fully drawn on the Closing Date.
The obligations of the Borrower under the Senior Facilities credit agreement
will be secured by substantially all assets of the Borrower (including
intellectual property and real property, but excluding capital stock) and will
be guaranteed by each of the Borrower's domestic subsidiaries (and such
guarantees will be similarly secured). Such collateral will be shared equally
and ratably with holders of the Borrower's Series C Medium Term Notes to the
extent required by the indenture securing such notes.
The Credit Agreement is expected to contain customary covenants of the
Borrower and its subsidiaries, including, without limitation, restrictions on
(i) indebtedness, (ii) liens, (iii) guarantee obligations, (iv) mergers,
acquisitions and other business combinations, (v) sales of assets, (vi)
dividends and other payments in respect of capital stock, (vii) capital
expenditures, (viii) investments, loans and advances, (ix) optional payment or
modification of certain debt of the Borrower, (x) transactions with affiliates
and (xi) various financial covenants. Pursuant to the terms of the Credit
Agreement, and subject to applicable grace periods in certain circumstances,
the Borrower would be in default upon the non-payment of principal or interest
when due under such agreement, upon the non-fulfillment of the covenants
described above, upon certain changes in control of the ownership of the
Borrower or various other defaults to be described therein. If such a default
occurs, the Senior Facilities lenders would be entitled to take all actions
permitted to be taken by a secured creditor under the Uniform Commercial Code
and to accelerate the amounts due under the Credit Agreement and may require
all such amounts to be immediately paid in full. Loans under the Senior
Facilities will be required to be prepaid with a percentage to be agreed upon
of (a) net cash proceeds of certain equity and debt issuances of the Company,
the Borrower and any of its subsidiaries, (b) a percentage to be agreed upon
of certain assets of the Company, the Borrower and any of its subsidiaries and
(c) a percentage to be agreed upon of excess cash flow (to be defined in the
Credit Agreement and subject to certain limits to be specified therein) of the
Borrower.
The Subordinated Facility will consist of (i) the $500 million Senior
Subordinated Notes or (ii) a $500 million unsecured bridge loan financing (the
"Bridge Loan") that would be anticipated to be replaced with debt securities
substantially similar to the Senior Subordinated Notes as soon as practicable
after the Closing Date.
Should the $500 million principal amount of Senior Subordinated Notes be
issued by the Borrower, they would have an interest rate and other terms based
on market conditions at the time of pricing. The Senior Subordinated Notes
would be senior subordinated obligations of the Borrower, ranking pari passu
in right of payment with all other future senior subordinated indebtedness of
the Borrower. The Senior Subordinated Notes would not be registered under the
Securities Act and would not be able to be offered or sold in the United
States absent registration or an applicable exemption from the registration
requirements of the Securities Act.
59
<PAGE>
The Senior Subordinated Notes indenture would contain customary covenants
that would restrict, among other things, the ability of the Borrower and its
subsidiaries to (i) incur additional indebtedness, (ii) pay dividends or make
certain other restricted payments, (iii) incur liens, (iv) apply net proceeds
from certain asset sales, (v) merge or consolidate with any other person, or
sell, assign, transfer, lease, convey or otherwise dispose of substantially
all of the assets of the Borrower, (vi) enter into certain transactions with
affiliates, or (vii) incur other senior subordinated indebtedness. The Senior
Subordinated Notes indenture would also contain events of default which are
customary for transactions of this type.
The Bridge Loan would be funded in a principal amount of up to $500 million.
Borrowings made under the Bridge Loan would bear interest initially at the
Eurodollar Rate plus 5.5% per annum, which interest rate would increase by 1%
at the end of six months, and then increase by 0.5% at the end of each three-
month period thereafter; provided that the interest rate would not exceed 18%
per annum nor be less than 11.25% per annum. To the extent that the interest
rate exceeds 15%, the Borrower may at its option cause such excess interest to
be added to the principal amount of the Bridge Loan. The Bridge Loan would be
unsecured, although it would be guaranteed by the same entities guaranteeing
the Senior Facilities. The Bridge Loan would be a senior subordinated
obligation of the Borrower, ranking pari passu in right of payment with all
other existing future senior subordinated indebtedness of the Borrower.
The Bridge Loan would mature one (1) year after the Closing Date. If any of
the Bridge Loan has not been repaid in full on or prior to the maturity date,
the lender will have the option at any time or from time to time to receive
exchange notes ("Exchange Notes") that mature ten years after the Closing
Date. The maturity of any Bridge Loan that is not exchanged for Exchange Notes
on the Bridge Loan maturity date shall automatically be extended to the tenth
anniversary of the Closing Date. The Bridge Loan and the Exchange Notes shall
be treated as pari passu for all purposes. The Exchange Notes would bear
interest annually at the greater of (i) 13.25%, (ii) the then-current interest
rate on the Bridge Loan plus 0.5%, (iii) a 10-year reference U.S. Treasury
Rate plus 7.5% and (iv) a CSI reference high-yield index rate plus 3.5%;
provided that the Exchange Notes interest rate will at no time exceed 18% per
annum, nor be less than 11.25% per annum, and to the extent that the interest
rate exceeds 15%, the Borrower may at its option cause such excess interest to
be added to the principal amount of the Exchange Notes. The Bridge Loan would
be required to be prepaid (and the Exchange Notes redeemed) with the net
proceeds of certain asset sales and equity issuances, and upon the occurrence
of a change in control of the Borrower, in each case to the extent permitted
by the terms of the Senior Facilities. The Bridge Loan and the Exchange Notes
would contain customary covenants of the Borrower and its subsidiaries, and
standard and customary events of default. Warrants to purchase an aggregate of
5% of the Common Stock of the Company at a nominal exercise price for a period
of 10 years from the Closing Date ("Warrants") would be escrowed by the
Company on the Closing Date if the Bridge Loan is consummated. After the
Closing Date, the Warrants would be issued to the holders of any Bridge Loan
debt (in proportion to the amount of debt held by such holder) for resale by
such holders at a price no higher than par in connection with an arm's length
sale of any Bridge Loan debt to a third party. In addition, the holders of any
Bridge Loan debt outstanding on the one year anniversary of the Closing Date
would be entitled to receive Warrants as follows: 16.67% of such warrants
would be issued pro-rata to the then-existing debt holders at the end of each
three (3) month period thereafter that such holder continues to hold such
debt. Any Warrants to which none of the holders of the Bridge Loan debt is, or
may become, entitled will be returned to the Company for cancellation.
The Company has been advised by CSI and Chase that they have informed
MergerCo that, in view of current market conditions, they would exercise their
right under the Commitment Letter to change the pricing, terms, and structure
of the financing. In addition, Apollo, on behalf of MergerCo, recently
indicated to the Company that in view of current market conditions it does not
believe that MergerCo would be able to obtain the financing necessary to
consummate the Merger. The Commitment Letter will terminate in accordance with
its terms on November 30, 1998 if no amounts have been funded thereunder. The
Recapitalization Merger Agreement provides that if the transaction is not
consummated on or prior to November 30, 1998, either MergerCo or the Company
will be able to terminate the transaction, to the extent that the terminating
party is not in breach of the agreement. In light of current circumstances,
including, without limitation, the notice from Apollo and the position
expressed by CSI and Chase, there can be no assurances that the Merger will be
consummated. See "--Recent Developments; Material Uncertainty of Consummating
the Merger," "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER AGREEMENT--
Conditions to Consummation of the Merger," and "--Termination."
60
<PAGE>
The Company has not received any firm proposals from the Investors to
restructure or renegotiate the transaction and there can be no assurances that
the Company will receive any such proposals. In the event that the Company
does receive a proposal from the Investors to renegotiate or restructure the
transaction and the Board of Directors accepts such a proposal, if there is a
change in the terms of the Merger Financing that would have a material effect
on the pro forma financial statements contained in the Proxy
Statement/Prospectus, or if there are any material changes affecting the
rights of stockholders, the Company will mail to stockholders a revised Proxy
Statement/Prospectus reflecting the terms and conditions of the revised
transaction and resolicit proxies.
Pursuant to the Recapitalization Merger Agreement, the parties have agreed
to use all reasonable efforts to take all actions necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by the Recapitalization Merger Agreement.
Accordingly, although there can be no assurances that the Merger will be
consummated, the Company is proceeding to take the actions required to close
the Merger, including the mailing of this Proxy Statement/Prospectus and
obtaining stockholder approval of the Merger at the Special Meeting. See "--
Recent Developments; Material Uncertainty of Consummating the Merger."
CONVERSION OF MERGERCO INTERESTS
Pursuant to the Merger, the MergerCo Interests, all of which are owned by
the Investors, will be converted into 4,500,000 shares of Company Common
Stock, which will represent 90% of the outstanding Company Common Stock after
the Merger.
Ownership. The following table reflects the expected ownership of the
Company after consummation of the Merger (but does not reflect the six and
one-half for one stock split).
<TABLE>
<CAPTION>
AMOUNT OF
TITLE OF BENEFICIAL PERCENT
CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
-------- --------------------------------------------- ---------- --------
<C> <S> <C> <C>
Common Stock Investors
Apollo and affiliates(1)..................... 3,375,000 67.5%
Atlas(2)..................................... 1,125,000 22.5%
--------- -----
Subtotal..................................... 4,500,000 90.0%
Retained Shares.............................. 500,000 10.0%
--------- -----
SHARE OWNERSHIP.............................. 5,000,000 100.0%
Stock Options(3)............................. 250,000
---------
SHARE AND OPTION OWNERSHIP(4)................ 5,250,000
</TABLE>
- --------
(1)The address of Apollo and affiliates is c/o Apollo Advisors IV, L.P., Two
Manhattanville Road, Purchase, New York 10577.
(2)The address of Atlas is 633 Third Avenue, New York, New York 10017.
(3)To be issued to officers, employees and independent contractors of the
Company.
(4)Does not include Warrants that will allow the holders to purchase up to 5%
of the amount of outstanding Company Common Stock on a fully diluted basis
at a nominal exercise price for a period of 10 years from the Closing
Date. Warrants would be issued only if the Bridge Loan is funded.
61
<PAGE>
STOCKHOLDERS' APPRAISAL RIGHTS
Pursuant to Section 262 of the DGCL ("Section 262"), any holder of Company
Common Stock who does not wish to accept the consideration to be paid pursuant
to the Recapitalization Merger Agreement may elect to have the fair value of
such stockholder's shares (the "Dissenting Shares") of Company Common Stock
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger) judicially determined and paid to such stockholder
in cash, together with a fair rate of interest, if any, provided that such
stockholder complies with the provisions of Section 262. The following
discussion is not a complete statement of the law pertaining to appraisal
rights under Delaware law, and is qualified in its entirety by the full text
of Section 262, which is included in its entirety as Annex D to this Proxy
Statement/Prospectus. All references in Section 262 and in this summary to a
"stockholder" are to the record holder of the shares of Company Common Stock
as to which appraisal rights are asserted.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, a constituent corporation must notify each of
its stockholders of record who were such as of the record date for such
meeting and for whom appraisal rights are available, not less than 20 days
prior to the meeting, that appraisal rights are available, and must include in
such notice a copy of Section 262. This Proxy Statement/Prospectus constitutes
such notice to stockholders of the Company. Any stockholder who wishes to
exercise such appraisal rights or who wishes to preserve the right to do so
should review carefully Annex D to this Proxy Statement/Prospectus because
failure to comply with the procedures specified in Section 262 timely and
properly will result in the loss of appraisal rights. Moreover, because of the
complexity of the procedures for exercising the right to seek appraisal of the
Company Common Stock, the Company believes that stockholders who consider
exercising such rights should seek the advice of counsel.
Any holder of Company Common Stock wishing to exercise the right to dissent
from the Merger and demand appraisal under Section 262 of the DGCL must
satisfy each of the following conditions:
(i) Such stockholder must deliver to the Company a written demand for
appraisal of such stockholder's shares before the vote on the
Recapitalization Merger Agreement at the Special Meeting. This written
demand for appraisal must be in addition to and separate from any proxy or
vote against the Recapitalization Merger Agreement; merely voting against,
abstaining from voting or failing to vote in favor of approval and adoption
of the Recapitalization Merger Agreement will not constitute a demand for
appraisal within the meaning of Section 262;
(ii) Such stockholder must not vote for approval and adoption of the
Recapitalization Merger Agreement. A failure to vote will satisfy this
requirement, but a vote in favor of the Recapitalization Merger Agreement,
by proxy or in person, or the return of a signed proxy that does not
specify a vote against approval and adoption of the Recapitalization Merger
Agreement or a direction to abstain in connection with the proposal, will
constitute a waiver of such stockholder's right of appraisal and will
nullify any previously filed written demand for appraisal because, in the
absence of express contrary instructions, such shares of Company Common
Stock will be voted in favor of the proposal. Accordingly, a stockholder
who desires to perfect appraisal rights with respect to any of such
stockholder's shares of Company Common Stock must, as one of the procedural
steps involved in such perfection, either (i) refrain from executing and
returning the enclosed proxy card and from voting in person in favor of the
proposal to approve the Recapitalization Merger Agreement, or (ii) check
either the "Against" or the "Abstain" box next to the proposal on such card
or affirmatively vote in person against the proposal or register in person
an abstention with respect thereto.
(iii) Such stockholder must continuously hold such shares from the date
of making the demand through the Effective Time. Accordingly, a stockholder
who is the record holder of shares of Company Common Stock on the date the
written demand for appraisal is made but who thereafter transfers such
shares prior to the Effective Time will lose any right to appraisal in
respect of such shares.
A demand for appraisal should be executed by or on behalf of the stockholder
of record, fully and correctly, as such stockholder's name appears on such
stockholder's stock certificates, should specify the stockholder's
62
<PAGE>
name and mailing address, the number of shares of Company Common Stock owned
and that such stockholder intends thereby to demand appraisal of such
stockholder's Company Common Stock. If the shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the shares are owned of
record by more than one person as in a joint tenancy or tenancy in common, the
demand should be executed by or on behalf of all owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on
behalf of a stockholder; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, the
agent is acting as agent for such owner or owners. A record holder such as a
broker who holds shares as nominee for several beneficial owners may exercise
appraisal rights with respect to the shares held for one or more beneficial
owners while not exercising such rights with respect to the shares held for
one or more beneficial owners; in such case, the written demand should set
forth the number of shares as to which appraisal is sought, and where no
number of shares is expressly mentioned, the demand will be presumed to cover
all shares held in the name of the record owner. Stockholders who hold their
shares in brokerage accounts or other nominee forms and who wish to exercise
appraisal rights are urged to consult with their brokers to determine the
appropriate procedures for the making of a demand for appraisal by such a
nominee.
A stockholder who elects to exercise appraisal rights should mail or deliver
a written demand to: XTRA Corporation, 60 State Street, Boston, Massachusetts
02109, Attention: Corporate Secretary.
Within 10 days after the Effective Time, the Company must give written
notice that the Merger has become effective to each stockholder who has
complied with Section 262. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing such notice, demand in writing from
the Company the appraisal of such stockholder's shares. Within 120 days after
the Effective Time, but not thereafter, either the Company or any stockholder
who has complied with the requirements of Section 262 may file a petition in
the Delaware Court of Chancery demanding a determination of the value of the
shares of Company Common Stock held by all dissenting stockholders. The
Company does not presently intend to file such a petition, and stockholders
seeking to exercise appraisal rights should not assume that the Company will
file such a petition or that the Company will initiate any negotiations with
respect to the fair value of such shares. Accordingly, stockholders who desire
to have their shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed in Section 262. Inasmuch as the Company has no obligation to file
such a petition, the failure of a stockholder to do so within the period
specified could nullify such stockholder's previous written demand for
appraisal. In any event, at any time within 60 days after the Effective Time
(or at any time thereafter with the written consent of the Company), any
stockholder who has demanded appraisal has the right to withdraw the demand
and to accept payment of the consideration provided in the Recapitalization
Merger Agreement.
Pursuant to the Recapitalization Merger Agreement, (i) the Company has
agreed to give MergerCo (a) prompt notice of any written demands for
appraisal, withdrawals of demands for appraisal of Company Common Stock and
any other instruments relating to the DGCL received by the Company and (b) the
opportunity to participate in all negotiations and proceedings with respect to
demands for appraisal, and (ii) the Company will not voluntarily make any
payment with respect to demands for appraisal and will not, except with the
prior written consent of MergerCo, settle or offer to settle, any such
demands.
Within 120 days after the Effective Time, any stockholder who has complied
with the provisions of Section 262 to that point in time will be entitled to
receive from the Company, upon written request, a statement setting forth the
aggregate number of shares not voted in favor of the Recapitalization Merger
Agreement and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. The Company must mail such
statement to the stockholder within 10 days of receipt of such request.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine which stockholders are
entitled to appraisal rights and will appraise the "fair value" of their
shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. The costs of the
action may be determined by the Delaware Chancery Court and taxed upon the
parties as the Delaware Chancery Court deems equitable. Upon application of a
dissenting stockholder, the Delaware Chancery Court may also
63
<PAGE>
order that all or a portion of the expenses incurred by any stockholder in
connection with the appraisal proceeding, including, without limitation,
reasonable attorneys' fees and the fees and expenses of experts, be charged
pro rata against the value of all of the shares entitled to appraisal.
STOCKHOLDERS CONSIDERING SEEKING APPRAISAL SHOULD BE AWARE THAT THE FAIR VALUE
OF THEIR SHARES AS DETERMINED UNDER SECTION 262 COULD BE MORE THAN, THE SAME
AS OR LESS THAN THE CONSIDERATION THEY WOULD RECEIVE PURSUANT TO THE
RECAPITALIZATION MERGER AGREEMENT IF THEY DID NOT SEEK APPRAISAL OF THEIR
SHARES AND THAT INVESTMENT BANKING OPINIONS, SUCH AS THE GOLDMAN SACHS
OPINION, ARE NOT OPINIONS AS TO FAIR VALUE UNDER SECTION 262.
In determining fair value, the Delaware Chancery Court is to take into
account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme
Court discussed the factors that could be considered in determining fair value
in an appraisal proceeding, stating that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community
and otherwise admissible in court" should be considered, and that "fair price
obviously requires consideration of all relevant factors involving the value
of a company." The Delaware Supreme Court stated that, in making this
determination of fair value, the court must consider market value, asset
value, dividends, earnings prospects, the nature of the enterprise and any
other facts which could be ascertained as of the date of the merger that throw
any light on future prospects of the merged corporation. In Weinberger, the
Delaware Supreme Court stated that "elements of future value, including the
nature of the enterprise, which are known or susceptible of proof as of the
date of the merger and not the product of speculation, may be considered."
Section 262 provides that fair value is to be "exclusive of any element of
value arising from the accomplishment or expectation of the merger." In Cede &
Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such
exclusion is a "narrow exclusion [that] does not encompass known elements of
value."
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the shares
subject to such demand for any purpose or be entitled to the payment of
dividends or other distributions on those shares (except dividends or other
distributions payable to holders of record of shares as of a record date prior
to the Effective Time).
At any time within 60 days after the Effective Time, any stockholder will
have the right to withdraw such demand for appraisal and to accept the terms
offered in the Merger; after this period, the stockholder may withdraw such
demand for appraisal only with the consent of the Company. If no petition for
appraisal is filed with the Delaware Chancery Court within 120 days after the
Effective Time, or if such stockholder has withdrawn such demand for appraisal
as discussed in the preceding sentence, stockholders' rights to appraisal
shall cease, and all holders of shares of Company Common Stock will be
entitled to receive the Merger Consideration. Any stockholder may withdraw
such stockholder's demand for appraisal by delivering to the Company a written
withdrawal of such stockholder's demand for appraisal and acceptance of the
Merger, except that (i) any such attempt to withdraw made more than 60 days
after the Effective Time will require written approval of the Company and (ii)
no appraisal proceeding in the Delaware Chancery Court shall be dismissed as
to any stockholder without the approval of the Delaware Chancery Court, and
such approval may be conditioned upon such terms as the Delaware Chancery
Court deems just. If (i) the Company does not approve a stockholder's request
to withdraw a demand for appraisal when such approval is required or (ii) the
Delaware Chancery Court does not approve the dismissal of an appraisal
proceeding, the stockholder would be entitled to receive only the appraised
value determined in any such appraisal proceeding, which value could be lower
than the value of the Merger Consideration.
FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH IN SECTION 262 OF
THE DGCL WILL RESULT IN THE LOSS OF A STOCKHOLDER'S STATUTORY APPRAISAL
RIGHTS.
64
<PAGE>
MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER AGREEMENT
The following is a brief summary of material provisions of the
Recapitalization Merger Agreement which is included as Annex A to this Proxy
Statement/Prospectus and is incorporated herein by reference. Such summary is
qualified in its entirety by reference to the Recapitalization Merger
Agreement.
THE MERGER
The Recapitalization Merger Agreement provides that, following the approval
of the Merger and the approval and adoption of the Recapitalization Merger
Agreement by the vote of a majority of the shares of Company Common Stock
entitled to vote thereon and the satisfaction or waiver of the other
conditions to the Merger, MergerCo will be merged with and into the Company,
the separate existence of MergerCo will cease, the Company will continue as
the Surviving Corporation in the Merger, the MergerCo Interests will be
converted into an aggregate of 4,500,000 shares of the Company Common Stock,
500,000 shares of the Company Common Stock will be retained by the Company's
existing stockholders (the "Retained Share Members") and the balance of the
outstanding shares of the Company Common Stock (other than Dissenting Shares
(as defined in the Recapitalization Merger Agreement)) will be converted into
the right to receive $65.00 per share in cash.
If the conditions to the Merger are satisfied or waived, the Company and
MergerCo will cause the Merger to be consummated by filing with the Secretary
of State of the State of Delaware a duly executed Certificate of Merger, and
the Merger will become effective upon the filing and acceptance thereof or at
such date thereafter as is provided in the Certificate of Merger.
Each share of Company Common Stock issued and outstanding immediately prior
to the Effective Time (other than shares of Company Common Stock owned by the
Company or any subsidiary of the Company, which will be canceled and retired,
and other than Dissenting Shares) will be treated, subject to proration as
described below, as follows: (i) for each share of Company Common Stock with
respect to which an election to retain such shares has been effectively made
and not revoked (the "Potential Election Shares") and which is to be retained,
the right to retain such share (an "Election Share"); (ii) for each share of
Company Common Stock which was not a Potential Election Share, but which is to
be retained as a result of proration, the right to retain such share (a "Non-
Election Share" and, together with the Election Shares, the "Retained
Shares"); and (iii) for each share of Company Common Stock (other than
Dissenting Shares and Retained Shares) the right to receive in cash from the
Company following the Merger an amount equal to $65.00, and each such share
will no longer be outstanding, will automatically be canceled and retired and
will cease to exist, and each holder of a certificate representing any such
shares will, to the extent such certificate represents such shares, cease to
have any rights with respect thereto, except the right to receive the Cash
Consideration applicable thereto, upon surrender of such certificate and as
more fully described under "THE MERGER--Merger Consideration." With regard to
the treatment of fractional share interests, see "THE MERGER--Fractional
Shares."
PRORATION
Pursuant to the Recapitalization Merger Agreement, if the number of
Potential Election Shares exceeds 500,000 (the "Retained Share Number"), then
the number of shares of the Company Common Stock which will be retained will
be reduced by such excess number of shares. In such event, each holder of
Potential Election Shares shall retain Retained Shares (rounded to the nearest
whole number) determined by multiplying the number of Potential Election
Shares held by such holder by the Non-Cash Proration Factor (which will be
determined by dividing Retained Share Number by the total number of Potential
Election Shares) and all Potential Election Shares other than those shares
which are retained as aforesaid will be converted to cash based on the Cash
Consideration.
Pursuant to the Recapitalization Merger Agreement, if the number of
Potential Election Shares is less than or equal to the Retained Share Number,
then the aggregate number of shares of the Company Common Stock which shall be
converted into the right to receive cash shall be decreased by a number of
shares equal to the excess of the Retained Share Number over the number of
Potential Election Shares. In such event, each Potential
65
<PAGE>
Election Share shall be retained by the holders and each share of the Company
Common Stock other than a Potential Election Share or a Dissenting Share
("Potential Cash Shares") shall be retained or converted into cash, with the
number of Potential Cash Shares being retained to be determined by multiplying
the number of Potential Cash Shares held by such holder by the Cash Proration
Factor (which will be determined by dividing (x) the difference between the
Retained Share Number and the number of Potential Election Shares by (y) the
number of Potential Cash Shares).
As set forth in greater detail below, stockholders who elect to retain
shares of Company Common Stock or to convert such shares into the right to
receive the Cash Consideration may experience a range of actual outcomes based
upon the actions taken by other stockholders. For example, a stockholder
holding 100 shares and electing to retain all of them will receive from 3 to
100 shares, and will receive the Cash Consideration for 0 to 97 of such
shares, depending upon the actions of other stockholders. A stockholder
holding 100 shares and electing to convert all of them into the right to
receive the Cash Consideration with respect thereto will receive the Cash
Consideration for from 97 to 100 of such shares and will receive from 0 to 3
shares, depending on the actions of other stockholders. The following examples
further illustrate the potential effects of proration. All fractional shares
are subject to payment of cash instead of issuing fractional shares, and to
simplify the following examples, the impact of fractional shares has been
excluded.
A. HOLDER A OWNS 100 SHARES AND DOES NOT ELECT TO RETAIN ANY SHARES.
1. If other stockholders elect to retain 500,000 shares of Company Common
Stock in the aggregate, then Holder A will receive $6,500 in cash (100
shares at $65.00 per share). This is because other stockholders have
satisfied the Retained Share Number.
2. If stockholders elect to retain fewer than 500,000 shares in the
aggregate, then Holder A will not receive all cash for its 100 shares and
will be required to retain some shares. This is because the Retained Share
Number has not been met and thus each stockholder must retain a number of
shares in order to increase the number of retained shares to the Retained
Share Number. However, even in the case of maximum proration (i.e. no
stockholder elects to retain shares and no stockholder exercises dissenters
rights), Holder A will still be assured of receiving at least $6,305 in
cash (97 shares at $65.00 per share) and will retain at most 3 shares of
Company Common Stock.
B. HOLDER B OWNS 100 SHARES AND ELECTS TO RETAIN ALL ITS SHARES.
1. If the stockholders (including Holder B) elect to retain more than
500,000 shares, then Holder B will not be able to retain all its shares and
will be required to receive some cash. This is because the number of
Potential Election Shares has exceeded 500,000 and thus the number of
shares which may be retained must be reduced to the Retained Share Number.
For example, if stockholders elected to retain 1,000,000 shares in the
aggregate, then each holder, including Holder B, would be able to retain
only 50% of its shares in order to reduce the number of retained shares to
the Retained Share Number. Therefore, Holder B would be able to retain only
50 shares (or 50% of its 100 shares) and would receive $3,250 in cash (50
shares at $65.00 per share). In the case of maximum proration (i.e. all
stockholders elect to retain their shares), Holder B would be able to
retain only 3 shares (or 3%) and would receive $6,305 in cash (or 97%).
2. If the stockholders (including Holder B) elect to retain 500,000 or
fewer shares in the aggregate, then Holder B will be able to retain all 100
of its shares. This is because in this situation the Company will accept
all shares elected to be retained to reach the Retained Share Number. As
described in example A.2 above, if fewer than 500,000 shares are elected to
be retained, non-electing stockholders will then be prorated into shares to
reach the Retained Share Number.
C. HOLDER C OWNS 100 SHARES AND ELECTS TO RETAIN SOME BUT NOT ALL ITS SHARES
(THIS EXAMPLE HAS ASSUMED AN ELECTION TO RETAIN 50 SHARES AND CONVERT 50 TO
CASH).
1. In the unlikely event that stockholders (including Holder C) elect to
retain exactly 500,000 shares in the aggregate, then Holder C will be able
to retain its 50 Potential Election Shares and will receive $3,250 in cash
(50 shares at $65.00 per share). This is because the Retained Share Number
has been met exactly.
66
<PAGE>
2. If the stockholders (including Holder C) elect to retain more than
500,000 shares in the aggregate, then Holder C will not be able to retain
all of its 50 Potential Election Shares. Again, this is because the number
of Potential Election Shares has exceeded 500,000 and thus the number of
shares which may be retained must be reduced in order to meet the Retained
Share Number. For example, if stockholders elected to retain 1,000,000
shares in the aggregate, then each holder, including Holder C, would be
able to retain only 50% of its Potential Election Shares in order to reduce
the number of retained shares to 500,000 and thus meet the Retained Share
Number. Therefore, Holder C would be able to retain only 25 shares (or 50%
of its 50 Potential Election Shares) and would receive $4,875 in cash (75
shares at $65.00 per share). If the stockholders elected to retain more
than 1,000,000 shares in the aggregate, Holder C would receive fewer shares
than in the example above, but would receive a commensurately greater
amount of cash.
3. If the stockholders (including Holder C) elect to retain fewer than
500,000 shares in the aggregate, then Holder C would be required to retain
more than 50 shares. Again, this is because the Retained Share Number has
not been reached and thus each stockholder must retain a number of shares
(in the case of Holder C, a number of additional shares) in order to
increase the aggregate number of retained shares to the Retained Share
Number. For example, if stockholders elected to retain 200,000 shares in
the aggregate, then all stockholders must collectively retain an additional
300,000 shares in order to reach the Retained Share Number. The additional
number of shares that C would be required to retain is calculated by
multiplying the 50 shares Holder C wants to convert to cash by a fraction
the numerator of which is 300,000 (the Retained Share Number minus the
number of Election Shares) and the denominator of which is the total number
of outstanding shares minus the number of Election Shares. If the
stockholders elected to retain fewer than 200,000 shares in the aggregate,
Holder C would receive more shares than in the example above but would
receive commensurately less cash.
Fractional shares of Company Common Stock will not be issued in the Merger.
Holders of Company Common Stock otherwise entitled to a fractional share of
Company Common Stock following the Merger will be paid cash in lieu of such
fractional share determined and paid as described under "THE MERGER--
Fractional Shares".
REPRESENTATIONS AND WARRANTIES
The Recapitalization Merger Agreement contains customary representations and
warranties of the Company with respect to the Company and its subsidiaries,
relating to, among other things: (a) organization, standing and similar
corporate matters; (b) the Company's capital structure and the ownership of
its subsidiaries; (c) the authorization, execution, delivery, performance and
enforceability of the Recapitalization Merger Agreement; (d) the absence of
defaults and conflicts under material contracts and filings, approvals and
consents required in connection with the entry into and consummation of the
Recapitalization Merger Agreement; (e) compliance with applicable laws; (f)
documents filed by the Company with the Commission and the accuracy of
information contained therein and the accuracy of the Company's financial
statements; (g) the absence of certain changes or events since the date of the
most recent audited financial statements filed with the Commission, including
material adverse changes with respect to the Company and the absence of
undisclosed liabilities; (h) the absence of pending or threatened material
litigation or investigations; (i) real estate related matters; (j) tax,
employee benefit, employment and labor and environmental matters; (k)
intellectual property matters; (l) the non-applicability of certain takeover
statutes; (m) the functionality of the Company's computer systems with respect
to the year 2000; (n) the enforceability, validity and effectiveness of
certain contracts of the Company; (o) personal property matters; (p) insurance
matters; (q) the required vote of the stockholders of the Company; (r) the
accuracy of information supplied by the Company in connection with this Proxy
Statement/Prospectus; (s) brokers' fees and expenses; (t) the receipt of a
fairness opinion from the Company's financial advisor; and (u) the
recommendation of the Board with respect to the Recapitalization Merger
Agreement and the transactions contemplated thereby (including the Merger).
The Recapitalization Merger Agreement also contains customary
representations and warranties of MergerCo relating to, among other things,
(a) organization, standing and similar corporate matters; (b) the
67
<PAGE>
authorization, execution, delivery, performance and enforceability of the
Recapitalization Merger Agreement and related matters; (c) the absence of
defaults and filings, approvals and consents required in connection with the
entry into and consummation of the Recapitalization Merger Agreement; (d) the
accuracy of information supplied by MergerCo in connection with this Proxy
Statement/Prospectus; (e) the fact that MergerCo was formed solely to engage
in the Merger; (f) the fact that MergerCo has no obligations or liabilities
and has not engaged in any business activity other than the Merger and actions
contemplated by the Recapitalization Merger Agreement; (g) brokers' fees and
expenses; and (h) the availability of equity funds and financing commitments
obtained in connection with the Merger.
CERTAIN PRE-CLOSING COVENANTS
Pursuant to the Recapitalization Merger Agreement, the Company has agreed
that, until the termination of the Recapitalization Merger Agreement or the
Effective Time, unless otherwise agreed in writing by MergerCo or as otherwise
specifically contemplated by the Recapitalization Merger Agreement:
(i) The Company will and will cause each of its subsidiaries to conduct
their respective businesses only in the ordinary and usual course and
consistent with past practice;
(ii) The Company will not and will cause each of its subsidiaries not to
(a) amend its certificate of incorporation or by-laws or equivalent
organizational or governing documents of any subsidiary; (b) split,
combine, subdivide or reclassify any outstanding shares of its capital
stock or declare, set aside or pay any dividend payable in cash, stock or
property or make any other distributions with respect to shares of capital
stock or any of them (other than dividends paid to the Company by its
wholly owned subsidiaries in respect of their common stock); (c) issue,
sell, pledge, dispose of, encumber or subject to any lien or authorize or
propose the issuance, sale, pledge, disposition or encumbrance of (or
imposition of a lien on) (A) any shares of, or rights of any kind to
acquire any shares of, capital stock of any class of any of them, or
securities convertible into any such shares, or any rights, warrants or
options or commitments of any nature whatsoever to acquire any such shares
or convertible securities or (B) any other securities in respect of or in
substitution for any outstanding shares of capital stock of any of them
(other than upon exercise of, and pursuant to, stock options outstanding on
the date of the Recapitalization Merger Agreement); or (d) redeem, purchase
or acquire or offer to acquire any shares of its capital stock;
(iii) The Company will use reasonable efforts to preserve intact the
business organization of the Company and its subsidiaries, to keep
available the services of the present officers and key employees of the
Company and its subsidiaries, and to preserve the good will of those having
business relationships with it and its subsidiaries;
(iv) The Company will not and will cause each of its subsidiaries not to
(a) (except for increases which are mandated by the terms of existing
agreements and increases for persons other than officers and directors in
the ordinary course of business and consistent with past practice) increase
in any manner the compensation or fringe benefits of any director, officer
or employee or pay any benefit not required by any existing plan or
arrangement (including, without limitation, the granting of stock options
or stock appreciation rights or the removal of existing restrictions in any
benefit plan), (b) grant any severance or termination pay not currently
required to be paid under existing severance plans (except in an amount not
greater than $10,000 to any single employee and, in any event, not greater
than $300,000 to all employees) to, or enter into or modify in any material
or economic respect any employment, consulting or severance agreement or
arrangement with, any present or former director, officer or other employee
of the Company or any of its subsidiaries, except for the granting of
severance or termination pay, in the ordinary course of business consistent
with past practice, to nonexecutive employees who are terminated by the
Company after the date of the Recapitalization Merger Agreement, (c)
establish, adopt, enter into or amend or terminate any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees or (d)
terminate the existing employment arrangements with any officer of the
Company or any of its subsidiaries or take any action that would constitute
a breach of any such arrangements or take any action (other than
consummation
68
<PAGE>
of the Merger) which would cause any change-of-control, severance or
similar payment to be payable to any such individual;
(v) The Company will not and will not permit any of its subsidiaries to
encumber, sell, lease or otherwise dispose of or acquire any assets other
than in the ordinary course of business consistent with past practice or,
except as otherwise provided in the Recapitalization Merger Agreement,
enter into any merger or other agreement providing for the acquisition of
the Company or any of its subsidiaries by any third party or acquire (by
merger, consolidation, or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or enter
into any lease for real property requiring the payment of $100,000 or more
per annum or having a term greater than two years.
(vi) Other than with respect to borrowings and repayments in the ordinary
course of business under existing lines of credit (which borrowings will
not in aggregate amount exceed $859 million in U.S. dollars at any one time
outstanding), neither the Company nor any subsidiary will (a) repurchase,
repay, incur or cause or permit to exist any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of
any person, or enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, or make any
loans, advances or capital contributions to, or investments in, any person
other than the Company or a direct or indirect wholly owned subsidiary of
the Company; (b) enter into, terminate, waive, modify or amend any Material
Contract (as defined in the Recapitalization Merger Agreement) in any
material respect or enter into or amend or modify any contract or agreement
for the purchase or lease of property, equipment or assets requiring
payments from third parties of $5 million or more and having a term of two
years or more; or (c) other than capital expenditures of $60.9 million
already ordered and set forth on Schedule 5.1(6) of the Recapitalization
Merger Agreement, authorize any capital expenditures in an amount exceeding
$10 million per month on a cumulative basis;
(vii) Except as may be required as a result of a change in law or in
generally accepted accounting principles, the Company will not change in
any material respect any of its accounting practices, principles or
methods;
(viii) Neither the Company nor any subsidiary will settle or compromise
any pending or threatened suit, action or claim for in excess of $250,000
per suit, action or claim, and $500,000 in the aggregate (it being agreed
that the Company may settle or compromise any of the foregoing pursuant to
which it is entitled to collect monies thereby in its reasonable judgment
in a manner consistent with past practice), or which relates to the
transactions contemplated by the Recapitalization Merger Agreement;
(ix) The Company will not adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
subsidiaries (other than the Recapitalization Merger Agreement and the
Merger);
(x) The Company will maintain all insurance policies in full force and
effect;
(xi) Except as would not have a Material Adverse Effect (as defined in
the Recapitalization Merger Agreement, as any change or effect that, either
individually or in the aggregate is or is likely to be materially adverse
to the business, assets, liabilities, financial condition or results of
operations of the Company and its subsidiaries taken as a whole other than
any such changes or effects affecting generally the industry in which the
Company and its subsidiaries compete and general economic conditions), the
Company will not and will cause its subsidiaries not to compromise or
settle any claim, with respect to taxes; and
(xii) Neither the Company nor any subsidiary will take or agree to take
in writing or otherwise, enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
LIMITATION ON SOLICITATIONS
The Recapitalization Merger Agreement provides that until the termination of
the Recapitalization Merger Agreement, the Company and its subsidiaries will
not, directly or indirectly, whether through any officer, director, employee,
representative, agent or advisor (including any attorney, accountant,
consultants, banker or
69
<PAGE>
financial advisor) of the Company or any of its subsidiaries or otherwise, (i)
solicit, initiate, encourage or facilitate the initiation of any inquiries or
proposals regarding any merger, sale of substantial assets, sale of shares of
capital stock (including without limitation by way of a tender offer),
liquidation, recapitalization, consolidation or other business combination
involving the Company or its subsidiaries or acquisition or exchange of any
capital stock or any material portion of the assets (except for acquisitions
of assets in the ordinary course of business consistent with past practice) of
the Company or its subsidiaries, or any combination of the foregoing or
similar transactions involving the Company or any subsidiaries of the Company
other than the Merger (any of the foregoing inquiries or proposals being
referred to in the Recapitalization Merger Agreement and herein as an
"Acquisition Proposal"), (ii) engage in negotiations or discussions
concerning, or provide or disclose any nonpublic information to any person
relating to, any Acquisition Proposal, (iii) enter into any agreement,
arrangement or understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by the
Recapitalization Merger Agreement, or (iv) agree to, approve or recommend any
Acquisition Proposal; provided, however, that nothing contained in the section
of the Recapitalization Merger Agreement described here will prevent the Board
of Directors of the Company from considering, negotiating, approving and
recommending to the stockholders of the Company a bona fide Acquisition
Proposal which is received by the Company after the date of the
Recapitalization Merger Agreement and is not solicited in violation of the
Recapitalization Merger Agreement, if such a proposal is, in the opinion of
the Company's Board of Directors, more favorable to the Company's stockholders
than the transactions contemplated by the Recapitalization Merger Agreement,
and the Board of Directors of the Company determines in good faith (upon
advice of outside legal counsel) that it is required to do so in order not to
violate its fiduciary duties.
The Recapitalization Merger Agreement also provides that the Company will
promptly notify MergerCo after receipt of any Acquisition Proposal, or any
modification of or amendment to any Acquisition Proposal, or any request for
nonpublic information relating to the Company or any of its subsidiaries in
connection with an Acquisition Proposal or for access to the properties, books
or records of the Company or any subsidiary by any person or entity that
informs the Board of Directors of the Company or such subsidiary that it is
considering making, or has made, an Acquisition Proposal. Such notice to
MergerCo will be made in writing, will identify the offeror and will indicate
whether the Company is providing or intends to provide the Person making the
Acquisition Proposal with access to information concerning the Company. The
Company will also furnish to MergerCo a written summary of the material terms
and conditions of the Acquisition Proposal.
If the Board of Directors of the Company receives a request for material
nonpublic information by a person who makes a bona fide Acquisition Proposal,
and the Board of Directors determines in good faith and upon the advice of
independent counsel that it is required to cause the Company to act in order
to not violate the directors' fiduciary duties, then, provided the person
making the Acquisition Proposal has executed a confidentiality agreement
substantially similar to the one then in effect between the Company and
MergerCo, the Company may provide such person with access to information
regarding the Company.
BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY FOLLOWING THE MERGER
The Recapitalization Merger Agreement provides that the Managers of MergerCo
immediately prior to the Effective Time will be the initial directors of the
Company following the Merger, each to hold office in accordance with the
Certificate of Incorporation and By-Laws of the Surviving Corporation. See
"MERGERCO AND THE INVESTORS."
The Recapitalization Merger Agreement also provides that the officers of
MergerCo immediately prior to the Effective Time will be the officers of the
Company following the Merger, in each case until their respective successors
are duly elected or appointed and qualified.
70
<PAGE>
Pursuant to the Shareholders' Agreement among the Investors, Apollo has
agreed to take appropriate action to cause up to two nominees chosen by Atlas
to serve as directors of the Company following the Effective Time. Atlas has
chosen Messrs. Martin Tuchman and Raoul Witteveen to serve as directors. See
"CERTAIN RELATED AGREEMENTS--Shareholders' Agreement." The following table
sets forth the name, age and position with the Company of each person who is
expected to serve as a director or executive officer of the Company after the
Effective Time. It is expected that an additional person may be chosen by
MergerCo to become a director as of the Effective Time. As of the date of this
Proxy Statement/Prospectus, no such person has been chosen. After the
Effective Time, the Board of Directors will be subject to change from time to
time.
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------- --- ---------------------------------
<S> <C> <C>
Andrew Africk 32 Director
Michael Gross 36 Director
Martin Tuchman 57 Chief Executive Officer, Director
Raoul Witteveen 43 Chief Financial Officer, Director
</TABLE>
MICHAEL GROSS, DIRECTOR
Michael Gross will be named a Director of the Company following the Merger.
Mr. Gross is one of the founding principals in 1990 of Apollo Advisors, L.P.
which, together with its affiliates, acts as managing general partner of
certain private securities investment funds, and of Lion Advisors, L.P., which
acts as financial advisor to and representative for certain institutional
investors with respect to securities investments. Mr. Gross is also a director
of Alliance Imaging, Inc., a provider of diagnostic imaging services, Allied
Waste Industries, Inc., a solid waste management company, Breuners Home
Furnishings, Inc., a furniture retailer, Converse, Inc., a high quality
athletic footwear company, Florsheim Group, Inc., a men's quality footwear
company, Imagyn Medical Technologies, Inc., a medical device company,
Proffitt's, Inc. a department store company, and SMT Health Services, Inc.,
operator of mobile Magnetic Resonance Imaging units.
ANDREW AFRICK, DIRECTOR
Andrew Africk will be named a Director of the Company following the Merger.
Mr. Africk has been employed by Apollo Capital Management, Inc., as Vice
President, and Lion Capital Management, Inc., as Vice President, for more than
five years and has been an officer of such entities for more than two years.
Mr. Africk is also a director of Continental Graphics Holdings, Inc., an
engineering graphics company, and Microbes, Inc, a polish and sanitation goods
company.
MARTIN TUCHMAN, CHIEF EXECUTIVE OFFICER
Martin Tuchman will be appointed a Director and Chief Executive Officer of
the Company following the Merger. Since 1988, Mr. Tuchman has served as
Chairman and Chief Executive Officer of Interpool, and since June 1983 he has
been Chairman of Princeton International Properties, a family-owned real
estate company with interests in properties located in Princeton, New Jersey.
RAOUL J. WITTEVEEN, CHIEF FINANCIAL OFFICER
Raoul J. Witteveen will be appointed a Director and Chief Financial Officer
of the Company following the Merger. Since March 1993, he has also served as
President, Chief Operating Officer, Chief Financial Officer and a director of
Interpool.
STOCK AND EMPLOYEE BENEFIT PLANS
The Recapitalization Merger Agreement provides that the Surviving
Corporation will honor, following the Effective Time, the terms of the
Incentive Plan as in effect on the date of the Recapitalization Merger
Agreement, with respect to all bonuses payable with respect to fiscal year
1998, except that, notwithstanding anything to the
71
<PAGE>
contrary in the Incentive Plan, termination of employment by the Company
following the Effective Time will not affect an employee's entitlement to
receive the full or a pro rated portion of his/her bonus based on the number
of days in fiscal 1998 during which such employee was employed by the Company
in 1998. The Company has amended the Incentive Plan to be consistent with the
terms of the Recapitalization Merger Agreement.
The Recapitalization Merger Agreement also provides that the Surviving
Corporation will make a profit-sharing contribution to the XTRA Corporation
401(k) Retirement and Savings Plan with respect to the plan year ended
September 30, 1998 at a level consistent with recent past practice, such
contribution to be allocated among all otherwise eligible active participants
in the Savings Plan who are employed by the Company or any of its subsidiaries
as of the Effective Time or whose employment is terminated by the Company or
its subsidiaries during such plan year on or after attainment of age 65 or
because of death or "physical or mental disability" (as defined) in proportion
to their relative Compensation (as defined in the Savings Plan) for such plan
year and regardless of whether such employees are employed on the last day of
such plan year. The Company has financing documents, or other requested
certificates or documents, including a certificate of the chief financial
officer of the Company with respect to solvency matters, comfort letters of
accountants and legal opinions as may be requested by MergerCo or its sources
of financing. In addition, in conjunction with the obtaining of any such
financing, the Company agreed, at the request of MergerCo, to call for
prepayment or redemption, to prepay, redeem, repurchase, defease and/or
renegotiate, or to solicit consents from holders of and modify, as the case
may be, any then existing indebtedness or equipment leases of the Company and
its subsidiaries; provided that no such prepayment, redemption, repurchase,
defeasance, renegotiation or modification will themselves actually be made
effective until immediately prior to, contemporaneous with or after the
Effective Time.
amended the Savings Plan consistent with the Recapitalization Merger Agreement
and to provide that Savings Plan participants employed by the Company whose
employment is terminated (other than for cause) or constructively terminated
within one year following the Effective Time will have a fully vested interest
in his or her account balance in the Savings Plan. See "THE MERGER--Effect on
Stock Options and Employee Benefit Matters."
ACCESS TO INFORMATION
Upon reasonable notice and subject to restrictions contained in
confidentiality agreements to which the Company is subject, the Company has
agreed in the Recapitalization Merger Agreement to, and to cause its
subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of, and financing sources for, MergerCo, reasonable
access, during the period to the Effective Time, to all its properties,
offices and facilities, books, contracts, commitments, records (financial and
otherwise), officers, directors, employees, accountants, counsel and other
representatives and agents, and, during such period, the Company will (and
will cause each of its subsidiaries to) furnish promptly to MergerCo all
information concerning its business, operations, properties, finances and
personnel as MergerCo may reasonably request, and will make available to
MergerCo the appropriate individuals (including attorneys, accountants and
other professionals) for discussion of the any of the foregoing as MergerCo
may reasonably request.
COOPERATION AND REASONABLE BEST EFFORTS
Pursuant to the Recapitalization Merger Agreement and subject to certain
conditions and limitations described therein, the parties have agreed to use
all reasonable efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by the Recapitalization Merger Agreement, including but not
limited to (i) cooperation in the preparation and filing of the Registration
Statement, this Proxy Statement, any required filings under the HSR Act or
other similar laws, and any amendments to any thereof, (ii) determining
whether any filings are required to be made or consents, approvals, waivers,
licenses, permits or authorizations are required to be obtained (or, which if
not obtained, would result in an event of default, termination, amendment,
alteration or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any Governmental
Entities or third parties, including parties to loan
72
<PAGE>
agreements or other debt instruments, in connection with the transactions
contemplated by the Recapitalization Merger Agreement, and (iii) promptly
furnishing information required in connection therewith and timely seeking to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and otherwise to satisfy or
cause to be satisfied all conditions precedent to its obligations under the
Recapitalization Merger Agreement. The Company agreed in the Recapitalization
Merger Agreement that it will not take any action to restrict, limit or
prohibit MergerCo's ability to exercise all of its rights and obligations
under the Voting Agreement, and that the Company and its Board of Directors
has provided and will provide and maintain all approvals required under
Section 203 of the DGCL in order to permit such exercise.
The Recapitalization Merger Agreement also provides that the Company and
MergerCo will cooperate with each other in taking, or causing to be taken, all
actions necessary to delist the Company Common Stock from the NYSE, provided
that such delisting will not be effective until after the Effective Time and
acknowledged that it is MergerCo's intent that the Retained Shares following
the Merger will not be listed on any national securities exchange or quoted on
The NASDAQ Stock Market Inc.'s National Market.
In the Recapitalization Merger Agreement, the Company agreed to provide, and
will cause its subsidiaries and its and their respective officers, employees
and advisors to provide, all necessary cooperation in connection with the
arrangement of any financing to be consummated contemporaneous with or at or
after the closing of the Merger in respect of the transactions contemplated by
the Recapitalization Merger Agreement, including without limitation,
participation in meetings, due diligence sessions, road shows, the preparation
of offering memoranda, private placement memoranda, prospectuses and similar
documents, the execution and delivery of any commitment letters, underwriting
or placement agreements, pledge and security documents, other definitive
The Company also agreed to cooperate with any reasonable requests of
MergerCo or the Commission related to the recording of the Merger as a
recapitalization for financial reporting purposes.
INDEMNIFICATION AND INSURANCE
The Recapitalization Merger Agreement provides that the Company will, to the
fullest extent permitted under applicable law or under the Company's
Certificate of Incorporation or By-Laws and regardless of whether the Merger
becomes effective, indemnify and hold harmless, and, after the Effective Time,
the Surviving Corporation will, to the fullest extent permitted under
applicable law, indemnify and hold harmless, each present and former director,
officer or employee of the Company or any of its subsidiaries against any
costs or expenses (including attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, (x) arising out of or pertaining to the
transactions contemplated by the Recapitalization Merger Agreement or (y)
otherwise with respect to any acts or omissions occurring at or prior to the
Effective Time, to the same extent as provided in the Company's Certificate of
Incorporation or By-Laws or any applicable indemnification agreement referred
to below. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Surviving Corporation will pay the reasonable fees and expenses of such
counsel retained by the Indemnified Party, promptly after reasonably
sufficient statements therefore are received, provided that such payment will
be conditioned upon such officer's, director's, employee's or agent's
agreement promptly to return such amounts to the Company if a court of
competent jurisdiction ultimately determines, and such determination will have
become final and non-appealable, that indemnification of such officer or
director in the manner contemplated by the Recapitalization Merger Agreement
is prohibited by applicable law, and (ii) the Surviving Corporation will
cooperate in the defense of any such matter; provided, however, that the
Surviving Corporation will not be liable for any settlement effected without
its written consent (which consent will not be unreasonably withheld).
In addition, the Surviving Corporation will honor and fulfill in all
respects the obligations of the Company pursuant to existing indemnification
agreements identified to MergerCo with the Company's directors and officers
existing at or before the Effective Time, as they relate to any actions or
events occurring on or prior to the Effective Time. For a period of six years
after the Effective Time, the Surviving Corporation will maintain in
73
<PAGE>
effect, if available, directors' and officers' liability insurance covering
those persons who are covered on the date of the Recapitalization Merger
Agreement by the Company's directors' and officers' liability insurance policy
on terms comparable to, or better than, those now applicable to directors and
officers of the Company; provided that (i) the Company following the Merger
will not be required to spend in excess of an amount equal to 150% of the 1997
annual premium therefor; provided further that if the Company following the
Merger would be required to spend in excess of such amount per annum to obtain
insurance having the maximum available coverage under the current policies,
the Company will be required to spend such amount per annum to maintain or
procure insurance coverage pursuant to the Recapitalization Merger Agreement,
subject to availability of such (or similar) coverage and (ii) such policies
may in the sole discretion of the Company be one or more "tail" policies for
all or any portion of the full six-year period. If the Surviving Corporation
or any of its successors or assigns transfers all or substantially all of its
properties and assets to any person during the six-year period following the
Effective Time, then, and in each such case, proper provision will be made so
that the successors and assigns of the Surviving Corporation assume the
obligations set forth in the section of the Recapitalization Merger Agreement
described here or a "tail" policy is purchased to meet the obligation to
provide insurance thereunder.
ADDITIONAL AGREEMENTS
In addition, the Company will give prompt notice to MergerCo, and MergerCo
will give prompt notice to the Company, of (i) the occurrence or nonoccurrence
of any event the occurrence or nonoccurrence of which would be likely to cause
any representation or warranty contained in the Recapitalization Merger
Agreement to become materially untrue or inaccurate, or (ii) any failure of
the Company or MergerCo, as the case may be, materially to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it thereunder; provided, however, that the delivery of any notice pursuant
to the section of the Recapitalization Merger Agreement described here will
not limit or otherwise affect the remedies available under the
Recapitalization Merger Agreement to the party receiving such notice.
The Recapitalization Merger Agreement also provides that (i) each of the
Company and MergerCo will give the other party to the Recapitalization Merger
Agreement reasonable opportunity to participate in the defense of any third
party action seeking to restrain or prohibit or otherwise oppose the Merger
and (ii) prior to the Closing Date, the Company will deliver to MergerCo a
letter identifying all persons who are, at the time the Recapitalization
Merger Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company will use its reasonable best efforts to cause each such person who
retains shares of Company Common Stock to deliver to MergerCo on or prior to
the Closing Date a written agreement substantially in the form attached as
Annex A to the Recapitalization Merger Agreement.
Furthermore, the Company will furnish to MergerCo the following information:
a. as soon as available but in any event within 30 days of each calendar
month, the unaudited consolidated balance sheets and statements of income
statements and cash flows of the Company, showing its financial condition
as of the close of such month and the results of operations during such
month and for the then elapsed portion of the Company's fiscal year, in
each case, setting forth the comparative figures for the corresponding
month in the prior fiscal year and the corresponding elapsed portion of the
prior fiscal year; and
b. all documents filed with or submitted to the Commission by the Company
simultaneously with such filing or submission.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of the Company and MergerCo to effect the Merger
are subject to various conditions which include, in addition to certain other
customary closing conditions, the following:
(i) the Recapitalization Merger Agreement and the Merger shall have been
adopted and approved by the requisite vote of holders of outstanding shares
of Company Common Stock.
74
<PAGE>
(ii) the waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have been terminated or shall have expired.
(iii) to the extent required by law, the Registration Statement of which
this Proxy Statement/Prospectus is a part will have become effective under
the Securities Act and will not be the subject of any stop order or
proceedings seeking a stop order, and any material "Blue Sky" and other
state securities laws applicable to the registration and qualification of
the Retained Shares following the Merger will have been complied with.
(iv) no preliminary or permanent injunction or other order by any court
of competent jurisdiction preventing the consummation of the Merger will be
issued and remain in effect (the Company and MergerCo agreed to use their
reasonable best efforts to have any such injunction lifted, it being
understood that such efforts will not include the divestiture of any
business or the material modification of existing business practices);
(v) no action will have been taken nor any statute, rule or regulation
will have been enacted by any Government Entity that makes the consummation
of the Merger or the transactions contemplated by the Recapitalization
Merger Agreement illegal; and
(vi) each of the Board of the Company and the Managers of MergerCo will
have received a copy of a solvency letter addressed to it, in form and
substance and from an independent evaluation firm reasonably satisfactory
to it, as to the solvency of the Company and its subsidiaries on a
consolidated basis after giving effect to the transactions contemplated by
the Recapitalization Merger Agreement, including all financings
contemplated by the Recapitalization Merger Agreement.
On August 13, 1998, the condition set forth in clause (ii) above was
satisfied. See "REGULATORY APPROVALS" for a description of certain required
filings with and consents from Governmental Entities.
MergerCo's obligation to effect the Merger is further subject to the
following additional conditions:
(i) the representations and warranties of the Company set forth in the
Recapitalization Merger Agreement will be true and correct (a) in all
respects in the case of a representation or warranty qualified by a
Material Adverse Effect or (b) in all material respects in the case of a
representation or warranty not so qualified by a Material Adverse Effect,
in each case as of the date of the Recapitalization Merger Agreement
(except where such representation is made as of a certain date, which will
be true as of such date) and as of the Effective Time as though made on and
as of the Effective Time.
(ii) the Company will have performed the obligations required to be
performed by it under the Recapitalization Merger Agreement at or prior to
the Effective Time, except for such failures to perform as have not had or
would not, individually or in the aggregate, have a Material Adverse Effect
or materially adversely affect the ability of the Company to consummate the
transactions contemplated by the Recapitalization Merger Agreement.
(iii) MergerCo will have received a certificate signed on behalf of the
Company by a senior executive officer of the Company to the effect set
forth in clauses (i) and (ii) above.
(iv) MergerCo will have received evidence, in form and substance
reasonably satisfactory to it, that such licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental
Entities and other third parties (including outstanding indebtedness) as
are necessary in connection with the transactions contemplated by the
Recapitalization Merger Agreement have been obtained, except where the
failure to obtain such licenses, permits, consents, approvals,
authorizations, qualifications and orders (other than with respect to
foreign antitrust or other similar laws) do not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(v) there will not be pending by any Governmental Entity any suit, action
or proceeding (or by any other person any suit, action or proceeding which
has a reasonable likelihood of success) (a) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by the Recapitalization Merger Agreement or the
Voting Agreements or seeking to obtain from MergerCo, the Company or any of
their respective subsidiaries or affiliates any damages that are material
to any such
75
<PAGE>
party (taken as a whole in the case of the Company and its subsidiaries),
(b) seeking to prohibit or limit the ownership or operation by MergerCo or
the Investors or any material portion of the business or assets of the
Company and its subsidiaries taken as a whole, (c) seeking to impose
limitations on the ability of the Investors to acquire or hold, or exercise
full rights of ownership of, any shares of Company Common Stock, including,
without limitation, the right to vote the Company Common Stock on all
matters properly presented to the stockholders of the Company or (d)
seeking to prohibit MergerCo or any of its affiliates from effectively
controlling in any material respect or any material portion of the
business, properties, assets or operations of the Company and its
subsidiaries taken as a whole.
(vi) MergerCo will have received certain agreements which restrict such
persons from selling their shares of Company Common Stock except in
accordance with the provisions of Rule 145 of the Securities Act (see Annex
A to the Recapitalization Merger Agreement which is included as Annex A to
this Proxy Statement/Prospectus) from each person identified by the Company
to be an "affiliate" of the Company for purposes of Rule 145 under the
Securities Act.
(vii) the Company will have received the proceeds of financing on terms
and conditions set forth in the Commitment Letters or upon terms and
conditions which are substantially equivalent thereto, and to the extent
that any of the terms and conditions are not set forth in the Commitment
Letters on terms and conditions reasonably satisfactory to MergerCo. See
"THE MERGER-Recent Developments; Material Uncertainty of Consummating the
Merger."
(viii) MergerCo will be reasonably satisfied that the Merger will be
recorded as a recapitalization for financial reporting purposes (provided
that if MergerCo is advised that the Commission finally determines that
recapitalization treatment will not be available, MergerCo will advise the
Company within 30 days of receipt of such final determination whether it
intends to waive such condition, and if it advises the Company that it has
determined not to so waive, the Company may terminate the Recapitalization
Merger Agreement as if the date of such advice from MergerCo was deemed to
be November 30, 1998 for purposes of the termination provisions of the
Recapitalization Merger Agreement described in clause (ii)(b) under "--
Termination"; and
(ix) the execution of the Recapitalization Merger Agreement and
consummation of the Merger will not require compliance by any of the
parties to the Recapitalization Merger Agreement and the transactions
contemplated thereby with the New Jersey Industrial Site Recovery Act,
N.J.S.A. 13 1K-6 et seq. or, if compliance is so required, such compliance
will have occurred prior to the Effective Time.
The obligation of the Company to effect the Merger is subject to the
following additional conditions:
(i) The representations and warranties of MergerCo set forth in the
Recapitalization Merger Agreement that are qualified as to materiality will
be true and correct and any such representations and warranties of MergerCo
set forth in the Recapitalization Merger Agreement that are not so
qualified will be true and correct in all material respects, in each case
as of the date of the Recapitalization Merger Agreement and as of the
Effective Time as though made at and as of the Effective Time.
(ii) MergerCo will have performed the obligations required to be
performed by it under the Recapitalization Merger Agreement at or prior to
the Effective Time in all material respects.
(iii) The Company will have received a certificate signed on behalf of
MergerCo by a senior executive officer of MergerCo to the effect set forth
in clauses (i) and (ii) above.
TERMINATION
The Recapitalization Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the Recapitalization
Merger Agreement by the stockholders of the Company or holders of equity
interests in MergerCo:
(i) by mutual written consent duly authorized by the Board of Directors
of the Company and the Managers of MergerCo;
76
<PAGE>
(ii) by either the MergerCo or the Company (a) if any Governmental Entity
has issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties to the Recapitalization
Merger Agreement will use their respective reasonable efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the
Merger or transactions contemplated by the Recapitalization Merger
Agreement or prohibiting MergerCo to acquire or hold or exercise rights of
ownership of the Shares (including under the Voting Agreements) and such
order, decree, ruling or other action is or has become final and non-
appealable; or (b) if the Merger has not been consummated on or before
November 30, 1998, provided that the right to terminate the
Recapitalization Merger Agreement for such cause will not be available to
the party whose action or failure to act was the cause of or resulted in
the failure of the Merger to occur on or before such date where such action
or failure to act constitutes a breach of the Recapitalization Merger
Agreement.
(iii) by MergerCo if (a) the required approval of the stockholders of the
Company is not obtained by reason of the failure to obtain the required
vote upon a vote held at a duly held meeting of stockholders or at any
adjournment thereof; or (b) the Company has (A) withdrawn, modified or
amended in any respect adverse to MergerCo its approval or recommendation
of the Recapitalization Merger Agreement or any of the transactions
contemplated therein, (B) failed to include in the Proxy Statement mailed
to its stockholders such recommendation, (C) recommended any Acquisition
Proposal from a person other than MergerCo or any of its affiliates or (D)
resolved to do any of the foregoing;
(iv) by the Company if, prior to receipt of the Company Stockholder
Approval, the Board approves any transaction relating to an Acquisition
Proposal (an "Acquisition Transaction"), on terms which the Board
determined in good faith (a) to be more favorable to the Company and its
stockholders than the transactions contemplated by the Recapitalization
Merger Agreement and (b) based upon the advice of its outside counsel, that
failing to approve such Acquisition Transaction and terminate the
Recapitalization Merger Agreement would constitute a breach of the
fiduciary duties of the Board under applicable law; provided that such
termination will not be permissible unless and until the Company will have
provided MergerCo prior written notice at least three business days prior
to such termination that the Board has authorized and intends to effect the
termination of the Recapitalization Merger Agreement pursuant to such
provision, the Company is otherwise in compliance in all material respects
with its obligations under the Recapitalization Merger Agreement, and on or
prior to such termination the Company has paid to MergerCo the Termination
Fee described in "--Expenses and Certain Required Payments"; or
(v) by MergerCo, if the Company has breached its representations and
warranties or the agreements and covenants to be performed by it and such
breach is incapable of being cured or not cured within 20 days of receipt
of written notice thereof from MergerCo.
AMENDMENT AND WAIVER
Any provision of the Recapitalization Merger Agreement may be waived at any
time by the party to the Recapitalization Merger Agreement that is, or whose
stockholders are, entitled to the benefits thereof. The Recapitalization
Merger Agreement may be amended or supplemented at any time, except that after
approval thereof by the stockholders of the Company, no amendment will be made
which decreases the Merger Consideration or that in any other way materially
adversely affects the rights of such stockholders (other than a termination of
the Recapitalization Merger Agreement) without the further approval of such
stockholders. Any waiver, amendment or supplement must be in writing and
signed by the party or parties intended to be bound thereby. The parties to
the Recapitalization Merger Agreement do not currently expect to require
waivers of any closing conditions or other provisions of the Recapitalization
Merger Agreement.
EXPENSES AND CERTAIN REQUIRED PAYMENTS
In the event that the Recapitalization Merger Agreement is terminated (see
"--Termination.") based on the provision described in items (iii)(a) or (v)
above (provided that the Company has received an Acquisition Proposal that has
been publicly announced or publicly known prior thereto), or items (iii)(b) or
(iv) above, then the Company will, with respect to the provisions described in
items (iii)(a), (iii)(b) and (v), within one business
77
<PAGE>
day of termination and with respect to the provision described in item (iv),
prior to such termination, pay to the Investors, as designated by MergerCo, a
termination fee of $35 million, plus reimbursement of all reasonable out-of-
pocket expenses and fees (but not in excess of $5 million).
In addition to any other amounts which may be payable or become payable
pursuant to the provision described in item (iii)(a) above, the Company will
(provided that MergerCo is not then in breach of its representations,
warranties, covenants or other obligations under the Recapitalization Merger
Agreement), promptly following termination of the Recapitalization Merger
Agreement pursuant to the provision described in item (ii)(b) above (other
than as a result of a failure of the recapitalization accounting condition) or
the provision described in item (v) above but in no event later than two
business days following a written request by MergerCo therefor, together with
related bills or receipts, reimburse MergerCo and its affiliates, for all
reasonable out-of-pocket expenses and fees (but not in excess of $5 million)
(including, without limitation, fees payable to all banks, investment banking
firms and other financial institutions, and their respective agents and
counsel, and all fees of counsel, accountants, financial printers, experts and
consultants to MergerCo and its affiliates), whether incurred prior to, on or
after the date of the Recapitalization Merger Agreement, in connection with
the Merger and the consummation of all transactions contemplated by the
Recapitalization Merger Agreement and the financing thereof.
Except as described above, all fees and expenses incurred in connection with
the Recapitalization Merger Agreement and the transactions contemplated
thereby will be paid by the party incurring such expenses, whether or not the
Merger is consummated; it being understood, however, that, as of the Effective
Time, all expenses of MergerCo, the Investors and their respective affiliates
incurred in connection with the transactions contemplated thereby will be
deemed to be expenses of the Company. As of the Effective Time, the Company
will assume all agreements between MergerCo, the Investors or their respective
affiliates and third parties relating to the financing of the transactions
contemplated thereby and will indemnify and hold harmless the Investors and
their affiliates with respect to all obligations thereunder.
In addition to any other amounts which may be payable or become payable
pursuant to the provision of the Recapitalization Merger Agreement described
in the immediately preceding paragraph, in the event of the termination of the
Recapitalization Merger Agreement pursuant to the provision of the
Recapitalization Merger Agreement described in item (v) above and the receipt
of an Acquisition Proposal within 90 days after the date of such termination,
the Company will pay to the Investors, within two business days after the
receipt of the Acquisition Proposals, the Termination Fee.
78
<PAGE>
CERTAIN RELATED AGREEMENTS
VOTING AGREEMENTS
The following is a brief summary of the material provisions of the Voting
Agreements, the form of which is included as Annex B to this Proxy
Statement/Prospectus. The following summaries of the Voting Agreements are
qualified in their entirety by reference to the Voting Agreements, which are
incorporated by reference herein.
Voting
Each of the Funds has agreed that at any meeting of stockholders of the
Company called to vote upon the Merger and the Recapitalization Merger
Agreement or at any adjournment thereof or in any other circumstances upon
which a vote, consent or other approval with respect to the Merger and the
Recapitalization Merger Agreement is sought, it shall vote (or cause to be
voted) the Subject Shares in favor of the Merger, the adoption by the Company
of the Recapitalization Merger Agreement and the approval of the terms thereof
and each of the other transactions contemplated by the Recapitalization Merger
Agreement (provided the Funds shall not be required to vote in favor or the
Recapitalization Merger Agreement or the Merger if the Recapitalization Merger
Agreement has, without the written consent of such stockholder, been amended
in any manner that is material and adverse to such stockholder).
During the term of the Voting Agreements, each of the Funds has agreed that
it will vote any of the Subject Shares against the approval of any other
merger, consolidation, sale of assets, reorganization, recapitalization,
liquidation or winding up of the Company or any other extraordinary
transaction involving the Company or any matters related to or in connection
therewith, or any corporate action relating to or the consummation of which
would either frustrate the purposes of, or prevent or delay the consummation
of, the transactions contemplated by the Recapitalization Merger Agreement.
Each of the Funds has granted to MergerCo and certain representatives of
Apollo, a proxy to vote the Subject Shares as indicated in the two paragraphs
above.
Transfer Restrictions
The Voting Agreements provide that prior to the termination of the Voting
Agreements, the Funds will not (i) sell, transfer, pledge, encumber, assign or
otherwise dispose of (including by gift or by contribution or distribution or
otherwise) (or consent to any of the foregoing) (collectively, "Transfer"), or
enter into any contract, option or other arrangement or understanding
(including any profit sharing arrangement) with respect to the Transfer of,
any of the Subject Shares or any interest therein other than pursuant to the
terms thereof and pursuant to the Recapitalization Merger Agreement, (ii)
enter into any voting arrangement or understanding, whether by proxy, voting
agreement or otherwise, or (iii) take any action that would make any of its
representations or warranties contained in the Voting Agreements untrue or
incorrect or have the effect of preventing or disabling such stockholder from
performing its obligations under the Voting Agreements.
Additional Covenants
Pursuant to the Voting Agreements, the Funds have further agreed (i) to
waive their appraisal rights with respect to the Merger or rights to dissent
from the Merger, (ii) not to, and not to permit any investment banker,
financial advisor, attorney, accountant or other representatives retained by
it, to, directly or indirectly, (a) solicit, initiate or encourage (including
by way of furnishing information), or take any other action to facilitate, any
inquiries or the making of any proposal that may lead to an Acquisition
Proposal or (b) participate in any discussions or negotiations regarding any
proposed Acquisition Proposal, and (iii) to provide an affiliate letter to
MergerCo.
79
<PAGE>
Termination
The Voting Agreements will terminate, and no party will have any rights or
obligations thereunder and such Agreements will become null and void and have
no further effect, except as otherwise provided therein, immediately following
the earliest to occur of (x) the Effective Time or (y) the termination of the
Recapitalization Merger Agreement pursuant to its terms.
EMPLOYMENT AGREEMENTS
As of the date of this Proxy Statement/Prospectus, the Company has not
entered into any employment agreements with any officer or key employee with
respect to his employment by the Company following the Effective Date. It is
expected that as of the Effective Date, the Company will have entered into an
employment agreement with William Franz, Vice President, XTRA Lease.
REGISTRATION RIGHTS AGREEMENT
The following is a brief summary of the material provisions of the
Registration Rights Agreement.
Demand Registration
Pursuant to the Registration Rights Agreement, each of (i) Atlas or
Interpool, (ii) Apollo and (iii) any other investor in the Company who becomes
a party to the Registration Rights Agreement may request in writing that the
Company effect the registration under the Securities Act of all or part of
such shareholder's Registrable Securities (as defined in the Registration
Rights Agreement) specifying in the request the number and type of Registrable
Securities to be registered by such shareholder and the intended method of
disposition thereof. Each such shareholder may request one (or, if Apollo,
two) such Demand Registration(s) to be a shelf registration pursuant to Rule
415 of the Securities Act, with such registration statement to remain
effective for two years. Pursuant to the Registration Rights Agreement, upon
receipt of such Shareholder Request, the Company will promptly give written
notice of such requested Demand Registration to all other holders of
Registrable Securities, which other holders shall have the right, subject to
certain limitations, to include the Registrable Securities held by them in
such registration and thereupon the Company will, as expeditiously as
possible, use its best efforts to effect the registration under the Securities
Act of the Registrable Securities that the Company has been so requested to
register by such shareholder; and all other Registrable Securities that the
Company has been requested to register by any other holder thereof by written
request given to the Company within 10 calendar days after the giving of such
written notice by the Company.
The Company will not be obligated to effect more than (A) four Demand
Registrations at the request of Apollo and (B) two Demand Registrations at the
request of Interpool or Atlas and (ii) the Company will not be obligated to
file a registration statement unless the Company has received requests for
such registration with respect to at least 5% of the outstanding shares of
Common Stock.
If the Board of Directors of the Company makes a good faith determination,
certified by the Chief Executive Officer of the Company, that (i) the filing
of a registration statement or the compliance by the Company with its
disclosure obligations in connection with a registration statement would
require the disclosure of material information that the Company has a bona
fide business purpose for preserving as confidential or (ii) such registration
would be likely to have an adverse affect on any proposal or plan by the
Company to engage in any financing transaction, acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer or similar transaction, the Company may delay the filing of a
registration statement and shall not be required to maintain the effectiveness
thereof or amend or supplement a registration statement for a period expiring
upon the earlier to occur of (A) the date on which such material information
is disclosed to the public or ceases to be material, in the case of clause
(i), (B) the date on which such transaction is completed or abandoned, in the
case of clause (ii), or (C) 120 days after the Company makes such good faith
determination, in the case of either clauses (i) or (ii); provided that in
such event, the holders of Registrable Securities initiating the request for
such registration will be entitled to withdraw such request, and if such
request if withdrawn such registration will not count as the permitted
registration.
80
<PAGE>
Piggyback Registration
The Registration Rights Agreement provides that if at any time the Company
proposes to register any of its equity securities under the Securities Act
(other than a registration on Form S-4 or S-8 or any successor forms thereto)
for the account of another Person or for its own account, on a form and in a
manner that would permit registration of Registrable Securities for sale to
the public under the Securities Act, it will give written notice to all the
holders of Registrable Securities promptly of its intention to do so. Upon the
written request of any holder of Registrable Securities delivered to the
Company within 30 calendar days after the receipt of any such notice, the
Company will effect the registration under the Securities Act of all the
Registrable Securities that the Company has been so requested to register;
provided, however, that if, at any time after giving such written notice of
its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company determines for any reason not to register such securities, the Company
may, at its election, give written notice of such determination to each holder
of Registrable Securities who made a request for registration as hereinabove
described and thereupon the Company will be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay the registration expenses in connection
therewith). The Registration Rights Agreement also provides that if such
registration involves an Underwritten Offering (as defined in the Registration
Rights Agreement), all holders of Registrable Securities requesting to be
included in the Company's registration must sell their Registrable Securities
to the underwriters selected by the Company on the same terms and conditions
as apply to the Company.
SHAREHOLDERS' AGREEMENT
The Investors have entered into a Shareholders' Agreement providing for
Atlas to have at least one director on the Company's Board of Directors
following the Effective Time of the Merger and certain tag-along and drag-
along rights in the event of the sale of the Company Common Stock by Apollo.
Pursuant to the Shareholders' Agreement, if Apollo agrees to sell or exchange
a majority or greater amount of the then outstanding Company Common Stock of
the Company to a third party, Apollo has the right to require each of the
other Shareholders (which are specified in the Shareholders' Agreement as (i)
Atlas or Interpool, (ii) Apollo, (iii) any other investor in the Company who
becomes a party to the Shareholders' Agreement, and (iv) certain permitted
transferees who become party to or bound by the provisions of the
Shareholders' Agreement in accordance with the terms thereof) to (i) if such
sale is structured as a sale of stock, sell to such third party all shares of
Company Common Stock owned by them or (ii) if such sale is structured as a
merger, consolidation or other transaction requiring the consent or approval
of the Company's stockholders, vote such Shareholder's shares of Company
Common Stock in favor thereof and otherwise consent thereto. In addition, the
Shareholders' Agreement provides that, with certain exceptions, Apollo will
refrain from effecting any sale of 15% or more of the outstanding Company
Common Stock unless, prior to the consummation thereof, the other Shareholders
have been afforded the opportunity to join in such sale on a pro rata basis.
81
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Recapitalization Merger Agreement provides that, on or prior to the
Effective Time, the Company, at the request of MergerCo, will enter into a
management agreement with Apollo (or an affiliate thereof) pursuant to which
the Company will agree to pay an annual management fee of $1 million and agree
to continue to receive financial advisory services from Apollo and its
designees on an ongoing basis with compensation to be determined, all on terms
reasonably satisfactory to MergerCo. If the Merger is consummated in
accordance with the Recapitalization Merger Agreement, then the Surviving
Corporation following the Merger shall pay to Apollo or any designee, on the
closing date of the Merger, a fee of $12.5 million in cash, for arranging the
transactions contemplated by the Recapitalization Merger Agreement (including
the financing thereof).
Pursuant to the Engagement Letter, the Company has agreed to pay Goldman
Sachs upon consummation of the Merger a transaction fee of 0.625% of the
aggregate equity consideration, as described in the Engagement Letter, paid in
the transaction. The Company has agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including attorney's fees, and to indemnify
Goldman Sachs against certain liabilities, including certain liabilities under
the federal securities laws. The Recapitalization Merger Agreement provides
that the aggregate fees payable to Goldman Sachs in connection with the Merger
will not be in excess of $6.5 million.
For a description of certain management arrangements in connection with the
Merger, see "THE MERGER--Interests of Certain Persons in the Merger" and
"MANAGEMENT--Employment and Related Agreements."
82
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data of the Company
has been prepared to give effect to the Merger and related transactions as a
recapitalization for financial reporting purposes. Accordingly, the historical
basis of the Company's assets and liabilities will not be affected by the
transactions and the sales and purchases of the Company Common Stock will be
accounted for as capital transactions at amounts paid to stockholders. For a
discussion of the Merger and related transactions, see "THE MERGER".
The Company has been advised by CSI and Chase that they have informed
MergerCo that, in view of current market conditions, they would exercise their
right under the Commitment Letter to change the pricing, terms, and structure
of the financing. In addition, Apollo, on behalf of MergerCo, recently
indicated to the Company that in view of current market conditions it does not
believe that MergerCo would be able to obtain the financing necessary to
consummate the Merger. The Commitment Letter will terminate in accordance with
its terms on November 30, 1998 if no amounts have been funded thereunder. The
Recapitalization Merger Agreement provides that if the transaction is not
consummated on or prior to November 30, 1998, either MergerCo or the Company
will be able to terminate the transaction, to the extent that the terminating
party is not in breach of the agreement. In light of current circumstances,
including, without limitation, the notice from Apollo and the position
expressed by CSI and Chase, there can be no assurances that the Merger will be
consummated. See "THE MERGER--Recent Developments; Material Uncertainty of
Consummating the Merger," "MATERIAL PROVISIONS OF THE RECAPITALIZATION MERGER
AGREEMENT--Conditions to Consummation of the Merger," and "--Termination."
The pro forma financial statements have been prepared assuming the Bridge
Loan is taken down, given the current market conditions for high yield
securities such as the Senior Subordinated Notes. The pro forma financial
statements also reflect the financial terms for such Bridge Loan and the
Senior Facilities which are currently enumerated in the Commitment Letter.
MergerCo has informed the Company that, based on current market conditions
and after having reviewed the matter with CSFB and CSI, it does not believe
that it is presently feasible to place the Senior Subordinated Notes on terms
reasonably satisfactory to MergerCo. However, if the Senior Subordinated Notes
were to be placed, the interest rate borne by the Notes, in all likelihood,
would be higher than that to be borne by the Bridge Loan. In the event that
the Senior Subordinated Notes are placed with a higher interest rate, the pro
forma loss would be greater than that currently presented in the pro forma
financial statements.
The recapitalization adjustments presented are based upon available
information and certain assumptions and adjustments outlined in the
accompanying notes to the unaudited pro forma consolidated financial data that
the Company believes are reasonable under the circumstances. The historical
consolidated income statement for the year ended September 30, 1997 was
derived from the audited consolidated financial statements of the Company
included elsewhere herein. The historical consolidated income statement for
the nine months ended June 30, 1998 and June 30, 1997 and the historical
consolidated balance sheet data as of June 30, 1998 were derived from the
unaudited financial statements of the Company included elsewhere herein.
The unaudited pro forma consolidated balance sheet of the Company as of June
30, 1998 gives effect to the Merger assuming that it was completed on June 30,
1998. The unaudited pro forma consolidated statement of operations of the
Company for the year ended September 30, 1997 gives effect to the Merger as if
it had occurred on October 1, 1996. The unaudited pro forma consolidated
income statement of the Company for the nine months ended June 30, 1998 gives
effect to the Merger as if it had occurred on October 1, 1997. The unaudited
pro forma consolidated statement of operations of the Company for the nine
months ended June 30, 1997 gives effect to the Merger as if it had occurred on
October 1, 1996.
The unaudited pro forma financial data should be read in conjunction with
the historical consolidated financial statements of the Company and notes
thereto, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS," other financial data included elsewhere
83
<PAGE>
in this Proxy Statement, and the information concerning the Merger, including
the sources and uses therefore. See "THE MERGER--Merger Financing."
The pro forma financial data and related notes are provided for
informational purposes only. They do not necessarily reflect the results of
operations or financial position of the Company that would have resulted had
the events referred to above or in the notes to the unaudited pro forma
financial data been consummated as of the date and for the periods indicated.
The pro forma financial data is not intended to project the Company's
financial position or results of operations for any future period.
The pro forma consolidated financial data gives effect to the six and one-
half for one stock split (to be effected as a dividend of five and one-half
shares of Company Common Stock for each share of Company Common Stock
outstanding) which the Company expects to implement following the consummation
of the Merger.
84
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
(A)
HISTORICAL PRO FORMA
JUNE 30, JUNE 30,
1998 ADJUSTMENTS 1998
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
------
Property and equipment...................... $2,163 $2,163
Accumulated depreciation.................... (732) (732)
------ ------
Net property and equipment.............. 1,431 1,431
Lease contracts receivable.................. 44 44
Trade receivables, net...................... 60 60
Other assets................................ 16 $ 29 (c) 45
Cash........................................ 7 7
------ ----- ------
$1,558 $ 29 $1,587
====== ===== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
------------------------------------
Liabilities:
Debt...................................... $ 818 $ 747 (d) $1,565
Deferred income taxes..................... 276 (12)(e) 264
Accounts payable and accrued expenses..... 72 72
------ ----- ------
Total liabilities....................... 1,166 735 1,901
Stockholders' equity (deficit):
Common Stock, Par Value................... 8 8 (f) 16
Capital in Excess of Par.................. 57 281 (f) 338
Retained earnings......................... 335 (995)(f) (660)
Cumulative translation adjustment......... (8) (8)
------ ----- ------
Total stockholders' equity (deficit).... 392 (706) (314)
------ ----- ------
$1,558 $ 29 $1,587
====== ===== ======
</TABLE>
The accompanying notes are an integral part of this unaudited pro forma
consolidated balance sheet.
85
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
(MILLIONS OF DOLLARS)
(a) On June 18, 1998, the Company entered into the Recapitalization Merger
Agreement with MergerCo. Pursuant to the Recapitalization Merger
Agreement, MergerCo will merge with and into the Company and the Company
will be the surviving corporation.
(b) A summary of the sources and uses of proceeds of the Merger is as follows:
<TABLE>
<S> <C>
SOURCES OF FUNDS
Merger Financing................................................ $ 978
MergerCo Equity Investment...................................... 292
-------
Total sources of funds......................................... $ 1,270
=======
</TABLE>
<TABLE>
<S> <C>
USES OF FUNDS
Merger consideration............................................ $ 967
Cash settlement of stock options................................ 12
Repayment of existing debt...................................... 215
Merger fees and expenses........................................ 76
-------
Total uses of funds............................................ $ 1,270
=======
(c) The adjustment reflects the capitalized portion of the debt issuance costs
anticipated to be paid to effect the Merger.
(d) The adjustment reflects the following:
Term Loans........................................................ $ 478
Bridge Loan, net of $16 million debt discount..................... 484
-------
Total new debt.................................................. 962
Repayment of Revolving Credit Facility............................ (131)
Repayment of Series B Medium Term Notes........................... (84)
-------
Net change in debt.............................................. $ 747
=======
</TABLE>
The Bridge Loan is shown net of $16 million of unamortized debt discount
attributed to the value of the warrants.
The Company intends, prior to Closing, to offer to repurchase the Series B
Medium Term Notes and to seek the consent of the noteholders to the
deletion of certain covenants contained therein. If the Company is not
successful in obtaining the consent of a sufficient number of noteholders
to modify the terms thereof, the Company intends to defease such notes and
to establish a debt defeasance fund in connection therewith.
(e) The adjustment reflects the tax benefit, at a 40% effective rate, of the
tax deductible portion of the fees and expenses related to the Merger.
86
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET--(CONTINUED)
(f) The adjustment reflects the following:
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -----
<S> <C> <C> <C> <C>
Repurchase and exchange of common stock.. $(5) $(27) $(935) $(967)
Equity investment by the Investors....... 292 292
Warrants issued with Bridge Loan......... 16 16
Stock split issued in the form of a stock
dividend................................ 13 (13) --
Cash settlement of stock options, net of
tax benefit............................. (7) (7)
Fees and expenses related to the Merger,
net of tax benefits..................... (40) (40)
--- ---- ----- -----
$ 8 $281 $(995) $(706)
=== ==== ===== =====
</TABLE>
87
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(D)
HISTORICAL PRO FORMA
NINE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, 1997 ADJUSTMENTS JUNE 30, 1997
----------------- ----------- -----------------
<S> <C> <C> <C>
Revenues..................... $ 318 $ 318
Operating expenses
Depreciation on rental
equipment................. 110 110
Rental equipment operating
expenses.................. 80 80
Selling and administrative
expense................... 32 $ 1 (a) 33
----- ---- ------
222 1 223
----- ---- ------
Operating income......... 96 (1) 95
Interest expense............. 47 68 (b) 115
----- ---- ------
Pretax income (loss)..... 49 (69) (20)
Provision (benefit) for in-
come taxes.................. 20 (28)(c) (8)
----- ---- ------
Income (loss) from continuing
operations before
nonrecurring charges
directly attributable to the
Merger...................... $ 29 $(41) $ (12)
===== ==== ======
Basic earnings (loss) per
common share................ $1.90 $(0.37)
Basic common shares outstand-
ing (in millions)........... 15.3 (f) 32.5
Diluted earnings (loss) per
common share................ $1.90 $(0.37)
Diluted common shares out-
standing (in millions)...... 15.3 (f) 32.5 (g)
</TABLE>
The accompanying notes are an integral part of this unaudited pro forma
consolidated statement of operations.
88
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(D)
HISTORICAL PRO FORMA
NINE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, 1998 ADJUSTMENTS JUNE 30, 1998
----------------- ----------- -----------------
<S> <C> <C> <C>
Revenues....................... $ 342 $ 342
Operating expenses
Depreciation on rental equip-
ment........................ 113 113
Rental equipment operating
expenses.................... 83 83
Selling and administrative
expense..................... 33 $ 1 (a) 34
----- ---- -----
229 1 230
----- ---- -----
Operating income........... 113 (1) 112
Interest expense............... 44 68 (b) 112
----- ---- -----
Pretax income.............. 69 (69) --
Provision for income taxes..... 28 (28)(c) --
----- ---- -----
Income from continuing opera-
tions before nonrecurring
charges directly attributable
to the Merger................. $ 41 $(41) $ --
===== ==== =====
Basic earnings per common
share......................... $2.69 $0.00
Basic common shares outstanding
(in millions)................. 15.3(f) 32.5
Diluted earnings per common
share......................... $2.68 $0.00
Diluted common shares outstand-
ing (in millions)............. 15.4(f) 34.1(g)
</TABLE>
The accompanying notes are an integral part of this unaudited pro forma
consolidated income statement.
89
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(D)
HISTORICAL PRO FORMA
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 ADJUSTMENTS SEPTEMBER 30, 1997
------------------ ----------- ------------------
<S> <C> <C> <C>
Revenues................... $ 435 $ 435
Operating expenses
Depreciation on rental
equipment............... 149 149
Rental equipment operat-
ing expenses............ 109 109
Selling and administra-
tive expense............ 43 $ 1 (a) 44
----- ---- ------
301 1 302
----- ---- ------
Operating income....... 134 (1) 133
Interest expense........... 63 91 (b) 154
----- ---- ------
Pretax income (loss)... 71 (92) (21)
Provision (benefit) for in-
come taxes................ 28 (37)(c) (9)
----- ---- ------
Income (loss) from continu-
ing operations
before nonrecurring
charges directly
attributable to the Merg-
er........................ $ 43 $(55) $ (12)
===== ==== ======
Basic earnings (loss) per
common share.............. $2.79 $(0.38)
Basic common shares out-
standing (in millions).... 15.3(f) 32.5
Diluted earnings (loss) per
common share.............. $2.78 $(0.38)
Diluted common shares out-
standing (in millions).... 15.3(f) 32.5 (g)
</TABLE>
The accompanying notes are an integral part of this unaudited pro forma
consolidated statement of operations.
90
<PAGE>
XTRA CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENTS
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(a) The adjustment is an annual management fee of $1 million, which the
Company will pay to Apollo Management IV, L.P. as set forth in the terms
and conditions of the Recapitalization Merger Agreement. The adjustment is
included on a prorated basis for the nine months ended June 30, 1997 and
1998.
(b) The adjustment to interest expense reflects the following:
<TABLE>
<CAPTION>
NINE NINE
MONTHS MONTHS YEAR
ENDED ENDED ENDED
06/30/97 06/30/98 09/30/97
-------- -------- --------
<S> <C> <C> <C> <C> <C>
Interest expense on exist-
ing Revolving Credit Fa-
cility repaid in the
Merger................... $(6) $(6) $(8)
Interest expense on exist-
ing Series B Medium Term
Notes repaid in the Merg-
er....................... (5) (5) (6)
Interest expense on Merger
Financing:
<CAPTION>
AMOUNT DESCRIPTION RATE
------ ----------- ----
<S> <C> <C> <C> <C> <C>
$103 Term Loan A 7.65% 6 6 8
200 Term Loan B 7.90% 12 12 16
175 Term Loan C 8.15% 11 11 14
500 Bridge Loan 11.88% 45 45 60
----
978 Total
====
Annual commitment fees on
Merger Financing......... 2 2 3
Amortization of deferred
debt issuance costs in-
curred on the
Merger Financing......... 3 3 4
--- --- ---
$68 $68 $91
=== === ===
</TABLE>
Since interest rates in connection with the Merger Financing have not been
determined as of the date of this Proxy Statement, the adjustment
represents the Company's current estimate of interest rates.
The interest expense adjustment which relates to the revolving credit
facility and the Series B Notes to be repaid or repurchased in connection
with the Merger, was calculated by assuming that the actual average
balances outstanding during the periods indicated were reduced by the
amounts assumed to be repaid at June 30, 1998 (as indicated in footnote (d)
to the Unaudited Pro Forma Consolidated Balance Sheet). The interest
expense adjustment was calculated based on the prevailing interest rates
during the periods indicated.
Borrowings made under the Bridge Loan would bear interest initially at the
Eurodollar Rate plus 5.5% per annum, which interest rate would increase by
1% at the end of six months, and then increase by 0.5% at the end of each
three-month period thereafter; provided that the interest rate would not
exceed 18% per annum nor be less than 11.25% per annum. To the extent that
the interest rate exceeds 15%, the Borrower may at its option cause such
excess interest to be added to the principal amount of the Bridge Loan. The
Bridge Loan would be unsecured, although it would be guaranteed by the same
entities guaranteeing the Senior Facilities. Lenders funding the Bridge
Loan would be entitled to warrants to purchase 5% of the outstanding shares
of Company Common Stock on a fully diluted basis at an exercise price of
$.01 per share for a period of 10 years from the closing of the Bridge
Loan. The warrants become exercisable over six consecutive quarters (16.67%
of the total warrants per quarter) beginning five quarters after the
closing of the Bridge Loan provided that the Bridge Loan is outstanding at
such times. The warrants held by an initial lender also will become
exercisable immediately in the event that the lender sells some or all of
its portion of the Bridge Loan to a third party at any time after the
closing of the Bridge Loan. Assuming that all of the warrants become
exercisable, the Company would allocate approximately $484 million of the
proceeds of the Bridge Loan to debt represented by the Bridge Loan and
approximately $16 million to equity represented by the warrants. See "THE
MERGER--Merger Financing." Interest expense on the Bridge Loan was
calculated assuming an average borrowing rate of 11.88% on the face amount
of the Bridge Loan (11.25% in the first
91
<PAGE>
XTRA CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENTS--(CONTINUED)
six months, 12.25% for the next three months and 12.75% for the next three
months) in the first 12 months after the Merger, plus the accretion of the
discount on the Bridge Loan related to the warrants of approximately $2
million. If the Company prepays the Bridge Loan debt, the accretion of the
debt discount would be adjusted accordingly.
MergerCo has informed the Company that, based on current market conditions
and after having reviewed the matter with CSFB and CSI, it does not believe
that it is presently feasible to place the Senior Subordinated Notes on
terms reasonably satisfactory to MergerCo. However, if the Senior
Subordinated Notes were to be placed, the interest rate borne by the Notes,
in all likelihood, would be higher than that to be borne by the Bridge
Loan. In the event that the Senior Subordinated Notes are placed with a
higher interest rate, the pro forma loss would be greater than that
currently presented in the pro forma financial statements.
Each 1/8% increase or decrease in the assumed weighted average interest
rate on the Merger Financing would change the pro forma interest expense by
$.9 million and $1.2 million for the nine month periods ended June 30, 1997
and 1998 and the year ended September 30, 1997.
(c) Reflects the income tax effects of the recapitalization adjustments,
assuming a 40% tax rate.
(d) The Unaudited Pro Forma Consolidated Income Statements exclude the non-
recurring items described below that are directly attributable to the
Merger:
1. A compensation charge of $7 million associated with the cash
settlement of stock options that are canceled as a result of the
Merger. The compensation charge net of tax is computed based on
793,449 options outstanding at June 30, 1998 multiplied by the excess
of $65.00 over the weighted average exercise price of $49.95.
2. Severance costs of $8 million net of tax for employees who will be
terminated following the completion of the Merger.
3. A prepayment premium of $6 million net of tax associated with the
retirement of the Series B Medium Term Notes.
4. Transaction related charges of $26 million for costs associated with
arranging the Merger and other fees and expenses such as legal,
accounting and filing fees.
These charges will be included in the Company's income statements as
incurred, primarily in the accounting period in which the Merger is
completed.
(e) The Unaudited Pro Forma Consolidated Income Statements excludes the cost
savings expected to be achieved in the first 12 months after the Merger by
consolidating certain functions and operations. Such consolidation plan
and related agreements are currently in process and will be finalized
prior to the completion of the Merger.
(f) The historical basic and diluted earnings per share do not reflect the
contemplated stock split. Had the stock split been reflected in the
historical financial statements, the basic and diluted earnings per share,
respectively, would have been $.43 and $.43 for the twelve months ended
September 30, 1997, $.29 and $.29 for the nine months ended June 30, 1998,
and $.41 and $.41 for the nine months ended June 30, 1997.
(g) Diluted shares outstanding does not include warrants that will allow the
holders to purchase up to 5% of the amount of outstanding Company Common
Stock for any period in which such warrants are anti-dilutive. See note
(b) above.
92
<PAGE>
PRO FORMA CAPITALIZATION
The following table sets forth the unaudited pro forma consolidated cash and
cash equivalents and capitalization of the Company (i) at June 30, 1998 and
(ii) after giving pro forma effect to the Merger and related transactions as
if they had occurred on June 30, 1998. This table should be read in
conjunction with "THE MERGER -- Merger Financing," "SELECTED HISTORICAL
CONSOLIDATED FINANCIAL DATA," "UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
DATA," "MANAGEMENT'S DISCUSSION AND ANALYSIS," and the Consolidated Financial
Statements (including the notes thereto) appearing elsewhere in this Proxy
Statement.
<TABLE>
<CAPTION>
JUNE 30, 1998
------------------------
ACTUAL PRO FORMA
---------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents.......................... $ 7 $ 7
========== ==========
Debt:
Existing Debt:
Revolving Credit Facility...................... $ 131 $ --
Medium Term Notes--Series B.................... 84 --
Medium Term Notes--Series C.................... 583 583
Capital Lease Obligations, net................. 20 20
Merger Financing:
Revolving Facility............................. -- -- (1)
Term Loan A.................................... -- 103 (2)
Term Loan B.................................... -- 200
Term Loan C.................................... -- 175
Bridge Loan, net of $16 million debt dis-
count(3)...................................... -- 484
---------- ----------
Total debt..................................... $ 818 $ 1,565
Stockholders' equity (deficit):
Company Common Stock, including additional paid-
in-capital...................................... 65 --
Recapitalized Common Stock, including additional
paid-in-capital................................. -- 354
Retained earnings (deficit)...................... 335 (660)
Cumulative translation adjustments............... (8) (8)
---------- ----------
Total Stockholders' equity (deficit)........... 392 (314)
---------- ----------
Total Capitalization........................... $ 1,210 $ 1,251
========== ==========
</TABLE>
- --------
(1) Commitments received to provide sources up to $250 million after the
Effective Time.
(2) An additional $147 million will be available on a delayed-draw basis after
the Effective Time.
(3) The Bridge Loan is shown net of $16 million of unamortized debt discount
attributed to the value of the warrants.
93
<PAGE>
1998 XTRA CORPORATION STOCK OPTION AND INCENTIVE AWARD PLAN
The following is a summary of the terms of the Stock Option Plan. The Stock
Option Plan has been approved by the Board of Directors of the Company and is
subject to approval by the stockholders of the Company. The Stock Option Plan
is attached as Annex D to this Proxy Statement/Prospectus and is incorporated
herein by reference. The following summary is qualified in its entirety by the
actual terms of the Stock Option Plan.
General
The purpose of the Stock Option Plan is to align the interests of directors,
officers, other employees and independent contractors of the Company and its
subsidiaries with those of the Company's stockholders; to reinforce corporate,
organizational and business-development goals; to promote the achievement of
year-to-year and long-range financial and other business objectives; and to
reward the performance of individual officers, other employees and independent
contractors in fulfilling their personal responsibilities for long-range
achievements.
The Stock Option Plan will be administered by Board of Directors or by a
Committee designated by the Board of Directors. Subject to the terms of the
Stock Option Plan, the Board of Directors will have full authority to
determine, among other things, the persons to whom awards under the Stock
Option Plan ("Awards") will be made, the type of Award to be granted to any
participant, the number of shares of Company Common Stock subject to Awards,
and the specific terms and conditions applicable to Awards, including, but not
limited to, the duration, vesting and exercise or other realization periods,
performance criteria, if any, the circumstances for forfeiture and the form
and timing of payment with respect to any Award.
The Stock Option Plan provides that a maximum of 250,000 shares of Company
Common Stock shall be reserved for issuance thereunder. In the event that the
Board of Directors shall determine that any dividend or other distribution
(whether in the form of cash, Company Common Stock or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange or other
similar corporate transaction or event affects the Company Common Stock such
that an adjustment is appropriate in order to prevent dilution or enlargement
of the rights of participants under the Stock Option Plan, then the Board of
Directors shall make such equitable changes or adjustments as it deems
necessary or appropriate to any or all of (i) the number and kind of shares of
Company Common Stock that may thereafter be issued in connection with Awards,
(ii) the number and kind of shares of Company Common Stock issued or issuable
in respect of outstanding Awards and (iii) the exercise price, grant price, or
purchase price relating to any Award; provided that, with respect to incentive
stock options ("ISOs"), as such term is defined in Section 422 of the Code,
such adjustment shall be made in accordance with Section 424 of the Code.
Grants of a variety of Awards, including, but not limited to, stock options,
stock appreciation rights ("SARs"), dividend equivalent rights, restricted
stock and restricted stock units may be made under the Stock Option Plan to
selected directors, officers, other employees and independent contractors of
the Company and its present or future subsidiaries, in the discretion of the
Board of Directors. Stock options may be either ISOs or nonqualified stock
options. The exercise price of a nonqualified stock option may be at or below
the fair market value per share of Company Common Stock on the date of grant
but not below 50% of Fair Market Value (as defined in the Stock Option Plan);
generally, the exercise price of an ISO may not be less than the fair market
value per share of Company Common Stock on the date of grant. Stock options
will become exercisable in accordance with a schedule established at the time
of grant. The Board of Directors will determine each stock option's expiration
date; provided that no ISO may be exercised more than ten years after the date
of grant. The Stock Option Plan provides that the exercise price for stock
options granted thereunder may, as determined by the Board of Directors, be
payable in cash, shares of Company Common Stock, through a cashless "broker-
dealer" exercise method, by authorizing the Company to withhold shares of
Company Common Stock (in the sole discretion of the Board of Directors), by a
combination of the foregoing or by such other payment method as the Board of
Directors may prescribe.
94
<PAGE>
The Stock Option Plan provides for the grant of Awards of "Incentive Units"
and "Stock Units," the vesting and payment of which will be dependent upon the
achievement of certain performance goals to be established for a specific
performance period. Stock Units will also be credited with dividend equivalent
rights which, once credited, will be converted into an equivalent number of
Stock Units. Payments in respect of vested Incentive Units and Stock Units may
be made in cash, shares of Company Common Stock, or a combination of the
foregoing, as determined by the Board of Directors in its discretion.
In addition to the foregoing Awards, the Board of Directors may, in its sole
discretion, grant such other forms of stock-based and cash-based Awards as it
may determine to be consistent with the purpose of the Stock Option Plan.
As of the date of the mailing of this Proxy Statement/Prospectus, no options
have been granted under the Stock Option Plan, and it is not known how many
options, if any, will be granted, as of the Effective Time, to executive
officers or employees of the Company. Inasmuch as future Awards under the
Stock Option Plan will be granted at the sole discretion of the Board of
Directors and that performance criteria may vary from year to year and
participant to participant, future benefits under the Stock Option Plan are
not determinable. As of the Effective Time, the Fair Market Value per share of
the Company Common Stock is assumed to be $65.00.
The Stock Option Plan provides for the grant of Annual Incentive
Compensation Awards, which become payable only if and to the extent that
performance goals with respect to the applicable performance period are
attained. The Board of Directors will determine the amount of each Annual
Incentive Compensation Award and shall specify with respect to a performance
period the performance goals applicable to the Award. Unless otherwise
provided by the Board of Directors in connection with specified terminations
of employment, payment in respect of Annual Incentive Compensation Awards will
be made only if and to the extent that the performance goals with respect to
such performance period are attained. Payments in respect of Annual Incentive
Compensation Awards will be made either in cash or Company Common Stock or in
a combination of cash and Company Common Stock, as determined by the Board of
Directors. Subject to such exceptions as may be determined by the Board of
Directors, if the participant's continuous employment with the Company or any
of its subsidiaries terminates prior to the expiration of the performance
period of an Annual Incentive Compensation Award, any and all rights to
payment in respect of such award will be forfeited.
In the event of a Change of Control (as defined in the Stock Option Plan),
each Option or SAR, the vesting of which is subject to the achievement of a
performance goal, that is not vested as of such time will no longer be subject
to such performance-based vesting requirements but will be subject only to the
time-based vesting requirements contained in the Award Agreement setting forth
the terms of such Option or SAR; and each Annual Incentive Compensation Award
will no longer be subject to its performance-based vested requirements but
will be subject only to the time-based vesting requirements contained in the
award agreement setting forth the terms of such Award.
The Stock Option Plan may, at any time and from time to time, be altered,
amended, suspended, or terminated in whole or in part by the Board of
Directors. No amendment may be made, however, that adversely affects any of
the rights of a participant under any Award theretofore granted, without such
participant's consent.
Material Federal Income Tax Consequences
The following discussion is a brief summary of material United States
federal income tax consequences under current federal income tax laws relating
to an Award of stock options under the Stock Option Plan. This summary is not
intended to be exhaustive and, among other things, does not describe state,
local or foreign income and other tax consequences. Each participant in the
Stock Option Plan should consult such participant's tax advisor regarding the
particular tax consequences to such person of receiving Awards pursuant to the
Stock Option Plan.
95
<PAGE>
Nonqualified Stock Options ("NSO"). An optionee generally will not be taxed
upon the grant of an NSO. Rather, at the time of exercise of such NSO (and in
the case of an untimely exercise of an ISO), the optionee will recognize
ordinary income for federal income tax purposes in an amount equal to the
excess of the fair market value of the shares purchased over the option price.
The Company will generally be entitled to a tax deduction for the year in
which the optionee recognizes the ordinary income and in an amount equal to
such income.
If shares acquired upon exercise of an NSO (or upon untimely exercise of an
ISO) are later sold or exchanged, any gain or loss recognized upon the sale or
exchange will generally be a capital gain or loss, long-term or short-term,
depending upon the applicable holding period with respect to such shares.
Incentive Stock Options. An optionee will not be taxed upon the grant or
timely exercise of an ISO, except for certain alternative minimum tax ("AMT")
consequences summarized below. Exercise of an ISO will be timely if made
during its term and if the optionee remains an employee of the Company or a
subsidiary at all times during the period beginning on the date of grant of
the ISO and ending on the date three months before the date of exercise (or
one year before the date of exercise in the case of a disabled optionee).
Exercise of an ISO will also be timely if made by the legal representative of
an optionee who dies (i) while in the employ of the Company or a subsidiary or
(ii) within three months after termination of employment. The tax consequences
of an untimely exercise of an ISO will be determined in accordance with the
rules applicable to NSOs. Also, ISOs held by an individual will be treated as
NSOs to the extent they first become exercisable in any calendar year for
shares having a grant-date fair market value in excess of $100,000.
If stock acquired pursuant to the timely exercise of an ISO is later sold or
exchanged, in general any gain or loss recognized upon the sale or exchange
will, except as noted below be a capital gain or loss (long-term or short-
term, depending upon the applicable holding period with respect to such
shares). The Company, under these circumstances, will not be entitled to any
federal income tax deduction in connection with either the exercise of the ISO
or the sale of such stock by the optionee.
If, however, stock acquired pursuant to the exercise of an ISO is disposed
of by the optionee prior to the expiration of two years from the date of grant
of the ISO or within one year from the date such stock is transferred to him
upon exercise (a "disqualifying disposition"), the optionee generally will be
taxable at the time of such disqualifying disposition as follows: (i) he or
she will recognize income taxable at ordinary income rates to the extent of
the difference between the option price and the lesser of the fair market
value of the stock on the date the ISO is exercised or the amount realized (if
any) on such disqualifying disposition and (ii) if the disposition is a sale
or exchange, any additional gain will be taxed as short-term or long-term
capital gain (depending upon the applicable holding period with respect to
such shares). In such case, the Company will generally be entitled to a
federal income tax deduction for the year of the disqualifying disposition for
the amount taxable to the optionee as ordinary income.
The amount by which the fair market value of the stock on the exercise date
of a timely exercised ISO exceeds the option price will increase the
optionee's "alternative minimum taxable income" and may result in an AMT
imposed under Section 55 of the Code.
Exercise with Shares. According to a published ruling of the Internal
Revenue Service, an optionee who pays the option price upon exercise of an
NSO, in whole or in part, by delivering shares of Company Common Stock already
owned by him or her will recognize no gain or loss for federal income tax
purposes on the shares surrendered, but otherwise will be taxed according to
the rules described above for NSOs. (See "Material Federal Income Tax
Consequences--Nonqualified Stock Options ("NSO").") With respect to shares
acquired upon exercise which are equal in number to the shares surrendered,
the tax basis of such shares will be equal to the tax basis of the shares
surrendered, and the holding period of such acquired shares will include the
holding period of the shares surrendered. The tax basis of additional shares
received upon exercise will be equal to the fair market value of such shares
on the date of exercise, and the holding period for such additional shares
will commence on such date.
96
<PAGE>
The Treasury Department has issued proposed regulations that, if adopted in
their current form, would appear to provide for the following rules with
respect to the exercise of an ISO by surrender of previously owned shares of
Company Common Stock. If the shares surrendered in payment of the exercise
price of an ISO are "statutory option stock" (including stock acquired
pursuant to the exercise of an ISO) and if, at the date of surrender, the
applicable one-year and two-year holding periods for such shares had not been
met, such surrender will constitute a "disqualifying disposition" and any gain
recognized on such transfer will be taxable to the optionee as ordinary
income, as discussed above. Otherwise, when shares of the Company Common Stock
are surrendered upon exercise of an ISO, in general, (i) no gain or loss will
be recognized as a result of the exchange, (ii) the number of shares received
that is equal in number to the shares surrendered will have a tax basis equal
to the tax basis of the shares surrendered and (except for purposes of
determining whether a disposition will be a disqualifying disposition) will
have a holding period that includes the holding period of the shares
exchanged, and (iii) any additional shares received will have a zero tax basis
and will have a holding period that begins on the date of the exchange. If any
of the shares received are disposed of within two years of the date of grant
of the ISO or within one year after exercise, the shares with the lowest basis
will be deemed to be disposed of first, and such disposition will be a
disqualifying disposition giving rise to ordinary income as discussed above.
97
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion below contains certain forward-looking statements, including
estimates of economic and industry conditions, equipment utilization, and
capital expenditures. Actual results may vary from those contained in such
forward-looking statements. See "Risk Factors." The 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's fiscal years (the period from October 1 to September
30).
XTRA 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. 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.
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
maintain 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 the interest
rates.
The Company's June 1995 acquisition of Matson Leasing Company, a marine
container leasing company, 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.
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. See "Risk Factors--Variable Revenues and Operating
Results."
98
<PAGE>
NINE MONTHS ENDED JUNE 30, 1998 VERSUS THE NINE MONTHS ENDED JUNE 30, 1997
Revenues
The following table sets forth the Company's average equipment utilization
(dollar-weighted by net investment in various types of equipment), average
fleet size in units, and average net investment in revenue equipment for the
nine months ended June 30, 1998 and 1997. The Company's fleet size and average
net investment include 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>
NINE MONTHS
ENDED
JUNE 30,
----------------
1997 1998
------- -------
<S> <C> <C>
NORTH AMERICA:
XTRA Lease:
Utilization.............................................. 87% 90%
Units.................................................... 77,000 78,000
Net Investment in equipment (in millions)................ 660 727
XTRA Intermodal:
Utilization.............................................. 81% 81%
Units.................................................... 53,000 54,000
Net Investment in equipment (in millions)................ 326 293
Total: North America
Utilization.............................................. 85% 88%
Units.................................................... 130,000 132,000
Net investment in equipment (in millions)................ $ 986 $ 1,020
INTERNATIONAL:
Utilization.............................................. 78% 83%
Units.................................................... 156,000 164,000
Net Investment in equipment (in millions)................ $ 418 $ 407
CONSOLIDATED:
Utilization.............................................. 83% 86%
Units.................................................... 286,000 296,000
Net investment in equipment (in millions)................ $ 1,404 $ 1,427
</TABLE>
Revenues increased by 8% or $24 million for the nine months ended June 30,
1998 over the same period a year ago. The Company's average equipment
utilization improved from 83% in the first nine months of fiscal year 1997 to
86% in the first nine months of fiscal 1998. Average net investment in
equipment increased by $23 million from the same period of the prior year due
primarily to an increase in the net investment in over-the-road trailers,
which was partially offset by a decline in the net investment in the
intermodal equipment and marine container fleets. For the full fiscal year
1998, average equipment utilization is expected to be higher than the 1997
average of 84%.
The Company's North American revenues increased $20 million from the same
period a year ago due to strong levels of domestic freight leading to more
working units, as well as an improvement in lease rates. The Company's North
American utilization averaged 88% in the first nine months of fiscal 1998, as
compared to 85% in the comparable prior year period. XTRA Lease's revenues
increased $21 million from the same period a year ago due to strong levels of
domestic freight leading to more working units, as well as an improvement in
lease rates. XTRA Lease's utilization averaged 90% in the first nine months of
fiscal 1998, as compared to 87% in the comparable prior year period.
Increasing demand for equipment was reflected in increased truck tonnage,
99
<PAGE>
an indicator of domestic freight levels in the U.S. XTRA Intermodal's revenues
decreased $1 million from the same period a year ago due to a slight decrease
in working units, as well as declining lease rates. XTRA Intermodal's
utilization averaged 81% in the first nine months of both fiscal 1998 and
1997.
The Company's North American over-the-road trailer fleet averaged 76,000
units, or 50% of average net investment in equipment in the first nine months
of fiscal year 1998, compared to 74,000 units, or 46% of average net
investment in equipment, in the comparable prior year period. The Company
continues to review its intermodal trailer fleet as the railroads shift toward
more domestic container usage. Given the reduced demand for intermodal
trailers and the expected continued trend toward domestic containers from
trailers, XTRA believes its intermodal trailer fleet is appropriately sized.
XTRA's intermodal trailer fleet averaged 23,000 units, or 11% of average net
investment in equipment in the first nine months of 1998, versus 23,000 units,
or 13% of average net investment in equipment, in the comparable prior year
period.
International revenues increased $4 million from the same period of the
prior year. An increase in revenues attributable to more working units was
partially offset by lower average effective lease rates. Equipment utilization
improved to 83% from 78% in the comparable prior year period. Marine container
lease rates, which had been experiencing a steady decline at least since
fiscal year 1996, remained relatively flat during the most recent twelve month
period. Lease rates in the first nine months of fiscal year 1998 declined
compared to the comparable prior year period. The Company's average
international fleet size increased to 164,000 units in the first nine months
of fiscal 1998 from 156,000 units in the comparable prior year period.
Operating Expenses
Total operating expenses increased by 3% or $7 million for the nine months
ended June 30, 1998 from the same period of fiscal 1997. Depreciation expense
increased by 3% or $3 million due to a larger fleet investment. Rental
equipment operating expense increased by 4% or $3 million due primarily to
higher tire and facility expenses associated with increased working units.
Selling and administrative expenses increased by 3% or $1 million with no one
factor contributing significantly to the increase.
Interest Expense
Interest expense decreased by 6% or $3 million for the nine months ended
June 30, 1998 from the same period of fiscal 1997, due primarily to lower
average debt outstanding.
Pretax Income
Pretax earnings increased 41% or $20 million for the nine months ended June
30, 1998 over the same period a year ago, primarily due to higher equipment
utilization.
Provision for Income Taxes
The effective income tax rates used in the interim financial statements are
estimates of the fiscal years' rates. The effective income tax rate for fiscal
1997 was 40%. For the nine months ended June 30, 1998, the Company has
recorded a provision for income taxes using an estimated effective income tax
rate of 40%. The Company's effective income tax rate for fiscal 1997 and its
estimated effective income tax rate for fiscal 1998 are higher than the
statutory U.S. Federal income tax rate primarily due to state income taxes.
100
<PAGE>
THREE YEARS ENDED SEPTEMBER 30, 1997
Revenues
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, 1995, 1996, and 1997. 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,
----------------------------
1995(/1/) 1996 1997
------- ------- -------
<S> <C> <C> <C>
NORTH AMERICA:
XTRA Lease:
Utilization............. 89% 84% 88%
Units................... 73,000 77,000 77,000
Net Investment in equip-
ment (in millions)..... 557 648 674
XTRA Intermodal:
Utilization............. 82% 78% 82%
Units................... 56,000 56,000 54,000
Net Investment in equip-
ment (in millions)..... 362 357 322
Total:
Utilization............. 86% 81% 85%
Units................... 129,000 133,000 131,000
Net investment in equip-
ment (in millions)..... $ 919 $ 1,005 $ 996
INTERNATIONAL:
Utilization............. 90% 81% 79%
Units................... 31,000 141,000 157,000
Net investment in equip-
ment (in millions)..... $ 92 $ 403 $ 418
CONSOLIDATED:
Utilization............. 86% 81% 84%
Units................... 160,000 274,000 288,000
Net investment in equip-
ment (in millions)..... $ 1,066 $ 1,408 $ 1,414
</TABLE>
- --------
(1) The Company acquired certain net assets of Matson Leasing Company 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
101
<PAGE>
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. XTRA Lease's revenues increased 6% or $14 million due to higher
equipment utilization and improving lease rates. Utilization averaged 88% in
1997, as compared to 84% in 1996. Lower industry-wide capital spending and
increasing demand, as reflected in improving truck tonnage, positively
impacted the supply/demand balance during 1997. XTRA Intermodal's revenues
decreased 3% or $2 million due to declining lease rates. Utilization averaged
82% in 1997, as compared to 78% in 1996. During 1997, intermodal loadings
improved, resulting in increased utilization. The 2,000 unit decrease in the
North American fleet size was primarily due to reductions in the intermodal
trailer fleet, offset by additions to the over-the-road trailer fleet.
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
continued 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.
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 trailer 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 first 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,
with no other single factor contributing significantly to the increase.
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,
----------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Average net debt outstanding (in millions of dollars).... $518 $906 $882
Interest expense as a percentage of average net debt out-
standing................................................ 8.0% 7.3% 7.1%
</TABLE>
102
<PAGE>
In 1996, interest expense increased 60% or $25 million due primarily to an
increase in the average net debt outstanding, due primarily to the acquisition
of certain net assets of Matson Leasing Company on June 30, 1995. 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
North American 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 improved 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" at F-7 through F-8, F-11 through F-12.
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
supply, 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 and capital leases. The capital
expenditures for 1998 represent XTRA's commitments for 1998 as of July 31,
1998.
<TABLE>
<CAPTION>
1995 1996 1997 1998
---- ---- ---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C> <C> <C>
Over-the-road trailers................................... $204 $100 $193 $180
Marine containers........................................ 379 79 30 10
Intermodal trailers...................................... 50 2 -- --
Chassis.................................................. 46 22 2 6
Domestic containers...................................... 1 2 18 --
Non-revenue equipment.................................... 19 5 6 8
---- ---- ---- ----
Total................................................. $699 $210 $249 $204
==== ==== ==== ====
</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 $358 million in
equipment acquired in the acquisition of Matson Leasing Company. 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 July 31, 1998, committed capital expenditures for fiscal 1998 amounted to
$204 million. Any additional capital expenditures for the remainder of fiscal
year 1998 will likely be modest. As of July 31, 1998, the Company had
committed capital spending for fiscal year 1999 amounting to $41 million,
reflecting expected continued strong demand for over-the-road trailers.
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 Company Common Stock net
of stock options exercised, and increased net debt (debt less cash)
outstanding by $486 million. During the nine months ended June 30, 1998, the
Company generated cash flows from operations of $211 million. During the same
period, XTRA invested $129 million in property and equipment and paid
dividends of $10 million. Net debt outstanding (debt less cash) decreased $77
million.
103
<PAGE>
The Company has authorized the repurchase of up to $200 million of Company
Common Stock. As of June 30, 1998, The Company had repurchased $79 million of
Company Common Stock under this authorization. The Company has agreed in the
Recapitalization Merger Agreement not to repurchase or pay dividends on the
Common Stock until the earlier of the termination of the Recapitalization
Merger Agreement and the Effective Time.
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. See "Risk Factors--Sufficiency of
Committed Financing." The Company historically has had available a variety of
external sources at favorable rates and terms to finance its acquisitions and
the growth of its leasing equipment fleet. However, the availability of such
capital depends heavily upon prevailing market conditions and the Company's
capital structure and credit ratings.
Currently, the Company's external financing options include a combination of
medium-term and long-term borrowings in the public and non-public debt market,
a revolving credit agreement, intermediate- and long-term financing from banks
and institutional investors, and lease financing. XTRA and XTRA, Inc. have
registered with the Commission $604 million of securities consisting of
Preferred Stock and Company Common Stock of XTRA as well as senior and
subordinated debt securities of XTRA, Inc., fully and unconditionally
guaranteed by XTRA (the "Shelf Registration") (see Note 4 of the "Notes to
Consolidated Financial Statements" at F-9). As of July 31, 1998, the Company
had $532 million available for issuance under this Shelf Registration,
although the Company currently does not intend to issue securities under the
Shelf Registration after the Merger. In addition, upon consummation of the
Merger, the Company expects to have $147 million available under the Term
Facility and $250 million available under the Revolving Facility.
In connection with the Merger, the Company will become substantially more
leveraged: at June 30, 1998, on a pro forma basis after giving effect to the
Merger and Merger Financing, the Company would have had $1.565 billion of
consolidated indebtedness. Moreover, the Company will be subject to
significant operating restrictions under the terms of the New Credit Facility,
the indenture governing the Notes and the instruments governing its other
indebtedness. See "Risk Factors--Restrictive Debt Covenants". The Company
anticipates that its operating cash flow, together with borrowings under the
Senior Facilities, will be sufficient to meet its operating expenses and to
service its debt requirements as they become due. However, there can be no
assurance that XTRA's business will generate sufficient operating cash flow to
meet the Company's operating expenses and to service its debt requirements as
they become due. See "Risk Factors--Substantial Leverage."
The Credit Agreement and the Indenture are expected to limit the ability of
the Company and its subsidiaries to incur indebtedness to the amount of (i)
$875 million which may be borrowed under the Credit Agreement, (ii) the $500
million of Senior Subordinated Notes, (iii) purchase money indebtedness and
other indebtedness in an aggregate principal amount not to exceed $45 million
and (iv) the amount of outstanding Series C Medium Term Notes ($583 million at
June 30, 1998) and the amount of outstanding capitalized lease obligations
($20 million at June 30, 1998), and will additionally permit intercompany
debt, the replacement of certain existing debt and certain other limited
indebtedness customarily excepted from restrictions on indebtedness.
YEAR 2000
The Company has completed an assessment of the majority of its systems and
has developed specific workplans to address the year 2000 issue. The Company's
assessment resulted in the identification of certain applications and
information systems that needed to be replaced or modified. The applications
consisted of certain purchased software packages used on the Company's
personal computers and the information systems are primarily those used by the
Company's XTRA Intermodal business. With respect to the purchased software
packages, work plans were created and new applications were installed to
replace each of the purchased software packages with applications that are
year 2000 compliant. The Company has completed modification and testing of its
systems applications used by the Intermodal business. The Company expects that
the total costs to fix its year 2000 issues Company-wide will amount to
approximately $1 million.
104
<PAGE>
The Company is in the process of completing an assessment of the potential
risks associated with business disruption as a result of year 2000 issues
experienced by the Company's vendors, suppliers and customers. Upon completion
of this assessment, the Company will determine whether certain contingency
plans should be put in place and what the cost of those plans will be. At this
point, the Company has not identified any required contingency plans which
would require that material expenditures be made by the Company.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income," which established standards for the
reporting and display of comprehensive income in general-purpose financial
statements. Statement 130 is effective for fiscal years beginning after
December 15, 1997. Adoption of this standard will not impact the Company's
consolidated financial position, results of operations, or cash flows, and any
effect will be limited to the form and content of the Company's disclosures.
The Financial Accounting Standards Board issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
requires companies to present segment information based upon the way that
management organizes the segments within a company. Statement 131 is effective
for periods beginning after December 15, 1997. In the initial year of its
application, this statement need not be applied to interim financial
statements. Adoption of this standard will not impact the Company's
consolidated financial position, results of operations, or cash flows, and any
effect will be limited to the form and content of the Company's disclosures.
105
<PAGE>
THE COMPANY
GENERAL
The Company is a leading global transportation equipment lessor with
operations in the highway, domestic intermodal and marine container markets.
The Company manages a diverse fleet of approximately 300,000 units,
constituting a net investment of approximately $1.4 billion, consisting of:
(i) over-the-road ("OTR") trailers; (ii) intermodal equipment, including
intermodal (or "piggyback") trailers, chassis and domestic containers; and
(iii) marine containers.
In North America, XTRA believes that it is the second largest operating
lessor of OTR trailers; the second largest operating lessor of intermodal
trailers; the third largest operating lessor of domestic containers; and the
fifth largest operating lessor of chassis. XTRA also believes that it is the
eighth largest lessor of marine containers world-wide. The Company believes
that its extensive operating network and effective fleet management provide a
competitive advantage by enabling it to offer timely and diverse equipment
availability, flexible drop-off points and varied lease terms.
The Company leases its equipment fleet to over 15,000 customers including
trucking companies, railroads, steamship lines and private trucking fleet
owners in North America, Europe and Asia. The Company has had long-standing
relationships with many of its customers, including J.B. Hunt Transport
Services, Inc., RyderSystem, Inc., CSX Corporation, Norfolk Southern
Corporation, Wal-Mart Stores, Inc., the United Parcel Service of America, Inc.
and the United States Postal Service.
For the five-year period ended September 30, 1997, revenues, operating
income, net income and EBITDA grew at compound annual growth rates of 16.5%,
15.4%, 9.5% and 18.2%, respectively. This growth was generated primarily
through adding new equipment and through fleet acquisitions of other leasing
companies combined with maintaining consistent utilization levels.
THE TRANSPORTATION LEASING INDUSTRY
Background
Transportation equipment customers lease equipment to cover cyclical,
seasonal and geographic needs and as a substitute for purchasing. In addition,
capital and capacity-constrained transportation providers often use leasing to
maximize their asset utilization and reduce capital expenditures. By
maintaining a large and diversified fleet, leasing companies are able to
provide customers with a broad selection of equipment and quick response
times, which reduce equipment shortfalls and lost opportunities.
Transportation equipment is generally leased through finance or operating
leases. XTRA primarily participates in the operating lease segment, generally
avoiding finance leases because it believes the value-added component of such
leases is low. Generally, finance leases are longer term and have lower levels
of customer service, while operating leases can be either daily (per diem)
leases or term (one year or longer) leases. Operating lessors generally offer
customer services, which may include roadside assistance, insurance, repair
and maintenance and regulatory compliance. Operating lessors generally will
enter into term leases due to the greater revenue stability associated with
longer-term leases even though long-term lease rates are typically lower than
per diem lease rates. The percentage of equipment on term leases versus per
diem leases varies widely among leasing companies, depending upon each
company's desire to have predictable revenues and cash flows.
Trends
The Company believes that there are several fundamental trends occurring in
the freight transportation industry that result from attempts by freight
transportation companies and shippers to reduce their operating costs and
capital expenditures. These trends include (i) complete or partial outsourcing
of freight transportation by
106
<PAGE>
companies to for-hire trucking and third party logistics companies in lieu of
maintaining private fleets; (ii) the adoption by shippers and their customers
of time-definite inventory strategies (for example, just-in-time inventory
strategies); and (iii) attempts by freight transportation companies and
shippers to shift capital resources
previously dedicated to maintaining private transportation fleets to
activities more closely related to the company's core competencies. Based on
these trends, industry statistics and its experience, XTRA's management
believes that customers will increasingly use leasing as part of their asset
management strategy.
Benefits of Leasing versus Owning
To a lessee, the primary benefits of leasing versus owning are the
following:
. Reduced Capital Expenditures. Leasing is an attractive option for
transportation companies because ownership requires significant capital
investment. For some customers, such as railroads or steamship
companies, owning trailers, chassis or containers is not critical to
their investment strategy. For example, railroads have ongoing capital
requirements to upgrade railcars and tracks that make leasing ancillary
equipment, such as chassis, an attractive alternative to ownership
allowing them to focus their capital expenditures on their core assets.
. Improved Asset Management. Regional and seasonal demand imbalances
frequently leave transportation companies with regional and seasonal
surpluses or shortages requiring costly repositioning of empty
equipment. Lessors help transportation companies manage these imbalances
by providing required equipment as needed, reducing the cost of
maintaining local inventories and minimizing repositioning costs. In
addition, leasing customers can utilize the newest types of equipment in
an effort to increase productivity and lower distribution costs without
the need to continually purchase new equipment.
. Lower Administration and Maintenance Costs. Customers are able to focus
on improving their core businesses because lessors assume responsibility
for the administrative obligations relating to the maintenance of
fleets, such as taxes, licensing and on-going regulatory compliance and,
generally, repair and maintenance.
. Increased Fleet Flexibility. Transportation companies benefit from the
variety of lease types offered by leasing companies such as per diem,
term or, in certain cases, finance leases. These various types of leases
provide transportation companies flexibility in sizing their fleets
while minimizing capital costs. For example, certain leases allow
transportation companies to pick up and drop off equipment at different
locations around the world. In addition, customers can choose from a
variety of specifications among different equipment types.
COMPANY STRENGTHS
Leading Market Positions
The Company believes that it is the second largest operating lessor of both
OTR and intermodal trailers in North America. The Company believes that it
enjoys a leadership position as the result of having: (i) an extensive
operating network; (ii) a large and well-maintained fleet with a variety of
equipment options to meet customer specifications; (iii) excellent brand name
recognition and (iv) strong customer relationships.
Effective Fleet Management
The Company's utilization rates for its OTR trailers and intermodal
equipment have averaged 88% and 83%, respectively, for the last five years.
The Company's utilization rate for its marine container business has averaged
81% since the Company acquired its marine container business in June 1995. In
addition, the Company has maintained average yearly utilization rates for its
entire fleet in excess of 80% in each year since 1990. The Company attributes
its utilization rates to its fleet management strategy of maximizing equipment
availability,
107
<PAGE>
ensuring customer satisfaction and maintaining high fleet quality. As part of
its strategy, the Company (i) maintains close relationships with its customers
in order to assess equipment demand, (ii) acquires and disposes of equipment
as opportunities arise and (iii) actively monitors market conditions to
optimize the mix of its per diem and term leases. At June 30, 1998,
approximately 38% of the Company's total units were leased to customers under
term leases.
Diverse and Long Standing Customer Base
The Company's three principal operating divisions serve diverse markets in
the global transportation equipment industry, thereby reducing the reliance on
any one sector of the market. XTRA leases its equipment
to more than 15,000 customers including trucking companies, railroads,
steamship lines, and private trucking fleet owners. The Company has enjoyed
long-standing relationships with many of its customers. For example, many
railroads have been customers of the Company since its founding in 1957, and
some of the largest trucking companies have been customers of the Company for
more than 10 years.
High EBITDA Margins and Ability to Manage Net Cash Flows
The Company's EBITDA margin (EBITDA divided by revenues) for the twelve
months ended June 30, 1998 and its average EBITDA margin for the last five
fiscal years were 66% and 65%, respectively. The Company attributes these
ratios to its extensive operating network, superior customer service and long-
standing customer relationships. In addition, the Company has been able to
generate predictable net cash flows (EBITDA minus capital expenditures)
through economic and industry cycles, in part, as a result of (i) the
Company's significant proportion of term leases, (ii) the diversity of its
business lines, (iii) the geographic coverage of its operations and (iv) its
ability to minimize or cancel capital expenditures during periods of economic
downturn.
POST-MERGER BUSINESS STRATEGY
Following the Merger, the primary elements of the strategy to enhance the
Company's market positions and to maximize the Company's profitability and
cash flow are expected to be as follows:
Capitalize on the Growth of OTR Trailer Leasing
The Company believes, based on its business experience and industry
statistics, that the leasing segment of the OTR trailer market, which the
Company estimates currently constitutes approximately 10% of all OTR trailers,
will increase. The Company believes that a primary reason for growth in the
leasing segment is the increasing trend of companies to outsource their
transportation fleets in order to utilize a variable cost approach to
operating their businesses. As private fleet owners seek to provide their
services with fewer owned assets to reduce costs and capital commitments, they
typically look to truckload carriers and logistics companies to handle their
transportation needs. Because a significant percentage of the Company's OTR
revenues are generated by truckload companies, the Company believes it is well
positioned to benefit from this outsourcing trend. The Company has allocated
and will continue to allocate the majority of its fleet expenditures to the
purchase of new OTR trailers. In addition, XTRA intends to maintain its strong
reputation and high brand name recognition in the OTR business by continually
offering a wide availability of well-maintained, in-demand equipment types
throughout North America.
Optimize Term Lease Business
At June 30, 1998, approximately 38% of XTRA's total units were leased under
term leases. The Company believes that maintaining a significant portion of
its lease portfolio on a term versus per diem basis will provide greater
stability and predictability through economic and industry cycles. The Company
actively monitors market conditions and manages its lease portfolio
accordingly to optimize the mix of its term and per diem leases.
Provide Superior Customer Service
The Company believes that superior customer service is a key differentiating
factor in its industry. In addition to cost, the Company's customers are
principally focused on customer service, which includes
108
<PAGE>
equipment availability, the quality of such equipment, the convenience of
locations to pick up and return such equipment and other related factors. The
Company intends to continue providing enhanced services to its customers, such
as 24-hour emergency roadside assistance and user-friendly repair and return
procedures.
Pursue Attractive Acquisitions
The Company has historically pursued strategic acquisitions that
complemented or broadened the Company's business segments and operations. The
Company believes that acquisition opportunities may continue to develop as the
transportation equipment leasing industry further rationalizes. The Company
intends to selectively pursue acquisition opportunities to the extent of its
available resources.
LEASE TYPES AND RATES
XTRA leases its equipment on both a per diem and term basis. Per diem leases
are for a period of less than one year, with the option to return the
equipment without prior notice. Term leases are for a period of one year
or more, with most being three to five years. Term lease agreements may have
early termination penalties that apply in the event of early redelivery,
although in most cases equipment is not returned prior to the expiration of
the lease. Term leases typically have lower lease rates than per diem leases
in return for more predictable utilization rates and cash flow.
Many of XTRA's OTR per diem and term leases provide for additional fees if
the equipment is returned to a location other than the originating location.
XTRA's marine container and intermodal trailer leases allow the customers to
return equipment at a different location. Returns of marine containers are
subject to quantity and location limitations and additional drop-off fees are
built into the lease terms. XTRA's marine container leases provide customers
with incentives to return marine containers to more desirable locations.
Lease rates depend on several factors including the type of lease, length of
term, maintenance provided, type and age of the equipment and market
conditions. In addition, in the OTR trailer business, the Company charges its
customers a fee based on the number of miles the trailer has been driven or
charges actual tire and brake wear incurred. The Company offers additional
value-added services for which the Company charges specified fees. For
example, in the OTR business, these services include roadside assistance,
various insurance alternatives and trailer repair and maintenance. Over the
last several years, the Company has capitalized on strong market demand by
maintaining a strong overall term lease portfolio of approximately 38% of
total units at June 30, 1998.
UTILIZATION
An important component of the Company's business is the portion of its fleet
that is on lease at any given time. This measure, called the utilization rate,
is defined as the number of units on lease divided by the total number of
units in the fleet. The Company leases equipment both on a term and a per diem
basis in order to effectively utilize the fleet and maintain a balance between
the greater stability of revenue associated with term leases and the increased
profitability potential of per diem lease pricing. The Company actively
manages the distribution of its units and keeps a large, diversified and well-
maintained fleet of mostly standardized equipment in order to operate at high
utilization rates.
109
<PAGE>
The Company's utilization rates over the last ten years are illustrated
below:
<TABLE>
<CAPTION>
UTILIZATION HISTORY
------------------------------------------------------------------------
JUNE 30, FIVE YEAR
BUSINESS SEGMENT 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 AVERAGE(1)
---------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lease:
Over-the-Road Trail-
ers................... 81% 78% 77% 82% 86% 91% 89% 84% 88% 90% 88%
Intermodal Equipment:
Combined Operations.... 78 85 84 88 92 94 83 78 82 81 83
International:
Marine Containers...... -- -- -- -- -- -- -- 81 79 83 81
</TABLE>
- --------
(1) All averages are for five years except for marine containers. The average
utilization for marine containers is for three years. The Company acquired
Matson Leasing Company on June 30, 1995.
EQUIPMENT FLEET
Overview
The Company's equipment fleet has increased over time through purchases of
new equipment and through fleet acquisitions of other leasing companies. The
Company's fleet size and net investment includes equipment owned by the
Company (99% of book value) and equipment leased-in from third parties under
capital leases (1%). The average age of the OTR and intermodal chassis,
trailer and domestic container fleets is seven years (with depreciable lives
of generally 12 to 20 years). The average age of the marine container fleet is
five years (with a depreciable life of 15 years).
The Company's fleet and net investment is comprised as follows:
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
------------------------ AT JUNE 30,
EQUIPMENT FLEET: 1993 1994 1995 1996 1997 1998
---------------- ---- ---- ---- ---- ---- ------------------
(UNITS IN THOUSANDS) ($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Over-the-road trailers........ 65 69 76 75 78 77 738
Intermodal
Trailers..................... 33 34 29 24 23 23 156
Chassis...................... 15 16 21 24 23 23 106
Domestic containers.......... 8 8 8 8 10 10 34
--- --- --- --- --- --- -----
56 58 58 56 56 56 296
Marine containers............. -- -- 126 152 162 165 397
--- --- --- --- --- --- -----
Total........................ 121 127 260 283 296 298 1,431
=== === === === === === =====
</TABLE>
XTRA's fleet of approximately 300,000 units is managed to maximize equipment
availability, customer satisfaction and fleet quality. This strategy has
historically resulted in consistent overall utilization rates. XTRA maintains
close relationships with its customers and monitors equipment demand and
availability through quality information systems, which help it to better
understand customers' needs and to respond quickly to equipment requests.
Purchasing Policy
XTRA's equipment purchasing is driven by market requirements and anticipated
future demand. The Company primarily purchases equipment that appeals to a
broad customer base in order to maximize leasing potential and residual
values. The Company's technical staff and purchasing department coordinate
with manufacturing companies to build the Company's equipment according to
high quality standards. The Company typically places its orders with
manufacturers three to six months in advance for new equipment. The Company
seeks to structure significant flexibility into the purchase of new equipment
by including cancellation clauses in many of its purchase commitments. The
short lead time and cancellation clauses allow the Company to reduce capital
expenditures during periods of economic downturn.
110
<PAGE>
XTRA is a significant purchaser of equipment for many of the products it
purchases from manufacturers. As a result of the large quantity that XTRA
purchases, as well as the relationships it has built with suppliers, XTRA is
able to achieve better terms and buy equipment more cost effectively than many
of its smaller competitors and customers. New equipment typically carries a
warranty of five years for major structural parts and of one to five years for
minor components.
Market for Used Equipment
The Company seeks to dispose of equipment at attractive prices at the
optimal points of the equipment cycle. The Company generally sells its used
equipment directly from its branch facilities to customers and other end
users, rather than to used equipment wholesalers, in order to obtain more
favorable prices. XTRA disposes of used equipment in a generally liquid
aftermarket which includes buyers such as trucking companies, private fleet
owners and others. The Company continually disposes of older equipment in
order to maintain the quality of its fleet. The Company has historically sold
its used equipment at prices reflecting modest gains over the depreciated
equipment book value.
Repair and Maintenance
All equipment is inspected and repaired when returned by a customer, and
lease contracts as well as industry practice require customers to pay for all
damage repair other than certain items of wear and tear. Repair and
maintenance services are performed either by XTRA personnel or by qualified
third party professionals and verified by the Company's technical and
operations staff. The Company strives to maintain its fleet to high standards
in order to maximize useful life, residual value and customer satisfaction.
The Company believes that, due to the age profile of its fleet and the high
quality of its equipment, its repair and maintenance costs are minimized.
Moreover, XTRA has consistently focused on limiting the amount of time that
equipment spends in repair.
Before any repair or refurbishment is authorized on older equipment in the
fleet, the Company's technical and operations staff reviews the age, condition
and type of equipment and its suitability for continued leasing. XTRA compares
the future anticipated cash flows from continuing to own and lease the
equipment net of the cost of such repair or refurbishment with the prevailing
market resale price that might be obtained and makes the appropriate decision
whether to repair or sell the equipment.
By continually reviewing market conditions, purchasing and disposing of
equipment at opportune times and maintaining high fleet quality, the Company
seeks to effectively manage its fleet for optimal utilization.
DESCRIPTION OF OPERATING DIVISIONS
The Company conducts its leasing operations through three divisions: XTRA
Lease, XTRA Intermodal and XTRA International.
XTRA LEASE
General
XTRA Lease, the Company's OTR trailer business operation, leases trailers to
contract and common motor carriers and to private-fleet owners through North
America. XTRA Lease's fleet consists of approximately 77,000 trailers
(including approximately 7,500 trailers in Canada and approximately 1,400
trailers in Mexico), comprised mostly of dry cargo vans 48' and 53' long by
102" wide, and 2,000 chassis. For the fiscal year ended September 30, 1997 and
the nine months ended June 30, 1998, the average equipment utilization rates
for the
111
<PAGE>
OTR business were 88% and 90%, respectively. Approximately 41% of the XTRA
Lease units were leased on a term basis as of June 30, 1998, with the balance
of units available for lease on a per diem basis.
In 1997, the average purchase price of a 53' long OTR trailer with air ride
suspension was approximately $19,000 and had a depreciable life of 12 years.
As a trailer approaches the end of its depreciable life, the Company typically
makes a decision to: (i) sell the unit; (ii) keep the unit in its per diem
pool; or (iii) place the unit in its storage fleet. The Company's current OTR
trailer fleet includes approximately 12,000 units in its storage fleet that
continue to generate revenue without adding significant incremental costs. The
Company's strategy of continually evaluating the optimal use of equipment as
it ages seeks to maximize the revenues generated from its equipment including
its residual value.
Competitive Environment
XTRA estimates the leasing segment of the industry OTR trailer fleet (fleet
owned by leasing companies) to be about 300,000 units. XTRA enjoys a strong
competitive position in the OTR segment and believes its fleet of
approximately 77,000 units at June 30, 1998, or 26% of the leased fleet, is
exceeded only by Transport International Pool, an affiliate of General
Electric Capital Corporation ("TIP"), which has an estimated share of
32%. The remainder of the industry is fragmented and primarily spread among
many smaller, more regional equipment providers. These operators are focused
more on customers within their own geographic region and are generally unable
to provide the same level of service to larger, more national transportation
customers. XTRA Lease's strong market presence and national infrastructure are
distinct advantages over many of its competitors.
Market Trends
Management believes that the leasing segment for OTR trailers will increase
due to a number of factors. One contributing factor is an increasing trend of
private fleet owners outsourcing transportation fleets as companies move
towards a variable cost approach to operate their businesses. In addition, as
more private owners seek to provide their services with fewer owned units to
reduce costs and capital commitments, they typically look to truckload
carriers and logistics companies to handle their transportation needs, who in
total, are a significant portion of XTRA Lease's customer base.
A second factor, the continued move toward time definite inventory
strategies, such as just-in-time, as well as better driver time management and
truck utilization, should focus companies on leasing rather than owning
trailers in its leasing fleet. An increasing number of trailers are left empty
at loading docks as drivers employ a drop-off rather than a wait-and-unload
strategy to improve efficiencies and driver utilization. The result is an
increasing ratio of trailers to trucks in the freight transportation market.
Leasing companies are increasingly being relied upon to handle these
increasing trailer needs.
Recently, some domestic freight has moved from the railroad to the trucking
industry. The Company believes this has occurred due to the increased
consolidation in the railroad industry, which has caused more rationalized
track and service availability and an increase in containerized trade from
overseas, which is placed on railroads at major ports displacing domestic
traffic. These factors have increased the volume of the Company's truckload
and less-than-truckload customers, who in turn continue to satisfy increased
demand in part from leasing companies such as the Company.
Due to its national operating network and its strong reputation, XTRA
believes it is well positioned to capitalize on the increased trends favoring
the use of leasing companies.
Customer Base
XTRA Lease has a diversified customer base consisting of more than 15,000
customers with the top 10 customers representing less than 15% of that
division's sales. In addition, the composition of revenues is well distributed
among truckload carriers, private fleet operators and less-than-truckload
carriers. XTRA Lease has
112
<PAGE>
had long-term relationships with a number of key customers, including J.B.
Hunt Transport Services, Inc., Wal-Mart Stores, Inc., Landstar System, Inc.,
Yellow Freight Systems, the United Parcel Service of America, Inc. and the
United States Postal Service.
Sales and Marketing Strategy
XTRA Lease serves customers through 96 branch locations throughout the
United States, Canada and Mexico. Its sales force is organized into regions
and branches to allow for local servicing while drawing on the resources of a
national infrastructure. Sales representatives are typically located close to
the customer to allow for localized servicing. In many cases, the Company's
sales representatives have established long-term relationships with its
customers. When sales representatives cannot meet specific requests with local
inventories, they may draw upon XTRA Lease's national infrastructure to
satisfy a request. The national localized presence of XTRA Lease is a
significant competitive advantage over regional and smaller competitors.
The Company's sales force is performance oriented with a significant portion
of the total compensation of sales representatives, sales managers and
regional sales vice presidents being incentive-based.
XTRA INTERMODAL
General
XTRA's intermodal business is comprised of three rental products: intermodal
trailers, chassis and domestic containers. Intermodal traffic refers to the
shipment of goods in standardized containers through two or more modes of
transportation, usually rail, truck or ship. On certain routings, shipping
goods over two or more modes of transportation is more cost efficient. For
example, over long distance, high density freight lanes, intermodal
transportation is more cost efficient than trucking. Further, containerization
is more efficient and economical than "break bulk transportation", in which
the goods are unpacked and repacked at various intermediate points en route to
their final destination.
Intermodal ("Piggyback") Trailers
Intermodal trailers are designed to be carried on rail flatcars, pulled by
tractor over the highway and, to a lesser extent, transported over water by
ships and barges. The Company's intermodal trailer fleet of 23,000 units
consists primarily of units 45' and 48' long by 102" wide. In 1997, new
intermodal trailers cost approximately $17,000 to purchase and had a
depreciable life of 12 years. Approximately 27% of the intermodal trailer
fleet was leased on a term basis as of June 30, 1998, with the remainder of
the fleet available for lease on a per diem basis.
Chassis
Chassis are wheeled rectangular frames used to transport containers over the
highway. XTRA's chassis are used as transport vehicles for marine and domestic
containers, which are loaded or unloaded at shipyards, rail terminals or
consignee locations. Once loaded, the chassis and the container together are
the functional equivalent of a trailer. Loading the container on a chassis
allows the container to be delivered to the final inland destination.
Marine chassis are generally 20' or 40' in length to accommodate marine
containers, while domestic chassis are generally 48' or 53' in length and
handle domestic containers. In 1997, new marine chassis cost $7,500 to
purchase and had a depreciable life of 20 years. 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 as of June 30, 1998 with the balance available for
lease on a per diem basis.
113
<PAGE>
Domestic Containers
Domestic containers are steel or aluminum containers designed to transport
freight on chassis over rail or highway within North America. These containers
substitute for intermodal and OTR 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 64% of the Company's domestic containers were leased
on a term basis as of June 30, 1998, with the balance leased or available for
lease on a per diem basis.
Competitive Environment
With respect to intermodal trailers XTRA believes that it is the second-
largest trailer lessor and believes it owns 25% of the total intermodal
trailer fleet. XTRA believes that its largest competitor, Transamerica, owns
an estimated 38% of the total intermodal trailer fleet.
In the leased segment of the chassis market, the Company believes that it is
the fifth largest lessor in the United States with approximately 8% of total
leased chassis. The Company's largest competitor is Flexi-Van, which the
Company believes owns approximately 33% of total leased chassis.
In the domestic container market, the Company believes that it is the third
largest in the United States with approximately 16% of leased domestic
containers.
Market Trends
Over the last several years, there has been a gradual shift in intermodal
traffic from the use of intermodal "piggyback" trailers to domestic containers
to transport goods over rail. The shift has occurred primarily due to the
railroad's ability to double stack containers, which cannot be done with
intermodal "piggyback" trailers, and offering better freight rates to use
containers. However, the Company believes that demand for intermodal trailers
will continue for some time due to several factors, including: (i) the
preference of certain shippers to use intermodal trailers over the combination
of domestic containers and chassis due to logistical ease; and (ii) the
relative inefficiency of containers in locations where limited space precludes
the storage of a sufficient number of chassis.
Although the shift from intermodal trailers to domestic containers probably
will continue, XTRA expects that its intermodal business will continue to be a
source of cash flow because of the controlled downsizing that XTRA is engaged
in with respect to this business resulting in XTRA not having to make
significant investments in the business.
The demand for chassis has been growing significantly due primarily to: (i)
the growth in the use of international and domestic containers; and (ii) the
desire by shippers to consolidate ancillary, but critical assets. The use of
containers, which are placed on chassis to transport the container to the
final destination, has increased due to the many benefits of shipping goods by
container versus alternative methods. For the last five years, the growth rate
of containerized trade has been approximately 7% per year. As the use of
containerized trade continues to increase, the market for chassis, a critical
part of moving the container to the final destination, will similarly
increase. In addition, the railroads and shipping lines have focused on
reducing their capital expenditures on ancillary assets in favor of more core
assets such as railcars or ships. To take advantage of this trend, the Company
has established neutral chassis pools at key rail interchange locations and
ports in the United States.
Customer Base
XTRA Intermodal's customer base is concentrated with the top ten customers
representing approximately 88% of its sales. This high concentration is due
primarily to the concentration of ownership in the railroad sector, the
largest user of intermodal equipment. Even though the railroad companies are
the Company's biggest
114
<PAGE>
customers in this segment, the intermodal trailer per diem leasing decision is
often made by the ultimate shipper or by intermediaries known as intermodal
marketing companies which influence the choice of equipment and selection of
supplier. As a result, the ultimate intermodal trailer customers of the
Company are more diverse than the railroads. More recently, XTRA has expanded
its chassis leasing business with non-rail customers, such as steamship lines,
to diversify customer concentration. For fiscal year 1997, 64% and 33% of XTRA
Intermodal's revenues were derived from railroads and steamship lines,
respectively.
Sales and Marketing Strategy
XTRA conducts its intermodal trailer business operations through five branch
offices, each of which is strategically located in cities with access to large
railroad operations. The Company has a dedicated sales force for each of the
railroad companies and steamship lines it serves. In addition, senior sales
representatives call on additional shippers and intermodal marketing companies
to secure business. The Investors have informed the Company that they may
consider various strategic alternatives for the Company's intermodal
operations for review by the Board of the Company following completion of the
Merger. These alternatives may include retaining a company already in this
business to manage XTRA's intermodal operations or entering into a joint
venture with such a company.
XTRA INTERNATIONAL
General
The Company's 165,000 marine containers are standard, dry cargo 20' and 40'
rectangular steel boxes leased primarily to steamship lines for transporting
freight on ships worldwide. Use of containers has exceeded world gross
domestic product primarily as a result of the logistical advantages and
efficiencies resulting from containerization. Standardization of the
construction, maintenance and handling of containers allows containers to be
picked up, dropped off stored and repaired effectively throughout the world.
For the 1997 fiscal year and since the marine container fleet was acquired
in June 1995, the average utilization rates for the Company's marine
containers were 79% and 81%, respectively. Approximately 33% of XTRA's marine
container fleet was leased on a term basis at June 30, 1998, with the
remainder of the fleet either leased or available for lease on a per diem
basis.
In 1997, on average, a new 20' marine container costs approximately $1,800
and had a depreciable life of 15 years. Similar to the Company's other
equipment types, as equipment approaches the end of its useful life, the
Company typically makes a decision to: (i) sell the unit; (ii) place the unit
on a new term lease; or (iii) place the unit in its per diem pool. The
Company's strategy of continuing to evaluate the optimal use of equipment as
it ages seeks to maximize the revenues generated from its equipment while
minimizing any decline of residual value.
Competitive Environment
XTRA believes that its fleet is the eighth largest lessor of marine
containers worldwide with an estimated share of 4%. The largest competitors in
this segment are Genstar/SeaContainers and Transamerica each having a 23%
share. Over the last several years, there has been consolidation in the
container leasing business resulting from several acquisitions. The result of
the consolidation has been fewer lessors, a more rationalized industry, and a
stabilizing pricing environment.
Market Trends
The demand for containers is influenced primarily by the volume of
international and domestic trade. In recent years, however, the rate of growth
in the container industry has exceeded world gross domestic product as a whole
due to several factors, including the existence of geographical trade
imbalances, the expansion of
115
<PAGE>
shipping lines, changes in manufacturing practices and increased exports by
certain technologically advanced countries of components parts for assembly in
other countries and the subsequent re-importation of finished products.
Leasing companies currently own approximately half of the world's container
fleet as compared to 45% in 1993. The balance is owned predominantly by the
shipping lines.
Customer Base
For fiscal year 1997, XTRA International's top ten customers comprised
approximately 40% of the division's sales. In addition, XTRA International's
customer base is located in various countries throughout the world.
Strategy
As part of the Merger, the Investors, on behalf of the Company, currently
are exploring retaining a company already in the marine container business to
manage XTRA's marine container business following the Merger. In addition, if
appropriate terms can be reached, the Investors, on behalf of the Company, may
consider selling the marine container business to a third party. However, no
assurances can be given that the transactions contemplated by such a strategy
will be consummated or of the terms of such transactions.
FACILITIES
The Company maintains 95 facilities for the storage and distribution of its
OTR and intermodal equipment throughout North America, occupying 701 acres, of
which 390 acres are owned. These facilities generally occupy two to 16 acres.
XTRA's North American equipment is leased from equipment pools operated by
Company employees at 95 locations. The international marine container
operations are managed by 14 Company offices and seven agency locations, which
utilize 137 independent depot locations worldwide to store and maintain
equipment.
INFORMATION SYSTEMS
The Company manages its information systems at the business unit level and
maintains operations in Liberty, Missouri (XTRA Intermodal), St. Louis,
Missouri (XTRA Lease) and San Francisco, California (XTRA International) .
XTRA Lease has had a substantial capital outlay since 1994 in order to replace
or develop its business critical systems. The Company has undertaken a
Company-wide standardization initiative. The Company also has completed an
assessment of the majority of its information systems to determine if they
will have a "Year 2000 problem" and has developed specific workplans to
address the issue. The Company expects that the costs it will incur to ensure
that its systems are Year 2000 compliant will not be material to the Company's
results of operations, liquidity, or consolidated financial position. However,
there can be no assurance that the systems of other companies on which the
Company's systems rely also will be timely converted or that any such failure
to convert by another company would not have an adverse effect on the
Company's information systems and business.
SUPPLIERS
New equipment purchases are made by the Company from a number of different
suppliers depending on the product purchased. In each of the last five years,
no single equipment manufacturer has accounted for more than 25% of the
Company's total capital spending for revenue equipment. XTRA believes that it
benefits from positive relationships with the various manufacturers because,
among other reasons, it is a significant purchaser of transportation
equipment.
EMPLOYEES
At June 30, 1998, the Company had 880 employees, none of whom were
unionized.
116
<PAGE>
ENVIRONMENTAL MATTERS
Although the nature of the Company's operations at its owned and leased
facilities is such that it is not a heavily regulated entity pursuant to
Federal and state environmental laws and regulations, the Company is required
to comply with such laws and regulations, including laws and regulations
related to the generation, handling, storage, transportation, treatment and
disposal of hazardous and solid wastes. In addition, under various
Federal, state and local environmental laws, ordinances and regulations, a
current or previous owner or operator of real property may become liable for
the costs of removal or remediation of hazardous or toxic substances on, under
or in such property, typically without regard to fault.
The Illinois Environmental Protection Agency has notified the Company of
alleged environmental contamination of its Fairmont City, Illinois property
that resulted from the prior owners' zinc smelting operations. As a result,
the Company has taken certain actions to suppress dust that have significantly
reduced the level of airborne contaminants at the site. Based on the Company's
current understanding of the nature of the contamination at the site, the
Company does not believe that the ultimate resolution of this matter will have
a material adverse effect on the Company's results of operations, cash flows
or financial condition.
The Company believes that its facilities are in compliance in all material
respects with all applicable United States Federal, state and local
environmental laws, ordinances and regulations, as well as comparable laws and
regulations outside the United States. No assurances can be given, however,
that the current environmental condition of the Company's owned and leased
facilities are not other than as currently understood by the Company, or will
not be adversely affected by the condition of properties in the vicinity of
the Company's owned and leased properties, or by the activities of third
parties unrelated to the Company, or that future laws, ordinances or
regulations will not impose any material environmental liability on the
Company.
REGULATION
The Company's OTR and intermodal equipment is subject to various Federal and
state licensing and operating regulations as well as to various industry
standards. From time to time, certain Federal agencies promulgate regulations
which have a direct impact on the Company's OTR and intermodal equipment
relating to brake systems, periodic inspection systems, underride protection
and other safety-related issues. These agencies include the Federal Highway
Administration (the "FHWA") of the United States Department of Transportation,
which regulates the use of motor vehicles on the United States highways, the
National Highway Traffic Safety Administration, which regulates the
manufacture of new motor vehicles, other agencies in the United States and
similar agencies in Mexico and Canada. Recently, the FHWA published a Notice
of Proposed Rulemaking to amend the Federal Motor Carrier Safety Regulations
to require that motor carriers engaged in interstate commerce install
retroreflective tape or reflex reflectors on the sides and rear of all
trailers that (i) were manufactured prior to December 1, 1993, (ii) have an
overall width of 80 inches or more and (iii) have a gross vehicle weight
rating of 10,000 lbs. or more. The FHWA has proposed that motor carriers be
required to install retroreflective tape or reflex reflectors within two years
of the effective date of the final rule. A significant number of the Company's
OTR and intermodal trailers would be impacted if the proposed rule is adopted
in its present form, although the number of trailers effected will depend upon
the date the rule is adopted, with the Company's ongoing disposition of or
conversion to off-road use of trailers decreasing the number of trailers that
will be effected. The Company believes that the cost of complying with the
rule (in its present form) would not have a material adverse effect on the
Company's results of operations, cash flows or financial condition. The
Company's international leasing operations also can be adversely affected by
tariff barriers and political instability in foreign countries.
LEGAL PROCEEDINGS
From time to time, the Company is involved in various claims and legal
actions arising out of the normal course of its business. Currently, there are
no pending claims or actions that management believes will have a material
adverse effect on the Company's financial position and results of operations.
117
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their respective
ages and principal positions with the Company are set forth below. Each of the
directors and officers hold office until the Board of Directors' meeting
following the next Annual Meeting of Stockholders and until his respective
successor is elected and qualified, or his earlier resignation, removal or
death.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A
DIRECTOR OR
NAME AGE POSITION OFFICER
---- --- -------- -----------
<S> <C> <C> <C>
Lewis Rubin............. 60 President, Chief Executive Officer and Director 1990
Robert B. Blakeley...... 38 Vice President and Controller 1991
Jeffrey R. Blum......... 46 Vice President, Administration and Human Resources 1995
Michael K. Fox.......... 52 Vice President, XTRA Intermodal 1994
William H. Franz........ 47 Vice President, XTRA Lease 1993
Thomas A. Giacchetto.... 33 Chief Counsel and Secretary 1998
Frederick M. Gutterson.. 56 Vice President, XTRA International 1995
Christopher P. Joyce.... 37 Vice President and Treasurer 1993
Michael J. Soja......... 49 Vice President and Chief Financial Officer 1978
Michael D. Bills........ 41 Director 1997
H. William Brown........ 60 Director 1996
Michael N.
Christodolou........... 36 Director 1998
Robert M. Gintel........ 70 Director 1990
Robert B. Goergen....... 60 Director 1990
Herbert C. Knortz....... 77 Director 1990
Francis J. Palamara..... 73 Director 1990
Martin L. Solomon....... 62 Director 1990
</TABLE>
Lewis Rubin (60)--President and Chief Executive Officer. Since 1990, Mr.
Rubin has been Chief Executive Officer and President of the Company. From 1988
to 1990, he was a consultant with Lewis Rubin Associates, a consulting firm
advising the transportation equipment industry. From 1984 to 1988, Mr. Rubin
served as President and Chief Executive Officer of Gelco CTI Container
Services, a subsidiary of Gelco Corporation, a diversified international
management services corporation, and as an Executive Vice President of Gelco
Corporation. From 1981 to 1983, Mr. Rubin was President and Chief Executive
Officer of Flexi-Van Corporation, a company engaged in the leasing of
intermodal transportation equipment. Mr. Rubin is a Director of Oneita
Industries, Inc., a textile and apparel company, (Member of Executive
Committee.)
Robert B. Blakeley (38)--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 (46)--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, a national real estate
management firm, from 1993 to 1995 and Signal Capital Corporation, a
diversified financial services company, prior to 1993.
Michael K. Fox (52)--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.
118
<PAGE>
William H. Franz (47)--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.
Thomas A. Giacchetto (33)--Chief Counsel and Secretary. Mr. Giacchetto
joined the Company in 1995 as Senior Corporate Counsel. He was elected to his
present position in April 1998. Prior to that, Mr. Giacchetto was an associate
with Hutchins Wheeler & Dittmar, a Boston law firm from September 1990 through
June 1995.
Frederick M. Gutterson (56)--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 (37)--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.
Michael J. Soja (49)--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.
Michael D. Bills (41)--Director. Since 1995, Mr. Bills has been Chief
Operating Officer and Senior Managing Director of Tiger Management L.L.C., an
investment management company. From 1991 to 1995, Mr. Bills taught at both the
University of Virginia's Darden Graduate School of Business Administration and
the McIntire School of Commerce. From 1986 to 1991, Mr. Bills was also with
Tiger Management L.L.C. serving as Managing Director. Previously, Mr. Bills
was with Goldman, Sachs & Co. from 1981 to 1986. Mr. Bills currently serves as
Co-Chairman of the Board of Trustees of the Tiger Foundation, a New York based
charitable foundation, and as a Director of the India Magnum Fund, an
investment fund managed by Morgan Stanley & Co. (Member of Executive
Committee.)
H. William Brown (60)--Director. Since May 1997, Mr. Brown has been Chief
Financial Officer of Maritrans Inc., a shipping company engaged in petroleum
transportation. Previously, from 1992 through 1996, Mr. Brown was Vice
President--Finance & Administration and Chief Financial Officer of
Consolidated Rail Corporation, one of the largest railroad companies in North
America. From 1986 to 1992, Mr. Brown served as Senior Vice President--Finance
of Consolidated Rail Corporation. Previously, Mr. Brown served in various
other executive capacities with Consolidated Rail Corporation from 1978 until
1986. Mr. Brown was a member of the Board of Governors of The Philadelphia
Stock Exchange from March 1994 until he retired in September 1997. (Member of
Audit and Nominating Committees.)
Michael N. Christodolou (36)--Director. Since 1993, Mr. Christodolou has
been Director of Equity Investments for Taylor and Company, an investment
consulting firm providing services to entities associated with the Bass
family, including Trinity I Fund, L.P. From 1988 to 1993, Mr. Christodolou
served as an investment analyst for Taylor and Company.
Robert M. Gintel (70)--Director. Since 1990, Mr. Gintel has been Vice
Chairman of the Board of Directors of the Company. He is Senior Partner of
Gintel & Co. Limited Partnership, a securities broker/dealer firm and member
organization of the New York Stock Exchange, Inc., Chairman of the Board and
Chief Executive Officer of Gintel Asset Management, Inc., a registered
investment advisor, and Chairman of the Board and Chief Executive Officer of
the Gintel Fund. Mr. Gintel has held such positions for more than the past
five years. Mr. Gintel was a Director and Chairman of the Board of Oneita
Industries, Inc., a textile and apparel company until he retired in August
1997. (Member of Executive and Nominating Committees.)
119
<PAGE>
Robert B. Goergen (60)--Director. Since 1990, Mr. Goergen has been Chairman
of the Board of Directors of the Company. Since 1976, he has been Chairman of
the Board and Chief Executive Officer of Blyth Industries, Inc., a
manufacturer and importer of candles and home decorating accessories. Since
1979, Mr. Goergen has been the general partner or president of various Ropart
entities whose business is investing in securities for their own account. Mr.
Goergen is a Director of Bank of America Illinois, a subsidiary of Bank of
America. Since November 1996, Mr. Goergen has been a Director of Leading Edge
Packaging, Inc., a packaging company. He is also Chairman of the Board of
Trustees of the University of Rochester. (Chairman of Executive Committee and
member of Compensation Committee.)
Herbert C. Knortz (77)--Director. Retired. From 1973 through 1991, Mr.
Knortz was a Trustee of Corporate Property Investors, a real estate investment
trust. Mr. Knortz also served in various executive capacities with ITT
Corporation, a diversified international manufacturing and services
corporation, from 1961 until his retirement as Executive Vice President and
Director in 1986. He is a former Director of Sheraton Corporation and Hartford
Insurance Group. From 1985 to 1986, Mr. Knortz was President and Chief
Executive Officer of the National Association of Accountants, and from 1986 to
1987, its Chairman. (Chairman of Nominating Committee and member of Audit
Committee.)
Francis J. Palamara (73)--Director. Since 1988, Mr. Palamara has been a
business consultant. From 1981 to 1988, he was Executive Vice President,
Finance of ARA Services, Inc., now known as Aramark, Inc., a food services
corporation, and until 1992, a member of its Board of Directors. From 1972 to
1978, Mr. Palamara served as Executive Vice President and Chief Operating
Officer of the New York Stock Exchange, Inc. and from 1978 to 1981, Executive
Vice President and Director of Pittston Company. Mr. Palamara serves as a
Director of the Gintel Fund and the Glenmede Funds. (Chairman of Audit
Committee and member of Compensation Committee.)
Martin L. Solomon (62)--Director. Since June 1997, Mr. Solomon has been the
Chairman and Chief Executive Officer of American Country Holdings Inc., an
insurance company holding company. Since 1990, Mr. Solomon has been a private
investor. From 1988 to 1990, he was a Managing Director and general partner of
Value Equity Associates, I, L.P., an investment partnership. From 1985 to
1987, Mr. Solomon was an investment analyst and portfolio manager with
Steinhardt Partners, an investment partnership. From 1985 to 1996, Mr. Solomon
was a Director and Vice Chairman of the Board of Great Dane Holdings, Inc., a
company engaged in the manufacture of transportation equipment, automobile
stamping, the leasing of taxis and insurance. Since 1995, Mr. Solomon has been
a Director of DLB Oil & Gas, Inc., a company engaged in oil exploration and
production. Since April 1996, Mr. Solomon has been a Director of Hexcel Corp.,
a company engaged in the manufacture of composite materials, and since June
1997, Mr. Solomon has been a Director of Telephone and Data Systems, Inc., a
diversified telecommunications service company with established wireless and
wireline operations. (Chairman of Compensation Committee and member of
Executive Committee.)
120
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY COMPENSATION TABLE
The following information is given regarding compensation earned by the
Chief Executive Officer and the four other most highly compensated executive
officers of the Company with respect to the 1997, 1996 and 1995 fiscal years,
in accordance with rules on executive compensation disclosure adopted by the
Commission.
<TABLE>
<CAPTION>
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
------------------ ---- ------------------- ------------ ------------ ---------------
ANNUAL COMPENSATION LONG-TERM
------------------- COMPENSATION
------------
<S> <C> <C> <C> <C> <C> <C>
Lewis Rubin............. 1997 $ 504,166 $ 329,848 -- 100,000 $11,250
President and Chief 1996 500,000 174,712 -- -- 11,061
Executive Officer 1995 408,333 222,793 -- 140,000 13,605
William Franz........... 1997 255,000 143,903 -- 45,000 11,250
Vice President, XTRA 1996 221,250 85,315 -- 11,061
Lease 1995 198,750 96,278 -- 50,000 13,568
Frederick M. Gutterson
(2).................... 1997 263,200 7,897 -- 26,250 11,250
Vice President, XTRA 1996 254,452 14,819 -- -- 11,061
International 1995 62,500 90,000 -- 40,000 3,175
Michael J. Soja......... 1997 221,450 84,515 -- 26,250 11,250
Vice President and 1996 213,000 60,518 -- -- 11,061
Chief Financial Officer 1995 205,250 86,954 -- 50,000 13,762
Michael K. Fox.......... 1997 180,250 107,630 -- 5,000 11,250
Vice President, XTRA 1996 173,750 51,566 -- -- 11,061
Intermodal 1995 162,500 37,783 -- 40,000 10,870
</TABLE>
- --------
(1) The amounts shown for each named officer for fiscal 1997 include matching
Company contributions under the Company's 401(k) plan and the Company's
contribution under the defined contribution plan, as follows: Mr. Rubin:
$4,500 and $6,750; Mr. Franz: $4,500 and $6,750; Mr. Gutterson: $4,500 and
$6,750; Mr. Soja: $4,500 and $6,750; and Mr. Fox $4,500 and $6,750.
(2) Mr. Gutterson became Vice President, XTRA International, a subsidiary of
the Company on June 30, 1995.
121
<PAGE>
OPTION/SAR GRANTS TABLE
The table below includes for the individuals named in the Summary
Compensation Table certain information concerning individual grants of stock
options made during the fiscal year ended September 30, 1997.
<TABLE>
<CAPTION>
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION GRANT DATE
NAME GRANTED FISCAL YEAR PRICE ($/SH) DATE PRESENT VALUE(3)
- ---- ---------- ------------ ------------ ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Lewis Rubin............. 25,000(1) 10% $40.75 November 12, 2001 $ 328,750
75,000(2) 30 56.94 September 29, 2002 1,377,750
William H. Franz........ 7,500(1) 3 40.75 November 12, 2001 98,625
37,500(2) 15 56.94 September 29, 2002 688,875
Frederick M. Gutterson.. 7,500(1) 3 40.75 November 12, 2001 98,625
18,750(2) 7 56.94 September 29, 2002 344,438
Michael J. Soja......... 7,500(1) 3 40.75 November 12, 2001 98,625
18,750(2) 7 56.94 September 29, 2002 344,438
Michael K. Fox.......... 5,000(1) 2 40.75 November 12, 2001 65,750
</TABLE>
- --------
(1) All options were granted on November 13, 1996 and have a term of five
years. One-third of the shares subject to the option vest and become
exercisable on each of the first, second and third anniversaries of the
date of grant. The exercise price of each option is equal to the fair
market value of the underlying Company Common Stock on the date of grant,
as determined by the closing price of the Company Common Stock on November
13, 1996 of $40.75.
(2) All options were granted on September 30, 1997 and have a term of 5 years.
All of the shares subject to the option vested immediately on the date of
grant. The exercise price of each option is equal to the fair market value
of the underlying Company Common Stock on the date of grant, as determined
by the closing price of the Company Common Stock on September 30, 1997 of
$56.94.
(3) This is a hypothetical valuation as of the grant date using a modified
Black-Scholes valuation formula pursuant to Commission regulations and
does not reflect the actual value of the option awards at any given time.
The Black-Scholes model assumed (a) an option term of five years, (b) a
risk-free interest rate of 6% (the yield on five-year U.S. Treasury
securities), (c) a standard deviation of stock-return of 31.2%, and (d) a
dividend yield of 1.8%. The standard deviation of stock return represents
a statistical measure intended to reflect the anticipated fluctuation of
price movements over the life of the option.
122
<PAGE>
AGGREGATE OPTION/SAR EXERCISES AND
FISCAL YEAR END OPTION/SAR VALUE TABLE
The table below includes for the individuals named in the Summary
Compensation Table certain information concerning each exercise of stock
options during fiscal 1997 and the fiscal year-end value of unexercised
options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR END(#) FISCAL YEAR END($)(1)
------------------------- -------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lewis Rubin............. -- -- 245,000 25,000 $1,411,800 $404,688
William H. Franz........ 5,000 $72,013 92,500 7,500 347,562 121,406
Frederick M. Gutterson.. -- -- 45,417 20,833 271,667 257,240
Michael J. Soja......... 5,000 40,388 73,750 7,500 347,562 121,406
Michael K. Fox.......... -- -- 50,000 5,000 388,550 80,938
</TABLE>
- --------
(1) Based on share price of $56.94, which was the closing price for a share of
the Company Common Stock on September 30, 1997.
123
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares cumulative total shareholder returns for the
Company for the preceding five fiscal years with the S&P 500 Stock Index and
the Dow Jones Transportation Index. The graph assumes the investment of $100
at the commencement of the measurement period with dividends reinvested.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
--------------------------------------------------
9/92 9/93 9/94 9/95 9/96 9/97
<S> <C> <C> <C> <C> <C> <C>
XTRA CORP 100 217 235 207 200 274
S & P 500 100 113 117 152 183 257
DJ TRANSPORATION AVG 100 129 120 160 172 263
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee
The Compensation Committee of the Board of Directors is responsible for the
administration of the Company's executive compensation program. The Committee
is made up of three Directors who are not employees of the Company. It is
responsible for setting the compensation levels of the Company's Chief
Executive Officer and other senior executives, including the executives named
in the Summary Compensation Table. The Committee is also responsible for the
administration of certain compensation and benefit plans. The Committee met 6
times during the year ended September 30, 1997.
Compensation Philosophy
The Committee believes that the Company's executive compensation program
should attract and retain talented executives. The Committee provides its
executives with the opportunity to earn significant compensation if the
Company and the individual meet or exceed challenging performance goals. This
strategy has helped the Company attract, retain and motivate high quality
executives who have developed and implemented a successful business strategy
which has increased earnings per share from $1.00 in fiscal 1991 to $2.77 in
fiscal 1997, an increase of 177%. The Committee believes that increasing
stockholder value is one of the key measures of management performance. During
the five-year period ending September 30, 1997, the total return to the
Company's stockholders, assuming reinvestment of dividends, has been 174%.
This compares to returns of 157% for the S & P 500 Index and 163% for the Dow
Jones Transportation Index for the same period.
124
<PAGE>
The Committee periodically reviews a number of independent compensation
surveys as guidelines to determine competitive pay practices. The survey data
is reviewed directly and is also summarized by independent compensation
consultants. Generally, the survey data used is for transportation related
companies of similar size to the Company and based in the United States.
However, since the Company's competition for executive talent is not limited
to the transportation industry, compensation data for other companies of
similar size is also considered. The survey data used to assess the Company's
executive compensation includes some companies that are part of the Dow Jones
Transportation Index as well as other transportation and non-transportation
companies.
Section 162(m) of the Code generally limits to $1 million the deduction a
public company may claim in any year for compensation paid to the chief
executive officer and the four other most highly compensated executive
officers unless the compensation is performance based. The Committee believes
that it will not be denied any tax deduction during fiscal 1998 as a result of
Section 162(m). While the Committee expects that action will be taken to
qualify most compensation approaches to ensure deductibility, tax
considerations do not automatically cause the Committee to modify its
executive compensation program.
The Committee believes that the total compensation provided to the Company's
executives is both prudent and competitive. Also, the committee believes that
the program has helped to successfully focus XTRA's executive team on
increasing Company performance and stockholder value.
Base Salaries
Base salaries are determined at the discretion of the Committee based on a
review of competitive market pay practices, performance evaluations and
expected future individual contributions. The Committee uses the median of the
range of base salaries from independent compensation surveys to target the
Company's base salary levels. However, it also considers an individual's
unique position, responsibilities and performance in setting salary levels. In
reviewing individual performances, the Committee considers the views of the
Chief Executive Officer, Mr. Lewis Rubin, with respect to other executive
officers.
During fiscal 1997, the Committee increased the base salary levels of senior
executives, other than the CEO, on average 7.9% after the Committee
considered, but did not formally weigh, inflation, corporate performance,
employee performance ad competitive conditions.
Annual Incentives
Annual incentives are paid primarily through the Company's Economic Profit
Incentive Plan (the "Economic Profit Plan") which was adopted by the Board of
Directors in 1996 to take effect for fiscal 1997. The Economic Profit Plan's
objectives are to enhance commitment to the long-term success of the Company
by linking personal financial rewards to the growth of value of the Company,
by increasing the Company's Economic Profit (as defined below), and to
increase the Company's ability to attract and retain key executives. Under the
Economic Profit Plan, annual incentives are determined by establishing target
incentive awards based on a percentage of base salary. Actual awards are based
on corporate performance or divisional performance depending upon the
responsibilities of the participant. Corporate and divisional performance are
measured by the growth of Economic Profit by comparing the actual Economic
Profit against a target Economic Profit as designated by the Committee. The
term "Economic Profit" is defined as after-tax operating profit (before
interest expense), less a capital charge for all capital invested in the
Company or division, as applicable. The term "capital charge" is defined as
the Company's weighted average, after-tax, cost of capital, representing a
blend of the Company's equity and debt capital cost.
Awards for corporate executives, other than the CEO, are determined based on
Company performance (weighted 100%). The annual awards for divisional
presidents are determined based on Company performance (weighted 25%), and
division performance (weighted 75%). Annual awards for other divisional staff
are
125
<PAGE>
determined based on division performance (weighted 100%). The Committee sets
the annual award for the CEO directly based on Company performance (weighted
100%) and its discretionary evaluation of the CEO's individual performance.
Annual incentive target awards for the CEO and other executives named in the
Summary Compensation Table range from 35% to 60% of salary. Actual cash awards
may be up to 1.5 times the target awards plus 33% of any positive amount in
the participant's bonus reserve account, an account maintained for each
participant which carries forward any earned but unpaid bonuses from prior
years. This bonus reserve account may also contain a negative balance from
prior years. In such cases the negative amount must be offset against any
positive bonuses earned. The Committee approved awards for the named
executives, other than the CEO, that averaged bonuses earned. The Committee
approved awards for the named executives, other than the CEO, that averaged
102% of the targeted award levels. The annual incentive for the CEO is
discussed under the CEO Compensation section.
Long-Term Incentives
From time to time, the Committee has granted stock options to the Company's
executives in order to align their interests with the interests of
stockholders. Since stock options are granted at market price,the value of the
stock options is wholly dependent on an increase in the price of the Company's
Common Stock. Stock options are considered effective long-term incentives by
the Committee because an executive is rewarded only if the value of the
Company's Common Stock increases, thus increasing stockholder value. In
determining grants of options for executives, the Committee has reviewed
competitive data of long-term incentive practices at other transportation
related companies and companies of similar size to the Company but in other
industries. The Committee has also taken into account the level of past stock
compensation grants and the value of those grants in determining awards for
the Company's executives.
On November 13, 1996, the Committee recommended the grant of options
covering 100,500 shares of the Company's Common Stock to certain key members
of senior management, which included a grant to Mr. Rubin of 25,000 shares. On
September 30, 1997, the Committee also recommended the grant of options
covering 150,000 shares of the Company's Common Stock to certain key members
of senior management, which included a grant to Mr. Rubin of 75,000 shares.
The number of options granted was based on the Committee's review of the
individual executive's position and potential within XTRA, and the level of
past stock compensation awards granted to the individual executive.
CEO Compensation
The Committee awarded an annual incentive award that was 109% of Mr. Rubin's
target annual incentive, based on the Committee's discretionary evaluation of
Mr. Rubin's individual performance. In evaluating the CEO's individual
performance, the Committee considered, but did not formally weigh the
financial progress that the Company has made as measured by the growth of
Economic Profit and earnings per share as well as the factors described above
under "--Compensation Philosophy."
In fiscal 1997, the Committee awarded Mr. Rubin two stock option grants of
25,000 and 75,000 shares, respectively. As discussed above, the option grants
were determined by the Committee after considering competitive option grant
practices as well as Mr. Rubin's individual performance and previous stock
compensation awards.
Martin L. Solomon, Chairman
Robert B. Goergen
Francis J. Palamara
126
<PAGE>
Compensation Committee Interlocks and Insider Participation
During a portion of fiscal 1997, Mr. Solomon was director of, and owned an
equity interest in the parent corporation of Great Dane Trailers, Inc. ("Great
Dane"). In December 1996 Mr. Solomon sold his equity interest in Great Dane
and ceased being a Director. Mr. Solomon is also Chairman of the Compensation
Committee. During fiscal 1997, the Company purchased certain transportation
equipment from Great Dane. See "--Certain Transactions" below for additional
information.
COMPENSATION OF DIRECTORS
The Company pays its directors, other than the Chairman and Vice Chairman of
the Board, a monthly retainer of $1,375. The Chairman and Vice Chairman of the
Board are paid monthly retainers of $5,000 and $1,667, respectively. All
directors are paid a fee of $1,000 for each meeting of the Board of Directors
attended in person or by telephone. In addition, Committee chairmen and
members receive $1,000 for each Committee meeting attended. A monthly retainer
of $250 is also paid to Committee chairmen. Mr. Rubin, as an officer, does not
receive fees for attendance at Committee meetings. Directors may elect to
defer part or all of their director's fees pursuant to the Company's Deferred
Director Fee Option Plan.
Deferred Director Fee Option Plan--The Company's Deferred Director Fee
Option Plan (the "1993 Plan") permits non-employee directors to choose between
receiving their fees from the Company in the form of cash or non-qualified
stock options. The option exercise price is 50% of the fair market value of
the shares at the time the options are awarded and the amount of shares is
determined by dividing the directors' fees by the exercise price. Mr. Solomon
is the only current director who has elected to participate in the 1993 Plan.
At November 13, 1997, there were outstanding options to purchase 4,854 shares
of the Company Common Stock at an average option exercise price of $22.45.
During fiscal 1997, Mr. Solomon was awarded an option to purchase 779 shares
of the Company Common Stock at an option price of $21.81 on December 31, 1996
and an option to purchase 899 shares of Company Common Stock at an option
price of $21.69 on January 24, 1997. Options granted in lieu of annual
retainer fees become exercisable as to all shares covered thereby on the first
anniversary of the date of grant and options granted in lieu of meeting fees
become exercisable six months following the date of grant.
Stock Option Plan for Directors--The Company has established the 1991 Stock
Option Plan for Non-Employee Directors (the "1991 Plan"), pursuant to which
each of the then current directors who was not an employee of the Company
(each an "Eligible Director") was awarded options to purchase 4,000 shares of
Company Common Stock upon adoption of the 1991 Plan. The Plan also provides
initial grants to newly elected directors for options covering 4,000 shares of
Company Common Stock. Following the initial grant, each person who is an
Eligible Director on the day immediately succeeding the day of each annual
meeting of stockholders of the Company will receive options covering 1,000
shares (subject to the maximum number of shares available under the 1991 Plan)
of Company Common Stock on such date. The exercise price of each option is
100% of fair market value (as defined in the 1991 Plan) on the date of award.
At November 13, 1997, there were outstanding options to purchase 26,000 shares
of Company Common Stock under the 1991 Plan at an average option exercise
price of $44.16. The exercise price of the options for 1,000 shares awarded to
each such director following the 1997 Annual Meeting of Stockholders was
$43.38 per share. In addition, Mr. Bills was awarded an option to purchase
4,000 shares upon his election to the Board of Directors on August 5, 1997 at
an exercise price of $47.00 per share. Options become exercisable on the
earlier of (i) the first anniversary of the date of grant or (ii) the date
immediately prior to the date of the next annual meeting of stockholders
following the grant date provided that such date is at least 355 days after
such grant date. 100,000 shares have been authorized for delivery upon
exercise of options under the 1991 Plan. The 1991 Plan is administered by the
Compensation Committee of the Board of Directors.
127
<PAGE>
CERTAIN TRANSACTIONS
During fiscal 1997, the Company purchased certain transportation equipment
from Great Dane for an aggregate purchase price of $54 million. The
transaction was consummated on an arms-length basis and on usual and customary
commercial terms. Until December 1996, Mr. Solomon was a director of, and
owned an equity interest in, the parent corporation of Great Dane.
The Company has agreed to indemnify and hold harmless, each present and
former director, officer or employee of the Company or any of its subsidiaries
against any costs or expenses, judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, (x) arising out of or pertaining to the
transactions contemplated by the Recapitalization Merger Agreement or (y)
otherwise with respect to any acts or omissions occurring at or prior to the
Effective Time, to the same extent as provided in the Company's Certificate of
Incorporation or By-Laws or any applicable existing indemnification agreement.
In addition, under the Recapitalization Merger Agreement, the Company has
agreed, subject to certain conditions, that for a period of six years after
the Effective Time, the Company will maintain in effect, if available,
directors' and officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers' liability
insurance policy (a copy of which has been made available to MergerCo) on
terms comparable to, or better than, those now applicable to directors and
officers of the Company. See "MATERIAL PROVISIONS OF THE RECAPITALIZATION
MERGER AGREEMENT--Indemnification and Insurance."
128
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Under the Company's Certificate of Incorporation, the Company is authorized
to issue up to 30 million shares of Company Common Stock, of which 15,372,903
shares were issued and outstanding as of November 2, 1998, and 3 million
shares of Preferred Stock, in one or more series, with such designations,
voting powers, preferences and relative participating, optional or other
special rights, and with such qualifications, limitations or restrictions
thereon, as may be stated or expressed in resolutions providing for the
creation and issuance thereof adopted by the Board of Directors of the
Company. No Preferred Stock is currently outstanding.
Each holder of Company Common Stock is entitled to one vote for each share
held. Holders of Company Common Stock do not have preemptive rights and are
not entitled to cumulative voting in the election of Directors. All
outstanding shares of Company Common Stock are, and all Retained Shares will
be, fully paid and non-assessable. The Board of Directors is authorized to
issue from time to time all of the authorized but unissued shares of Company
Common Stock.
In case of any liquidation, dissolution or winding up of the Company, the
holders of Company Common Stock are entitled to share pro rata in the
distribution of all assets of the Company remaining after the holders of any
series of Preferred Stock have been paid the preference designated for such
shares. Subject to the senior rights of any Preferred Stock, the holders of
Company Common Stock are entitled to receive dividends when and as declared by
the Board of Directors and paid by the Company from funds legally available
therefor. The Company's source of funds for the payment of cash dividends is
advances and dividends from its subsidiary, XTRA, Inc. Several of the
Company's loan agreements contain restrictions on the payment of cash
dividends by the Company, including limitations restricting dividends to a
fixed amount plus consolidated net income of the Company earned since a date
specified in the relevant agreement. In addition, such loan agreements
restrict the payment of advances and dividends to the Company from its
subsidiary, XTRA, Inc. See "RISK FACTORS." The Company has agreed in the
Recapitalization Merger Agreement not to pay dividends pending consummation of
the Merger.
FOLLOWING THE MERGER
If the Merger is approved by the requisite vote of the stockholders of
Company Common Stock at the Special Meeting, at the Effective Time the
Certificate of Incorporation of the Company will read in its entirety in the
form set forth as Exhibit A to the Recapitalization Merger Agreement which is
included as Annex A hereto, until thereafter amended as provided therein and
under the DGCL. The Certificate of Incorporation is being amended in
connection with the Merger to reflect the revised capitalization of the
Company following the Merger, including following the proposed stock-split,
and to eliminate provisions, such as the ability to issue preferred stock,
which are not considered to be necessary following the consummation of the
Merger. Following the Merger, the Company will be authorized under its
Certificate of Incorporation to issue 50 million shares of Company Common
Stock, as compared to 30 million shares of Company Common Stock and 3 million
shares of Company Preferred Stock prior to the Merger.
The By-laws of the Company as in effect at the Effective Time will continue
to be the By-laws of the Company following the Merger until thereafter changed
or amended as provided therein or by applicable law.
CERTAIN OTHER PROVISIONS OF THE CERTIFICATE OF INCORPORATION
Delaware law permits a corporation to eliminate the personal liability of
its directors to the corporation or to any of its stockholders for monetary
damages for a breach of fiduciary duty as a director, except (i) for breach of
the director's duty of loyalty, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
for certain unlawful dividends and stock repurchases or (iv) for any
transaction from which the director derived an improper personal benefit. The
Company's Certificate of Incorporation provides that no director of the
Company will be personally liable to the Company or its stockholders for
monetary damages for any breach of his fiduciary duty as a director, except as
provided by Delaware law.
The Company is subject to the provisions of Section 203 of the DGCL. In
general, this statute prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder,
129
<PAGE>
unless the business combination is approved in a prescribed manner. An
interested stockholder "is a person who, together with affiliates and
associates, owns (or within the prior three years did own) 15% or more of the
corporation's voting stock." In light of the approval of the transactions
contemplated by the Merger Agreement and the Voting Agreements by the Board of
Directors of the Company, the Investors will not be subject to the
prohibitions of Section 203.
SPECIAL MEETINGS OF STOCKHOLDERS
The By-laws provide that special meetings of stockholders of the Company may
be called only by the Board of Directors, the Chairman of the Board, if any,
the President, or the holders of twenty percent of the issued and outstanding
shares of Company Common Stock.
STOCKHOLDER ACTION BY WRITTEN CONSENT
As permitted by Delaware law, the Company's Certificate of Incorporation
does not permit stockholder action by written consent. The affirmative vote of
the holders of at least 80% of the Company's then outstanding Company Common
Stock is required to amend, alter or repeal this provision. Following the
Merger, the Company's Certificate of Incorporation will not prohibit
stockholder action by written consent.
ADVANCE NOTICE REQUIREMENT FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
The By-laws provide that stockholders seeking to bring business before a
meeting of stockholders, including a proposal to nominate candidates for
election as directors at an annual or special meeting of stockholders, must
provide timely notice thereof, as set forth in the By-laws, in writing. These
notice provisions are in addition to any other notice requirements provided by
applicable law or regulation.
INDEMNITY
The Company's Certificate of Incorporation provides that the Company shall,
to the maximum extent permitted from time to time under the law of the State
of Delaware, indemnify and upon request shall advance expenses to any person
who is or was a party or is threatened to be made a party to any threatened,
pending or completed action, suit, proceeding or claim, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to be a director or officer of the Company or while a
director or officer is or was serving at the request of the Company as a
director, officer, partner, trustee, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, against expenses (including attorney's fees
and expenses), judgments, fines, penalties and amounts paid in settlement
incurred in connection with the investigation, preparation to defend or
defense of such action, suit, proceeding, or claim; provided, however, that
the foregoing shall not require the Company to indemnify or advance expenses
to any person in connection with any action, suit, proceeding, claim or
counterclaim initiated by or on behalf of such person. Such indemnification is
not exclusive of other indemnification rights arising under any by-law,
agreement, vote of directors or stockholders or otherwise and inures to the
benefit of the heirs and legal representatives of such person. In addition,
the Company maintains a directors' and officers' liability insurance policy.
Following the Merger, the Company's By-laws will provide similar
indemnification and expense payment provisions.
SHARES RESERVED FOR ISSUANCE
As of June 30, 1998 the Company has 495,845 shares of Company Common Stock
reserved for issuance upon the exercise of options to be granted under the
Option Plans. Following the Merger, the Company intends to reserve 250,000
shares of Company Common Stock for issuance pursuant to Awards granted under
the Stock Option Plan.
EXCHANGE AGENT
The Exchange Agent and registrar for the Company Common Stock is Boston
Equiserve.
130
<PAGE>
LISTING
The Company Common Stock is listed on NYSE under the symbol "XTR." Following
the Merger, the Company intends to delist the Company Common Stock. See "THE
MERGER--Delisting; Deregistration."
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 1998, certain information
concerning ownership of shares of Company Common Stock by: (i) persons who are
known by the Company to own beneficially more than 5% of the outstanding
shares of Company Common Stock; (ii) each director and named executive officer
of the Company; and (iii) all directors and executive officers of the Company
as a group as of June 30, 1998.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(1)
- ------------------------ ------------------------ -----------
<S> <C> <C>
American Century Companies, Inc........... 957,200 6.3%
4500 Main St.
Kansas City, Missouri 64111
Franklin Mutual Advisers, Inc............. 1,447,800 9.5%
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Tiger Management L.L.C(2)................. 5,291,400 34.5%
101 Park Avenue
47th Floor
New York, NY 10178
Trinity I Fund, L.P(2).................... 1,372,900 9.0%
201 Main Street, Suite 3200
Fort Worth, Texas 76102 07078
Westport Asset Management Inc............. 1,424,320 9.3%
253 Riverside Avenue
Westport, Connecticut 06880
Michael D. Bills.......................... 4,000 *
H. William Brown.......................... 5,000 *
Michael N. Christodolou................... -- --
Michael K. Fox............................ 46,667 *
William H. Franz.......................... 95,000 *
Robert M. Gintel.......................... 23,000 *
Robert B. Goergen......................... 44,852(3) *
Frederick M. Gutterson.................... 61,250 *
Herbert C. Knortz......................... 9,800 *
Francis J. Palamara....................... 9,800 *
Lewis Rubin............................... 286,056 1.9%
Michael J. Soja........................... 90,534 *
Martin L. Solomon......................... 38,897 *
All Directors and Executive Officers as a
group, including those named above (17
persons)................................. 762,108 5.0%
</TABLE>
- --------
* Less than 1%.
(1) Nature of beneficial ownership is direct and arises from sole voting and
investment power, unless otherwise noted by footnote.
131
<PAGE>
Information with respect to beneficial ownership of the Company Common
Stock is based in part upon information contained in filings with the
Commission and in part on information obtained directly from the holders.
The percentages shown in the foregoing table have been computed on the
basis of shares outstanding on June 30, 1998. The number of shares reported
as held for each of the holders of Company Common Stock was as of June 30,
1998. For purposes of determining beneficial ownership of the Company
Common Stock, options exercisable within 60 days of June 30, 1998 have been
included.
(2) As described under "CERTAIN RELATED AGREEMENTS--Voting Agreements,"
pursuant to Voting Agreements entered into with MergerCo, Tiger and
Trinity on behalf of the Funds, have agreed to vote the shares of Company
Common Stock reflected on the table above in favor of the Recapitalization
Merger Agreement and the transactions contemplated thereby. Accordingly,
MergerCo may also be considered to be the beneficial owner of such
securities.
(3) Includes 2,824 shares of Company Common Stock owned by Mr. Goergen's wife,
and 700 shares held in trust for the benefit of Mr. Goergen's mother. Mr.
Goergen disclaims beneficial ownership of such shares.
MERGERCO AND THE INVESTORS
MergerCo is an entity formed by (i) Apollo on behalf of its managed funds,
and (ii) Atlas, an affiliate of Interpool. The principal executive offices of
MergerCo and Apollo are located at c/o Apollo Advisors IV, L.P., Two
Manhattanville Road, Purchase, New York 10577 and their phone number is (914)
694-8000.
MergerCo is a Delaware limited liability company, formed solely for the
purpose of consummating the Merger and effecting the transactions contemplated
by the Recapitalization Merger Agreement. All of the membership interests of
MergerCo are owned by Apollo Investment Fund IV, L.P., a Delaware limited
partnership ("AIF IV"), Apollo Overseas Partners IV, L.P., a Cayman Islands
limited partnership ("Overseas Partners"), and Atlas. MergerCo will not have
any assets or liabilities other than those arising under the Recapitalization
Merger Agreement or in connection with the Merger, or engage in any activities
other than those incident to its formation and capitalization and the Merger
and accordingly, no meaningful financial information regarding MergerCo is
available.
Apollo is the day-to-day manager for AIF IV and Overseas Partners. Apollo's
general partner is AIF IV Management, Inc., a Delaware corporation ("AIF IV,
Inc.").
Apollo Advisors IV, L.P., a Delaware limited partnership ("Advisors"), is
the general partner of AIF IV and the general partner of Overseas Partners.
Each of AIF IV, Overseas Partners and Advisors is principally engaged in the
business of investing in securities.
Apollo Capital Management IV, Inc., a Delaware corporation ("Apollo
Capital"), is the general partner of Advisors. Apollo Capital is principally
engaged in the business of serving as general partner to Advisors.
The principal office of AIF IV, Overseas Partners, AIF IV, Inc., Advisors
and Apollo Capital is c/o Apollo Advisors IV, L.P., Two Manhattanville Road,
Purchase, New York 10577.
Atlas is principally engaged in the business of investing in securities.
Interpool owns approximately 99% of the membership interests of Atlas. The
principal executive office of Atlas is 633 Third Avenue, New York, New York
10017.
Interpool is engaged in the business of leasing intermodal dry freight
standard containers and chassis. Interpool's common stock, par value $.001 per
share, is publicly traded and is listed on NYSE. The principal executive
office of Interpool is 211 College Road East, Princeton, New Jersey 08540.
132
<PAGE>
REGULATORY APPROVALS
ANTITRUST
Under the HSR Act and the rules promulgated thereunder by the FTC, the
Merger may not be consummated until notification has been given and certain
information has been furnished to the FTC and the Antitrust Division and the
applicable waiting period has expired or been terminated. The Investors and
the Company have filed Notification and Report Forms under the HSR Act with
the FTC and the Antitrust Division, and on August 13, 1998, the waiting period
was terminated. No foreign regulatory filings are required in connection with
the consummation of the Merger.
At any time before or after consummation of the Merger, the Antitrust
Division or the FTC could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including seeking to
enjoin the consummation of the Merger or seeking divestiture of substantial
assets of the Company. At any time before or after the Effective Time, any
state could take such action under the antitrust laws as it deems necessary or
desirable in the public interest. Such action could include seeking to enjoin
the consummation of the Merger or seeking divestiture of substantial assets of
the Company. Private parties may also seek to take legal action under the
antitrust laws under certain circumstances. The Company and MergerCo believe
that the Merger can be effected in compliance with federal and state antitrust
laws.
OTHER
The obligations of MergerCo under the Recapitalization Merger Agreement are
also subject to the receipt of all necessary licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental
authorities and other third parties as are necessary in connection with the
transactions contemplated by the Merger. Certain aspects of the Merger will
require notification to, and filings with, certain securities and other
authorities in certain states or countries, including jurisdictions where the
Company currently operates.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements and financial statement schedule of
the Company at September 30, 1996 and 1997, and for each of the three years in
the period ended September 30, 1997, appearing in this Proxy
Statement/Prospectus have been audited by Arthur Andersen LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein,
and are included in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing. A representative of Arthur
Andersen LLP will be present at the Special Meeting to answer appropriate
questions and will have an opportunity to make a statement.
STOCKHOLDER PROPOSALS
In the event that the Merger is consummated, it is anticipated that the
Company Common Stock will be delisted from NYSE and the Company Common Stock
will be eligible for deregistration under the Exchange Act. If the
stockholders of the Company do not approve the Recapitalization Merger
Agreement or if the Merger is not consummated for any other reason and the
Company Common Stock continues to be registered under the Exchange Act,
stockholder proposals intended to be presented at the Company's 1999 Annual
Meeting of Stockholders must have been received by the Company by August 24,
1998 to be included in the proxy materials for such meeting. Also, the Company
may use its discretionary authority to vote any proposal not included in the
Company's proxy materials if the Company was not notified by November 7, 1998
of a stockholder's intention to present such proposal at the Company's 1999
Annual Meeting.
133
<PAGE>
LEGAL MATTERS
The validity of the shares of Company Common Stock being retained in the
Merger is being passed upon for the Company by Ropes & Gray, Boston,
Massachusetts. Ropes & Gray has delivered an opinion concerning certain
Federal income tax consequences of the Merger. See "THE MERGER--Material
Federal Income Tax Consequences."
OTHER MATTERS
Except for the approval and adoption of the Recapitalization Merger
Agreement and the approval of the Stock Option Plan, the Board does not intend
to bring any other matters before the Special Meeting and does not know of any
matters to be brought before the Special Meeting by others. If any other
matter should come before the Special Meeting, it is the intention of the
persons named in the accompanying proxy to vote the proxy on behalf of the
stockholders they represent in accordance with the best judgment of such
persons.
134
<PAGE>
XTRA CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Financial Statements
Consolidated Balance Sheets as of September 30, 1997 and September 30,
1996................................................................... F-3
Consolidated Income Statements for the Three Years Ended September 30,
1997................................................................... F-4
Consolidated Statements of Cash Flows for the Three Years Ended Septem-
ber 30, 1997........................................................... F-5
Consolidated Statements of Stockholders' Equity for the Three Years
Ended September 30, 1997............................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
Consolidated Balance Sheets as of June 30, 1998 and as of September 30,
1997................................................................... F-17
Consolidated Income Statements for the Three Months Ended June 30, 1998
and 1997 and Nine Months Ended June 30, 1998 and 1997.................. F-18
Consolidated Statements of Cash Flows for the Nine Months Ended June 30,
1998 and 1997.......................................................... F-19
Consolidated Statements of Stockholders' Equity for the Period September
30, 1996 through June 30, 1998......................................... F-20
Notes to Consolidated Financial Statements.............................. F-21
</TABLE>
F-1
<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
F-2
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<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.
F-3
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
<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
---- ---- ----
Basic earnings per common share................................. 2.79 2.56 3.40
Basic common shares outstanding................................. 15.3 16.0 16.8
Diluted earnings per common share............................... 2.78 2.56 3.39
Diluted common shares outstanding............................... 15.3 16.1 16.9
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<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 activi-
ties............................................... (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.
F-5
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE THREE YEARS ENDED SEPTEMBER
30, 1997
--------------------------------------
COMMON
STOCK
$.50 CAPITAL IN CUMULATIVE
PAR EXCESS OF RETAINED TRANSLATION
VALUE PAR VALUE EARNINGS ADJUSTMENT
------ ---------- -------- -----------
(MILLIONS OF DOLLARS)
<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 bene-
fits.................................. -- 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 bene-
fits.................................. -- 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 bene-
fits.................................. -- 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.
F-6
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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, where the present value of
the minimum lease payments at the beginning of the lease term equals or
exceeds 90% of the fair value of the leased property, 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.
Equipment Disposals
For purposes of the statements of cash flows, the net book value of
equipment sold is included in cash flow from operations to reflect the total
proceeds, including the gain or loss on sale already included in income, from
the continuous disposal of fleet units.
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.
F-7
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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. The calculation is prepared in accordance with 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 is replaced
with "Basic Earnings Per Share" and fully diluted earnings per share is
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.
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
F-8
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
revenue over the lease term using the interest method, which provides a level
rate of return on the net investment in the lease.
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
LEASES LEASES
--------- -------
(MILLIONS OF
DOLLARS)
<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>
1997 1996
---------- ----------
(MILLIONS OF DOLLARS)
<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
Debt as of September 30, 1997 and 1996 consisted of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(MILLIONS OF DOLLARS)
<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.
F-9
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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>
1997 1996
---------- ----------
(MILLIONS OF DOLLARS)
<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
DEBT MATURITIES
---------------------
(MILLIONS OF DOLLARS)
<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
F-10
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
(5) INCOME TAXES
The components of the provision for income taxes for 1997, 1996, and 1995
are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- -------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Current tax provision
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>
1997 1996
---------- ----------
(MILLIONS OF DOLLARS)
<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>
F-11
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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
COMMITMENTS
---------------------
(MILLIONS OF DOLLARS)
<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.
F-12
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(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>
1997 1996 1995
------ ------ ------
(MILLIONS OF
DOLLARS)
<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
F-13
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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>
1997 1996
---------- ----------
(MILLIONS OF DOLLARS,
EXCEPT PER SHARE
AMOUNTS)
<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 $4.40, respectively.
Because the SFAS 123 method of accounting has not been applied to options
granted prior to October 1, 1995, the resulting pro forma compensation cost
may not be representative of that to be expected in future years.
F-14
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes the stock option transactions pursuant to the
Company's stock incentive and stock option plans for the three-year period
ended September 30, 1997:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
(000S) PER SHARE ($)
------ ----------------
<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>
(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.
F-15
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
FOR THE TWO YEARS ENDED SEPTEMBER 30, 1997 AMOUNT VALUE
------------------------------------------ ------------ ----------
(MILLIONS OF DOLLARS)
<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.
(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)
SELECTED INCOME STATEMENT DATA:
-------------------------------
<S> <C> <C> <C>
Revenues.............................................. $ 435 $ 422 $ 378
Income before provision for income taxes.............. 71 69 98
Net income............................................ 43 41 57
<CAPTION>
SELECTED BALANCE SHEET DATA:
----------------------------
<S> <C> <C> <C>
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>
F-16
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1998 1997(1)
----------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Property and equipment............................... $2,163 $2,112
Accumulated depreciation............................. (732) (658)
------ ------
Net property and equipment....................... 1,431 1,454
Lease contracts receivable........................... 44 43
Trade receivables, net............................... 60 65
Other assets......................................... 16 19
Cash................................................. 7 4
------ ------
$1,558 $1,585
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Debt............................................... $ 818 $ 892
Deferred income taxes.............................. 276 252
Accounts payable and accrued expenses.............. 72 81
------ ------
Total liabilities................................ 1,166 1,225
------ ------
Commitments and contingencies:
Stockholders' equity:
Common stock, par value $.50 per share; authorized:
30,000,000 shares; issued and outstanding;
15,372,903 shares at June 30, 1998 and 15,276,600
at September 30, 1997............................. 8 8
Capital in excess of par value..................... 57 52
Retained earnings.................................. 335 304
Cumulative translation adjustment.................. (8) (4)
------ ------
Total stockholders' equity....................... 392 360
------ ------
$1,558 $1,585
====== ======
</TABLE>
- --------
(1) Derived from XTRA Corporation's audited September 30, 1997 financial
statements.
The accompanying notes are an integral part of these consolidated financial
statements.
F-17
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE
MONTHS NINE MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
----------- -----------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues............................................... $ 112 $ 105 $ 342 $ 318
Operating expenses
Depreciation on rental equipment..................... 38 37 113 110
Rental equipment operating expenses.................. 29 27 83 80
Selling and administrative expense................... 11 11 33 32
----- ----- ----- -----
78 75 229 222
----- ----- ----- -----
Operating income................................... 34 30 113 96
Interest expense....................................... 14 16 44 47
----- ----- ----- -----
Pretax income...................................... 20 14 69 49
Provision for income taxes............................. 8 5 28 20
----- ----- ----- -----
Net income............................................. $ 12 $ 9 $ 41 $ 29
===== ===== ===== =====
Basic earnings per common share........................ $0.80 $0.56 $2.69 $1.90
Basic common shares outstanding (in millions).......... 15.3 15.3 15.3 15.3
Diluted earnings per common share...................... $0.80 $0.56 $2.68 $1.90
Diluted common shares outstanding (in millions)........ 15.4 15.3 15.4 15.3
Cash dividends declared per share...................... $0.22 $0.20 $0.64 $0.58
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-18
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
JUNE 30,
------------
1998 1997
----- -----
<S> <C> <C>
Cash flows from operations:
Net income..................................................... $ 41 $ 29
Add non-cash income and expense items:
Depreciation and amortization, net............................. 113 110
Deferred income taxes.......................................... 24 18
Bad debt expense............................................... 4 4
Add other cash items:
Net change in receivables, other assets, accounts payable and
accrued expenses.............................................. (10) (20)
Cash receipts from lease contracts receivable.................. 19 15
Recovery of property and equipment net book value.............. 20 25
----- -----
Total cash provided from operations.......................... 211 181
----- -----
Cash used for investment activities:
Additions to property and equipment............................ (129) (182)
----- -----
Total cash used for investing activities..................... (129) (182)
----- -----
Cash flows from financing activities:
Borrowings of long term debt................................... -- 72
Payments of long-term debt..................................... (74) (51)
Options exercised and related tax benefits..................... 5 --
Repurchase of common stock, net................................ -- (12)
Dividends paid................................................. (10) (9)
----- -----
Total cash used for financing activities..................... (79) --
----- -----
Net increase decrease in cash.................................... 3 (1)
Cash at beginning of period...................................... 4 8
----- -----
Cash at end of period............................................ $ 7 $ 7
===== =====
Total interest paid.............................................. $ 53 $ 55
Total income taxes paid.......................................... $ 3 $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-19
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(MILLIONS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON
STOCK CAPITAL IN CUMULATIVE
$0.50 EXCESS OF RETAINED TRANSLATION
PAR VALUE PAR VALUE EARNINGS ADJUSTMENT
--------- ---------- -------- -----------
<S> <C> <C> <C> <C>
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 -- --
Common stock repurchased............ -- (13) -- --
Translation adjustment.............. -- -- -- (1)
--- ---- ---- ---
Balance at September 30, 1997....... 8 52 304 (4)
Net income.......................... -- -- 41 --
Common stock cash dividends declared
at $.64 per share.................. -- -- (10) --
Options exercised and related tax
benefits........................... -- 5 -- --
Translation adjustment.............. -- -- -- (4)
--- ---- ---- ---
Balance at June 30, 1998............ $ 8 $ 57 $335 $(8)
=== ==== ==== ===
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-20
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) 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 prior period financial statements have been
reclassified to be consistent with the current period's presentation.
(2) The effective income tax rates used in the interim financial statements
are estimates of the fiscal years' rates. The effective income tax rate
for fiscal 1997 was 40%. For the nine months ended June 30, 1998, the
Company recorded a provision for income taxes using an estimated effective
income tax rate of 40%. The Company's effective income tax rate for fiscal
1997 and its estimated effective income tax rate for fiscal 1998 are
higher than the statutory U.S. Federal income tax rate due primarily to
state income taxes.
(3) The Company's long-term debt includes a current portion of $51 million at
June 30, 1998 and $57 million at September 30, 1997.
(4) XTRA Corporation's assets consist substantially of the aggregate assets,
liabilities, earnings and equity of XTRA, Inc., a wholly-owned direct
subsidiary. In addition, XTRA Corporation generally guarantees the debt of
XTRA, Inc.
The condensed consolidated financial data for XTRA, Inc. included in the
consolidated financial information of the Company is summarized below:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1998 1997
-------- -------------
(MILLIONS OF DOLLARS)
<S> <C> <C>
SELECTED BALANCE SHEET DATA:
----------------------------
Net property and equipment............................ $1,431 $1,454
Receivables, net...................................... 104 108
Other assets.......................................... 23 23
------ ------
Total assets........................................ $1,558 $1,585
====== ======
Debt.................................................. $ 818 $ 892
Deferred income taxes................................. 276 252
Other liabilities..................................... 77 86
------ ------
Total liabilities................................... 1,171 1,230
------ ------
Stockholders' equity.................................. 387 355
------ ------
Total liabilities and stockholders' equity.......... $1,558 $1,585
====== ======
<CAPTION>
FOR THE THREE MONTHS
ENDED JUNE 30,
----------------------
1998 1997
-------- -------------
(MILLIONS OF DOLLARS)
<S> <C> <C>
SELECTED INCOME STATEMENT DATA:
-------------------------------
Revenues.............................................. $ 112 $ 105
Pretax income......................................... 20 14
Net income............................................ 12 9
<CAPTION>
FOR THE NINE MONTHS
ENDED JUNE 30,
----------------------
1998 1997
-------- -------------
<S> <C> <C>
Revenues.............................................. $ 342 $ 318
Pretax income......................................... 68 49
Net income............................................ 41 29
</TABLE>
F-21
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) 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. 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
dilutive outstanding common stock equivalents and is computed similarly to
primary earnings per share according to APB 15.
The following tables provide a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations, as
required by SFAS 128:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED JUNE ENDED JUNE
30, 30,
------------- -------------
1998 1997 1998 1997
------ ------ ------ ------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net income (in millions)(numerator)............ $ 12 $ 9 $ 41 $ 29
====== ====== ====== ======
Computation of Basic Shares Outstanding
Weighted average number of basic common shares
outstanding (denominator)..................... 15,321 15,259 15,301 15,270
====== ====== ====== ======
Basic earnings per common share................ $ 0.80 $ 0.56 $ 2.69 $ 1.90
====== ====== ====== ======
Computation of Diluted Shares Outstanding
Weighted average common shares outstanding..... 15,321 15,259 15,301 15,270
Common stock equivalents for diluted common
shares outstanding............................ 65 18 71 15
------ ------ ------ ------
Weighted average number of diluted common
shares outstanding (denominator).............. 15,386 15,277 15,372 15,285
====== ====== ====== ======
Diluted earnings per common share.............. $ 0.80 $ 0.56 $ 2.68 $ 1.90
------ ------ ------ ------
</TABLE>
(6) On June 19, 1998, XTRA Corporation (the "Company") entered into an
Agreement and Plan of Merger and Recapitalization, dated as of June 18,
1998, which was amended and restated as of July 31, 1998 (the
"Recapitalization Merger Agreement"), between the Company and Wheels
MergerCo LLC, a newly organized Delaware limited liability company
("MergerCo") formed solely for the purpose of consummating the
transactions contemplated by the Recapitalization Merger Agreement by (i)
Apollo Management IV, L.P., on behalf of its managed funds ("Apollo"), and
(ii) Atlas Capital Partners LLC ("Atlas"), an affiliate of Interpool, Inc.
("Interpool") (collectively, together with Apollo, the "Investors").
F-22
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AND RECAPITALIZATION
BY AND BETWEEN
WHEELS MERGERCO LLC
AND
XTRA CORPORATION
DATED AS OF JULY 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 1
The Merger
<C> <S> <C>
Section 1.1 The Merger.................................................. A- 1
Section 1.2 Closing..................................................... A- 2
Section 1.3 Effective Time.............................................. A- 2
Section 1.4 Effect of the Merger........................................ A- 2
Section 1.5 Name, Certificate of Incorporation, By-Laws................. A- 2
Section 1.6 Directors and Officers...................................... A- 2
ARTICLE 2
Effect of the Merger on the Capital Stock of the Constituent Corporations
Section 2.1 Effect on Capital Stock..................................... A- 2
Section 2.2 Common Share Elections...................................... A- 3
Section 2.3 Proration................................................... A- 4
Section 2.4 Options; Stock Plans........................................ A- 5
Section 2.5 Payment for Common Shares................................... A- 5
Section 2.6 Stock Transfer Books........................................ A- 7
Section 2.7 No Further Ownership Rights in Company Common Stock......... A- 7
Section 2.8 Lost, Stolen or Destroyed Certificates...................... A- 7
Section 2.9 Taking of Necessary Action; Further Action.................. A- 7
ARTICLE 3
Representations and Warranties of the Company
Section 3.1 Organization and Qualification; Subsidiaries................ A- 7
Section 3.2 Capitalization.............................................. A- 8
Section 3.3 Authority Relative to this Agreement........................ A- 9
Section 3.4 No Conflict, Required Filings and Consents.................. A- 9
Section 3.5 Compliance.................................................. A-10
Section 3.6 SEC Filings; Financial Statements........................... A-10
Section 3.7 Absence of Certain Changes or Events........................ A-11
Section 3.8 No Undisclosed Liabilities.................................. A-11
Section 3.9 Absence of Litigation....................................... A-11
Section 3.10 Filings; Form S-4; Proxy Statement.......................... A-11
Section 3.11 Opinion of Financial Advisor................................ A-12
Section 3.12 Tax Matters................................................. A-12
Section 3.13 Takeover Statutes Not Applicable............................ A-12
Section 3.14 Properties.................................................. A-12
Section 3.15 Intellectual Property....................................... A-13
Section 3.16 Labor Matters............................................... A-14
Section 3.17 Year 2000 Compliance........................................ A-14
Section 3.18 Material Contracts.......................................... A-14
Section 3.19 Employee Benefits; ERISA.................................... A-15
Section 3.20 Environmental Laws.......................................... A-16
Section 3.21 Title to Personal Properties; Condition of Assets........... A-17
Section 3.22 Insurance................................................... A-17
Section 3.23 Required Company Vote....................................... A-18
Section 3.24 Board Recommendations....................................... A-18
Section 3.25 Brokers..................................................... A-18
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 4
Representations and Warranties of MergerCo
<C> <S> <C>
Section 4.1 Organization and Qualification............................ A-18
Section 4.2 Financing................................................. A-18
Section 4.3 Authority Relative to this Agreement...................... A-18
Section 4.4 No Conflict, Required Filings and Consents................ A-19
Section 4.5 Filings; Form S-4; Proxy Statement........................ A-19
Section 4.6 Brokers and Finders....................................... A-19
ARTICLE 5
Conduct of Business Pending the Merger
Section 5.1 Conduct of Business by the Company Pending the Merger..... A-20
Section 5.2 No Solicitation, etc...................................... A-21
ARTICLE 6
Additional Agreements
Section 6.1 HSR Act................................................... A-22
Section 6.2 Stockholders' Meetings; Form S-4 and Proxy Statement...... A-22
Section 6.3 Access to Information; Confidentiality.................... A-23
Section 6.4 Indemnification and Insurance............................. A-23
Section 6.5 Notification of Certain Matters........................... A-24
Section 6.6 Further Action............................................ A-24
Section 6.7 Disposition of Litigation................................. A-25
Section 6.8 Affiliates................................................ A-25
Section 6.9 Stop Transfer Order....................................... A-26
Section 6.10 Public Announcements...................................... A-26
Section 6.11 Retention Bonus Plan...................................... A-26
Section 6.12 Company Information....................................... A-26
Section 6.13 Registration Rights Agreement............................. A-26
Section 6.14 Management Agreement...................................... A-26
Section 6.15 Employee Plans............................................ A-26
ARTICLE 7
Conditions to the Merger
Section 7.1 Conditions to Obligation of each Party to Effect the
Merger................................................... A-27
Section 7.2 Additional Conditions to Obligations of MergerCo.......... A-27
Section 7.3 Additional Conditions to Obligations of the Company....... A-28
ARTICLE 8
Termination
Section 8.1 Termination............................................... A-29
Section 8.2 Effect of Termination..................................... A-30
Section 8.3 Fees and Expenses......................................... A-30
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 9
General Provisions
<C> <S> <C>
Section 9.1 Nonsurvival of Representations, Warranties and Agreements.......... A-31
Section 9.2 Notices............................................................ A-31
Section 9.3 Certain Definitions................................................ A-32
Section 9.4 Waiver and Amendment............................................... A-33
Section 9.5 Headings........................................................... A-33
Section 9.6 Severability....................................................... A-33
Section 9.7 Entire Agreement................................................... A-33
Section 9.8 Parties in Interest................................................ A-33
Section 9.9 Failure or Indulgence Not Waiver, Remedies Cumulative.............. A-33
Section 9.10 Governing Law...................................................... A-33
Section 9.11 Counterparts....................................................... A-33
Section 9.12 Specific Performance............................................... A-34
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AND RECAPITALIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND RECAPITALIZATION,
dated as of July 31, 1998 (this "Agreement"), by and between WHEELS MERGERCO
LLC, a Delaware limited liability company ("MergerCo"), and XTRA CORPORATION,
a Delaware corporation (the "Company").
WHEREAS, as of June 18, 1998, MergerCo and the Company entered into an
Agreement and Plan of Merger and Recapitalization, and MergerCo and the
Company desire to amend and restate in its entirety such Agreement and Plan of
Merger and Recapitalization.
WHEREAS, the Managers of MergerCo and the Board of Directors of the Company
have approved the merger of MergerCo with and into the Company as set forth
below (the "Merger"), in accordance with the Delaware Limited Liability
Company Act (the "DLLCA") and the General Corporation Law of the State of
Delaware (the "DGCL") and upon the terms and subject to the conditions set
forth in this Agreement, pursuant to which the holders of shares of common
stock, par value $.50 per share (the "Common Shares" or the "Shares") of the
Company which are issued and outstanding immediately prior to the Effective
Time (as defined in Section 1.3) will be entitled, subject to the terms hereof
and other than as set forth herein, the right either (i) to retain a portion
of their Common Shares or (ii) to receive cash in accordance with this
Agreement;
WHEREAS, the Merger and this Agreement require the vote of a majority of the
issued and outstanding shares of the Common Shares for the approval thereof
(the "Company Stockholder Approval");
WHEREAS, the Board of Directors of the Company has, subject to the terms and
conditions set forth herein, (i) unanimously determined that (A) the
consideration to be paid for each Share in the Merger is fair to the
stockholders of the Company, and (B) the Merger is otherwise in the best
interests of the Company and its stockholders, and (ii) resolved to approve
and adopt this Agreement and the transactions contemplated hereby and to
recommend approval and adoption of this Agreement by the stockholders of the
Company;
WHEREAS, as a condition to MergerCo's willingness to enter into this
Agreement and consummate the transactions contemplated hereby, MergerCo has
required that the certain stockholders (as specified in the Voting Agreements
(as defined below) (the "Stockholders")) agree, among other things, to vote
all Common Shares beneficially owned by the Stockholders in accordance with
each of the Voting Agreements, each dated as of even date herewith (the
"Voting Agreements"), and comply with the other provisions of the Voting
Agreements;
WHEREAS, certain terms used herein are defined in Section 9.3;
WHEREAS, MergerCo and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger, and also
to prescribe various conditions to the Merger; and
WHEREAS, it is intended that the Merger be recorded as a recapitalization
for financial reporting purposes.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
MergerCo and the Company hereby agree as follows:
ARTICLE 1
The Merger
Section 1.1 The Merger. At the Effective Time (as defined in Section 1.3),
and subject to and upon the terms and conditions of this Agreement and the
provisions of the DLLCA and the DGCL, MergerCo shall be merged with and into
the Company, the separate corporate existence of MergerCo shall cease, and the
Company shall continue its corporate existence under the laws of the State of
Delaware as the surviving corporation. The Company as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
A-1
<PAGE>
Section 1.2 Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, the consummation of the Merger will take place on the third
business day after satisfaction or waiver of the conditions set forth in
Article 7, at 10:00 a.m., at the offices of Ropes & Gray, One International
Place, Boston, Massachusetts, unless another date, time or place is agreed to
by the parties hereto.
Section 1.3 Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article 7, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger as contemplated by the DLLCA and the DGCL (the "Certificate of
Merger"), together with any required related certificates, with the Secretary
of State of the State of Delaware, in such form as required by, and executed
in accordance with the relevant provisions of, the DLLCA and the DGCL (the
time of such filing or such later time as is specified in the Certificate of
Merger being the "Effective Time").
Section 1.4 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the DLLCA and the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all
the property, rights, privileges, powers and franchises of the Company and
MergerCo shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and MergerCo shall become the debts, liabilities and
duties of the Surviving Corporation.
Section 1.5 Name, Certificate of Incorporation, By-Laws.
(1) Name. The name of the Surviving Corporation shall be XTRA Corporation.
(2) Certificate of Incorporation. At the Effective Time and without any
further action on the part of the Company or MergerCo or their respective
stockholders, or Members, as the case may be, the Restated Certificate of
Incorporation, as amended, of the Company (the "Certificate of
Incorporation"), as in effect immediately prior to the Effective Time, shall
be amended and restated so as to read in its entirety in the form set forth as
Exhibit A hereto and, as so amended, until thereafter further amended as
provided therein and under the DGCL, shall be the certificate of incorporation
of the Company following the Merger.
(3) By-Laws. At the Effective Time and without any further action on the
part of the Company or MergerCo or their respective stockholders or members,
as the case may be, the By-laws of the Company as in effect immediately prior
to the Effective Time shall be the By-laws of the Surviving Corporation and
thereafter may be amended or repealed in accordance with their terms and the
Certificate of Incorporation of the Company following the Merger and as
provided under the DGCL.
Section 1.6 Directors and Officers. The Managers of MergerCo immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
MergerCo immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors
are duly elected or appointed and qualified.
ARTICLE 2
Effect of the Merger on the Capital Stock of the Constituent Corporations
Section 2.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the MergerCo, the Company or the
holders of any of the following securities:
(1) Interests in MergerCo. All of the interests in MergerCo issued and
outstanding immediately prior to the Effective Time shall be converted into
a number of Common Shares following the Merger equal to 4,500,000 Common
Shares (or such lesser number as may be determined by MergerCo prior to the
mailing
A-2
<PAGE>
of the Proxy Statement (as hereinafter defined), with each member receiving
a number of Common Shares which equals the percentage of all such shares
corresponding to its percentage of all interests of MergerCo issued and
outstanding immediately prior to the Effective Time.
(2) Cancellation. Each Share held in the treasury of the Company and each
Share owned by any direct or indirect wholly owned Subsidiary of the
Company immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, cease to
be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
(3) Retention of and Payment for Common Shares. Except as otherwise
provided herein and subject to Sections 2.2 and 2.3, each Common Share
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger, be treated as follows:
(i) for each Common Share with respect to which an election to retain
such Common Shares has been effectively made and not revoked in
accordance with Section 2.2 (the "Potential Election Shares") and which
is to be retained in accordance with Section 2.3(2)(ii) or Section
2.3(3), the right to retain such fully paid and nonassessable Common
Share (an "Election Share");
(ii) for each Common Share which was not a Potential Election Share,
but which is to be retained in accordance with Section 2.3(3)(ii), the
right to retain such fully paid and non-assessable Common Share (a
"Non-Election Share" and, together with the Election Shares, the
"Retained Shares"); and
(iii) for each Common Share (other than Dissenting Shares (as defined
in Section 2.5(10) and Retained Shares) the right to receive in cash
from the Company following the Merger an amount equal to $65 (the "Cash
Price" and, with the Retained Shares, the "Merger Consideration") and
each such Common Share shall no longer be outstanding, shall
automatically be canceled and retired and shall cease to exist, and
each holder of a Certificate representing any such Common Shares shall,
to the extent such Certificate represents such Shares, cease to have
any rights with respect thereto, except the right to receive the Cash
Price applicable thereto, upon surrender of such Certificate in
accordance with Section 2.5.
Section 2.2 Common Share Elections. Each person who, on or prior to the
Election Date (as defined in Section 2.2(b) below), is a record holder of
Common Shares will be entitled to make an unconditional election on or prior
to such Election Date to express a desire to retain such shares, on the basis
hereinafter set forth and subject to Section 2.3 hereof.
(1) Subject to any required clearance by the Securities and Exchange
Commission (the "SEC"), the Company shall prepare and mail a form of
election (the "Form of Election"), which form shall be subject to the
reasonable approval of MergerCo, with the Proxy Statement to the record
holders of Common Shares as of the record date for the Special Meeting (as
hereinafter defined), which Form of Election shall be used by each record
holder of Common Shares who elects to express a desire to retain Common
Shares held by such holder. The Company will use its best efforts to make
the Form of Elections available to all persons who become holders of Common
Shares during the period between such record date and the Election Date,
with a copy of the Proxy Statement. Any such holder's election shall have
been properly made only if the Exchange Agent shall have received at its
designated office, by 5:00 p.m., New York City time on the second business
day prior to the date of the Special Meeting (the "Election Date"), a Form
of Election properly completed and signed and accompanied by Certificates
for the Common Shares to which such Form of Election relates, duly endorsed
in blank or otherwise in a form acceptable for transfer on the books of the
Company (or by an appropriate guarantee of delivery of such certificates
asset forth in such Form of Election from a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an
office or correspondent in the United States, provided such certificates
are in fact delivered to the Exchange Agent within three NYSE trading days
after the date of execution of such guarantee of delivery).
(2) Any Form of Election may be revoked by the holder submitting it to
the Exchange Agent only by written notice received by the Exchange Agent
(i) prior to 5:00 p.m., New York City time on the Election
A-3
<PAGE>
Date or (ii) after the Election Date, if (and to the extent that) the
Exchange Agent is legally required to permit revocations and the Effective
Time shall not have occurred prior to such date. In addition, all Forms of
Election shall automatically be revoked if the Exchange Agent is notified
in writing by MergerCo and the Company that the Merger has been abandoned.
If a Form of Election is revoked, the Certificate or Certificates (or
guaranties of delivery, as appropriate) for the Common Shares to which such
Form of Election relates shall be promptly returned to the stockholder
submitting the same to the Exchange Agent.
(3) The determination of the Exchange Agent shall be binding with respect
to whether or not elections have been properly made or revoked pursuant to
this Section 2.2 and when elections and revocations were received by it. If
the Exchange Agent determines that any election to retain Common Shares was
not properly made, such shares shall be treated by the Exchange Agent as
shares for which no election was received, and such shares shall be
retained or converted in accordance with Section 2.1 and 2.3. The Exchange
Agent shall also make all computations as to the allocation and the
proration contemplated by Section 2.3, and any such computation shall be
conclusive and binding on the holders of Common Shares. The Exchange Agent
may, with the mutual agreement of MergerCo and the Company, make such rules
as are consistent with this Section 2.2 for the implementation of the
elections provided for herein as shall be necessary or desirable fully to
effect such elections.
Section 2.3 Proration.
(1) Notwithstanding anything in this Agreement to the contrary, the
"Retained Share Number" shall equal 500,000 Common Shares (or such lesser
number as is determined by MergerCo prior to the mailing of the Proxy
Statement).
(2) If the number of Potential Election Shares is greater than the Retained
Share Number, then each Potential Election Share shall be retained as an
Election Share in accordance with the terms of Section 2.1(3)(i) or receive
cash in accordance with the terms of Section 2.1(3)(iii) in the following
manner:
(i) A proration factor (the "Non-Cash Proration Factor") shall be
determined by dividing the Retained Share Number by the total number of
Potential Election Shares.
(ii) The number of Potential Election Shares covered by each election to
be retained as Election Shares shall be determined by multiplying the Non-
Cash Proration Factor by the total number of Potential Election Shares
covered by such election, rounded down to the nearest whole number.
(iii) All Potential Election Shares, other than those shares which are
retained in accordance with Section 2.3(2)(ii), shall be converted into
cash in accordance with the terms of Section 2.1(3)(iii).
(3) If the number of Potential Election Shares is less than or equal to the
Retained Share Number, then each Potential Election Share shall be retained as
an Election Share in accordance with the terms of Section 2.1(3)(i) and each
Common Share other than a Potential Election Share or a Dissenting Share (a
"Potential Cash Share") shall be retained as a Non-Election Share in
accordance with Section 2.1(3)(ii) or converted into cash in accordance with
the terms of Section 2.1(3)(iii) in the following manner:
(i) A proration factor (the "Cash Proration Factor") shall be determined
by dividing (x) the difference between the Retained Share Number and the
number of Potential Election Shares, by (y) the number of Potential Cash
Shares.
(ii) The number of Potential Cash Shares held by each stockholder to be
retained as Non-Election Shares in accordance with Section 2.1(3)(ii) shall
be determined by multiplying the Cash Proration Factor by the total number
of Potential Cash Shares held by such stockholder, rounded down to the
nearest whole number.
(iii) All Potential Cash Shares, other than those shares retained as Non-
Election Shares, shall be converted to cash in accordance with Section
2.1(3)(iii).
A-4
<PAGE>
Section 2.4 Options; Stock Plans. (1) Except as may be agreed to by the
Company, with the consent of MergerCo, and employees identified by MergerCo
prior to the Effective Time, options to acquire Shares ("Stock Options") which
are outstanding as of the date of this Agreement and which were granted to
employees, former employees or directors under the Company's 1987 Stock
Incentive Plan, 1997 Stock Incentive Plan, 1991 Stock Option Plan for Non-
Employee Directors and Deferred Director Fee Option Plan (which are the only
stock option plans, programs or similar arrangements of the Company or any of
its Subsidiaries) (the "Option Plans") shall be canceled by the Company and
terminated, and each holder of a Stock Option who executes an agreement
acknowledging the cancellation of such Stock Option, whether or not then
exercisable, shall be entitled to receive as soon as practicable after the
Effective Time from the Company in consideration for such cancellation an
amount in cash (less applicable withholding taxes, but without interest) equal
to the product of (i) the number of Shares previously subject to such Stock
Option, multiplied by (ii) the positive excess, if any, of the Cash Price over
the exercise price per share of the Shares previously subject to such Stock
Option. The Company agrees that prior to the Effective Time it shall take all
steps necessary or appropriate under the Option Plans to effect the foregoing
as of the Effective Time. The Company shall take all necessary actions
required to properly withhold and remit to the proper taxing authorities all
income, employment and other taxes required by applicable law to be withheld
from the payment of such cash amounts.
(2) The Company agrees that it will take all necessary action prior to the
Effective Time to terminate the Company's Employee Stock Purchase Plan as of
the Effective Time.
Section 2.5 Payment for Common Shares.
(1) From and after the Effective Time, such bank or trust company as shall
be mutually acceptable to MergerCo and the Company shall act as exchange agent
(the "Exchange Agent"). Following the Effective Time, MergerCo shall cause to
be made available to the Exchange Agent, as and when required, an amount (the
"Exchange Fund") equal to the aggregate Merger Consideration to which holders
of Common Shares shall be entitled at the Effective Time pursuant to Section
2.1(3).
(2) Promptly after the Effective Time, MergerCo shall cause the Exchange
Agent to mail to each record holder of certificates (the "Certificates") that
immediately prior to the Effective Time represented Common Shares a form of
letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent and instructions for use in
surrendering such Certificates and receiving the Merger Consideration in
respect thereof.
(3) In effecting the payment of the Cash Price in respect of Common Shares
represented by Certificates entitled to payment of the Cash Price pursuant to
Section 2.1(3)(iv) (the "Cashed Shares"), upon the surrender of each such
Certificate, the Exchange Agent shall pay the holder of such Certificate the
Cash Price multiplied by the number of Cashed Shares, in consideration
therefor. Upon such payment (and the exchange, if any, of Certificates
formerly representing Common Shares for certificates representing Retained
Shares) such Certificate shall forthwith be cancelled.
(4) In effecting the exchange of Retained Shares in respect of Common Shares
represented by Certificates which, at the Effective Time, shall become
Retained Shares, upon surrender of each such Certificate, the Exchange Agent
shall deliver to the holder of such Certificate a certificate representing
that number of whole Retained Shares which such holder has the right to
receive pursuant to the provisions of Section 2.1(3), and cash in lieu of
fractional Retained Shares. Upon such exchange (and any payment of the Cash
Price for Cashed Shares), such Certificate so surrendered shall forthwith be
cancelled.
(5) Until surrendered in accordance with paragraphs (3) or (4) above, each
such Certificate (other than Certificates representing Common shares held by
MergerCo or any of its affiliates, in the treasury of the Company or by any
wholly owned subsidiary of the Company or Dissenting Shares) shall represent
solely the right to receive the aggregate Merger Consideration relating
thereto. No interest or dividends shall be paid or accrued on the Merger
Consideration. If the Merger Consideration (or any portion thereof) is to be
delivered to
A-5
<PAGE>
any person other than the person in whose name the Certificate formerly
representing Common Shares surrendered therefor is registered, it shall be a
condition to such right to receive such Merger Consideration that the
Certificate so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the person surrendering such Common Shares
shall pay to the Exchange Agent any transfer or other rates required by reason
of the payment of the Merger Consideration to a person other than the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
(6) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Common Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the Common Shares represented thereby, and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to Section
2.5(7) until the surrender of such Certificates in accordance with this
Section 2.5. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the holder of the certificate
representing whole Common Shares issued in exchange therefor, without
interest, at the time of such surrender, the amount of any cash payable in
lieu of a fractional Common Share to which such holder is entitled pursuant to
Section 2.5(7).
(7) No Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of Common Shares retained pursuant to the Merger who
would otherwise have been entitled to retain a fraction of a Retained Share
(after taking into account all Shares delivered by such holder) shall receive,
in lieu thereof, a cash payment (without interest) equal to such fraction
multiplied by the Cash Price.
(8) Termination of Escrow Fund. Promptly following the date which is 180
days after the Effective Time, the Exchange Agent shall deliver to the
Surviving Corporation all cash, Certificates and other documents in its
possession relating to the transactions described in this Agreement, and the
Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing a Common Share may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in consideration therefor the
aggregate Merger Consideration relating thereto, without any interest or
dividends thereon.
(9) No Liability. None of MergerCo, the Company or Exchange Agent shall be
liable to any person in respect of any Retained Shares (or dividends or
distributions with respect thereto) or cash from the Exchange Fund or the
Common Shares Trust delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time (or immediately
prior to such earlier date on which any Retained Shares, any cash in lieu of
fractional Retained Shares or any dividends or distributions with respect to
Common Shares in respect of such Certificate would otherwise escheat to or
become property of any Governmental Entity) any such shares, cash, dividends
or distributions in respect of such Certificate shall, to the extent permitted
by applicable law, become the property of the Surviving Corporation, free and
clear of all claims or interest of any person previously entitled thereto.
(10) Dissenter's Rights. Notwithstanding 2.1(3), Common Shares that have not
been voted for adoption of the Merger and the Merger Agreement and with
respect to which appraisal shall have been properly demanded in accordance
with the DGCL ("Dissenting Shares") shall not be converted into the right to
receive the Merger Consideration at or after the Effective Time unless and
until the holder of such Common Shares withdraws his or her demand for such
appraisal (in accordance with the DGCL) or becomes ineligible for such
appraisal. If a holder of Dissenting Shares shall withdraw (in accordance with
the DGCL) his or her demand for such appraisal or shall become ineligible for
such appraisal, then, as of the Effective Time or the occurrence of such
event, whichever last occurs, such holder's Dissenting Shares shall cease to
be Dissenting Shares and shall be converted into and represent the right to
receive the Merger Consideration without interest. The Company shall give
MergerCo (i) prompt notice of any written demands for appraisal, withdrawals
of demands for appraisal of Common Shares and any other instruments relating
to the DGCL received by the Company and (ii) the opportunity to participate in
all negotiations and proceedings with respect to demands for appraisal. The
A-6
<PAGE>
Company will not voluntarily make any payment with respect to demands for
appraisal and will not, except with the prior written consent of MergerCo,
settle or offer to settle any such demands.
(11) Withholding Rights. The Surviving Corporation or the Exchange Agent
shall be entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement to any holder of Common Shares,
such amounts as the Exchange Agent or Surviving Corporation is required to
deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
Surviving Corporation or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of the Shares in respect of which such deduction and withholding was made by
the Exchange Agent or the Surviving Corporation.
Section 2.6 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed with respect to the Common Shares and no
transfer of Common Shares shall thereafter be made.
Section 2.7 No Further Ownership Rights in Company Common Stock. The Merger
Consideration delivered upon the surrender for exchange of Shares in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation
of Shares which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided
in this Article 2.
Section 2.8 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the MergerCo or
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder
thereof, such Merger Consideration as may be required pursuant to this Article
2; provided, however, that MergerCo may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably
direct as indemnity against any claim that may be made against MergerCo or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
Section 2.9 Taking of Necessary Action; Further Action. Each of MergerCo and
the Company will take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the Merger in accordance with
this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and MergerCo, the officers and directors
of the Company and MergerCo immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
ARTICLE 3
Representations and Warranties of the Company
The Company hereby represents and warrants to MergerCo that, except as set
forth in the SEC Reports (as hereafter defined) or in the section of the
written disclosure schedule delivered on or prior to the date hereof by the
Company to MergerCo relating to the correlative section of this Article 3 (the
"Company Disclosure Schedule"):
Section 3.1 Organization and Qualification; Subsidiaries. The Company and
each of its Subsidiaries (as defined below) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, and has full corporate power and authority, directly or
indirectly, to own its properties and assets and to carry on its business as
it is now being conducted. The Company and each of its
A-7
<PAGE>
Subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties or assets owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed will not have a Material Adverse Effect
(as defined in Section 9.3). A true and complete list of all of the Company's
Subsidiaries, together with the jurisdiction of incorporation of each
Subsidiary, the authorized capitalization of each Subsidiary, and the name of
each holder of, and the number of shares of each Subsidiary's outstanding
capital stock owned thereby, is set forth in Section 3.1 of the Company
Disclosure Schedule. "Significant Subsidiary" means a Subsidiary of the
Company which is a "significant subsidiary" (as such term is defined in Rule
1-02 of Regulation S-X of the SEC) of the Company. Except for the ownership
interests set forth in Section 3.1 of the Company Disclosure Schedule, neither
the Company nor any Subsidiary owns, directly or indirectly, any capital stock
or other ownership interest in any other person. The Company has heretofore
furnished to MergerCo complete and correct copies of the Certificate of
Incorporation and the By-laws of the Company and XTRA, Inc., a Maine
corporation which is wholly owned by the Company. Such certificates of
incorporation and by-laws are in full force and effect and no other
organizational documents are applicable to or binding upon the Company or
XTRA, Inc. The Company and its Significant Subsidiaries are not in violation
of any of the provisions of their respective certificates of incorporation,
by-laws or equivalent organizational or governing documents.
Section 3.2 Capitalization. The authorized capital stock of the Company
consists of (i) 30,000,000 Common Shares and, (ii) 3,000,000 shares of
Preferred Stock. As of the date hereof, 15,327,905 Common Shares and no shares
of Preferred Stock are issued and outstanding and 837,949 Common Shares are
reserved for issuance upon exercise of outstanding stock options. All the
issued and outstanding Common Shares have been duly authorized and validly
issued and are fully paid and nonassessable, and are not subject to, nor were
they issued in violation of, any preemptive (or similar) rights. Except as set
forth above, there are no shares of capital stock or other equity interests of
the Company authorized, issued or outstanding, and there are no outstanding
options, warrants, rights, calls, subscriptions, convertible or other
securities or other agreements, commitments of any character relating to the
issued or unissued capital stock or other securities of the Company or any
Subsidiary obligating the Company or any Subsidiary to issue, transfer or sell
any Shares or other securities and there are no securities exchangeable for or
convertible into capital stock or other equity or voting securities of the
Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking, and
there are not outstanding any equity equivalents, interests in the ownership
or earnings of the Company or any of its Subsidiaries or other similar rights.
As of the date hereof, the only outstanding indebtedness for borrowed money of
the Company and its Subsidiaries is set forth in Section 3.2 of the Company
Disclosure Schedule (exclusive of the purchase price of property due within 90
days of date of purchase). There are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of capital stock of the Company or any Subsidiary.
Section 3.2 of the Disclosure Schedule contains a table which sets forth, with
respect to each class of outstanding options (i) the number of Common Shares
subject to options which are included in such class, (ii) the names of the
officers and directors of the Company and any other Person to whom options
have been granted, (iii) the number of options granted to such officers and
directors and any other Person which are presently exercisable or which will
become exercisable at some future date and, in each case, the exercise price
of each option. All Common Shares subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instrument pursuant to
which they are issuable, shall be duly authorized, validly issued, fully paid
and nonassessable and free of preemptive (or similar) rights. There are no
agreements or arrangements pursuant to which the Company is or could be
required to register Common Shares or other securities under the Securities
Act or other agreements or arrangements with or among any securityholders of
the Company with respect to securities of the Company. There are no
outstanding bonds, debentures, notes or other indebtedness or other securities
of the Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which stockholders
of the Company may vote. There are no obligations, contingent or otherwise, of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any Common Shares or the capital stock of any Subsidiary or to provide
funds to or make any investment (in the form of a loan, capital
A-8
<PAGE>
contribution, guaranty or otherwise) in any such Subsidiary or any other
entity. All of the outstanding shares of the capital stock of each Significant
Subsidiary (other than any directors' qualifying shares) are validly issued,
fully paid and nonassessable and owned by the Company or by a wholly-owned
Subsidiary of the Company, free and clear of all liens, claims, pledges,
mortgages, charges, security interests and encumbrances of any nature
whatsoever ("Liens") and there are no voting trusts, voting agreements or
similar understandings applicable with respect to such shares.
Section 3.3 Authority Relative to this Agreement. The Company has full
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to carry out the transactions contemplated hereby.
The execution, delivery and the performance of this Agreement and the
consummation of the transactions contemplated hereby by the Company, have been
duly authorized by all necessary corporate action on the part of the Company,
subject only to approval of the Merger, if necessary, by the stockholders of
the Company as provided in Section 6.2 and the filing and recording of
appropriate merger documents as required by the DGCL. This Agreement and the
Merger have been approved by the Board of Directors of the Company. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming due authorization and due and valid execution and delivery by
MergerCo, is a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except that such enforcement
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
and (ii) general principles of equity regardless of whether applied in a
proceeding in equity or at law. The Board of Directors of the Company has
approved this Agreement and the Voting Agreement (including the option
contemplated thereby) and the transactions contemplated hereby and thereby
(including the Merger) so as to render inapplicable hereto and thereto the
limitation on business combinations contained in Section 203 of the DGCL (or
any similar provision). No provision of the Certificate of Incorporation, By-
laws or other equivalent organizational or governing instruments of the
Company or any of its Subsidiaries would, directly or indirectly, restrict or
impair the ability of MergerCo or its affiliates to vote, or otherwise to
exercise the rights of a stockholder with respect to, securities of the
Company and its Subsidiaries that may be acquired or controlled by MergerCo or
its affiliates or permit any stockholder to acquire securities of the Company
on a basis not available to MergerCo in the event that MergerCo were to
acquire securities of the Company, and neither the Company nor any of its
Subsidiaries has any rights plan, preferred stock or similar arrangement which
have any of the aforementioned consequences.
Section 3.4 No Conflict, Required Filings and Consent.
(1) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company and the consummation of
the transactions contemplated hereby will not, (i) conflict with or violate
the Certificate of Incorporation or By-laws of the Company or the equivalent
organizational or governing documents of any Significant Subsidiary, (ii)
assuming that all consents, approvals and authorizations contemplated by
clauses (i) of subsection (2) below have been obtained and all filings
described in such clauses have been made, conflict with or violate any
federal, foreign, state or provincial law, ordinance, rule, regulation, order,
judgment, arbitral award or decree (collectively, "Laws") applicable to the
Company or any of its Subsidiaries or by which its or any of their respective
properties is bound or affected, or (iii) result in any breach or violation of
or constitute a default (or an event that with notice or lapse of time or both
would become a default under), or impair the Company's or any of its
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the properties
or assets of the Company or any of its Subsidiaries pursuant to, any note,
bond, loan, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
its or any of their respective properties or assets is bound or affected,
except in any such case (A) with respect to clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences that do
not individually or in the aggregate, have a Material Adverse Effect or
prevent, hinder or materially delay the ability of the Company to consummate
the transactions contemplated by this Agreement and (B) with respect to clause
(iii), as set forth in Section 3.4 of the Company Disclosure Schedule.
A-9
<PAGE>
(2) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any federal, foreign, state or provincial governmental or regulatory
authority (a "Governmental Entity") except for (A) (i) the filing with the
Securities and Exchange Commission (the "SEC") of (x) a proxy statement
relating to the Company Stockholder Approval (such proxy statement as amended
or supplemented from time to time, the "Proxy Statement"), (y) the
registration statement on Form S-4 to be filed by the Company in connection
with the retention of Common Stock of the Company in the Merger (the "Form S-
4"), and (z) such reports under the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and the
transactions contemplated hereby; (ii) the pre-merger notification
requirements of the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), foreign anti-trust or other similar laws (and the
applicable rules and regulations under any of the foregoing), (iii) the filing
and recordation of appropriate merger or other documents as required by the
DGCL, and by relevant authorities of other states in which the Company is
qualified to do business; and (iv) such other consents, approvals, orders,
authorizations, registrations, declarations, filings or notices as may be
required under the state securities laws ("Blue Sky Laws") and (B) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay consummation of
the Merger, or otherwise prevent or delay the Company from performing its
obligations under this Agreement, or would not otherwise have a Material
Adverse Effect.
Section 3.5 Compliance. Neither the Company nor any of its Subsidiaries is
in conflict with, or in default or violation of (i) any Law applicable to the
Company or any of its Subsidiaries or by which its or any of their respective
properties is bound or affected or (ii) any note, bond, loan, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or its or any of
their respective properties or assets is bound or affected, except for any
such conflicts, defaults or violations which do not have a Material Adverse
Effect.
Section 3.6 SEC Filings; Financial Statements.
(1) The Company and each of its Subsidiaries has filed with the SEC, to the
extent required to be filed, (i) its Annual Reports on Form 10-K for the
fiscal years ended September 30, 1997, 1996 and 1995, (ii) its Quarterly
Reports on Form 10-Q for each quarter subsequent to September 30, 1997, (iii)
Form 8-K reports since September 30, 1997, (iv) proxy statements relating to
all meetings of its stockholders (whether annual or relating to all meetings
of its stockholders (whether annual or special) during 1996, 1997 and 1998 and
(v) all other forms, statements, documents, reports or registration statements
required to be filed by the Company or any of its Subsidiaries since September
30, 1995 (collectively, the "SEC Reports"). The SEC Reports (i) complied in
all material respects in accordance with the requirements of the Securities
Act or the Exchange Act, and the rules and regulations thereunder, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(2) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the SEC Reports complied as to form in
all material respects with all applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, was prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes thereto), and each fairly presents in all material respects the
consolidated financial position of the Company and its Subsidiaries as at the
respective dates thereof and the consolidated results of its operations and
cash flows and stockholder equity for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount.
A-10
<PAGE>
Section 3.7 Absence of Certain Changes or Events. Except as set forth in the
SEC Reports filed and made publicly available, since March 31, 1998, the
Company and its Subsidiaries has conducted their business in the ordinary
course consistent with past practice and there has not occurred (a) any
Material Adverse Effect; (b) any amendments or changes in the Certificate of
Incorporation or By-laws of the Company; (c) any damage to, destruction or
loss of any asset of the Company (whether or not covered by insurance) that
could reasonably be expected to have a Material Adverse Effect; (d) any
material change by the Company in its accounting methods, principles or
practices; (e) any material revaluation by the Company of any of its assets,
including, without limitation, writing down the value of property or equipment
or writing off notes or accounts receivable other than in the ordinary course
of business or (f) except as otherwise reflected in the Company Disclosure
Schedule, any action which, if it is taken after the date hereof, would have
required the consent of MergerCo under Schedules 5.1(1), 5.1(2)(ii) (excluding
normal quarterly dividends), 5.1(iii)-(iv), 5.1(3), 5.1(5) (except for leases
of real property), 5.1(7), 5.1(8), 5.1(9), 5.1(10) or 5.1(12).
Section 3.8 No Undisclosed Liabilities. Except as disclosed in the Annual
Report on Form 10-K for the fiscal year ended September 30, 1997, or in
subsequent SEC Filings filed and publicly available prior to the date hereof,
the Company and its Subsidiaries have no liabilities or obligations, accrued,
absolute, contingent or otherwise, other than those which have been incurred
since March 31, 1998 in the ordinary course of business consistent with past
practice and those which, individually or in the aggregate, do not have a
Material Adverse Effect.
Section 3.9 Absence of Litigation. Except as disclosed in the SEC Reports,
there are no claims, actions, suits, proceedings or investigations pending or,
to the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, or any properties or rights of the Company or any of its
Subsidiaries, before any court or governmental or other regulatory or
administrative agency or commission that, individually or in the aggregate, do
not have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries nor any of their respective properties is or are subject to any
order, writ, judgment, injunction, decree, determination or award having, or
which is reasonably expected to have, in the foreseeable future a Material
Adverse Effect. As of the date hereof, no officer or director of the Company
is a defendant in any litigation commenced by stockholders of the Company with
respect to the performance of his or her duties as an officer and/or director
of the Company under any federal, state, local or foreign law (including
litigation under federal and state securities laws).
Section 3.10 Filings; Form S-4; Proxy Statement. None of the information
provided by the Company in any document to be filed with any Governmental
Entity in connection with the Merger and the transactions contemplated hereby
or supplied by the Company for inclusion in (i) the registration statement on
Form S-4 to be filed with the SEC by the Company in connection with the
retention of Common Shares following the Merger (such Form S-4, as amended or
supplemented, is herein referred to as the "Form S-4") will, at the time the
Form S-4 is filed with the SEC, and at any time it is amended or supplemented
or at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and (ii) the proxy statement to be sent to the stockholders of the
Company in connection with the Stockholders Meeting (as defined in Section
6.1) (such proxy statement, as amended or supplemented, is herein referred to
as the "Proxy Statement") will, at the date it is first mailed to the
Company's stockholders or at the time of the Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading, except that no representation is made by the Company with respect
to information supplied by MergerCo or any of its representatives which is
contained in or incorporated by reference in any of the foregoing documents
specifically for inclusion in the Proxy Statement. The Form S-4 will, as of
its effective date, and the prospectus contained therein will, as of its date,
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations promulgated thereunder. The Proxy
Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder.
A-11
<PAGE>
Section 3.11 Opinion of Financial Advisor. The Company has been advised by
its financial advisor, Goldman, Sachs & Co., that in its opinion, as of the
date hereof, the Merger Consideration to be received in the Merger by the
Company's stockholders (other than consideration paid with respect to
dissenting shares) is fair to the holders of Shares from a financial point of
view.
Section 3.12 Tax Matters.
(1) As used in this Agreement, (i) "Company Taxes" shall mean any and all
taxes, charges, fees, levies or other assessments, including income, gross
receipts, excise, real or personal property, sales, withholding, social
security, occupation, use, service, value added, license, net worth, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the
Internal Revenue Service or any taxing authority (whether domestic or foreign
including any state, local or foreign government or any subdivision or taxing
agency thereof) on the Company or any of its Subsidiaries, whether computed on
a separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest, penalties or additional amounts attributable to,
or imposed upon, or with respect to, any such taxes, charges, fees, levies or
other assessments, and (ii) "Tax Return" shall mean any report, return,
document, declaration or other information required to be filed with any
taxing authority or jurisdiction with respect to Company Taxes.
(2) Except as would not have a Material Adverse Effect:
Each of the Company and its Subsidiaries has timely filed or has had
timely filed on its behalf all Tax Returns that it was required to file on
or before the date hereof, and such Tax Returns are true, correct and
complete. Each of the Company and its Subsidiaries has timely paid all
Company Taxes required to be paid before the date hereof. There are no
Liens for Company Taxes on any of the properties of the Company or any of
its Subsidiaries other than Liens for Taxes not yet due.
(3) Except as would not have a Material Adverse Effect or as set forth in
Section 3.12 of the Company Disclosure Schedule:
No audit or other proceeding with respect to Company Taxes has been
commenced by any taxing authority, and neither the Company nor any of its
Subsidiaries has received any written notice of any audit, claim,
deficiency or assessment pending or proposed with respect to Company Taxes.
All deficiencies relating to Company Taxes asserted in writing and any
assessments made as a result of any examinations of Tax Returns of the
Company or any of its Subsidiaries by the IRS or the appropriate state,
local or foreign taxing authority have been paid in full or are being
contested in good faith. Neither the Company nor any of its Subsidiaries is
party to any written agreements or waivers extending the statutory period
of limitations applicable to any Company Taxes. There is no contract or
agreement, plan or arrangement by the Company or any of its Subsidiaries
covering any person that could give rise to the payment of any amount that
would not be deductible by the Company or its Subsidiaries by reason of
Section 162(m) or Section 280G of the Code or otherwise, as now in effect
or as in effect as of the Effective Time. Schedule 3.12 of the Company
Disclosure Schedule lists the currently outstanding power of attorneys
granted by or with respect to the Company and its Subsidiaries relating to
federal and state Company Taxes.
Section 3.13 Takeover Statutes Not Applicable. No "fair price,"
"moratorium," "control share MergerCo," "interested stockholder" or other
similar anti-takeover statute or regulation enacted under state or federal
laws in the United States (each a "Takeover Statute") applicable to the
Company or any of its Subsidiaries is applicable to the execution, delivery
and performance of this Agreement or the Voting Agreements or the consummation
of the Merger or the other transactions contemplated by this Agreement or the
Voting Agreements.
Section 3.14 Properties. (1) The Company or one of its Subsidiaries has (i)
good and marketable fee title to the real property owned in fee by the Company
or any of its Subsidiaries (collectively, the "Owned Properties") and (ii)
good and valid leasehold title or other occupancy right to the real property
leased, subleased or licensed by the Company or any of its Subsidiaries
(collectively, the "Leased Properties") (the Owned
A-12
<PAGE>
Properties and Leased Properties being sometimes referred to herein
collectively as the "Company Properties"), in each case free and clear of all
options to purchase or lease (in the case of the Owned Properties), leases,
subleases, rights of first offer, conditions of limitation, easements, Liens,
covenants, rights-of-way and other restrictions (collectively, "Title
Matters"), except for such Liens and Title Matters, which individually or in
the aggregate, do not have a Material Adverse Effect or which do not
materially and adversely affect the current use or value of any Company
Properties significant to the Company and its Subsidiaries taken as a whole.
(2) Each agreement under which real property is leased, subleased or
licensed to the Company or one of its Subsidiaries (collectively, the "Company
Leases") is in full force and effect in accordance with its respective terms
and the Company or one of its Subsidiaries is the holder of the lessee's or
tenant's interest thereunder and there exists no default under any of the
Company Leases by the Company or any of its Subsidiaries and no circumstance
exists which, with the giving of notice, the passage of time or both could
result in such a default, except for such matters or other circumstances
which, individually or in the aggregate, do not have a Material Adverse
Effect. Except as set forth in Section 3.14(b) of the Company Disclosure
Schedule, the consummation of the Merger or other transactions contemplated
hereby does not violate the terms of any of the Company Leases, other than
violations, which individually or in the aggregate do not have a Material
Adverse Effect. Except as set forth in Section 3.14(b) of the Company
Disclosure Schedule, there are no Company Leases subject to any Lien,
sublease, assignment, license or other agreement granting to any third party
any interest in such Company Lease or any right to the use or occupancy of any
Leased Property, except for any of the foregoing matters which, individually
or in the aggregate, do not have a Material Adverse Effect.
(3) Each of the Company and its Subsidiaries has all permits necessary to
own or operate its Owned Real Property and Leased Real Property as currently
owned, and, to the knowledge of the Company, no such permits will be required,
solely as a result of the Merger or the other transactions contemplated
hereby, to be issued after the Closing in order to permit the Company
following the Merger to continue to own or operate such Company Properties,
other than any such permits the absence of which would not reasonably be
expected to have a Material Adverse Effect. Except as set forth in Section
3.14(b) of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has received, with respect to any Owned Real Property or Leased
Real Property, any written notice of default or any written notice of
noncompliance with respect to applicable federal, state, local and foreign
laws and regulations relating to zoning, building, fire, use restriction or
safety or health codes which have not been remedied in all respects which has
a Material Adverse Effect. There is no pending or, to the knowledge of the
Company, threatened condemnation or other governmental taking of any of the
Owned Real Property or Leased Real Property, which would have a Material
Adverse Effect. All material buildings, structures, improvements and fixtures
located on, under, over or within the Company Properties, taken as a whole,
(A) are in good operating condition and repair and are structurally sound and
free of any material defects; and (B) are suitable, sufficient and appropriate
in all respects for their current and contemplated uses.
Section 3.15 Intellectual Property. Except as does not have a Material
Adverse Effect: (i) the Company and each of its Subsidiaries owns, or is
licensed or otherwise has the right to use (in each case, free and clear of
any Liens of any kind), all Intellectual Property used in or necessary for the
conduct of its business as currently conducted; (ii) no claims are pending or,
to the knowledge of the Company, threatened, and the Company and its
Subsidiaries have not received any notice or notification alleging, that the
Company or any of its Subsidiaries is infringing on or otherwise violating the
rights of any person with regard to any Intellectual Property owned by,
licensed to and/or used by the Company or its Subsidiaries and, to the
knowledge of the Company, there is no basis therefor; (iii) neither the
Company nor any of its subsidiaries has infringed upon or misappropriated, or
is infringing upon or misappropriating, any U.S. or foreign patents or
copyrights or any U.S., state or foreign trademarks, or other Intellectual
Property rights of any person; (iv) to the knowledge of the Company, no person
is infringing on or otherwise violating any right of the Company or any of its
Subsidiaries with respect to any Intellectual Property owned by and/or
licensed to the Company or its Subsidiaries; and (v) the execution and
delivery of this Agreement, compliance with its terms and the consummation of
the transactions contemplated hereby do not and will not conflict with or
result in any violation or default (with or without notice or lapse of time or
both) or give rise to any right, license or Lien relating to Intellectual
Property, or right of termination,
A-13
<PAGE>
alteration, amendment, cancellation or acceleration of any Intellectual
Property right or obligation, or the loss or encumbrance of any Intellectual
Property or benefit related thereto, or result in or require the creation,
imposition or extension of any Lien upon any Intellectual Property or right.
For purposes of this Agreement, "Intellectual Property" means all intellectual
property or other proprietary rights of every kind, including, without
limitation, all domestic or foreign patents, patent applications, inventions
(whether or not patentable), processes, products, technologies, discoveries,
copyrightable and copyrighted works, apparatus, trade secrets, trademarks
(registered and unregistered) and trademark applications and registrations,
brand names, certification marks, service marks and service mark applications
and registrations, trade names, trade dress, copyright registrations, design
rights, customer lists, marketing and customer information, mask works,
rights, know-how, licenses, technical information (whether confidential or
otherwise), software, and all documentation thereof.
Section 3.16 Labor Matters. Except as disclosed in Section 3.16 of the
Company Disclosure Schedule, (i) neither the Company nor any of its
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization; (ii) to the knowledge of the Company, neither the Company nor
any of its Subsidiaries is the subject of any proceeding asserting that it or
any of its Subsidiaries has committed an unfair labor practice or seeking to
compel it to bargain with any labor organization as to wages or conditions of
employment; (iii) there is no strike, work stoppage or other labor dispute
involving the Company or any of its Subsidiaries pending or, to the Company's
knowledge, threatened; (iv) to the knowledge of the Company, no action, suit,
complaint, charge, arbitration, inquiry, proceeding or investigation by or
before any Governmental Entity brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of its employees is pending or threatened against the Company
or any of its Subsidiaries; (v) to the knowledge of the Company, no grievance
is pending or threatened against the Company or any of its Subsidiaries; (vi)
neither the Company nor any of its Subsidiaries is a party to, or otherwise
bound by, any consent decree with, or citation by, any Governmental Entity
relating to employees or employment practices and (vii) there have been no
adverse developments with respect to the matters set forth on Schedule 3.16,
except, with respect to matters in clauses (iv), (v), (vi) or (vii),
individually or in the aggregate, do not have a Material Adverse Effect.
Section 3.17 Year 2000 Compliance. Except as disclosed in the SEC Reports,
all software, databases, microcode, hardware, systems and devices with date-
related functionality used by the Company or its Subsidiaries, or which are in
development by or for the Company or any of its Subsidiaries, correctly
Process (as defined below) all dates, including those before, on or after
January 1, 2000 (taking into account leap year considerations), without any
loss of functionality, interoperability or performance, and whether used on a
stand- alone basis or in combination with other software, hardware, system or
device. For purposes of the foregoing, "Process" means all functions,
including but not limited to accepting as input, calculating, storing,
displaying and generating as output.
Section 3.18 Material Contracts. The Company has delivered or made available
to MergerCo true and correct copies of all written Material Agreements (as
hereinafter defined). Except as set forth in Section 3.18 of the Company
Disclosure Schedule, each Material Agreement is in full force and effect and,
to the knowledge of the Company, is valid and enforceable by the Company or a
Subsidiary of the Company, as the case may be, in accordance with its terms
except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or hereafter
in effect, affecting creditors' rights generally, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. Except as set forth in Section 3.18 of
the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is in default in the observance or the performance of any term or
obligation to be performed by it under any Material Agreement except for such
defaults the effect of which, individually or in the aggregate, do not have a
Material Adverse Effect. To the knowledge of the Company, no other Person is
in default in the observance or the performance of any term or obligation to
be performed by it under any agreement which default has a Material Adverse
Effect. Except as set forth in Section 3.18 of the Disclosure Schedule, to the
knowledge of the Company, there exist no indemnification agreements with any
of the directors and officers of
A-14
<PAGE>
the Company. As used in this Agreement, "Material Agreement" shall mean each
agreement, arrangement, instrument, bond, note, commitment, franchise,
indemnity, indenture, lease, license or understanding, whether or not in
writing, to which the Company or any of its Subsidiaries is a party or to
which the Company, any of its Subsidiaries or any of their respective
properties is subject that (i) was filed as exhibit to or otherwise reflected
in the report on Form 10-K filed with the SEC by the Company for the Company's
fiscal year ended September 30, 1997 or in SEC reports filed thereafter, (ii)
obligates the Company or any of its Subsidiaries to pay after March 31, 1998
an amount in excess of $500,000 in any twelve-month period beginning after
March 31, 1998 (other than for real estate leases or other than for insurance
policies listed on Schedule 3.22), (iii) provides for the extension of credit
(other than for employee advances in the ordinary course of business) in an
amount in excess of $10,000 or more in any single transaction or $50,000 in
any series of transactions, (iv) provides for a guaranty by the Company or any
of its Subsidiaries of obligations of others in excess of $1,000,000, (v)
constitutes a consulting agreement or personal service contract not terminable
on less than sixty (60) days' notice without penalty and calling for payments
of $100,000 or more per year, (vi) represents a contract upon which the
Company and its Subsidiaries taken as a whole are substantially dependent,
(vii) in addition to that as set forth on Schedule 3.2, represents
indebtedness for borrowed money for $100,000 or more, (viii) relates to the
divestiture or acquisition since June 30, 1995 of a significant amount of
assets other than in the ordinary course of business, or (ix) limits, in any
material respect, the ability of the Company or any of its Subsidiaries to
engage in any present lines of business, compete with any Person in the
Company's present lines of business or expand the nature or geographic scope
of the Company's present lines of business.
Section 3.19 Employee Benefits; ERISA.
(1) Schedule 3.19(1) contains a true and complete list of each material
deferred compensation and each other equity compensation plan, program,
agreement or arrangement; each severance or termination pay and other
"welfare" plan, fund or program (within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")); each
"pension" plan, fund or program (within the meaning of Section 3(2) of ERISA);
each employment, termination or severance agreement (other than those
requiring the payment of less than $50,000 per year to any employee or former
employee and less than $500,000 per year in the aggregate to all employees);
and each other employee material benefit plan, fund, program, agreement or
arrangement, in each case, that is sponsored, maintained or contributed to or
required to be contributed to by the Company or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a "single employer" within the meaning of Section
4001(b) of ERISA, or to which the Company or an ERISA Affiliate is party,
whether written or oral, for the benefit of any employee or former employee of
the Company or any Subsidiary (the "Plans"). Neither the Company, any
Subsidiary nor any ERISA Affiliate has any commitment or formal plan, whether
legally binding or not, to create any additional employee benefit plan or
modify or change any existing Plan that would affect any employee or former
employee of the Company or any Subsidiary. No Plan is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA. Each Plan may be terminated at
any time by the Company or the appropriate Subsidiary or ERISA Affiliate.
(2) With respect to each Plan, the Company has heretofore delivered to
MergerCo each of the following documents:
(i) a copy of the Plan and any amendments thereto (or if the Plan is not
a written Plan, a description thereof);
(ii) a copy of the two most recent annual reports;
(iii) a copy of the most recent Summary Plan Description required under
ERISA with respect thereto;
(iv) if the Plan is funded through a trust or any third party funding
vehicle, a copy of the trust or other funding agreement and the latest
financial statements thereof; and
(v) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan intended to qualify under Section
401 of the Internal Revenue Code of 1986, as amended (the "Code").
A-15
<PAGE>
(3) Each Plan has been operated and administered in all material respects in
accordance with its terms and applicable law, including but not limited to
ERISA and the Code. To the knowledge of the Company, each Plan intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified
and the trusts maintained thereunder are exempt from taxation under Section
501(a) of the Code. To the knowledge of the Company, each Plan intended to
satisfy the requirements of Section 501(c)(9) has satisfied such requirements.
To the knowledge of the Company, neither the Company or any Subsidiary, any
Plan, any trust created thereunder, nor any trustee or administrator thereof
has engaged in a transaction in connection with which the Company or any
Subsidiary, any Plan, any such trust, or any trustee or administrator thereof,
or any party dealing with any Plan or any such trust could be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or
a tax imposed pursuant to Section 4975 or 4976 of the Code.
(4) No Plan provides medical, surgical, hospitalization, death or similar
benefits (whether or not insured) for employees or former employees of the
Company or any Subsidiary for periods extending beyond their retirement or
other termination of service, other than (i) coverage mandated by applicable
law, (ii) death benefits under any "pension plan," or (iii) benefits the full
cost of which is borne by the current or former employee (or his beneficiary).
(5) Except as set forth in Schedule 3.19(5) hereto, the consummation of the
transactions contemplated by this Agreement will not, either alone or in
combination with another event, (i) entitle any current or former employee or
officer of the Company or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or officer.
(6) There are no pending, threatened or anticipated claims by or on behalf
of any Plan, by any employee, former employee or beneficiary covered under any
such Plan, or otherwise involving any such Plan (other than routine claims for
benefits).
Section 3.20 Environmental Laws. (1) Except as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect or is
disclosed in Schedule 3.20: (i) the Company and its Subsidiaries hold, and, to
the knowledge of the Company, are in compliance with, all Environmental
Permits, and the Company and its Subsidiaries are otherwise in compliance with
all applicable Environmental Laws and there are no circumstances that might
prevent or interfere with such compliance in the future; (ii) none of the
Company or any of its Subsidiaries has received any Environmental Claim, and
the Company is not aware of any threatened Environmental Claim or of any
circumstances, conditions or events that could reasonably be expected to give
rise to an Environmental Claim, against the Company or any of its
Subsidiaries; (iii) none of the Company or any of its Subsidiaries has entered
into or agreed to any consent decree, order or agreement under any
Environmental Law, and none of the Company or any of its Subsidiaries is
subject to any judgment, decree, order or other requirement relating to
compliance with any Environmental Law or to investigation, cleanup,
remediation or removal of regulated substances under any Environmental Law;
(v) to the knowledge of the Company, there are no past (including, without
limitation, with respect to assets or businesses formerly owned, leased or
operated by the Company or any of its Subsidiaries) or present actions,
activities, events, conditions or circumstances, including without limitation
the release, threatened release, migration, emission, discharge, generation,
treatment, storage or disposal of Hazardous Materials, that could reasonably
be expected to give rise to a material liability of the Company or any of its
Subsidiaries under any Environmental Laws or any contract or agreement; (vi)
no modification, revocation, reissuance, alteration, transfer, or amendment of
the Environmental Permits, or any review by, or approval of, any third party
of the Environmental Permits is required solely by reason of the execution or
delivery of this Agreement or the consummation of the transactions
contemplated hereby or the continuation of the business of the Company or its
Subsidiaries following such consummation; (vii) to the knowledge of the
Company, Hazardous Materials have not been generated, transported, treated,
stored, disposed of, released or threatened to be released at, on, from or
under any of the properties or facilities currently or formerly owned, leased
or otherwise used by the Company or any of its Subsidiaries, in violation of,
or in a manner or to a location that could give rise to a material liability
under, any
A-16
<PAGE>
Environmental Laws; and (viii) to the knowledge of the Company, the Company
and its Subsidiaries have not assumed, contractually or by operation of law,
any liabilities or obligations under any Environmental Laws.
(3) The Company has provided or made available to MergerCo or its
representatives copies of all material Environmental Reports in its possession
relating to its Fairmont City, Illinois facility. For purposes of this
Agreement, an Environmental Report means any report, study, assessment, audit,
or other similar document prepared by or for the Company or its Subsidiaries,
or in the possession of any of them, that addresses environmental matters
affecting its Fairmont City, Illinois facility.
(4) For purposes of this Agreement, the following terms shall have the
following meanings:
"Environmental Claim" means any written or oral notice, claim, demand,
action, suit, complaint, proceeding or other communication by any person
alleging liability or potential liability (including without limitation
liability or potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damage,
personal injury, fines or penalties) arising out of, relating to, based on
or resulting from (i) the presence, discharge, emission, release or
threatened release of any Hazardous Materials at any location, whether or
not owned, leased or operated by the Company or any of its Subsidiaries,
(ii) circumstances forming the basis of any violation or alleged violation
of any Environmental Law or Environmental Permit or (iii) otherwise
relating to obligations or liabilities under any Environmental Laws.
"Environmental Laws" means all applicable federal, state, local and
foreign statutes, rules, regulations, ordinances, orders, decrees and
common law relating in any manner to contamination, pollution or protection
of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act, the
Solid Waste Disposal Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Occupational Safety and Health Act, the
Emergency Planning and Community-Right- to-Know Act, the Safe Drinking
Water Act, all as amended, and similar state, local and foreign laws.
"Environmental Permits" means all permits, licenses, registrations and
other governmental authorizations required under Environmental Laws for the
Company and its Subsidiaries, including without limitation in connection
with the operations of the Company's and its Subsidiaries' facilities and
otherwise to conduct their respective businesses.
"Hazardous Materials" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, asbestos and asbestos containing
materials, pollutants, contaminants and all other materials, substances and
forces, including but not limited to electromagnetic fields, regulated
pursuant to, or that could form the basis of liability under, any
Environmental Law.
Section 3.21 Title to Personal Properties; Condition of Assets.
(1) Except as set forth in Schedule 3.21 of the Disclosure Schedule and
except where the failure to so have will have a Material Adverse Effect, the
Company and each Subsidiary has good and marketable title to, or valid
leasehold interests in, all its material personal properties and assets. All
such material personal properties and assets are free and clear of all Liens
other than those set forth in Schedule 3.21 of the Company Disclosure Schedule
and except for Liens that, individually or in the aggregate, do not materially
interfere with the ability of the Company or any Subsidiary to conduct its
business as currently conducted and do not adversely affect the value of, or
the ability to sell, in any material respect, such personal properties and
assets.
(2) The material personal properties and assets of the Company and its
Subsidiaries, taken as a whole, are in reasonably good repair and operating
condition, ordinary wear and tear excepted, and are sufficient for the conduct
of the business of the Company and Subsidiaries as presently conducted.
Section 3.22 Insurance. The Company has in full force and effect the
insurance policies set forth in Schedule 3.22 of the Company Disclosure
Schedules.
A-17
<PAGE>
Section 3.23 Required Company Vote. The affirmative vote of a majority of
the outstanding Common Shares is the only vote of the holders of any class or
series of the Company's securities necessary to approve this Agreement, the
Merger and the other transactions contemplated hereby.
Section 3.24 Board Recommendations. The Board of Directors of the Company,
at a meeting duly called and held, has by vote of the directors present (which
directors constituted a quorum) (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, and the Voting
Agreement and the transactions contemplated thereby, taken together, are fair
to and in the best interests of the stockholders of the Company and (ii)
resolved to recommend that the holders of the Common Shares approve this
Agreement and the transactions contemplated herein, including the Merger.
Section 3.25 Brokers. No broker, finder or investment banker other than
Goldman, Sachs & Co. (the "Company Financial Advisor") is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
and on behalf of the Company. The Company has heretofore furnished to MergerCo
a complete and correct copy of all agreements between the Company and the
Company Financial Advisor pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated hereby. The aggregate fees
payable under such agreements will not be in excess of $6.5 million.
ARTICLE 4
Representations and Warranties of MergerCo
MergerCo hereby represents and warrants to the Company that:
Section 4.1 Organization and Qualification. MergerCo is a limited liability
company duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has full corporate power and
authority, directly or indirectly, to own its properties and assets and to
carry on its business as it is now being conducted. MergerCo was formed on
June 17, 1998 solely for the purpose of engaging in the transactions
contemplated by this Agreement. Except for (i) obligations or liabilities
incurred in connection with its organization and the transactions contemplated
by this Agreement, and (ii) this Agreement and any other agreements or
arrangements contemplated by this Agreement or in furtherance of the
transactions contemplated hereby, MergerCo has not incurred, directly or
indirectly, through any Subsidiary or Affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangements with any Person.
Section 4.2 Financing. Investors in MergerCo (the "Investors") have, as of
the date hereof, sufficient sources of liquid capital funds, to fund, in cash,
to the Company at least $292.5 million in equity capital and MergerCo has
received and provided the Company with true and correct copies of executed
commitment letters (the "Commitment Letters") from certain institutional
lenders and investors with respect to secured bank facilities, unsecured
subordinated debt financing and equity financing (such persons being
collectively referred to as the "Financing Sources") and, subject to its
receipt of the financing contemplated by the Commitment Letters, will have as
of the Closing Date funds in an aggregate amount sufficient to (i) pay the
aggregate Cash Price with respect to all outstanding Shares, (ii) prepay,
redeem, refinance or renegotiate the Company's existing indebtedness other
than with respect to the Company's Series C Medium Term Notes and capital
leases, if required to consummate the Merger and the other transactions
contemplated hereby, and pay any and all fees, expenses and costs in
connection with any such prepayment, redemption, refinancing or renegotiation
and in connection with obtaining of the financing contemplated by the
Commitment Letters, (iii) consummate all of the other transactions
contemplated by this Agreement, and (iv) provide sufficient working capital
needs of the Company following the Merger (as determined by MergerCo)
(collectively, the "Required Financing").
Section 4.3 Relative to this Agreement. MergerCo has full power and
authority to enter into this Agreement, to perform its obligations hereunder
and to carry out the transactions contemplated hereby. The
A-18
<PAGE>
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary action on the part of MergerCo. This Agreement has been duly and
validly executed and delivered by MergerCo and, assuming due authorization and
due and valid execution and delivery by the Company, this Agreement
constitutes a legal, valid and binding agreement of MergerCo enforceable
against it in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and (ii)
general principles of equity regardless of whether applied in a proceeding in
equity or at law.
Section 4.4 No Conflict, Required Filings and Consents.
(1) The execution and delivery of this Agreement by MergerCo does not, and
the performance of this Agreement by MergerCo will not, (i) conflict with or
violate the Operating Agreement of MergerCo, (ii) assuming that all consents,
approvals and authorizations contemplated by clauses (i) of subsection (2)
below have been obtained and all filings described in such clauses have been
made, conflict with or violate any Laws applicable to MergerCo or by which its
properties or assets are bound or affected or (iii) result in any breach or
violation of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or impair MergerCo's rights or
alter the rights or obligations of any third party under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a Lien on any of the properties or assets of
MergerCo pursuant to, any note, bond, loan, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which MergerCo is a party or by which MergerCo or its properties or assets
are bound or affected, except, in any such case with respect to clauses (ii)
and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or prevent, hinder or materially
delay the ability of the MergerCo to consummate the Merger or the transactions
contemplated by this Agreement.
(2) The execution and delivery of this Agreement by MergerCo does not, and
the performance of this Agreement by MergerCo will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, domestic or foreign, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, the Blue Sky
Laws, the premerger notification requirements of the HSR Act, foreign
antitrust laws (and the applicable rules and regulations under any of the
foregoing), and the filing and recordation of appropriate merger or other
documents as required by the DGCL, and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger, or
otherwise prevent MergerCo from performing its obligations under this
Agreement, and would not have a Material Adverse Effect.
Section 4.5 Filings; Form S-4; Proxy Statement. None of the information
provided by MergerCo in any document to be filed with any Governmental Entity
in connection with the Merger and the transactions contemplated thereby or
supplied in writing by MergerCo specifically for inclusion in (i) the Form S-4
will, at the time the Form S-4 is filed with the SEC, and at any time it is
amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the Proxy Statement will, on the
date the Proxy Statement is first mailed to stockholders of the Company, on
the date of the Stockholders' Meeting (as hereafter defined) contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, MergerCo makes no representation or
warranty with respect to any information supplied by the Company or any of its
representatives which is contained in or incorporated by reference in any of
the foregoing documents.
Section 4.6 Brokers and Finders. Except as provided in Section 8.3(3),
neither MergerCo nor any of its officers, directors or employees has employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
by this Agreement which could result in any liability being imposed on the
Company.
A-19
<PAGE>
ARTICLE 5
Conduct of Business Pending the Merger
Section 5.1 Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, unless otherwise agreed in writing by
MergerCo or as otherwise specifically contemplated by this Agreement:
(1) The Company shall and shall cause each of its Subsidiaries to conduct
their respective businesses only in the ordinary and usual course and
consistent with past practice;
(2) The Company shall not and shall cause each of its Subsidiaries not to
(i) amend its Certificate of Incorporation or by-laws or equivalent
organizational or governing documents of any Subsidiary; (ii) split,
combine, subdivide or reclassify any outstanding shares of its capital
stock or declare, set aside or pay any dividend payable in cash, stock or
property or make any other distributions with respect to shares of capital
stock or any of them (other than dividends paid to the Company by its
wholly owned Subsidiaries in respect of their common stock); (iii) issue,
sell, pledge, dispose of, encumber or subject to any Lien or authorize or
propose the issuance, sale, pledge, disposition or encumbrance of (or
imposition of a Lien on) (A) any shares of, or rights of any kind to
acquire any shares of, capital stock of any class of any of them, or
securities convertible into any such shares, or any rights, warrants or
options or commitments of any nature whatsoever to acquire any such shares
or convertible securities or (B) any other securities in respect of or in
substitution for any outstanding shares of capital stock of any of them
(other than upon exercise of, and pursuant to, Stock Options outstanding on
the date of this Agreement); or (iv) redeem, purchase or acquire or offer
to acquire any shares of its capital stock;
(3) The Company shall use reasonable efforts to preserve intact the
business organization of the Company and its Subsidiaries, to keep
available the services of the present officers and key employees of the
Company and its Subsidiaries, and to preserve the good will of those having
business relationships with it and its Subsidiaries;
(4) The Company shall not and shall cause each of its Subsidiaries not to
(i) (except for increases which are mandated by the terms of existing
agreements and increases for persons other than officers and directors in
the ordinary course of business and consistent with past practice) increase
in any manner the compensation or fringe benefits of any director, officer
or employee or pay any benefit not required by any existing plan or
arrangement (including, without limitation, the granting of stock options
or stock appreciation rights or the removal of existing restrictions in any
Benefit Plan) (ii) grant any severance or termination pay not currently
required to be paid under existing severance plans (except in an amount not
greater than $10,000 to any single employee and, in any event, not greater
than $300,000 to all employees) to, or enter into or modify in any material
or economic respect any employment, consulting or severance agreement or
arrangement with, any present or former director, officer or other employee
of the Company or any of its Subsidiaries, except for the granting of
severance or termination pay, in the ordinary course of business consistent
with past practice, to nonexecutive employees who are terminated by the
Company after the date hereof, (iii) establish, adopt, enter into or amend
or terminate any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors,
officers or employees or (iv) terminate the existing employment
arrangements with any officer of the Company or any of its Subsidiaries or
take any action that would constitute a breach of any such arrangements or
take any action (other than consummation of the Merger) which would cause
any change-of-control, severance or similar payment to be payable to any
such individual;
(5) The Company shall not and shall not permit any of its Subsidiaries to
encumber, sell, lease or otherwise dispose of or acquire any assets other
than in the ordinary course of business consistent with past practice or,
except as otherwise provided herein, enter into any merger or other
agreement providing for the acquisition of the Company or any of its
Subsidiaries by any third party or acquire (by merger,
A-20
<PAGE>
consolidation, or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or enter
into any lease for real property requiring the payment of $100,000 or more
per annum or having a term greater than two years.
(6) Other than with respect to borrowings and repayments in the ordinary
course of business under existing lines of credit (which borrowings shall
not in aggregate amount exceed $859 million in U.S. dollars at any one time
outstanding), neither the Company nor any Subsidiary shall (i) repurchase,
repay, incur or cause or permit to exist any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of
any person, or enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, or make any
loans, advances or capital contributions to, or investments in, any person
other than the Company or a direct or indirect wholly owned Subsidiary of
the Company; (ii) enter into, terminate, waive, modify or amend any
Material Contract in any material respect or enter into or amend or modify
any contract or agreement for the purchase or lease of property, equipment
or assets requiring payments from third parties of $5,000,000 or more and
having a term of two years or more; or (iii) other than capital
expenditures of $60,900,000 already ordered and set forth on Schedule
5.1(6), authorize any capital expenditures in an amount exceeding
$10,000,000 per month on a cumulative basis;
(7) Except as may be required as a result of a change in law or in
generally accepted accounting principles, the Company shall not change in
any material respect any of its accounting practices, principles or
methods;
(8) Neither the Company nor any Subsidiary shall settle or compromise any
pending or threatened suit, action or claim for in excess of $250,000 per
suit, action or claim, and $500,000 in the aggregate (it being agreed that
the Company may settle or compromise any of the foregoing pursuant to which
it is entitled to collect monies thereby in its reasonable judgment in a
manner consistent with past practice), or which relates to the transactions
contemplated hereby;
(9) The Company shall not adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
Subsidiaries (other than this Agreement and the Merger);
(10) The Company shall maintain all insurance policies in full force and
effect;
(11) Except as would not have a Material Adverse Effect, the Company
shall not and shall cause its Subsidiaries not to compromise or settle any
claim, with respect to Company Taxes; and
(12) Neither the Company nor any Subsidiary shall take or agree to take
in writing or otherwise, enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Section 5.2 No Solicitation, etc.
(1) Until the termination of this Agreement, the Company and its
Subsidiaries shall not, directly or indirectly, whether through any
officer, director, employee, representative, agent or advisor (including
any attorney, accountant, consultants, banker or financial advisor) of the
Company or any of its Subsidiaries or otherwise, (i) solicit, initiate,
encourage or facilitate the initiation of any inquiries or proposals
regarding any merger, sale of substantial assets, sale of shares of capital
stock (including without limitation by way of a tender offer), liquidation,
recapitalization, consolidation or other business combination involving the
Company or its Subsidiaries or acquisition or exchange of any capital stock
or any material portion of the assets (except for acquisitions of assets in
the ordinary course of business consistent with past practice) of the
Company or its Subsidiaries, or any combination of the foregoing or similar
transactions involving the Company or any Subsidiaries of the Company other
than the Merger (any of the foregoing inquiries or proposals being referred
to herein as an "Acquisition Proposal"), (ii) engage in negotiations or
discussions concerning, or provide or disclose any nonpublic information to
any Person relating to, any Acquisition Proposal, (iii) enter into any
agreement, arrangement or understanding requiring it to abandon, terminate
or
A-21
<PAGE>
fail to consummate the Merger or any other transactions contemplated
hereby, or (iv) agree to, approve or recommend any Acquisition Proposal;
provided, however, that nothing contained in this Section 5.2(a) shall
prevent the Board of Directors of the Company from considering,
negotiating, approving and recommending to the stockholders of the Company
a bona fide Acquisition Proposal which is received by the Company after the
date and is not solicited in violation of this Agreement, if such a
proposal is, in the opinion of the Company's Board of Directors, more
favorable to the Company's stockholders than the transactions contemplated
by this Agreement, and the Board of Directors of the Company determines in
good faith (upon advice of outside legal counsel) that it is required to do
so in order not to violate its fiduciary duties.
(2) The Company shall promptly notify MergerCo after receipt of any
Acquisition Proposal, or any modification of or amendment to any Acquisition
Proposal, or any request for nonpublic information relating to the Company or
any of its Subsidiaries in connection with an Acquisition Proposal or for
access to the properties, books or records of the Company or any Subsidiary by
any Person or entity that informs the Board of Directors of the Company or
such Subsidiary that it is considering making, or has made, an Acquisition
Proposal. Such notice to MergerCo shall be made in writing, shall identify the
offeror and shall indicate whether the Company is providing or intends to
provide the Person making the Acquisition Proposal with access to information
concerning the Company as provided in Section 5.2(3). The Company shall also
furnish to MergerCo a written summary of the material terms and conditions of
the Acquisition Proposal.
(3) If the Board of Directors of the Company receives a request for material
nonpublic information by a person who makes a bona fide Acquisition Proposal,
and the Board of Directors determines in good faith and upon the advice of
independent counsel that it is required to cause the Company to act as
provided in this Section 5.2(c) in order to not violate the directors'
fiduciary duties, then, provided the person making the Acquisition Proposal
has executed a confidentiality agreement substantially similar to the one then
in effect between the Company and MergerCo, the Company may provide such
person with access to information regarding the Company.
(4) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than MergerCo)
conducted heretofore with respect to any of the foregoing. The Company agrees
not to release any such persons from the confidentiality provisions of any
confidentiality agreement to which the Company is a party.
ARTICLE 6
Additional Agreements
Section 6.1 HSR Act. As promptly as practicable after the date of the
execution of this Agreement, the Company and Parent shall file notifications
under and in accordance with the HSR Act in connection with the Merger and the
transactions contemplated hereby and shall respond as promptly as practicable
to any inquiries received from the Federal Trade Commission (the "FTC") and
the Antitrust Division of the Department of Justice (the "Antitrust Division")
for additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust matters.
Section 6.2 Stockholders' Meetings; Form S-4 and Proxy Statement.
(i) The Company acting through its Board of Directors, will, as promptly as
practicable following the date of effectiveness of the Form S-4 and in
consultation with MergerCo, shall take all action necessary in accordance with
the DGCL and its Certificate of Incorporation and By-Laws to (i) duly call,
give notice of convene and hold a meeting of the Company Stockholders for the
purpose of voting upon the approval and adoption of the Merger, this Agreement
and the transactions contemplated hereby (the "Stockholders' Meeting") and
(ii) (A) subject to its fiduciary duties under applicable law, include in the
Proxy Statement the recommendation of the
A-22
<PAGE>
Board of Directors that the stockholders of the Company vote in favor of the
approval of this Agreement and the transactions contemplated hereby and the
written opinion of the Company Financial Advisor that the Merger Consideration
to be received by the stockholders of the Company pursuant to the Merger, is
fair to such stockholders from a financial point of view, (B) include along
with the Proxy Statement a Form of Election, and (C) use its best efforts to
hold such meeting and obtain the necessary approval of this Agreement and the
transactions contemplated hereby by its stockholders, as soon as practicable
after the date hereof.
(ii) Promptly following the date of this Agreement, the Company shall
prepare the Proxy Statement, and the Company shall prepare and file with the
SEC the Form S-4, in which the Proxy Statement will be included. The Company
shall use its reasonable best efforts to have the Form S-4 declared effective
under the Securities Act as promptly as practicable after such filing. The
Company shall use its reasonable best efforts to cause the Proxy Statement to
be mailed to the Company's stockholders as promptly as practicable after the
Form S-4 is declared effective under the Securities Act. The Company shall
also take any action required to be taken under any applicable state
securities or "Blue Sky" laws in connection with the registration and
qualification in connection with the Merger of capital stock of the Company
following the Merger. MergerCo and the Company will cooperate with each other
in the preparation of the Proxy Statement and the Form S-4; without limiting
the generality of the foregoing, the Company will immediately notify MergerCo
of the receipt of any comments from the SEC, the effectiveness of the Form S-4
and any request by the SEC for any amendment to the Proxy Statement or the
Form S-4 or for additional information. All filings with the SEC, including
the Proxy Statement and the Form S-4 and any amendment thereto, and all
mailings to the Company's stockholders in connection with the Merger,
including the Proxy Statement, shall be subject to the prior review, comment
and approval of MergerCo. MergerCo will furnish to the Company all information
reasonably requested by the Company for inclusion in the Form S-4 and in the
Proxy Statement. The Company agrees to use its reasonable best efforts, after
consultation with MergerCo, to respond promptly to any comments made by the
SEC with respect to the Proxy Statement (and any preliminary version thereof
filed by it) and the Form S-4.
Section 6.3 Access to Information; Confidentiality. Upon reasonable notice
and subject to restrictions contained in confidentiality agreements to which
the Company is subject, the Company shall (and shall cause each of its
Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of, and financing sources for, MergerCo, reasonable
access, during the period to the Effective Time, to all its properties,
offices and facilities, books, contracts, commitments, records (financial and
otherwise), officers, directors, employees, accountants, counsel and other
representatives and agents, and, during such period, the Company shall (and
shall cause each of its Subsidiaries to) furnish promptly to the MergerCo all
information concerning its business, operations, properties, finances and
personnel as MergerCo may reasonably request, and shall make available to
MergerCo the appropriate individuals (including attorneys, accountants and
other professionals) for discussion of the any of the foregoing as MergerCo
may reasonably request. MergerCo shall keep such information confidential in
accordance with the terms of the confidentiality letter, dated March 24, 1998
(the "Confidentiality Letter"), between MergerCo and the Company.
Section 6.4 Indemnification and Insurance.
(1) The Company shall, to the fullest extent permitted under applicable law
or under the Company's Certificate of Incorporation or By-Laws and regardless
of whether the Merger becomes effective, indemnify and hold harmless, and,
after the Effective Time, the Surviving Corporation shall, to the fullest
extent permitted under applicable law, indemnify and hold harmless, each
present and former director, officer or employee of the Company or any of its
Subsidiaries (collectively, the "Indemnified Parties") against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, (x) arising out of or pertaining to the
transactions contemplated by this Agreement or (y) otherwise with respect to
any acts or omissions occurring at or prior to the Effective Time, to the same
extent as provided in the Company's Certificate of Incorporation or By-Laws or
any applicable indemnification agreement referred to in subparagraph (2)
below. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Surviving Corporation shall pay the reasonable fees and
A-23
<PAGE>
expenses of such counsel retained by the Indemnified Party, promptly after
reasonably sufficient statements therefore are received; provided that such
payment shall be conditioned upon such officer's, director's, employee's or
agent's agreement promptly to return such amounts to the Company if a court of
competent jurisdiction shall ultimately determine, and such determination
shall have become final and non-appealable, that indemnification of such
officer or director in the manner contemplated hereby is prohibited by
applicable law, and (ii) the Surviving Corporation will cooperate in the
defense of any such matter; provided, however, that the Surviving Corporation
shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld).
(2) The Surviving Corporation shall honor and fulfill in all respects the
obligations of the Company pursuant to indemnification agreements which are
listed in Section 6.4(2) of the Company Disclosure Schedule with the Company's
directors and officers existing at or before the Effective Time, as they
relate to any actions or events occurring on or prior to the Effective Time.
(3) For a period of six years after the Effective Time, the Surviving
Corporation to maintain in effect, if available, directors' and officers'
liability insurance covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy (a copy of which
has been made available to MergerCo) on terms comparable to, or better than,
those now applicable to directors and officers of the Company; provided that
(i) the Company following the Merger shall not be required to spend in excess
of an amount equal to 150% of the 1997 annual premium therefor; provided
further that if the Company following the Merger would be required to spend in
excess of a such amount per annum to obtain insurance having the maximum
available coverage under the current policies, the Company will be required to
spend such amount per annum to maintain or procure insurance coverage pursuant
hereto, subject to availability of such (or similar) coverage and (ii) such
policies may in the sole discretion of the Company be one or more "tail"
policies for all or any portion of the full six year period.
(4) This Section shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
and the Indemnified Parties, shall be binding on all successors and assigns of
the Surviving Corporation and shall be enforceable by the Indemnified Parties.
(5) If the Surviving Corporation or any of its successors or assigns
transfers all or substantially all of its properties and assets to any person
during the six-year period following the Effective Time, then, and in each
such case, proper provision shall be made so that the successors and assigns
of the Surviving Corporation assume the obligations set forth in this Section
6.4 or a "tail" policy is purchased to meet the obligation to provide
insurance hereunder.
Section 6.5 Notification of Certain Matters. The Company shall give prompt
notice to MergerCo, and MergerCo shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
contained in this Agreement to become materially untrue or inaccurate, or (ii)
any failure of the Company or MergerCo, as the case may be, materially to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 6.6 Further Action.
(1) Upon the terms and subject to the conditions hereof each of the parties
hereto shall use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including but not limited to (i)
cooperation in the preparation and filing of the Form S-4, the Proxy
Statement, any required filings under the HSR Act or other similar laws, and
any amendments to any thereof, (ii) determining whether any filings are
required to be made or consents, approvals, waivers, licenses, permits or
authorizations are required to be obtained (or, which if not obtained, would
result in an event of default,
A-24
<PAGE>
termination, amendment, alteration or acceleration of any agreement or any put
right under any agreement) under any applicable law or regulation or from any
Governmental Entities or third parties, including parties to loan agreements
or other debt instruments, in connection with the transactions contemplated by
this Agreement, and (iii) promptly furnishing information required in
connection therewith and timely seeking to obtain in a timely manner all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and otherwise to satisfy or cause to be satisfied
all conditions precedent to its obligations under this Agreement. The Company
shall not take any action to restrict, limit or prohibit MergerCo's ability to
exercise all of its rights and obligations under the Voting Agreement, and the
Company and its Board of Directors has provided and shall provide and maintain
all approvals required under Section 203 of the DGCL in order to permit such
exercise.
(2) Each of the parties agrees to cooperate with each other in taking, or
causing to be taken, all actions necessary to delist the Common Shares from
The New York Stock Exchange, Inc., provided that such delisting shall not be
effective until after the Effective Time. The parties also acknowledge that it
is MergerCo's intent that the retained Common Shares following the Merger will
not be listed on any national securities exchange or quoted on The NASDAQ
Stock Market Inc.'s National Market.
(3) The Company agrees to provide, and will cause its Subsidiaries and its
and their respective officers, employees and advisors to provide, all
necessary cooperation in connection with the arrangement of any financing to
be consummated contemporaneous with or at or after the Closing in respect of
the transactions contemplated by this Agreement, including without limitation,
participation in meetings, due diligence sessions, road shows, the preparation
of offering memoranda, private placement memoranda, prospectuses and similar
documents, the execution and delivery of any commitment letters, underwriting
or placement agreements, pledge and security documents, other definitive
financing documents, or other requested certificates or documents, including a
certificate of the chief financial officer of the Company with respect to
solvency matters, comfort letters of accountants and legal opinions as may be
requested by MergerCo or its sources of financing. In addition, in conjunction
with the obtaining of any such financing, the Company agrees, at the request
of MergerCo, to call for prepayment or redemption, to prepay, redeem,
repurchase, defease and/or renegotiate, or to solicit consents from holders of
and modify, as the case may be, any then existing indebtedness or equipment
leases of the Company and its Subsidiaries; provided that no such prepayment,
redemption, repurchase, defeasance, renegotiation or modification shall
themselves actually be made effective until immediately prior to,
contemporaneous with or after the Effective Time.
(4) The Company shall cooperate with any reasonable requests of MergerCo or
the SEC related to the recording of the Merger as a recapitalization for
financial reporting purposes, including, without limitation, to assist
MergerCo and its affiliates and representatives with any presentation to the
SEC with regard to such recording and to include appropriate disclosure with
regard to such recording in all filings with the SEC and all mailings to
stockholders made in connection with the Merger. In furtherance of the
foregoing, the Company shall provide to MergerCo, and MergerCo shall provide
to the Company, for the prior review of MergerCo's and the Company's advisors,
any description of the transactions contemplated by this Agreement which is
meant to be disseminated.
(5) In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall use their
reasonable best efforts to take all such necessary action.
Section 6.7 Disposition of Litigation. Each of the Company and MergerCo
shall give the other party reasonable opportunity to participate in the
defense of any third party action seeking to restrain or prohibit or otherwise
oppose the Merger.
Section 6.8 Affiliates. Prior to the Closing Date, the Company shall deliver
to MergerCo a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall
A-25
<PAGE>
use its reasonable best efforts to cause each such person who retains Common
Shares to deliver to MergerCo on or prior to the Closing Date a written
agreement substantially in the form attached as Annex A hereto.
Section 6.9 Stop Transfer Order. The Company shall notify the Company's
transfer agent that there is a stop transfer order with respect to all of the
Subject Shares (as defined in the Voting Agreement) and that the Voting
Agreement places limits on the voting of the Subject Shares.
Section 6.10 Public Announcements. Prior to the Effective Time, the Company
and MergerCo agree to consult with each other prior to issuing or causing the
publication of and provide each other the opportunity to review and comment
upon any press release or other announcement with respect to the Offer, the
Merger or this Agreement, and none of them shall issue or publish any such
press release or other announcement prior, except as may be required by law.
The parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement shall be mutually
agreed upon prior to the issuance thereof.
Section 6.11 Retention Bonus Plan. Following the execution of this
Agreement, the Company shall, if requested by MergerCo, implement an
appropriate retention bonus plan on terms mutually agreeable to the Company
and MergerCo. Retention Bonus Plan. Following the execution of this Agreement,
the Company shall, if requested by MergerCo, implement an appropriate
retention bonus plan on terms mutually agreeable to the Company and MergerCo.
Section 6.12 Company Information. The Company shall furnish to MergerCo the
following information (all to be prepared in accordance with generally
accepted accounting principles consistently applied):
(a) as soon as available but in any event within 30 days of each calendar
month, the unaudited consolidated balance sheets and statements of income
statements and cash flows of the Company, showing its financial condition
as of the close of such month and the results of operations during such
month and for the then elapsed portion of the Company's fiscal year, in
each case, setting forth the comparative figures for the corresponding
month in the prior fiscal year and the corresponding elapsed portion of the
prior fiscal year; and
(b) all documents filed with or submitted to the SEC by the Company
simultaneously with such filing or submission.
Section 6.13 Registration Rights Agreement. Prior to the Effective Time, the
Company shall execute and deliver to the Investors in MergerCo a registration
rights agreement in a form mutually acceptable to Investors and the Company,
such agreement to provide the Investors with six demand registration rights
and unlimited piggyback and S-3 registration rights for its Common Shares, all
subject to customary terms and provisions.
Section 6.14 Management Agreement. On or prior to the Effective Time, the
Company, at the request of MergerCo, shall enter into a management agreement
with Apollo Management IV, LP (or an affiliate thereof) pursuant to which the
Company shall agree to pay an annual management fee of $1,000,000 and agree to
continue to receive financial advisory services from Apollo Management IV, LP
and its designees on an ongoing basis with compensation to be determined, all
on terms reasonably satisfactory to MergerCo.
Section 6.15 Employee Plans.
(1) The Surviving Company shall honor, following the Effective Time, the
terms of the Economic Incentive Plan (the "Incentive Plan") as in effect on
the date hereof, with respect to all bonuses payable with respect to fiscal
year 1998, except that, notwithstanding anything to the contrary in the
Incentive Plan, any employee whose employment is terminated by the Company
following the Effective Time shall not affect an employee's entitlement to
receive the full or a pro rated portion of his/her bonus based on the number
of days in fiscal 1998 during which such employee was employed by the Company
in 1998. Prior to the Effective Time, the Company may amend the Incentive Plan
to be consistent with the terms of this Section 6.15. Each employee who is a
participant in the Incentive Plan shall be a third party beneficiary of this
Section.
A-26
<PAGE>
(2) The Surviving Corporation shall make a profit-sharing contribution to
the Company's 401(k) Savings and Retirement Plan (the "Savings Plan") as
described in Article VI of such plan with respect to the plan year ended
September 30, 1998 at a level consistent with recent past practice, such
contribution to be allocated among all otherwise eligible active participants
in the Savings Plan who are employed by the Company or any of its Subsidiaries
as of the Effective Time or whose employment is terminated by the Company or
its Subsidiaries during such plan year on or after attainment of age 65 or
because of death or "physical or mental disability" (as defined in Section 6.9
of the Savings Plan) in proportion to their relative Compensation (as defined
in the Savings Plan) for such plan year and regardless of whether such
employees are employed on the last day of such plan year. Prior to the
Effective Time, notwithstanding anything to the contrary herein, the Company
may amend the Savings Plan consistent with this Section 6.15(2); provided that
the Company shall provide MergerCo with an opportunity to review and comment
on any such amendment.
ARTICLE 7
Conditions to the Merger
Section 7.1 Conditions to Obligation of each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions:
(1) Stockholder Approval. The Company Stockholder Approval shall have
been obtained.
(2) HSR Act. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have
expired.
(3) Form S-4. To the extent required by applicable law, the Form S-4
shall have become effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order, and any
material "Blue Sky" and other state securities laws applicable to the
registration and qualification of the retained Common Shares following the
Merger shall have been complied with.
(4) No Injunctions or Restraints; Illegality. No preliminary or permanent
injunction or other order by any court of competent jurisdiction which
prevents the consummation of the Merger shall have been issued and remain
in effect (each party agreeing to use its reasonable best efforts to have
any such injunction lifted; it being understood that such efforts shall not
include the divestiture of any business or the material modification of
existing business practices);
(5) Governmental Actions. No action shall have been taken nor any
statute, rule or regulation shall have been enacted by any Government
Entity that makes the consummation of the Merger or the transactions
contemplated hereby illegal; and
(6) Solvency Letters. Each of the Board of Directors of the Company and
the Managers of MergerCo shall have received a copy of a solvency letter
addressed to it, in form and substance and from an independent evaluation
firm reasonably satisfactory to it, as to the solvency of the Company and
its Subsidiaries on a consolidated basis after giving effect to the
transactions contemplated by this Agreement, including all financings
contemplated hereby.
Section 7.2 Additional Conditions to Obligations of MergerCo. The obligation
of MergerCo to effect the Merger is further subject to the satisfaction or
waiver at or prior to the Effective Time of the following conditions:
(1) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct (i) in
all respects in the case of a representation or warranty qualified by a
Material Adverse Effect or (ii) in all material respects in the case of a
representation or warranty not so qualified by a Material Adverse Effect,
in each case as of the date of this Agreement (except where such
representation is made as of a certain date, which shall be true as of such
date) and as of the Effective Time as though made on and as of the
Effective Time.
A-27
<PAGE>
(2) Performance of Obligations of the Company. The Company shall have
performed the obligations required to be performed by it under this
Agreement at or prior to the Effective Time, except for such failures to
perform as have not had or would not, individually or in the aggregate,
have a Material Adverse Effect or materially adversely affect the ability
of the Company to consummate the transactions contemplated hereby.
(3) Receipt of Certificate. MergerCo shall have received a certificate
signed on behalf of the Company by a senior executive officer of the
Company to the effect set forth in subparagraphs (1) and (2) above.
(4) Consents, Etc. MergerCo shall have received evidence, in form and
substance reasonably satisfactory to it, that such licenses, permits,
consents, approvals, authorizations, qualifications and orders of
Governmental Entities and other third parties (including outstanding
indebtedness) as are necessary in connection with the transactions
contemplated hereby have been obtained, except where the failure to obtain
such licenses, permits, consents, approvals, authorizations, qualifications
and orders (other than with respect to foreign antitrust or other similar
laws) do not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(5) No Material Litigation. There shall not be pending by any
Governmental Entity any suit, action or proceeding (or by any other person
any suit, action or proceeding which has a reasonable likelihood of
success) (i) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by
this Agreement or the Voting Agreement or seeking to obtain from MergerCo,
the Company or any of their respective Subsidiaries or affiliates any
damages that are material to any such party (taken as a whole in the case
of the Company and its Subsidiaries), (ii) seeking to prohibit or limit the
ownership or operation by MergerCo or its investors of the Company or any
material portion of the business or assets of the Company and its
Subsidiaries taken as a whole, (iii) seeking to impose limitations on the
ability of the investors of MergerCo to acquire or hold, or exercise full
rights of ownership of, any shares of Common Shares, including, without
limitation, the right to vote the Common Shares on all matters properly
presented to the stockholders of the Company or (iv) seeking to prohibit
MergerCo or any of its Affiliates from effectively controlling in any
material respect or any material portion of the business, properties,
assets or operations of the Company and its Subsidiaries taken as a whole.
(6) Affiliate Letters. MergerCo shall have received the agreements
referred to in Section 6.8.
(7) Financing. The Company shall have received the proceeds of financing
on terms and conditions set forth in the Commitment Letters or upon terms
and conditions which are substantially equivalent thereto, and to the
extent that any of the terms and conditions are not set forth in the
Commitment Letters on terms and conditions reasonably satisfactory to
MergerCo.
(8) Recapitalization Accounting. MergerCo shall be reasonably satisfied
that the Merger shall be recorded as a recapitalization for financial
reporting purposes (provided that if MergerCo is advised that the SEC
finally determines that recapitalization treatment will not be available,
MergerCo will advise the Company within 30 days of receipt of such final
determination whether it intends to waive such condition and if it advises
the Company that it has determined not to so waive, the Company may
terminate this Agreement pursuant to Section 8.1(3) as if the date of such
advice from MergerCo was deemed to be November 30, 1998 for purposes of
Section 8.1(3)).
(9) The execution of this Agreement and consummation of the Merger will
not require compliance by any of the parties to this transaction with the
New Jersey Industrial Site Recovery Act, N.J.S.A. 13 1K-6 et seq. or, if
compliance is so required, such compliance shall have occurred prior to the
Effective Time.
Section 7.3 Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is further subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(1) Representations and Warranties. The representations and warranties of
MergerCo set forth in this Agreement that are qualified as to materiality
shall be true and correct and any such representations and
A-28
<PAGE>
warranties of MergerCo set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Effective Time as though
made at and as of the Effective Time.
(2) Performance of Obligations of MergerCo. MergerCo shall have performed
the obligations required to be performed by it under this Agreement at or
prior to the Effective Time in all material respects.
(3) Receipt of Certificates. The Company shall have received a
certificate signed on behalf of MergerCo by a senior executive officer of
MergerCo to the effect set forth in subparagraph (1) and (2) above.
ARTICLE 8
Termination
Section 8.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, notwithstanding approval thereof by the stockholders of
the Company or members of MergerCo:
(1) by mutual written consent duly authorized by the Board of Directors
of the Company and Managers of MergerCo;
(2) by either the MergerCo or the Company if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
(which order, decree, ruling or other action the parties hereto shall use
their respective reasonable efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the Merger or transactions
contemplated by this Agreement or prohibiting MergerCo to acquire or hold
or exercise rights of ownership of the Shares (including under the Voting
Agreement) and such order, decree, ruling or other action shall have become
final and non-appealable;
(3) by either MergerCo or the Company if the Merger shall not have been
consummated on or before November 30, 1998, provided that the right to
terminate this Agreement under this Section 8.1(3) shall not be available
to the party whose action or failure to act has been the cause of or
resulted in the failure of the Merger to occur on or before such date where
such action or failure to act constitutes a breach of this Agreement;
(4) by MergerCo if any required approval of the stockholders of the
Company shall not have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of stockholders or at
any adjournment thereof;
(5) by MergerCo, if the Company shall have (i) withdrawn, modified or
amended in any respect adverse to MergerCo its approval or recommendation
of this Agreement or any of the transactions contemplated herein, (ii)
failed to include in the Proxy Statement mailed to its stockholders such
recommendation, (iii) recommended any Acquisition Proposal from a person
other than MergerCo or any of its affiliates or (iv) resolved to do any of
the foregoing;
(6) by the Company if, prior to receipt of the Company Stockholder
Approval, the Board of Directors of the Company approves any transaction
relating to an Acquisition Proposal, on terms which the Board of Directors
of the Company has determined in good faith (i) to be more favorable to the
Company and its stockholders than the transactions contemplated by this
Agreement and (ii) based upon the advice of its outside counsel, that
failing to approve such Acquisition Proposal and terminate this Agreement
would constitute a breach of the fiduciary duties of the Board of Directors
of the Company under applicable law; provided that the termination
described in this Section 8.1(5) shall not be permissible unless and until
(i) the Company shall have provided MergerCo prior written notice at least
three business days prior to such termination that the Board of Directors
of the Company has authorized and intends to effect the termination of this
Agreement pursuant to this Section 8.1(5), (ii) the Company shall otherwise
be in compliance in all material respects with its obligations under this
Agreement, and (iii) on or prior to such termination the Company shall have
paid to MergerCo the fee described in Section 8.3(1); or
A-29
<PAGE>
(7) by MergerCo, if the Company shall have breached its representations
and warranties or the agreements and covenants to be performed by it and
such breach is incapable of being cured or not cured within 20 days of
receipt of written notice thereof from MergerCo.
Section 8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto or any of its
affiliates, directors, officers or stockholders or members, as the case may
be, except (i) as set forth in this Section 8.2, Section 8.3 and 9.8 hereof,
and (ii) nothing herein shall relieve any party from liability for any breach
hereof.
Section 8.3 Fees and Expenses.
(1) In the event that this Agreement is terminated pursuant to Section
8.1(4) (provided that the Company has received an Acquisition Proposal that
has been publicly announced or publicly known prior thereto), 8.1(5), 8.1(6)
or 8.1(7) (provided that the Company has received an Acquisition Proposal that
has been publicly announced or publicly known prior thereto) hereof, then the
Company shall, with respect to Section 8.1(4), 8.1(5) and 8.1(7), within one
business day of termination and with respect to Section 8.1(6), prior to such
termination, pay to the Investors, as designated by MergerCo, a termination
fee of $35 million, plus reimbursement of all reasonable out-of-pocket
expenses and fees (but not in excess of $5 million).
(2) In addition to any other amounts which may be payable or become payable
pursuant to Section 8.3(4), the Company shall (provided that MergerCo is not
then in breach of its representations, warranties, covenants or other
obligations under this Agreement), promptly following termination of this
Agreement pursuant to Section 8.1(3) (other than as a result of a failure of
the conditions set forth in Section 7.2(8)) or Section 8.1(7) but in no event
later than two business days following a written request by MergerCo therefor,
together with related bills or receipts, reimburse MergerCo and its
Affiliates, for all reasonable out-of-pocket expenses and fees (but not in
excess of $5 million) (including, without limitation, fees payable to all
banks, investment banking firms and other financial institutions, and their
respective agents and counsel, and all fees of counsel, accountants, financial
printers, experts and consultants to MergerCo and its affiliates), whether
incurred prior to, on or after the date hereof, in connection with the Merger
and the consummation of all transactions contemplated by this Agreement and
the financing thereof.
(3) If the Merger shall be consummated in accordance with this Agreement,
then the Surviving Corporation following the Merger shall pay to Apollo
Advisors IV, L.P. or any designee, on the Closing Date, a fee of $12.5 million
in cash, for arranging the transactions contemplated by this Agreement
(including the financings thereof), which amount shall be payable in same day
funds. No amount payable pursuant to any of the other provisions of this
Section 8.3 shall reduce the amount of the foregoing fee payable pursuant to
this subsection 8.3(3).
(4) Except as provided in subsections 8.3(2) and (3) above, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses,
whether or not the Merger is consummated; it being understood, however, that,
as of the Effective Time, all expenses of MergerCo, the Investors and their
respective Affiliates incurred in connection with the transactions
contemplated hereby shall be deemed to be expenses of the Company. As of the
Effective Time, the Company shall assume all agreements between MergerCo, the
Investors or their respective Affiliates and third parties relating to the
financing of the transactions contemplated hereby and shall indemnify and hold
harmless the Investors and their Affiliates with respect to all obligations
thereunder.
(5) In addition to any other amounts which may be payable or become payable
pursuant to Section 8.3(4), in the event of the termination of this Agreement
pursuant to Section 8.1(7) and the receipt of an Acquisition Proposal within
90 days after the date of such termination, the Company shall pay to the
Investors, within two business days after the receipt of the Acquisition
Proposals, the Termination Fee.
A-30
<PAGE>
ARTICLE 9
General Provisions
Section 9.1 Nonsurvival of Representations, Warranties and Agreements. The
representations and warranties in this Agreement shall terminate at the
Effective Time or the termination of this Agreement pursuant to Section 8.1,
as the case may be. The covenants and agreements contained in this Agreement
shall survive the Effective Time or termination of this Agreement, as the case
may be, and shall continue until they terminate in accordance with their
terms.
Section 9.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made if and when delivered personally or by overnight courier to the
parties at the following addresses or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified below (or at such
other address or telecopy number for a party as shall be specified by like
notice):
(1) If to MergerCo:
Apollo Management IV, L.P.
1301 Avenue of the Americas
38th Floor
New York, NY 10019
Attention: Michael S. Gross
Telecopier No.: (212) 261-4071
Telephone No.: (212) 261-4009
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: David J. Friedman, Esq.
Telecopier No.: (212) 735-2001
Telephone No.: (212) 735-2218
and
Atlas Capital Partners
633 Third Avenue
New York, New York 10017
Attention: Mitchell I. Gordon
Telecopier No.: (212) 916-3284
Telephone No.: (212) 986-3225
(2) If to the Company:
XTRA Corporation
Thomas A. Giacchetto
60 State Street
Boston, MA 02109
Attention: Chief Counsel and Secretary
Telecopier No.: (617) 367-7857
Telephone No.: (617) 523-5331
A-31
<PAGE>
With a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: David A. Fine, Esq.
Telecopier No.: (617) 951-7050
Telephone No.: (617) 951-7374
Section 9.3 Certain Definitions. For purposes of this Agreement, the term:
(1) "Affiliate" means a Person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned Person; including, without limitation,
any partnership or joint venture in which the first mentioned Person
(either alone, or through or together with any other Subsidiary) has,
directly or indirectly, an interest of 5% or more;
(2) "Beneficial Owner" with respect to any shares of Common Shares means
a person who shall be deemed to be the beneficial owner of such shares (i)
which such person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 of the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates
has, directly or indirectly, (A) the right to acquire (whether such right
is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding, or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares;
(3) "Business Day" means any day other than a day on which banks in The
Commonwealth of Massachusetts or the State of New York are required or
authorized to be closed;
(4) "Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock,
as trustee or executor, by contract or credit arrangement or otherwise;
(5) "Company Disclosure Schedule" means the disclosure schedule referred
to in heading of Article 3 of the Agreement and which is attached hereto
and the specific disclosures made herein shall be deemed to qualify and
amend the representations and warranties contained in Article 3 of the
Agreement to which the disclosures make reference to or reference is
apparent on its face and shall be read for all purposes together with such
representations and warranties.
(6) "Generally accepted accounting principles" shall mean the generally
accepted accounting principles set forth in the opinions and pronouncements
of the Accounting Principles Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity
as may be approved by a significant segment of the accounting profession in
the United States applied on a consistent basis.
(7) "Material Adverse Effect" when used in this Agreement in connection
with the Company or any of its Subsidiaries means any change or effect
that, either individually or in the aggregate is or is likely to be
materially adverse to the business, assets, liabilities, financial
condition or results of operations of the Company and its Subsidiaries
taken as a whole other than any such changes or effects affecting generally
the industry in which the Company and its Subsidiaries compete and general
economic conditions.
(8) "Person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act); and
(9) "Subsidiary" or "Subsidiaries" of the Company, MergerCo or any other
Person means any corporation, partnership, joint venture or other legal
entity of which the Company, the Surviving
A-32
<PAGE>
Corporation, MergerCo or such other person, as the case may be (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, more than 50% of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity.
(10) "Transactions contemplated hereby," "transactions contemplated by
this Agreement" and other similar references shall include the Merger and
all other actions and transactions contemplated by this Agreement and the
Voting Agreements.
Section 9.4 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is, or whose stockholders or members, as
the case may be, are, entitled to the benefits thereof. This Agreement may be
amended or supplemented at any time, except that after approval hereof by the
stockholders of the Company, no amendment shall be made which decreases the
Merger Consideration or that in any other way materially adversely affects the
rights of such stockholders (other than a termination of this Agreement)
without the further approval of such stockholders. No such waiver, amendment
or supplement shall be effective unless in writing and signed by the party or
parties intended to be bound thereby.
Section 9.5 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.6 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
Section 9.7 Entire Agreement; Assignment. This Agreement constitutes the
entire agreement and supersedes all prior agreements and undertakings (other
than the Confidentiality Letters), both written and oral, among the parties,
or any of them, with respect to the subject matter hereof. This Agreement
shall not be assigned by operation of law or otherwise.
Section 9.8 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, including, without limitation, by way of
subrogation, other than Section 6.4 (which is intended to be for the benefit
of the Indemnified Parties and may be enforced by such Indemnified Parties)
and Section 6.15(a) (which is intended to be for the benefit of employees of
the Company whose employment has been terminated prior to the Effective Time
and who are entitled to participate in the Incentive Plan and may be enforced
by them).
Section 9.9 Failure or Indulgence Not Waiver, Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
Section 9.10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware
applicable to contracts executed and fully performed within the State of
Delaware.
Section 9.11 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
A-33
<PAGE>
Section 9.12 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy
to which they are entitled at law or in equity.
IN WITNESS WHEREOF, MergerCo and the Company have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
Wheels MergerCo LLC
/s/ Andrew Africk
By: _________________________________
Name: Andrew Africk
Title: Manager
XTRA Corporation
/s/ Michael J. Soja
By: _________________________________
Name: Michael J. Soja
Title: Vice President and Chief
Financial Officer
A-34
<PAGE>
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
XTRA CORPORATION
FIRST: The name of the Corporation is XTRA Corporation (hereinafter the
"Corporation").
SECOND: The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation shall have
authority to issue is 50,000,000 shares of Common Stock, each having a par
value of $.50.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time to
time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless the
By-Laws so provide.
(4) No director shall be personally liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any
transaction from which the director derived an improper personal benefit.
Any repeal or modification of this Article FIFTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such
repeal or modification.
(5) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the directors
which would have been valid if such By-Laws had not been adopted.
(6) The Corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify and upon request
shall advance expenses to any person who is or was a party or is threatened
to be made a party to any threatened, pending or completed action, suit,
proceeding or claim, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was or has agreed to be
a director or officer of this Corporation or while a director or officer is
or was serving at the request of the Corporation as a director, officer,
partner, trustee, employee or agent of any corporation, partnership, joint
venture, trust or other enterprise, including service with respect to
employee benefit plans, against expenses (including attorneys' fees and
expenses), judgments, fines, penalties and amounts paid in
A-35
<PAGE>
settlement incurred in connection with the investigation, preparation to
defend or defense of such action, suit, proceeding or claim; provided,
however, that the foregoing shall not require the Corporation to indemnify
or advance expenses to any person in connection with any action, suit,
proceeding, claim or counterclaim initiated by or on behalf of such person.
Such indemnification shall not be exclusive of other indemnification rights
arising under any by-law, agreement, vote of directors or stockholders or
otherwise and shall inure to the benefit of the heirs and legal
representatives of such person. Any repeal or modification of the foregoing
provisions of this Section 6 shall not adversely affect any right or
protection of a director or officer of the Corporation existing at the time
of such repeal or modification.
SIXTH: Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the GCL) outside the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or in the By-Laws of the Corporation.
SEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
A-36
<PAGE>
ANNEX A
FORM OF AFFILIATE LETTER
Gentlemen:
The undersigned, a holder of shares of common stock, par value $.50 per
share ("Company Shares"), of XTRA Corporation, a Delaware corporation (the
"Company"), is entitled to retain and receive in connection with the merger
(the "Merger") of the Company with Wheels MergerCo LLC, a Delaware limited
liability company ("MergerCo"), securities (collectively, the "Securities") of
the Company. The undersigned acknowledges that the undersigned may be deemed
an "affiliate" of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933 (the "Act"), although nothing
contained herein should be construed as an admission of such fact.
If the undersigned were an affiliate under the Act, the undersigned's
ability to sell, assign or transfer the Securities retained by the undersigned
pursuant to the Merger may be restricted unless such transaction is registered
under the Act or an exemption from such registration is available. The
undersigned understands that such exemptions are limited and the undersigned
has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the
sale of such securities of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with the Company that the
undersigned will not sell, assign or transfer any of the Securities retained
by the undersigned pursuant to the Merger except (i) pursuant to an effective
registration statement under the Act, (ii) in conformity with the volume and
other limitations of Rule 145 or (iii) in a transaction which, in the opinion
of independent counsel reasonably satisfactory to the Company or as described
in a "no-action" or interpretive letter from the Staff of the Securities and
Exchange Commission (the "SEC"), is not required to be registered under the
Act.
In the event of a sale or other disposition by the undersigned of Securities
pursuant to Rule 145, the undersigned will supply the Company with evidence of
compliance with such Rule, in the form of a letter in the form of Annex I
hereto.
The undersigned understands that the Company may instruct its transfer agent
to withhold the transfer of any Securities disposed of by the undersigned, but
that upon receipt of such evidence of compliance the transfer agent shall
effectuate the transfer of the Securities sold as indicated in the letter.
The undersigned acknowledges and agrees that appropriate legends will be
placed on certificates representing Securities retained by the undersigned in
the Merger or held by a transferee thereof, which legends will be removed by
delivery of substitute certificates upon receipt of an opinion in form and
substance reasonably satisfactory to the Company from independent counsel
reasonably satisfactory to the Company to the effect that such legends are no
longer required for purposes of the Act.
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of
Securities and (ii) the receipt by MergerCo of this letter is an inducement
and a condition to MergerCo's obligations to consummate the Merger.
Very truly yours,
Dated:
A-37
<PAGE>
ANNEX B
FORM OF VOTING AGREEMENT
Voting Agreement, dated as of June 18, 1998 (this "Agreement"), by and among
Wheels MergerCo LLC, a Delaware limited liability company ("MergerCo"), and
(the "Stockholder").
Whereas, MergerCo and XTRA Corporation, a Delaware corporation (the
"Company"), propose to enter into an Agreement and Plan of Merger and
Recapitalization, dated as of the date hereof (the "Recapitalization
Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Recapitalization Agreement), providing for the
merger (the "Merger") of MergerCo with and into the Company, upon the terms
and subject to the conditions set forth in the Merger Agreement (a copy of
which is attached hereto as Exhibit A); and
Whereas, the Stockholder owns the number of shares of common stock, par
value $.50 per share, of the Company (the "Common Stock") set forth on
Schedule A attached hereto (such shares of Common Stock, together with any
other shares of Common Stock that the Stockholder acquires beneficial
ownership of after the date hereof and during the term of this Agreement,
whether upon the exercise of options, warrants or rights, the conversion or
exchange of convertible or exchangeable securities, or by means of purchase,
dividend, distribution, gift, devise or otherwise, being collectively referred
to herein as the "Subject Shares"); and
Whereas, as a condition to its willingness to enter into the
Recapitalization Agreement, MergerCo has requested that the Stockholder enter
into this Agreement.
Now, Therefore, to induce MergerCo to enter into, and in consideration of
its agreeing to enter into, the Recapitalization Agreement, and in
consideration of the premises and the representations, warranties and
agreements contained herein, intending to be legally bound hereby, the parties
hereto agree as follows:
1. Representations and Warranties of Each Stockholder. The Stockholder
hereby represents and warrants to MergerCo as follows:
(a) Authority; No Conflicts. The Stockholder has all requisite power and
authority to enter into and to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. execution, delivery and performance of this Agreement
by the Stockholder, the performance of its obligations hereunder and the
consummation of the transactions contemplated hereby, have been duly
authorized by all necessary action on the part of Stockholder. This
Agreement has been duly authorized, executed and delivered by the
Stockholder and, assuming due authorization, execution and delivery by
MergerCo, constitutes a legal, valid and binding obligation of the
Stockholder, enforceable in accordance with its terms. Except for
informational filings with the SEC, the execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated
hereby and compliance with the terms hereof will not, (i) conflict with, or
result in any violation of, or default (with or without notice or lapse of
time or both) under any provision of, any certificate or articles of
incorporation, bylaws, certificate or articles of limited partnership,
limited partnership agreement, trust agreement, loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise, license, judgment, order, notice, decree,
statute, law, ordinance, rule or regulation applicable to the Stockholder
or to the Stockholder's property or assets, including the Subject Shares,
(ii) to such Stockholder's knowledge, require any other filing with, or
permit, authorization, consent or approval of, or notice to, any federal,
state or local government or any court, tribunal, administrative agency or
commission or other governmental or regulatory authority or agency,
domestic, foreign or supranational, or (iii) to such Stockholder's
knowledge, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Stockholder or any of the Stockholder's
properties or assets, including the Subject Shares.
(b) The Subject Shares. The Stockholder is the [record and] beneficial
owner of, and has good and marketable title to, the Subject Shares set
forth opposite its name* on Schedule A hereto and has, and
- --------
* Provision only in Tiger Group Voting Agreements.
B-1
<PAGE>
throughout the term of this Agreement will have, good and marketable title
to the Subject Shares free and clear of all Liens[, except Liens arising
out of margin account borrowings with one or more brokerage firms on
customary terms]*. The Stockholder does not own, beneficially or of record,
any shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, other than the
Subject Shares set forth opposite its name on Schedule A hereto. The
Stockholder has the sole right and power to vote and dispose of the Subject
Shares, and none of such Subject Shares is subject to any voting trust or
other agreement, arrangement or restriction with respect to the voting or
transfer (other than the provisions of the Securities Act) of any of the
Subject Shares, except as contemplated by this Agreement.
(c) Brokers. No broker, finder, investment banker or other person
retained by the Stockholder is entitled to any brokerage, finder's or other
fee or commission in connection with the execution of this Agreement by the
Stockholder or the performance by the Stockholder of its obligations
hereunder.
(d) Proxies. The Stockholder represents that there are no proxies
heretofore given in respect of the Stockholder's Subject Shares.
2. Representations and Warranties of MergerCo. MergerCo hereby represents
and warrants to each Stockholder as follows:
(a) Existence; Authority; Conflicts. MergerCo is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by MergerCo, the performance of
its obligations hereunder and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary action on
the part of MergerCo. This Agreement has been duly authorized, executed and
delivered by and on behalf of MergerCo and, assuming due authorization,
execution and delivery by the Stockholder, constitutes a legal, valid and
binding obligation of MergerCo enforceable in accordance with its terms.
Except for informational filings with the SEC, the execution and delivery
of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, (i)
conflict with, or result in any violation of, or default (with or without
notice or lapse of time or both) under any provision of, any certificate or
articles of incorporation, bylaws, certificate or articles of limited
partnership, limited partnership agreement, trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order,
notice, decree, statute, law, ordinance, rule or regulation applicable to
MergerCo or to the MergerCo's property or assets, (ii) require any filing
with, or permit, authorization, consent or approval of, or notice to, any
federal, state or local government or any court, tribunal, administrative
agency or commission or other governmental or regulatory authority or
agency, domestic, foreign or supranational, or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to
MergerCo or any of the MergerCo's properties or assets.
(b) Brokers. No broker, finder, investment banker or other person is
entitled to any brokerage, finder's or other fee or commission for which
the Stockholder will be liable in connection with the execution of this
Agreement by MergerCo or the performance by MergerCo of its obligations
hereunder.
(c) Complete Agreement; No Additional Agreements. This Agreement
represents the complete agreement between MergerCo and the Stockholder, and
there are no additional agreements between MergerCo and any other
stockholder of the Company with respect to any matter referenced herein.
3. Covenants of the Stockholder. Until the termination of this Agreement in
accordance with Section 8 hereof, the Stockholder agrees, subject to the terms
and conditions of this Agreement, as follows:
- --------
* Provision only in Trinity Voting Agreement
B-2
<PAGE>
(a) Voting of Subject Shares for the Merger. At any meeting of
stockholders of the Company called to vote upon the Merger and the
Recapitalization Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval with respect to
the Merger and the Recapitalization Agreement is sought, the Stockholder
shall vote (or cause to be voted) the Subject Shares in favor of the
Merger, the adoption by the Company of the Recapitalization Agreement and
the approval of the terms thereof and each of the other transactions
contemplated by the Recapitalization Agreement (provided that the
Stockholder shall not be required to vote in favor or the Recapitalization
Agreement or the Merger if the Recapitalization Agreement has, without the
written consent of the Stockholder, been amended in any manner that is
material and adverse to the Stockholder).
(b) Voting of Subject Shares Against Competing Proposals. During the term
of this Agreement, Stockholder hereby agrees that it will vote any of the
Subject Securities against the approval of any other merger, consolidation,
sale of assets, reorganization, recapitalization, liquidation or winding up
of the Company or any other extraordinary transaction involving the Company
or any matters related to or in connection therewith, or any corporate
action relating to or the consummation of which would either frustrate the
purposes of, or prevent or delay the consummation of, the transactions
contemplated by the Recapitalization Agreement.
(c) Proxies. As security for the agreements of the Stockholder provided
for herein, the Stockholder hereby grants to MergerCo and to Michael Gross
and Andrew Africk, each in his individual capacity as an officer of
MergerCo and to any individual who shall succeed to any such officer of
MergerCo, a proxy to vote the Subject Shares as indicated in Sections 3(a)
and 3(b) above. The Stockholder agrees that this proxy shall be irrevocable
during the term of this Agreement and coupled with an interest and each
will take such further action or execute such other instruments as may be
necessary to effectuate the intent of this proxy and hereby revokes any
proxy previously granted by the Stockholder with respect to the Subject
Shares. The proxy granted pursuant to this Section 3(c) shall not affect
the Stockholder's ability to make an election, pursuant to the terms and
conditions of the Recapitalization Agreement, to receive cash or stock as
consideration in the Merger and (ii) shall terminate upon the termination
of this Agreement pursuant to Section 8. Each Stockholder hereby affirms
that each irrevocable proxy granted pursuant to this Section 3(c) is given
in connection with the execution of the Recapitalization Agreement, and
that each such irrevocable proxy is given to secure the performance of the
duties of the Stockholder under this Agreement. The Stockholder hereby
further affirms that each such irrevocable proxy is coupled with an
interest and may under no circumstances be revoked. The Stockholder hereby
ratifies and confirms all that the holder of each irrevocable proxy may
lawfully do or cause to be done by virtue hereof. Each such irrevocable
proxy is executed and intended to be irrevocable in accordance with the
provisions of Section 212(e) of the DGCL; provided, that each such
irrevocable proxy shall terminate upon termination of this Agreement
pursuant to Section 8.
(d) Transfer Restrictions. Prior to the termination of this Agreement,
the Stockholder agrees not to (i) sell, transfer, pledge, encumber, assign
or otherwise dispose of (including by gift or by contribution or
distribution or otherwise) (or consent to any of the foregoing)
(collectively, "Transfer"), or enter into any contract, option or other
arrangement or understanding (including any profit sharing arrangement)
with respect to the Transfer of, any of the Subject Shares or any interest
therein other than pursuant to the terms hereof and the Recapitalization
Agreement, (ii) enter into any voting arrangement or understanding, whether
by proxy, voting agreement or otherwise, or (iii) take any action that
would make any of its representations or warranties contained herein untrue
or incorrect or have the effect of preventing or disabling the Stockholder
from performing its obligations under this Agreement.
(e) Appraisal Rights. The Stockholder hereby irrevocably waives any
rights of appraisal with respect to the Merger or rights to dissent from
the Merger that the Stockholder may have.
(f) Acquisition Proposals. During the term of this Agreement, the
Stockholder shall not, nor shall it permit any investment banker, financial
advisor, attorney, accountant or other representatives retained by it, to,
directly or indirectly, (i) solicit, initiate or encourage (including by
way of furnishing information), or take any other action to facilitate, any
inquiries or the making of any proposal that may lead to an
B-3
<PAGE>
Acquisition Proposal or (ii) participate in any discussions or negotiations
regarding any proposed Acquisition Proposal.
(g) Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to such Stockholder's Subject Shares and
shall be binding upon any person or entity to which legal or beneficial
ownership of such Subject Shares shall pass, whether by operation of law or
otherwise. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure
of the Company affecting the Common Stock, or the acquisition of additional
shares of Common Stock or other voting securities of the Company by the
Stockholder, the number of Subject Shares listed in Schedule A beside the
name of the Stockholder shall be adjusted appropriately and this Agreement
and the obligations hereunder shall attach to any additional shares of
Common Stock or other voting securities of the Company issued to or
acquired by such Stockholder.
(h) Affiliate Letter. The Stockholder shall deliver to MergerCo on or
prior to the Effective Time a written agreement substantially in the form
attached as Annex A to the Recapitalization Agreement.
4. Further Assurances. The Stockholder will, from time to time, execute and
deliver, or cause to be executed and delivered, such additional or further
consents, proxies, documents and other instruments as MergerCo or the Company
may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement. If MergerCo or its affiliates
enters into any agreement with any other stockholder of the Company having a
purpose or effect substantially similar to that of this Agreement on financial
or other terms (with respect to such other stockholder) more favorable than
the terms of this Agreement, the Stockholder will have the right to elect any
of the benefits thereof, as they may be amended or waived from time to time.
The preceding sentences shall not apply to any arrangements entered into with
management of the Company.
5. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties, except that MergerCo may assign,
in its sole discretion, any or all of its rights, interests and obligations
hereunder to any affiliate of MergerCo. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their permitted assigns and their respective
successors (including the Company as successor to MergerCo pursuant to the
Merger).
6. Public Announcement. Neither MergerCo nor the Stockholder shall issue any
press release or make any public statement without the prior written consent
of the other parties hereto, except as may be required by applicable law,
court process or by obligations pursuant to any listing agreement with any
national securities exchange.
7. Term; Termination. This Agreement shall become effective upon execution
and delivery by all of the parties hereto and this Agreement shall terminate,
and no party shall have any rights or obligations hereunder and this Agreement
shall become null and void and have no further effect, except as otherwise
provided herein, immediately following the earliest to occur of (x) the
Effective Time or (y) the termination of the Recapitalization Agreement
pursuant to its terms. Nothing in this Section 7 shall relieve any party of
liability for breach of this Agreement.
8. Compliance with Rule 144(c). For a period of two years following the
Effective Time, the Company shall comply with all requirements of Rule 144(c)
promulgated under the Securities Act of 1933.
9. General Provisions.
(a) Amendments. This Agreement may not be amended except by an instrument
in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to MergerCo in accordance
with Section 9.2 of the Recapitalization Agreement and to the Stockholder
as set forth on Schedule A hereto (or at such other address for a party as
shall be specified by like notice).
B-4
<PAGE>
(c) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include," "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
(d) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that each party need not sign the same counterpart.
(e) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
(f) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
(g) Voidability. If prior to the execution hereof, the Board of Directors
of the Company shall not have duly and validly authorized and approved by
all necessary corporate action, this Agreement, the Recapitalization
Agreement and the transactions contemplated hereby and thereby, so that by
the execution and delivery hereof MergerCo would become, or could
reasonably be expected to become an "interested stockholder" with whom the
Company would be prevented for any period pursuant to Section 203 of the
DGCL from engaging in any "business combination" (as such terms are defined
in Section 203 of the DGCL), then this Agreement shall be void and
unenforceable until such time as such authorization and approval shall have
been duly and validly obtained.
(h) Expenses. Except as otherwise provided herein, all costs and expenses
incurred in connection with the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses.
10. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court of the United
States located in the Southern District of the State of New York or in a New
York state court located in Manhattan, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of
the parties hereto (i) consents to submit such party to the personal
jurisdiction of any Federal court located in the Southern District of the
State of New York or any New York state court located in Manhattan in the
event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (ii) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from
any such court, (iii) agrees that such party will not bring any action
relating to this Agreement or the transactions contemplated hereby in any
court other than a Federal court sitting in the Southern District of the State
of New York or a New York state court located in Manhattan and (iv) waives any
right to trial by jury with respect to any claim or proceeding related to or
arising out of this Agreement or any of the transactions contemplated hereby.
B-5
<PAGE>
In Witness Whereof, MergerCo and the Stockholder have each caused this
Agreement to be signed by its signatory thereunto duly authorized each as of
the date first written above.
Wheels MergerCo LLC
/s/ Andrew Africk
By:____________________________________
Name: Andrew Africk
Title: Manager
[ ]
By:
By:_________________________________
Name:
Title:
B-6
<PAGE>
ANNEX C
June 18, 1998
Board of Directors
XTRA Corporation
60 State Street
Boston, MA 02109-1826
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $.50
per share (the "Shares"), of XTRA Corporation (the "Company") of the aggregate
consideration (as defined below) to be received by such holders pursuant to
the Agreement and Plan of Merger and Recapitalization, dated June 18, 1998
(the "Agreement"), among Wheels MergerCo LLC ("MergeCo"), a limited liability
company organized at the direction of Apollo Management, L.P., and its
investing affiliates (collectively, "Apollo"), and the Company. The Agreement
provides for the merger (the "Merger") of MergeCo with and into the Company
pursuant to which each holder of a Share shall be entitled either (i) to
retain such Share or (ii) to receive $65.00 in cash for such Share, subject to
certain election and proration procedures set forth in the Agreement, as to
which we express no view. It is our understanding that the holders will
receive cash for approximately 97% of their Shares and retain the balance of
such Shares (the "Aggregate Consideration").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. We are familiar with the Company having provided certain investment
banking services to the Company from time to time, including having acted as
manager of various medium-term notes issuances and having acted as its
financial advisor in connection with, and having participated in certain of
the negotiations leading to, the Agreement. We have also provided investment
banking services from time to time to Apollo and its affiliates and may do so
in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; each Voting Agreement, dated June 18, 1998, entered into between
MergeCo and certain stockholders; the Annual Reports on Form 10-K of the
Company for the five fiscal years ended September 30, 1997; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company;
certain other communications from the Company to its stockholders; and certain
internal financial analyses and forecasts for the Company prepared by its
management without giving effect to the Merger. We also have held discussions
with members of the senior management of the Company regarding its past and
current business operations, financial condition and future prospects. In
addition, we have reviewed the reported price and trading activity for the
Shares, reviewed the financial terms of certain recent business combinations
in the equipment leading industry specifically and other industries generally,
and performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In that regard, we have
assumed with your consent that the financial forecasts provided to us and
discussed with us with respect to the Company have been reasonably prepared on
a basis reflecting the best currently available estimates and judgments of the
management of the Company. We have also assumed with your consent that the
Merger will be treated as a recapitalization in accordance with generally
accepted accounting principles. We have not made an independent evaluation or
appraisal with respect to the assets and liabilities of the Company or
concerning the solvency or fair value of the Company for any state law or
federal bankruptcy law purposes, and we have not been furnished with any such
evaluation or appraisal. We are not expressing any opinion herein on the
prices at which the Shares are likely to trade following the consummation of
the Merger, which may vary depending upon, among other factors, changes in
business, market or general economic conditions, liquidity and other factors
that generally influence the price of securities. Our advisory services and
the opinion expressed herein
C-1
<PAGE>
are provided for the information and assistance of the Board of Directors of
the Company in connection with its consideration of the transaction
contemplated by the Agreement and such opinion does not constitute a
recommendation as to how any holder of Shares should vote with respect to such
transaction or what election any such holder should make in connection with
the Merger.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the
Aggregate Consideration to be received by the holders of Shares pursuant to
the Agreement is fair from a financial point of view to such holders.
Very truly yours,
Goldman, Sachs & Co.
C-2
<PAGE>
ANNEX D
XTRA CORPORATION
1998 STOCK OPTION AND INCENTIVE AWARD PLAN
1.PURPOSE
XTRA Corporation ("the Company") hereby establishes the Company 1998 Stock
Option and Incentive Award Plan (the "Plan"). The purpose of the Plan is to
align the interests of officers, other employees and independent contractors
of the Company and its Subsidiaries with those of the Company's stockholders;
to reinforce corporate, organizational and business-development goals; to
promote the achievement of year-to-year and long-range financial and other
business objectives; and to reward the performance of individual officers,
other employees and independent contractors in fulfilling their personal
responsibilities for long-range achievements.
2.DEFINITIONS
The following terms, as used herein, shall have the following meanings:
(a) "Annual Incentive Compensation Award" shall mean an Award, pursuant to
the Annual Incentive Compensation Program, contingent upon the
attainment of Performance Goals with respect to a Performance Period.
(b) "Annual Incentive Compensation Program" shall mean the program set
forth in Section 8 of the Plan.
(c) "Award" shall mean any Option, Restricted Stock, Stock Unit, Incentive
Unit, Annual Incentive Compensation Award or freestanding SAR granted
pursuant to the Plan.
(d) "Award Agreement" shall mean any written agreement, contract, or other
instrument or document between the Company and a Participant evidencing
an Award.
(e) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under
the Exchange Act.
(f) "Board" shall mean the Board of Directors of the Company.
(g) "Cause" shall mean, unless otherwise defined in the applicable Award
Agreement (i) the engaging by the Participant in willful misconduct
that is injurious to the Company or its Subsidiaries, (ii) the
embezzlement or misappropriation of funds or property of the Company or
its Subsidiaries by the Participant or the conviction of the
Participant of a felony or the entrance of a plea of guilty or nolo
contendre by the Participant to a felony, or (iii) the willful failure
or refusal by the Participant to substantially perform his duties or
responsibilities that continues after being brought to the attention of
the Participant (other than any such failure resulting from the
Participant's incapacity due to Disability). For purposes of this
paragraph, no act, or failure to act, on the Participant's part shall
be considered "willful" unless done, or omitted to be done, by him not
in good faith and without reasonable belief that his action or omission
was in the best interest of the Company and its Subsidiaries.
Determination of Cause shall be made by the Board in its sole
discretion. Any such determination shall be final and binding on a
Participant.
(h) A "Change in Control" shall have occurred in the event that any Person
(other than Apollo Investment Fund IV, L.P. or any affiliate thereof,
or any fund managed by Apollo Management, L.P. or any of its affiliates
(collectively, "Apollo"), or Interpool, Inc., shall be or become the
Beneficial Owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such Person any
securities acquired directly from the Company, Apollo or Interpool,
Inc.) representing more than fifty percent (50%) of the combined voting
power of the Company's then outstanding securities.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean XTRA Corporation.
D-1
<PAGE>
(k) "DERs" shall mean dividend equivalent rights credited in respect of
Stock Units granted hereunder.
(l) "Disability" shall mean a physical or mental condition that the Company
determines prevents the Participant from substantially performing his
duties or responsibilities for a period of (i) six (6) consecutive
months or (ii) six (6) months in any twenty-four (24) month period.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" of a share of Stock on any date shall be the fair
market value of such Stock as determined by the Board in its sole
discretion; provided that (A) if the Stock is admitted to trading on a
national securities exchange, Fair Market Value on any date shall be
the last sale price reported for the Stock on such exchange on such
date or, if none, the next earlier date on which a sale was reported;
(B) if the Stock is admitted to quotation on the Nasdaq National Market
or other comparable quotation system, Fair Market Value on any date
shall be the last sale price reported for the Stock on such system on
such date or, if none, the next earlier date on which a sale was
reported; or (C) if the Stock is admitted to quotation on the Nasdaq
Stock Market, Fair Market Value on any date shall be the average of the
highest bid and lowest asked prices of the Stock on such system on such
date.
(o) "Incentive Stock Option" shall mean an Option intended to meet the
requirements of Section 422 of the Code, or any successor provision,
and that is designated by the Board as an Option intended to be an
Incentive Stock Option.
(p) "Incentive Unit" shall mean a unit that is assigned a dollar value and
that relates to a Long-Term Incentive Compensation Award.
(q) "Long-Term Incentive Compensation Award" shall mean an Award, granted
pursuant to the Long-Term Incentive Compensation Program, the payment
of which is contingent upon the attainment of Performance Goals with
respect to a Performance Period.
(r) "Long-Term Incentive Compensation Program" shall mean the program set
forth in Section 7 of the Plan.
(s) "Nonqualified Stock Option" shall mean an Option other than an
Incentive Stock Option.
(t) "Option" shall mean the right, granted pursuant to this Plan, of a
holder to purchase shares of Stock under the Stock Option and SAR
Program at an exercise price and upon the terms to be specified by the
Board.
(u) "Participant" shall mean a director, officer, other employee or
independent contractor of XTRA or any of its Subsidiaries who is,
pursuant to Section 4 of the Plan, selected to participate herein.
(v) "Performance Goal" shall mean the criteria and objectives, determined
by the Board, that must be met during the applicable Performance Period
as a condition of vesting or of the Participant's receipt of payment
(or, in the case of Restricted Stock, the lapse of restrictions) with
respect to an Award.
(w) "Performance Period" shall mean (i) with respect to the Long-Term
Incentive Compensation Program, the period of five (5) consecutive Plan
Years or such other period (which in no case may be less than one (1)
Plan Year) as may be determined by the Board, (ii) with respect to the
Annual Incentive Compensation Program, each Plan Year and (iii) with
respect to all other Awards, such period as the Board shall determine.
(x) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
Subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
Subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company.
(y) "Plan" shall mean the XTRA Corporation 1998 Stock Option and Incentive
Award Plan.
(z) "Plan Year" shall mean the Company's fiscal year.
D-2
<PAGE>
(aa) "Restricted Stock" shall mean any shares of Stock issued to a
Participant, without payment to the Company, pursuant to Section 7(a)
of the Plan.
(bb) "Retirement" shall mean retirement of a Participant from the employ of
the Company and its Subsidiaries in accordance with the terms of the
XTRA 401(k) Savings and Retirement Plan or any successor plan thereto
or, if a Participant is not covered by such plan, such retirement on or
after such Participant's 65th birthday.
(cc) "SAR" shall mean a tandem or freestanding stock appreciation right,
granted to a Participant under Section 6(a) or 6(b), as the case may
be, to be paid an amount measured by the appreciation in the Fair
Market Value of Stock from the date of grant to the date of exercise of
the right.
(dd) "Stock" shall mean shares of common stock, par value $.50 per share, of
the Company.
(ee) "Stock Option and SAR Program" shall mean the program set forth in
Section 6 hereof.
(ff) "Stock Unit" shall mean a unit that represents a share of Stock and
that relates to a Long-Term Incentive Compensation Award.
(gg) "Subsidiary" shall mean any entity in which the Company directly or
through intervening subsidiaries owns at least a majority interest of
the total combined voting power or value of all classes of stock or, in
the case of an unincorporated entity, at least a majority in the
capital and profits.
(hh) "Ten Percent Stockholder" shall mean a Participant who, at the time an
Incentive Stock Option is to be granted to such Participant, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing
more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company.
3.ADMINISTRATION
The Plan shall be administered by the Board or by a committee designated by
the Board to administer the Plan. The Board shall have the authority in its
sole discretion, subject to and not inconsistent with the express provisions
of the Plan, to administer the Plan and to exercise all the powers and
authorities either specifically granted to it under the Plan or necessary or
advisable in the administration of the Plan, including, without limitation,
the authority to grant Awards; to determine the persons to whom and the time
or times at which Awards shall be granted; to determine the type and number of
Awards to be granted, the number of shares of Stock to which an Award may
relate and the terms, conditions, restrictions and performance criteria
relating to any Award; to determine whether, to what extent, and under what
circumstances an Award may be settled, cancelled, forfeited, exchanged or
surrendered (provided that in no event shall the foregoing be construed to
permit the repricing of an Option (whether by amendment, cancellation and
regrant or otherwise) to a lower exercise price); to make adjustments in the
Performance Goals in recognition of unusual or nonrecurring events affecting
the Company or the financial statements of the Company, or in response to
changes in applicable laws, regulations or accounting principles; to construe
and interpret the Plan and any Award; to prescribe, amend and rescind rules
and regulations relating to the Plan; to determine the terms and provisions of
Award Agreements; and to make all other determinations deemed necessary or
advisable for the administration of the Plan.
The Board may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Board or
any person to whom it has delegated such duties may employ one or more persons
to render advice with respect to any responsibility the Board or such person
may have under the Plan. All decisions, determinations and interpretations of
the Board shall be final and binding on all persons, including the Company,
the Participants (or any person claiming any rights under the Plan from or
through any Participant) and any stockholder.
No member of the Board shall be liable for any action taken or determination
made in good faith with respect to the Plan or any Award granted hereunder.
D-3
<PAGE>
4.ELIGIBILITY
Awards may be granted to directors, officers, other employees and
independent contractors of the Company or any of its Subsidiaries in the sole
discretion of the Board. In determining the persons to whom Awards shall be
granted and the type of Award, the Board shall take into account such factors
as the Board shall deem relevant in connection with accomplishing the purposes
of the Plan.
5.STOCK SUBJECT TO THE PLAN; LIMITATION ON GRANTS
The maximum number of shares of Stock reserved for issuance pursuant to the
Plan shall be 250,000 shares, subject to adjustment as provided herein. Such
shares may, in whole or in part, be authorized but unissued shares or shares
that shall have been or may be reacquired by the Company in the open market,
in private transactions or otherwise. If any shares subject to an Award are
forfeited, cancelled, exchanged or surrendered or if an Award otherwise
terminates or expires without a distribution of shares to the Participant, the
shares of Stock with respect to such Award shall, to the extent of any such
forfeiture, cancellation, exchange, surrender, termination or expiration,
again be available for Awards under the Plan. Upon the exercise of any Award
granted in tandem with any other Awards, the tandem Award shall be cancelled
to the extent of the number of shares of Stock as to which the Award is
exercised and, notwithstanding the foregoing, such number of cancelled shares
shall no longer be available for Awards under the Plan. Upon a cash payment
made in respect of outstanding Stock Units or freestanding SARs, the number of
shares represented by such Stock Units or SARs shall no longer be available
for Awards under the Plan. Upon withholding of Stock Units to satisfy
withholding tax liability of a Participant, the number of shares so withheld
shall no longer be available for Awards under the Plan.
In the event that the Board shall determine that any dividend or other
distribution (whether in the form of cash, Stock or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange or other
similar corporate transaction or event affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Board shall make such
equitable changes or adjustments as it deems necessary or appropriate to any
or all of (i) the number and kind of shares of Stock that may thereafter be
issued in connection with Awards, (ii) the number and kind of shares of Stock
issued or issuable in respect of outstanding Awards and (iii) the exercise
price, grant price, or purchase price relating to any Award; provided that,
with respect to Incentive Stock Options, such adjustment shall be made in
accordance with Section 424 of the Code.
6.STOCK OPTION AND SAR PROGRAM
Each Option or freestanding SAR granted pursuant to this Section 6 shall be
evidenced by an Award Agreement, in such form and containing such terms and
conditions as the Board shall from time to time approve, which Award Agreement
shall comply with and be subject to the following terms and conditions, as
applicable.
(a)STOCK OPTIONS
(1)Number of Shares. Each Award Agreement shall state the number of
shares of Stock to which the Option relates. In the event that the Company
becomes subject to Section 162(m) of the Code, then beginning with the Plan
Year during which the Company becomes subject to Section 162(m), the number
of shares of Stock subject to Options granted to any one Participant in any
Plan Year shall not exceed one-third of the total number of shares of Stock
reserved for issuance pursuant to the Plan as provided in Section 5 hereof.
(2)Type of Option. Each Award Agreement shall specifically state that the
Option constitutes an Incentive Stock Option or a Nonqualified Stock
Option.
(3)Exercise Price. Each Award Agreement shall state the exercise price,
which shall not be less than fifty percent (50%) of the Fair Market Value
of the shares of Stock covered by the Option on the date of grant. The
exercise price shall be subject to adjustment as provided in Section 5
hereof.
D-4
<PAGE>
(4)Method and Time of Payment. The exercise price shall be paid in full
at the time of exercise. The exercise price may be paid (i) in cash or by
check, (ii) by the tender by the Participant to the Company of outstanding
shares of Stock, (iii) by means of a copy of irrevocable instructions to a
registered broker/dealer to deliver promptly to the Company an amount of
proceeds from the sale of shares of Stock to be issued pursuant to the
Option being exercised or of a loan made with respect to shares of Stock to
be issued pursuant to the Option being exercised sufficient, in either
case, to pay the exercise price, (iv) in the sole discretion of the Board,
by authorizing the Company to withhold whole shares of Stock which would
otherwise be delivered upon exercise of the Option or (v) a combination of
any of the foregoing, in any case, in an amount having a value equal to
such exercise price. The value of any Stock tendered pursuant to the
preceding sentence shall be the Fair Market Value of such Stock as of the
last trading day prior to the date of exercise.
(5)Term and Exercisability of Options. Each Award Agreement shall provide
that each Option shall become exercisable under the terms and in accordance
with the vesting schedule that shall be established by the Board at the
time that the Award is granted; provided that the Board shall have the
authority to accelerate the exercisability of any outstanding Option at
such time and under such circumstances as it, in its sole discretion, deems
appropriate. Options may be subject to such other conditions including, but
not limited to, restrictions on transferability of the shares acquired upon
exercise of such Options and Performance Goals with respect to which the
vesting of Options may be contingent, as the Board may prescribe in its
discretion in the applicable Award Agreement. The exercise period shall be
ten (10) years from the date of the grant of the Option or such shorter
period as is determined by the Board. The exercise period shall be subject
to earlier termination as provided in Section 6(a)(6) hereof. An Option may
be exercised, as to any or all full shares of Stock as to which the Option
has become exercisable, by written notice delivered in person or by mail to
the Secretary of the Company, specifying the number of shares of Stock with
respect to which the Option is being exercised. For purposes of the
preceding sentence, the date of exercise shall be deemed to be the date
upon which the Secretary of the Company receives such notification.
(6)Termination of Employment. Unless otherwise provided in the applicable
Award Agreement, in the event that a Participant ceases to be employed by
(or, in the case of a non-employee, ceases to perform services for the
Company) the Company or any Subsidiary (in each case, a "termination of
employment"), all the outstanding Options held by such Participant shall be
treated as follows:
(A)Cause. If the Participant is terminated from his employment with
the Company or any Subsidiary for Cause, all the Options (whether
vested or unvested) shall automatically terminate and be cancelled
(without any action on the part of the Company) on the date of the
termination of employment.
(B)Disability. If the Participant is terminated from his employment
with the Company or any Subsidiary by reason of Disability, all
unvested Options shall automatically terminate and be cancelled
(without any action on the part of the Company) on the date of
termination of employment. All Options that have vested prior to such
date shall remain exercisable for a period of one year following such
date.
(C)Death. If the Participant dies while employed by the Company or
any Subsidiary, all unvested Options shall automatically terminate and
be cancelled (without any action on the part of the Company) on the
date of death. Following the Participant's death his executors,
administrators, legatees or distributees may exercise the Options that
have vested prior to the date of death for a period of one year
following the date of death.
D-5
<PAGE>
(D)Other Terminations of Employment. If the Participant's employment
with the Company or any Subsidiary is terminated for any other reason,
all unvested Options shall automatically terminate and be cancelled
(without any action on the part of the Company) on the date of
termination of employment. All Options that have vested prior to such
date shall remain exercisable for a period of (i) ninety (90) days
following such date, in the event that the Company has terminated the
Participant's employment or (ii) thirty (30) days, in the event that
the Participant has terminated his or her employment with the Company,
in either case, pursuant to this subparagraph (D).
Notwithstanding the foregoing, in the case of a Nonqualified Stock
Option, the Board may provide, after the time the Option is granted,
that the Option may be exercised after the periods provided for in this
Section 6(a)(6), but in no event beyond the original term of the
Option.
(7)Tandem Stock Appreciation Rights. The Board shall have authority to
grant a tandem SAR to the grantee of any Option under the Plan with respect
to all or some of the shares of Stock covered by such related Option. A
tandem SAR shall, except as provided in this paragraph (7), be subject to
the same terms and conditions as the related Option. Each tandem SAR
granted pursuant to the Plan shall be reflected in the Award Agreement
relating to the related Option.
(A)Time of Grant. A tandem SAR may be granted either at the time of
grant or at any time thereafter during the term of the Option; provided
that tandem SARs related to Incentive Stock Options may only be granted
at the time of grant of the related Option.
(B)Payment. A tandem SAR shall entitle the holder thereof, upon
exercise of the tandem SAR or any portion thereof, to receive payment
of an amount computed pursuant to paragraph (D) below and payable in
the form determined pursuant to paragraph (G) below.
(C)Exercise. A tandem SAR shall be exercisable at such time or times
and only to the extent that the related Option is or has become
exercisable and shall not be transferable except to the extent the
related Option is or has become transferable. A tandem SAR shall be
exercisable only if the Fair Market Value of a share of Stock on the
date of exercise exceeds the exercise price specified in the related
Option.
(D)Amount Payable. Upon the exercise of a tandem SAR, the Participant
shall be entitled to receive an amount determined by multiplying (i)
the excess of the Fair Market Value of a share of Stock on the date of
exercise of such SAR over the exercise price of the related Option, by
(ii) the number of shares of Stock as to which such tandem SAR is being
exercised. Notwithstanding the foregoing, the Board may limit in any
manner the amount payable with respect to any tandem SAR by including
such a limit at the time it is granted.
(E)Treatment of Related Options and Tandem SARs Upon Exercise. Upon
the exercise of a tandem SAR, the related Option shall be cancelled to
the extent of the number of shares of Stock as to which the tandem SAR
is exercised and upon the exercise of an Option granted in connection
with a tandem SAR, the tandem SAR shall be cancelled to the extent of
the number of shares of Stock as to which the Option is exercised.
(F)Method of Exercise. Tandem SARs shall be exercised by a
Participant only by a written notice delivered in person or by mail to
the Secretary of the Company, specifying the number of shares of Stock
with respect to which the tandem SAR is being exercised. For purposes
of this paragraph (F), the date of exercise shall be deemed to be the
date upon which the Secretary of the Company receives such
notification.
(G)Form of Payment. Payment of the amount determined under paragraph
(D) above may be made solely in whole shares of Stock in a number
determined based upon their Fair Market Value on the date of exercise
of the tandem SAR or, at the sole discretion of the Board, solely in
cash, or in a combination of cash and shares of Stock as the Board
deems advisable. If the Board decides to make full payment in shares of
Stock, and the amount payable results in a fractional share, payment
for the
D-6
<PAGE>
fractional share shall be made in cash. Notwithstanding the foregoing,
to the extent required by Rule 16b-3 promulgated under the Exchange
Act, no payment in the form of cash may be made upon the exercise of a
tandem SAR to a Participant who is subject to the reporting
requirements of Section 16(a) of the Exchange Act unless the exercise
of such SAR is made during the period beginning on the third business
day and ending on the twelfth business day following the date of
release for publication of the Company's quarterly or annual statements
of earnings or is otherwise made under circumstances that comply with
such Rule 16b-3.
(8)Incentive Stock Options. Options granted as Incentive Stock Options
shall be subject to the following special terms and conditions, in addition
to the general terms and conditions specified in this Section 6.
(A)Value of Shares. The aggregate Fair Market Value (determined as of
the date the Incentive Stock Option is granted) of the shares of Stock
with respect to which Incentive Stock Options granted under this Plan
and all other Plans of the Company become exercisable for the first
time by each Participant during any calendar year shall not exceed
$100,000.
(B)Exercise Price. The exercise price relating to any Incentive Stock
Option shall not be less than one hundred percent (100%) of the Fair
Market Value of the shares of Stock on the date of grant of such
Incentive Stock Option.
(C)Ten Percent Stockholder. In the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, (x) the exercise price shall not
be less than one hundred ten percent (110%) of the Fair Market Value of
the shares of Stock on the date of grant of such Incentive Stock Option
and (y) the exercise period shall not exceed five (5) years from the
date of grant of such Incentive Stock Option.
(b)FREESTANDING STOCK APPRECIATION RIGHTS. The Board shall have authority
to grant a freestanding SAR that is not related to any Option. Freestanding
SARs shall be subject to the following terms and conditions:
(9)Number of Shares. Each Award Agreement shall state the number of
shares of Stock to which the freestanding SARs relate.
(10)Exercise Price. Each Award Agreement shall state the exercise price,
which shall not be less than one hundred percent (100%) of the Fair Market
Value of the shares of Stock (to which the freestanding SARs relate) on the
date of grant. The exercise price shall be subject to adjustment as
provided in Section 5 hereof.
(11)Term and Exercisability of Freestanding SARs. Each Award Agreement
shall provide the exercise schedule for the freestanding SAR as determined
by the Board, provided that the Board shall have the authority to
accelerate the exercisability of any freestanding SAR at such time and
under such circumstances as it, in its sole discretion, deems appropriate.
The exercise period shall be ten (10) years from the date of the grant of
the freestanding SAR or such shorter period as is determined by the Board.
The exercise period shall be subject to earlier termination as provided in
paragraph (b)(7) hereof. A freestanding SAR may be exercised, as to any or
all full shares of Stock as to which the freestanding SAR has become
exercisable, by written notice delivered in person or by mail to the
Secretary of the Company, specifying the number of shares of Stock with
respect to which the freestanding SAR is being exercised. For purposes of
the preceding sentence, the date of exercise shall be deemed to be the date
upon which the Secretary of the Company receives such notification.
(12)Payment. A freestanding SAR shall entitle the holder thereof, upon
exercise of the freestanding SAR or any portion thereof, to receive payment
of an amount computed pursuant to paragraph (5) below.
(13)Amount Payable. Upon the exercise of a freestanding SAR, the
Participant shall be entitled to receive an amount determined by
multiplying (i) the excess of the Fair Market Value of a share of Stock on
the date of exercise of such SAR over the exercise price of such SAR by
(ii) the number of shares of Stock as to which such freestanding SAR is
being exercised. Notwithstanding the foregoing, the Board may limit
D-7
<PAGE>
in any manner the amount payable with respect to any freestanding SAR by
including such a limit at the time it is granted.
(14)Form of Payment. Payment of the amount determined under paragraph (5)
above may be made solely in whole shares of Stock in a number determined
based upon their Fair Market Value on the date of exercise of the
freestanding SAR or, at the sole discretion of the Board, solely in cash,
or in a combination of cash and shares of Stock as the Board deems
advisable. If the Board decides to make full payment in shares of Stock,
and the amount payable results in a fractional share, payment for the
fractional share shall be made in cash. Notwithstanding the foregoing, to
the extent required by Rule 16b-3 promulgated under the Exchange Act, no
payment in the form of cash may be made upon the exercise of a freestanding
SAR to a Participant who is subject to the reporting requirements of
Section 16(a) of the Exchange Act unless the exercise of such SAR is made
during the period beginning on the third business day and ending on the
twelfth business day following the date of release for publication of the
Company's quarterly or annual statements of earnings or is otherwise made
under circumstances which comply with such Rule 16b-3.
(15)Termination. The terms and conditions set forth in Section 6(a)(6)
hereof, relating to exercisability of Options in the event of termination
of employment with the Company, shall apply equally with respect to the
exercisability of freestanding SARs following termination of employment.
7.LONG-TERM INCENTIVE COMPENSATION PROGRAM
Awards granted pursuant to this Section 7 shall be evidenced by an Award
Agreement in such form as the Board shall from time to time approve and the
terms and conditions of such Awards shall be set forth therein. Awards may be
granted in the form of Restricted Stock, Stock Units or Incentive Units.
(a)RESTRICTED STOCK. The Board shall determine the number of shares of
Restricted Stock granted pursuant to the Award and the Performance
Goals for the Performance Period, the attainment of which shall cause
the restrictions to lapse in whole or in part and allow all or a
specified portion of the Restricted Stock to vest, as specified in the
Award Agreement.
(1)Restrictions. During the Performance Period, shares of Restricted
Stock may not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, except by will or the laws of descent and
distribution. Certificates for shares of Stock issued pursuant to Awards of
Restricted Stock shall bear an appropriate legend referring to such
restrictions, and any attempt to dispose of any such shares of Stock in
contravention of such restrictions shall be null and void and without
effect. During the Performance Period, such certificates shall be held in
escrow by an escrow agent appointed by the Board.
(2)Ownership. Except to the extent otherwise set forth in the Award
Agreement, during the Performance Period the Participant shall possess all
incidents of ownership of such shares, subject to Section 7(a)(1),
including the right to receive dividends with respect to such shares and to
vote such shares.
(b)INCENTIVE UNITS. The Board shall determine the value of Incentive Units
granted pursuant to the Award and the Performance Goals for the
Performance Period with respect to such Award. Unless otherwise
provided by the Board in connection with specified terminations of
employment, payment in respect of Incentive Units shall be made only if
and to the extent that the Performance Goals with respect to such
Performance Period are attained. Performance Goals may include a level
of performance below which no payment shall be made and levels of
performance at which specified percentages (which may be greater than
one hundred percent (100%)) of the value of the Incentive Units shall
be paid.
(c)STOCK UNITS. The Board shall determine the number of Stock Units granted
pursuant to the Award and the Performance Goals for the Performance
Period with respect to such Award. Unless otherwise provided by the
Board in connection with specified terminations of employment, payment
in respect of the Stock Units shall be made only if and to the extent
that the Performance Goals with respect to such Performance Period are
attained. Performance Goals may include a level of
D-8
<PAGE>
performance below which no payment shall be made and levels of
performance at which payment shall be made in respect of specified
percentages (not to exceed one hundred percent (100%)) of such Stock
Units.
(1)DERs. Outstanding Stock Units shall be credited with DERs based upon
dividends paid on outstanding shares of Stock between the date such Stock
Units are granted and the date of payment in respect of such Stock Units.
Such DERs, once credited, shall be converted into an equivalent number of
Stock Units (including fractional Stock Units).
(A)DERs based on dividends paid in cash shall be credited, as of each
dividend payment date, in accordance with the following formula:
(A x B) / C
in which "A" equals the number of shares to which the Stock Units
relate, "B" equals the cash dividend per share and "C" equals the Fair
Market Value per share of Stock on the dividend payment date.
(B)If a dividend is paid in property other than cash, DERs shall be
credited, as of the dividend payment date, in accordance with the
formula set forth above, except that "B" shall equal the fair market
value per share of the property that the holder of the Stock Unit would
have received (as determined by the Board in its sole discretion) in
respect of the number of shares of Stock underlying such Stock Unit had
such shares been owned as of the record date for such dividend.
(d)TIME AND FORM OF PAYMENT. Unless otherwise determined by the Board, all
payments in respect of Stock Units and Incentive Units granted under
this Section 7 shall be made within a reasonable period after the end of
the Performance Period. Payments in respect of Stock Units and Incentive
Units shall be made either in cash or in Stock, or in a combination of
cash and Stock, as determined by the Board. For purposes of the
preceding sentence, (1) the Fair Market Value of Stock (as of the date
of payment) delivered in full or partial payment of Incentive Units
shall equal the portion of the value of Incentive Units (determined as
of the end of the Performance Period) with respect to which such payment
is being made and (2) the amount of cash delivered in full or partial
payment of Stock Units shall equal the Fair Market Value (as of the end
of the Performance Period) of the number of shares of Stock relating to
the Stock Units with respect to which such cash payment is being made.
(e)TERMINATION AND MISSED PERFORMANCE GOALS. Subject to such exceptions as
may be determined by the Board, if the Participant's continuous
employment with the Company or any of its Subsidiaries shall terminate
for any reason prior to the expiration of the Performance Period of an
Award, or to the extent any Performance Goals for the Performance Period
are not met, (i) any shares of Restricted Stock remaining subject to
restrictions shall thereupon be forfeited by the Participant and
transferred to, and reacquired by, the Company at no cost to the Company
and (ii) any and all rights to payment in respect of Incentive Units and
Stock Units shall be forfeited by the Participant.
8.ANNUAL INCENTIVE COMPENSATION PROGRAM
Awards granted pursuant to this Section 8 shall be evidenced by an Award
Agreement in such form as the Board shall from time to time approve and the
terms and conditions of such Awards shall be set forth therein.
(a)IN GENERAL. The Board shall determine the amount of each Annual Incentive
Compensation Award and shall specify with respect to a Performance Period the
Performance Goals applicable to the Award. Unless otherwise provided by the
Board in connection with specified terminations of employment, payment in
respect of Annual Incentive Compensation Awards shall be made only if and to
the extent that the Performance Goals with respect to such Performance Period
are attained. Performance Goals may include a level of performance below which
no payment shall be made and levels of performance at which specified
percentages (which may not be greater than one hundred percent (100%)) of the
Annual Incentive Compensation Award shall be paid.
D-9
<PAGE>
(b)TIME AND FORM OF PAYMENT. Unless otherwise determined by the Board, all
payments in respect of Annual Incentive Compensation Awards granted under this
Section 8 shall be made within a reasonable period after the end of the
Performance Period. Payments shall be made either in cash or in Stock, or in a
combination of cash and Stock, as determined by the Board. For purposes of the
preceding sentence, the Fair Market Value of Stock (as of the date of payment)
delivered in full or partial payment of Annual Incentive Compensation Awards
shall equal the portion of the value of Annual Incentive Compensation Awards
(determined as of the end of the Performance Period) with respect to which
such payment is being made.
(c)TERMINATION AND MISSED PERFORMANCE GOALS. Subject to such exceptions as
may be determined by the Board, if the Participant's continuous employment
with the Company or any of its Subsidiaries shall terminate for any reason
prior to the expiration of the Performance Period of an Award, or to the
extent that any Performance Goals for the Performance Period are not met, any
and all rights to payment in respect of Annual Incentive Compensation Awards
shall be forfeited by the Participant.
9.CHANGE IN CONTROL
Notwithstanding any other provision of the Plan, except as otherwise
determined by the Board and set forth in the applicable Award Agreement, in
the event of the occurrence of a Change in Control: each Option or SAR, the
vesting of which is subject to the achievement of a performance goal, that is
not vested as of such time shall no longer be subject to such performance-
based vesting requirements but shall be subject only to the time-based vesting
requirements contained in the Award Agreement setting forth the terms of such
Option or SAR; and each Annual Incentive Compensation Award shall no longer be
subject to its performance-based vesting requirements but shall be subject
only to the time-based vesting requirements contained in the Award Agreement
setting forth the terms of such Annual Incentive Compensation Award.
10.GENERAL PROVISIONS
(1)COMPLIANCE WITH LEGAL REQUIREMENTS. The Plan and the granting and
exercising of Awards, and the other obligations of the Company under the Plan
and any Award Agreement or other agreement shall be subject to all applicable
federal and state laws, rules and regulations, and to such approvals by any
regulatory or governmental agency as may be required. The Company, in its
discretion, may postpone the issuance or delivery of Stock under any Award as
the Company may consider appropriate and may require any Participant to make
such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of Stock in compliance
with applicable laws, rules and regulations.
(2)NONTRANSFERABILITY. Upon the death of a Participant, outstanding Options
granted to such Participant may be exercised only by the executor or
administrator of the Participant's estate or by a person who shall have
acquired the right to such exercise by will or by the laws of descent and
distribution. No transfer of an Option by will or the laws of descent and
distribution shall be effective to bind the Company unless the Board shall
have been furnished with (1) written notice thereof and with a copy of the
will and/or such evidence as the Board may deem necessary to establish the
validity of the transfer and (2) an agreement by the transferee to comply with
all the terms and conditions of the Option that are or would have been
applicable to the Participant and to be bound by the acknowledgements made by
the Participant in connection with the grant of the Option.
During a Participant's lifetime, the Board may permit the transfer,
assignment or other encumbrance of an outstanding Option unless (y) such
Option is an Incentive Stock Option and the Board and the Participant intend
that it shall retain such status or (z) the award is meant to qualify for the
exemptions available under Rule 16b-3, nontransferability is necessary under
Rule 16b-3 in order for the Option to so qualify and the Board and the
Participant intend that it shall continue to so qualify. Following delivery by
a Participant of written notice to the Secretary of the Company, the Board
may, subject to any conditions as the Board may prescribe, permit the transfer
by such Participant of any or all Options granted to such Participant pursuant
to the Plan to members of his or her immediate family, including, but not
limited to, children, grandchildren and spouse or to trusts for the benefit of
such immediate family members or to partnerships in which such family members
are the only partners; provided that no such transfer by any Participant may
be made in exchange for consideration.
D-10
<PAGE>
(c)NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or in any Award
granted or any Award Agreement or other agreement entered into pursuant hereto
shall confer upon any Participant the right to continue in the employ of the
Company or to be entitled to any remuneration or benefits not set forth in the
Plan or such Award Agreement or other agreement or to interfere with or limit
in any way the right of the Company to terminate such Participant's
employment.
(d)WITHHOLDING TAXES. Where a Participant or other person is entitled to
receive shares of Stock pursuant to the exercise of an Option or is otherwise
entitled to receive shares of Stock or cash pursuant to an Award hereunder,
the Company shall have the right to require the Participant or such other
person to pay to the Company the amount of any taxes that the Company may be
required to withhold before delivery to such Participant or other person of
cash or a certificate or certificates representing such shares.
Upon the disposition of shares of Stock acquired pursuant to the exercise of
an Incentive Stock Option, the Company shall have the right to require the
payment of the amount of any taxes that are required by law to be withheld
with respect to such disposition.
Unless otherwise prohibited by the Board or by applicable law, a Participant
may satisfy any such withholding tax obligation by any of the following
methods or by a combination of such methods: (1) tendering a cash payment, (2)
authorizing the Company to withhold from the shares of Stock or cash otherwise
payable to such Participant (y) one or more of such shares having an aggregate
Fair Market Value, determined as of the date the withholding tax obligation
arises, less than or equal to the amount of the total withholding tax
obligation or (z) cash in an amount less than or equal to the amount of the
total withholding tax obligation and (3) delivering to the Company previously
acquired shares of Stock (none of which shares may be subject to any claim,
lien, security interest, community property right or other right of spouses or
present or former family members, pledge, option, voting agreement or other
restriction or encumbrance of any nature whatsoever) having an aggregate Fair
Market Value, determined as of the date the withholding tax obligation arises,
less than or equal to the amount of the total withholding tax obligation.
(e)AMENDMENT AND TERMINATION OF THE PLAN. The Board may at any time and from
time to time alter, amend, suspend, or terminate the Plan in whole or in part;
provided that no amendment that requires stockholder approval in order for the
Plan to continue to comply with Rule 16b-3 promulgated under the Exchange Act
shall be effective unless the same shall be approved by the requisite vote of
the stockholders of the Company. Notwithstanding the foregoing, no amendment
shall affect adversely any of the rights of any Participant, without such
Participant's consent, under any Award theretofore granted under the Plan. The
power to grant Options under the Plan shall automatically terminate ten (10)
years after the adoption of the Plan by the stockholders. If the Plan is
terminated, any unexercised Option shall continue to be exercisable in
accordance with its terms and the terms of the Plan in effect immediately
prior to such termination.
(f)PARTICIPANT RIGHTS. No Participant shall have any claim to be granted any
Award under the Plan, and there is no obligation for uniformity of treatment
for Participants. Except as provided specifically herein, a Participant or a
transferee of an Award shall have no rights as a stockholder with respect to
any shares covered by any Award until the date of the issuance of a Stock
certificate to him for such shares.
(g)UNFUNDED STATUS OF AWARDS. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company.
(h)NO FRACTIONAL SHARES. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award. The Board shall determine whether
cash, other Awards, or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(i)GOVERNING LAW. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of Delaware without
giving effect to the conflict of laws principles thereof.
D-11
<PAGE>
(j)EFFECTIVE DATE. The Plan shall take effect upon its adoption by the
Board, but the Plan (and any grants of Awards made prior to the stockholder
approval mentioned herein) shall be subject to the requisite approval of the
stockholders of the Company. In the absence of such approval, such Awards
shall be null and void.
(k)BENEFICIARY. A Participant may file with the Board a written designation
of a beneficiary on such form as may be prescribed by the Board and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Participant, the executor or administrator of the Participant's
estate shall be deemed to be the grantee's beneficiary.
(l)INTERPRETATION. The Plan is designed and intended to comply with Rule
16b-3 promulgated under the Exchange Act and Section 162(m) of the Code and
all provisions hereof shall be construed in a manner to so comply.
D-12
<PAGE>
ANNEX E
DELAWARE CODE ANNOTATED
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
(S)262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to (S)228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251 (other than a merger effected pursuant to
(S)251(g) of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
E-1
<PAGE>
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constitutent corporation may fix, in advance, a record date that shall
E-2
<PAGE>
be not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof an who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have to pay to borrow money during the pendency of the proceeding. Upon
application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may proceed to
trial upon the appraisal prior to the final determination of the stockholder
entitled to an appraisal. Any stockholder whose name appears on the list filed
by the surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted his certificates of stock to the Register in
Chancery, if such is required, may participate fully in all proceedings until
it is finally determined that he is not entitled to appraisal rights under
this section.
E-3
<PAGE>
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
E-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20.INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of the State of Delaware, in which XTRA
Corporation is incorporated, empowers the Registrant to indemnify any of its
officers or directors against certain expenses, judgments, fines and amounts
paid in settlement in connection with certain actions, suits or proceedings,
provided generally, that such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In addition, the
statutes of Delaware contain provisions to the general effect that any
director shall in the performance of his duties be fully protected in relying
in good faith upon the books of account or records of the corporation or
statements prepared by any official of the corporation.
The Restated Certificate of Incorporation of XTRA Corporation includes the
following provision:
This corporation shall, to the maximum extent permitted from time to time
under the law of the State of Delaware, indemnify and upon request shall
advance expenses to any person who is or was a party or is threatened to be
made a party to any threatened, pending or completed action, suit,
proceeding or claim, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was or has agreed to be
a director or officer of this corporation or while a director or officer is
or was serving at the request of this corporation as a director, officer,
partner, trustee, employee or agent of any corporation, partnership, joint
venture, trust or other enterprise, including service with respect to
employee benefit plans, against expenses (including attorney's fees and
expenses), judgments, fines, penalties and amounts paid in settlement
incurred in connection with the investigation, preparation to defend or
defense of such action, suit, proceeding, or claim; provided, however, that
the foregoing shall not require this corporation to indemnify or advance
expenses to any person in connection with any action, suit, proceeding,
claim or counterclaim initiated by or on behalf of such person. Such
indemnification shall not be exclusive of other indemnification rights
arising under any by-law, agreement, vote of directors or stockholders or
otherwise and shall inure to the benefit of the heirs and legal
representatives of such person. Any repeal or modification of the foregoing
provisions of this Article 9 shall not adversely affect any right or
protection of a director or officer of this corporation existing at the
time of such repeal or modification.
ITEM 21.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)EXHIBITS. THE FOLLOWING IS A LIST OF EXHIBITS TO THIS REGISTRATION
STATEMENT:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
2.1 Amended and Restated Agreement and Plan of Merger and
Recapitalization, dated as of June 18, 1998 and amended as of
July 31, 1998, by and between the Company and Wheels MergerCo
LLC (included as Annex A to the Proxy Statement/Prospectus
included in this Registration Statement).
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).
3.2 Amended and Restated Articles of Incorporation of the Company
(included as Exhibit A to Annex A to the Proxy
Statement/Prospectus included in this Registration Statement).
3.3.1 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).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
3.3.2 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).
3.3.3 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).
3.3.4 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).
3.4 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).
4.1.1 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).
4.1.2 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).
4.1.3 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).
4.1.4 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
with the Securities and Exchange Commission as Exhibit 4.2.2 to
the Registrant's Annual Report on Form 10-K for the year ended
September 30, 1997, and incorporated herein by reference).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
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).
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).
5.1 Opinion of Ropes & Gray re: legality of the securities being
registered.
8.1 Opinion of Ropes & Gray re: tax matters.
9.1 Form of Voting Agreements dated as of June 18, 1998 by and between
MergerCo LLC and each of Jaguar Fund N.V., Lion L.P., Portfolio
Investors, L.P., Portfolio Investors, L.P., Puma, and Tiger
(included as Annex B to the Proxy Statement/Prospectus included
in this Registration Statement.)
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).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
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).
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 with the Securities and
Exchange Commission as Exhibit 10.13 to the Registrant's Annual
Report on Form 10-K for the year ended September 30, 1997, and
incorporated herein by reference).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
10.14 Severance Agreement, dated as of December 8, 1997, between the
Registrant and Lewis Rubin (filed with the Securities and
Exchange Commission as Exhibit 10.14 to the Registrant's Annual
Report on Form 10-K for the year ended September 30, 1997, and
incorporated herein by reference).
10.15 Severance Agreement, dated as of December 8, 1997, between the
Registrant and William H. Franz (filed with the Securities and
Exchange Commission as Exhibit 10.15 to the Registrant's Annual
Report on Form 10-K for the year ended September 30, 1997, and
incorporated herein by reference).
10.16 Severance Agreement, dated as of December 8, 1997, between the
Registrant and Michael J. Soja (filed with the Securities and
Exchange Commission as Exhibit 10.16 to the Registrant's Annual
Report on Form 10-K for the year ended September 30, 1997, and
incorporated herein by reference).
10.17 Severance Agreement, dated as of December 8, 1997, between the
Registrant and Michael K. Fox (filed with the Securities and
Exchange Commission as Exhibit 10.17 to the Registrant's Annual
Report on Form 10-K for the year ended September 30, 1997, and
incorporated herein by reference).
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 with the Securities and Exchange
Commission as Exhibit 10.18 to the Registrant's Annual Report on
Form 10-K for the year ended September 30, 1997, and incorporated
herein by reference).
10.19 Form of Severance Agreement entered into between the Registrant
and certain officers of the Registrant (filed with the Securities
and Exchange Commission as Exhibit 10.19 to the Registrant's
Annual Report on Form 10-K for the year ended September 30, 1997,
and incorporated herein by reference).
10.20 Registration Rights Agreement.
10.21 Management Agreement with Apollo
10.22 1998 XTRA Corporation Stock Option and Incentive Award Plan
(included as Annex D to the Proxy Statement/Prospectus included
in this Registration Statement).
11.1 Statement re: computation of per share earnings.
23.1 Consent of Ropes & Gray (included in Exhibit 5.1).
23.2 Consent of Ropes & Gray (included in Exhibit 8.1).
23.3 Consent of Arthur Andersen.
23.4 Consent of Goldman, Sachs & Co.
24.1 Powers of Attorney (included on signature page).
27 Financial Data Schedule (filed with the Securities and Exchange
Commission as Exhibit 27 to the Registrant's Annual Report on
Form 10-K for the year ended September 30, 1997, and incorporated
herein by reference).
99.1 Form of Proxy Card.
99.2 Form of Election/Letter of Transmittal.
99.3 Fairness Opinion of Goldman, Sachs & Co. (included as Annex C to
the Proxy Statement/Prospectus included in this Registration
Statement).
99.4 Consent of Andrew Africk.
99.5 Consent of Michael Gross.
99.6 Consent of Martin Tuchman.
99.7 Consent of Raoul J. Witteveen.
</TABLE>
II-5
<PAGE>
ITEM 22.UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) ((S)230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.
(5) The registrant undertakes that every prospectus (i) that is filed
pursuant to the immediately preceding undertaking, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415 will be filed
as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-6
<PAGE>
(7) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(8) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BOSTON, STATE OF
MASSACHUSETTS, ON OCTOBER 29, 1998.
XTRA Corporation
/s/ Michael J. Soja
By _________________________________
Michael J. Soja
Vice President and Chief Financial
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Lewis Rubin, Michael J. Soja, Robert B. Blakeley and Thomas A. Giacchetto, and
each of them, as their attorneys-in-fact, with full power of substitution and
resubstitution, for such person and in such person's name, place and stead, in
any and all capacities, to execute one or more amendments (including post-
effective amendments) to this Registration Statement and to file any such
amendment, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as such person might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert B. Goergen Chairman of the Board, October 29, 1998
____________________________________ Director
Robert B. Goergen
/s/ Robert M. Gintel Vice Chairman of the October 29, 1998
____________________________________ Board, Director
Robert M. Gintel
/s/ Lewis Rubin President, Chief Executive October 29, 1998
____________________________________ Officer and Director
Lewis Rubin (principal executive
officer)
/s/ Michael J. Soja Vice President and Chief October 29, 1998
____________________________________ Financial Officer
Michael J. Soja (principal financial
officer)
/s/ Robert B. Blakeley Vice President and October 29, 1998
____________________________________ Controller (principal
Robert B. Blakeley accounting officer)
/s/ Michael D. Bills Director October 29, 1998
____________________________________
Michael D. Bills
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ H. William Brown Director October 29, 1988
____________________________________
H. William Brown
/s/ Michael N. Christodolou Director October 29, 1998
____________________________________
Michael N. Christodolou
/s/ Herbert C. Knortz Director October 29, 1998
____________________________________
Herbert C. Knortz
/s/ Francis J. Palamara Director October 29, 1998
____________________________________
Francis J. Palamara
/s/ Martin L. Solomon Director October 29, 1998
____________________________________
Martin L. Solomon
</TABLE>
II-9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
2.1 Amended and Restated Agreement and Plan of Merger and
Recapitalization, dated as of June 18, 1998 and amended as of
July 31, 1998, by and between the Company and Wheels MergerCo LLC
(included as Annex A to the Proxy Statement/Prospectus included
in this Registration Statement).
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).
3.2 Amended and Restated Articles of Incorporation of the Company
(included as Exhibit A to Annex A to the Proxy
Statement/Prospectus included in this Registration Statement).
3.3.1 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).
3.3.2 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).
3.3.3 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).
3.3.4 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).
3.4 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).
4.1.1 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).
4.1.2 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).
4.1.3 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).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
4.1.4 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
with the Securities and Exchange Commission as Exhibit 4.2.2 to
the Registrant's Annual Report on Form 10-K for the year ended
September 30, 1997, and incorporated herein by reference).
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).
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).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
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).
5.1 Opinion of Ropes & Gray re: legality of the securities being
registered.
8.1 Opinion of Ropes & Gray re: tax matters.
9.1 Form of Voting Agreements dated as of June 18, 1998 by and between
MergerCo LLC and each of Jaguar Fund N.V., Lion L.P., Portfolio
Investors, L.P., Portfolio Investors, L.P., Puma, and Tiger
(included as Annex B to the Proxy Statement/Prospectus included
in this Registration Statement.)
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).
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).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
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 with the Securities and
Exchange Commission as Exhibit 10.13 to the Registrant's Annual
Report on Form 10-K for the year ended September 30, 1997, and
incorporated herein by reference).
10.14 Severance Agreement, dated as of December 8, 1997, between the
Registrant and Lewis Rubin (filed with the Securities and
Exchange Commission as Exhibit 10.14 to the Registrant's Annual
Report on Form 10-K for the year ended September 30, 1997, and
incorporated herein by reference).
10.15 Severance Agreement, dated as of December 8, 1997, between the
Registrant and William H. Franz (filed with the Securities and
Exchange Commission as Exhibit 10.15 to the Registrant's Annual
Report on Form 10-K for the year ended September 30, 1997, and
incorporated herein by reference).
10.16 Severance Agreement, dated as of December 8, 1997, between the
Registrant and Michael J. Soja (filed with the Securities and
Exchange Commission as Exhibit 10.16 to the Registrant's Annual
Report on Form 10-K for the year ended September 30, 1997, and
incorporated herein by reference).
10.17 Severance Agreement, dated as of December 8, 1997, between the
Registrant and Michael K. Fox (filed with the Securities and
Exchange Commission as Exhibit 10.17 to the Registrant's Annual
Report on Form 10-K for the year ended September 30, 1997, and
incorporated herein by reference).
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 with the Securities and Exchange
Commission as Exhibit 10.18 to the Registrant's Annual Report on
Form 10-K for the year ended September 30, 1997, and incorporated
herein by reference).
10.19 Form of Severance Agreement entered into between the Registrant
and certain officers of the Registrant (filed with the Securities
and Exchange Commission as Exhibit 10.19 to the Registrant's
Annual Report on Form 10-K for the year ended September 30, 1997,
and incorporated herein by reference).
10.20 Registration Rights Agreement.
10.21 Management Agreement with Apollo.
10.22 1998 XTRA Corporation Stock Option and Incentive Award Plan
(included as Annex D to the Proxy Statement/Prospectus included
in this Registration Statement).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
11.1 Statement re: computation of per share earnings.
23.1 Consent of Ropes & Gray (included in Exhibit 5.1).
23.2 Consent of Ropes & Gray (included in Exhibit 8.1).
23.3 Consent of Arthur Andersen.
23.4 Consent of Goldman, Sachs & Co.
24.1 Powers of Attorney (included on signature page).
27 Financial Data Schedule (filed with the Securities and Exchange
Commission as Exhibit 27 to the Registrant's Annual Report on
Form 10-K for the year ended September 30, 1997, and
incorporated herein by reference).
99.1 Form of Proxy Card.
99.2 Form of Election/Letter of Transmittal.
99.3 Fairness Opinion of Goldman, Sachs & Co. (included as Annex C to
the Proxy Statement/Prospectus included in this Registration
Statement).
99.4 Consent of Andrew Africk.
99.5 Consent of Michael Gross.
99.6 Consent of Martin Tuchman.
99.7 Consent of Raoul J. Witteveen.
</TABLE>
<PAGE>
EXHIBIT 5.1
October 29, 1998
XTRA Corporation
60 State St., 11th Fl.
Boston, MA 02109
Ladies and Gentlemen:
This opinion is furnished to you in connection with a registration statement
on Form S-4 (the "Registration Statement") filed with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, relating to the proposed merger (the "Merger") of Wheels MergerCo
LLC, a newly organized Delaware limited company ("MergerCo"), with and into
XTRA Corporation (the "Company"), pursuant to which (i) the outstanding shares
of MergerCo will be converted into an aggregate of 4,500,000 shares of Company
Common Stock, $.50 par value ("Company Common Stock"), and (ii) the existing
holders of Company Common Stock will be entitled to retain 500,000 shares of
Company Common Stock (the "Retained Shares").
We have acted as counsel for the Company in connection with the Merger. For
purposes of our opinion, we have examined and relied upon such documents,
records, certificates and other instruments as we have deemed necessary.
Based upon the foregoing, we are of the opinion that the Retained Shares
have been duly authorized and validly issued, and are fully paid and
nonassessable.
We hereby consent to the filing of this opinion as part of the Registration
Statement and to the use of our name therein and in the related joint proxy
statement/prospectus under the caption "Legal Matters".
Very truly yours,
/s/ Ropes & Gray
-------------------------------------
Ropes & Gray
<PAGE>
EXHIBIT 8.1
October 29, 1998
XTRA Corporation
60 State Street
Boston, MA 02109
Ladies & Gentlemen:
We have acted as counsel to XTRA Corporation ("XTRA"), a Delaware
corporation, in connection with the merger (the "Merger") of Wheels MergerCo,
LLC ("MergerCo"), a Delaware limited liability company, with and into XTRA,
contemplated by the Agreement and Plan of Merger and Recapitalization dated as
of June 18, 1998, as amended as of July 31, 1998, by and between XTRA and
MergerCo (the "Merger Agreement").
For purposes of the opinion set forth below, we have reviewed and relied
upon (i) the Merger Agreement, (ii) the Proxy Statement filed by XTRA with the
Securities and Exchange Commission on , 1998, (iii) the tax
representation letters delivered to us by MergerCo and XTRA in connection with
this opinion, and (iv) such other documents, records and instruments as we
have deemed necessary or appropriate as a basis for our opinion. We have
assumed without investigation or verification that all statements contained in
the foregoing documents are true, correct, and complete as of the date hereof
and will remain true, correct and complete as of the Effective Time, and that
no actions inconsistent with such statements have occurred or will occur.
We also have assumed that (i) the Merger will be consummated in accordance
with the Merger Agreement (including satisfaction of all covenants and
conditions to the obligations of the parties without amendment or waiver
thereof); (ii) all representations and warranties contained in the Merger
Agreement and tax representation letters are true, correct, and complete in
all respects, including that MergerCo is a transitory company formed solely
for the purpose of effecting the Merger and has conducted no business or other
activities except in connection with the Merger and that there is no present
plan to change or to cause XTRA to change the terms of its Common Shares;
(iii) the Merger will be effective as a merger under the applicable laws of
Delaware; and (iv) XTRA and MergerCo will comply with all reporting
obligations with respect to the Merger required under the Internal Revenue
Code (the "Code") and the Treasury regulations promulgated thereunder.
Any inaccuracy in, or breach of, any of the aforementioned statements,
representations and assumptions and any change in applicable law after the
date hereof could adversely affect our opinion. No ruling has been sought from
the Internal Revenue Service by XTRA or MergerCo as to the federal income tax
consequences of any aspect of the Merger, and the Internal Revenue Service is
not bound by our opinion herein.
The discussion under the caption "Material Federal Income Tax Consequences"
in the Proxy Statement being filed by XTRA with the Securities and Exchange
Commission in connection with the Merger (the "Proxy Statement") constitutes
the opinion of Ropes & Gray as to the material United States federal income
tax considerations generally applicable to XTRA stockholders in connection
with the Merger.
No opinion is expressed as to any matter not specifically addressed,
including the tax consequences of the Merger under any foreign, state, or
local tax law or the tax consequences of any other transactions contemplated
or entered into by XTRA or MergerCo in connection with the Merger. Our opinion
is based on current federal income tax law and we do not undertake to advise
you as to any changes in federal income tax law after the date hereof that may
affect our opinion.
This opinion is solely for your benefit, shall not inure to the benefit of
any other person, including without limitation any successor or assign of
XTRA, whether by operation of law or otherwise, and is not to be used,
circulated, quoted or otherwise referred to for any purpose without our
express written permission.
We hereby consent to the filing of this opinion as Exhibit 8 to the Proxy
Statement and to the use of our name in the Proxy Statement.
Very truly yours,
/s/ Ropes & Gray
-------------------------------------
Ropes & Gray
<PAGE>
EXHIBIT 10.20
================================================================================
_______________________________
XTRA CORPORATION
_______________________________
REGISTRATION RIGHTS AGREEMENT
by and among
XTRA CORPORATION,
APOLLO INVESTMENT FUND IV, L.P.,
APOLLO OVERSEAS PARTNERS, L.P.,
ATLAS CAPITAL PARTNERS LLC
and
INTERPOOL, INC.
________________________________
Dated as of ____ ___, 1998
________________________________
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June __,
1998, by and among XTRA CORPORATION, a Dela ware corporation (the "Company"),
APOLLO INVESTMENT FUND IV, L.P., a Delaware limited partnership ("Apollo
Investment"), APOLLO OVERSEAS PARTNERS IV, L.P., a Cayman Islands limited
partnership ("Apollo Overseas", and, together with Apollo Investment, "Apollo"),
ATLAS CAPITAL PARTNERS LLC, a Dela ware limited liability company ("Atlas") and
INTERPOOL, INC., a Delaware corporation ("Interpool"), and such other persons to
become parties to this Agreement as described herein.
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to an Agreement and Plan of Merger and Recapitalization,
dated as of June __, 1998, by and between WHEELS MERGERCO LLC, a Delaware
limited liability company ("MergerCo"), and the Company, MergerCo will be merged
with and into the Company (the "Merger");
WHEREAS, it is a condition to the obligation of the parties to the Merger
Agreement to consummate the Merger that the parties hereto execute this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
Section 1. Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following respective meanings:
"Affiliate" means as to any Person (a) any Person which directly or
indirectly controls, is controlled by, or is under common control with such
Person, (b) any Person who is a director, officer, partner or principal of such
Person or of any Person which directly or indirectly controls, is controlled
by, or is under common control with such Person, and (c) any individual who is a
member of the immediate family of any Person described in clause (a) or clause
(b) above. For purposes of this definition, "control" of a Person shall mean the
power, direct or indirect, (i) to vote or direct the voting of 5% or more of the
Voting Stock of such Person or (ii) to direct or cause the direction of the
management
<PAGE>
and policies of such Person whether by ownership of Capital Stock, by contract
or otherwise.
"Agreement" means this Agreement as in effect on the date hereof and as
hereafter from time to time amended, modified or supplemented in accordance with
the terms hereof.
"Board of Directors" means the Board of Directors of the Company as from
time to time hereafter constituted.
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock of any Person, including, without limitation, shares of
preferred or preference stock, (ii) all partnership interests (whether general
or limited) in any Person which is a partnership, (iii) all membership interests
or limited liability company interests in any limited liability company, and
(iv) all equity or ownership interests in any Person of any other type.
"Commission" means the Securities and Exchange Commission and any
successor commission or agency having similar powers.
"Common Stock" shall mean the common stock, par value $.50 per share, of
the Company.
"Exchange Act" means, as of any date, the Securities Exchange Act of 1934,
as amended, or any similar Federal statute then in effect and superseding such
act, and any reference to a particular section thereof shall include a reference
to the comparable section, if any, of such similar Federal statute, and the
rules and regulations thereunder.
"Fair Market Value" means the fair market value of shares of Common Stock
as determined from time to time by the Board of Directors as evidenced by a
resolution thereof.
"NASD" means the National Association of Securities Dealers, Inc. and its
successors and assigns.
"Person" means an individual or a corporation, association, partnership,
limited liability company, joint venture, organization, business, trust or any
other entity or organi-
2
<PAGE>
zation, including a government or any subdivision or agency thereof.
"Pro Rata Portion" means, with reference to any Shareholder at any time,
a fraction, the numerator of which is the number of shares of Common Stock then
issued and outstanding and held by such Shareholder, and the denominator of
which is the aggregate number of shares of Common Stock then issued and
outstanding and held by the Shareholders taken together.
"Registrable Securities" means (i) all shares of Common Stock outstanding
on the date hereof and now or hereafter owned of record or beneficially by the
Shareholders, and (ii) any shares of Capital Stock issued by the Company in
respect of any shares of Common Stock referred to in (i) by way of a stock
dividend or stock split or in connection with a combination or subdivision of
shares, reclassification, recapitalization, merger, consolidation or other
reorganization of the Company. As to any particular Registrable Securities
that have been issued, such securities shall cease to be Registrable Securities
when (i) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of under such registration statement, (ii) they shall have
been distributed to the public pursuant to Rule 144 under the Securities Act,
(iii) they shall have been otherwise transferred or disposed of, and new
certificates therefor not bearing a legend restricting further transfer shall
have been delivered by the Company, and subsequent transfer or disposition of
them shall not require their registration or qualification under the Secu
rities Act or any similar state law then in force, (iv) they shall have ceased
to be outstanding, or (v) with respect to the Registrable Securities held by any
Person, when such Registrable Securities, when aggregated with the Registrable
Securities held by such Person's Affiliates, constitute 1% or less of the shares
of Common Stock at the time outstanding.
"Registration Expenses" shall mean any and all out-of-pocket expenses
incident to the Company's performance of or compliance with Section 2 hereof,
including, without limitation, all Commission, stock exchange and NASD
registration and filing fees, gross underwriting spreads, all fees and expenses
of complying with securities and blue sky laws (including the reasonable fees
and disbursements of under-
3
<PAGE>
writers' counsel in connection with blue sky qualifications and NASD filings),
all fees and expenses of the transfer agent and registrar for the Registrable
Securities, all printing expenses, the fees and disbursements of counsel for the
Company and of its independent public accountants, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, and one firm of counsel retained by each Shareholder
exercising its rights under Section 5 hereof, but excluding underwriting
discounts and commissions and applicable transfer and documentary stamp taxes,
if any, which shall be borne by the seller of the Registrable Securities in all
cases.
"Securities Act" means, as of any date, the Securities Act of 1933, as
amended, or any similar Federal statute then in effect and superseding such act,
and any reference to a particular section thereof shall include a reference to
the comparable section, if any, of any such similar Federal statute, and the
rules and regulations thereunder.
"Shareholder" means, (i) Atlas or Interpool, (ii) Apollo, and (iii) any
other investor in the Company who becomes a party hereto (the "Other
Investors").
"Subsidiary" means, as to any Person, another Person of which outstanding
Voting Stock having the power to elect a majority of the members of the board of
directors (or comparable body or authority performing similar functions) of
such other Person are at the time owned, directly or indirectly through one or
more intermediaries, or both, by such first Person.
"Underwritten Offering" means a firm commitment underwriting through a
nationally recognized underwriter.
"Voting Stock" means Capital Stock of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for the
election of corporate directors (or Persons performing similar functions).
4
<PAGE>
Section 2. Registration Rights.
-------------------
Section 2.1 Demand Registration.
-------------------
(a) Subject to the conditions and limitations hereinafter set forth in
this Section 2.1, each of the Shareholders may request in writing that the
Company effect the registration under the Securities Act of all or part of such
Shareholder's Registrable Securities specifying in the request the number and
type of Registrable Securities to be registered by such Shareholder and the
intended method of disposition thereof (such notice is hereinafter referred to
as a "Shareholder Request"). A registration requested pursuant to this Section
2.1(a) is referred to herein as a "Demand Registration." Each Shareholder may
request one (or, if Apollo, two) such Demand Registration to be a shelf
registration pursuant to Rule 415 of the Securities Act, with such registration
statement to remain effective for two years; provided that (i) any such demand
shall require the approval of the Board of Directors, unless at the time of such
demand, the Company Common Stock is listed on a na tional stock exchange or
quoted on the Nasdaq National Market and has a public float of $100 million or
more, and (ii) the existence of such registration shall not affect the
Shareholder's obligations under Sections 2.3(e) and (h). Upon receipt of such
Shareholder Request, the Company will promptly give written notice of such
requested Demand Registration to all other holders of Registrable Securities,
which other holders shall have the right (subject to the limitations set forth
in Section 2.1(f) hereof) to include the Registrable Securities held by them in
such registration and thereupon the Company will, as expeditiously as possible,
use its best efforts to effect the registration under the Securities Act of
the following:
(i) the Registrable Securities that the Company has been so requested
to register by such Shareholder; and
(ii) all other Registrable Securities that the Company has been
requested to register by any other holder thereof by written request given
to the Company within 10 calendar days after the giving of such written
notice by the Company (which request shall specify the intended method of
disposition of such Registrable Securities), all to the extent necessary to
permit the disposition (in accordance with the intended methods
5
<PAGE>
thereof as aforesaid) of the Registrable Securities so to be registered.
(b) Subject to the proviso set forth in Section 2.1(e) hereof, (i) the
Company shall not be obligated to effect more than (A) four Demand Registrations
pursuant to this Section 2.1 at the request of Apollo and (B) two Demand
Registrations pursuant to this Section 2.1 at the request of Interpool or Atlas
and (ii) the Company shall not be obligated to file a registration statement
under Section 2.1(a) hereof unless the Company shall have received requests for
such registration with respect to at least 5% of the outstanding shares of
Common Stock. In addition, neither Interpool nor Atlas may exercise its rights
under this section to the extent transfers are prohibited under the
Shareholders' Agreement, dated as of June 18, 1998, among Interpool, Atlas,
Apollo, and such other persons to become parties to such agreement as described
therein.
(c) The Company shall not be obligated to file a registration statement
relating to any Shareholder Request under Section 2.1(a) hereof within a period
of 6 months after the effective date of any other registration statement filed
by the Company with the Commission.
(d) In connection with any offering pursuant to this Section 2.1, the only
shares that may be included in such offering are (i) Registrable Securities and
(ii) shares of authorized but unissued Common Stock that the Company elects to
include in such offering ("Company Securities").
(e) If the Board of Directors of the Company makes a good faith
determination, certified by the Chief Executive Officer of the Company, that (i)
the filing of a registration statement or the compliance by the Company with
its disclosure obligations in connection with a registration statement would
require the disclosure of material information that the Company has a bona
----
fide business purpose for preserving as confidential or (ii) such registration
- ----
would be likely to have an adverse affect on any proposal or plan by the Company
to engage in any financing transaction, acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer or
similar transaction, the Company may delay the filing of a registration
statement and shall not be required to maintain the effectiveness thereof or
amend or supplement a registra tion statement for a period expiring upon the
earlier to
6
<PAGE>
occur of (A) the date on which such material information is disclosed
to the public or ceases to be material, in the case of clause (i), (B) the date
on which such transaction is completed or abandoned, in the case of clause (ii),
or (C) 120 days after the Company makes such good faith determination, in the
case of either clauses (i) or (ii); provided that in such event, the holders of
---------
Registrable Securities initiating the request for such registration will be
entitled to withdraw such request, and if such request is withdrawn such
registration will not count as the permitted registration under this Section 2.1
in such event or in any other event, if in the case of any other event, such
holder reimburses the Company for all Registration Expenses relating to such
withdrawn registration.
(f) If, in connection with any Underwritten Offering, the managing
underwriter shall advise the Company and any holder of Registrable Securities
that has requested registration that, in its judgment, the number of
securities proposed to be included in such offering should be limited due to
market conditions, the Company will so advise each holder of Registrable
Securities that has requested registration, and shares shall be excluded from
such offering in the following order until such limitation has been met: First,
-----
the Registrable Securities requested to be included by the Company shall be
excluded until all such Registrable Securities shall have been so excluded; and
thereafter, the Registrable Securities requested to be included in such offering
- ----------
pursuant to Section 2.1(a)(i) hereof by the Shareholder making such request or
pursuant to Section 2.1(a)(ii) hereof by other Shareholders shall be excluded
pro rata, based on the respective number of Registrable Securities as to which
registration has been so requested by such Shareholders, provided, however, that
the Shareholder making such request pursuant to Section 2.1(a)(ii) hereof shall
not be entitled to so register a number of shares greater in proportion to its
total ownership of Registrable Securities than the proportion of shares of
Registrable Securities being registered by the Shareholder requesting
registration pursuant to Section 2.1(a)(i) in relation to that Shareholder's
total ownership of Registrable Securities.
(g) A registration requested pursuant to Section 2.1(a) hereof will not be
deemed to have been effected unless it has become effective; provided, that if
--------
after it has become effective, the offering of Registrable Securities pursuant
to such registration is interfered with by any stop
7
<PAGE>
order, injunction or other order or requirement of the Commission or other
governmental agency or court, such registration will be deemed not to have been
effected.
(h) If a Shareholder making a Shareholder Request specifies in the
Shareholder Request an Underwritten Offering, such Shareholder shall have the
right, with the approval of the Company, which approval shall not be
unreasonably withheld, to select the managing underwriter; provided, however, in
-------- -------
the event that the Company has elected to include Company Securities in such
offering, the Company shall have the right, with the approval of a majority of
the holders of Registrable Securities that have requested to be included in such
offering, which approval shall not be unreasonably withheld, to select the
managing underwriter.
(i) The Company will pay all Registration Expenses incurred in connection
with any Demand Registration effected by it pursuant to this Section 2.1.
Section 2.2 Piggyback Registrations.
-----------------------
(a) If at any time the Company proposes to register any of its equity
securities under the Securities Act (other than a registration on Form S-4 or S-
8 or any successor forms thereto) for the account of another Person or for its
own account, on a form and in a manner that would permit registration of
Registrable Securities for sale to the public under the Securities Act, it will
give written notice to all the holders of Registrable Securities promptly of its
intention to do so, describing such securities and specifying the form and
manner and the other relevant facts involved in such proposed registration,
including, without limitation, (x) the intended method of disposition of the
securities offered, including whether or not such registration will be
effected through an underwriter in an Underwritten Offering or on a "best
efforts" basis, and, in any case, the identity of the managing underwriter, if
any, and (y) the price at which the Registrable Securities are reasonably
expected to be sold. Upon the written request of any holder of Registrable
Securities delivered to the Company within 30 calendar days after the receipt
of any such notice (which request shall specify the Registrable Securities
intended to be disposed of by such holder), the Company will effect the
registration under the Securities Act of all the Registrable Securities that the
Company has been so requested to register; provided, however, that:
-------- -------
8
<PAGE>
(i) if, at any time after giving such written notice of its intention
to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities, the
Company may, at its election, give written notice of such determination to
each holder of Registrable Securities who shall have made a request for
registration as hereinabove provided and thereupon the Company shall be
relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith); and
(ii if such registration involves an Underwritten Offering, all
holders of Registrable Securities requesting to be included in the
Company's registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as
apply to the Company.
(b) The Company shall not be obligated to effect any registration of
Registrable Securities under this Section 2.2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
dividend reinvestment plans or stock option or other employee benefit plans.
(c) If a registration pursuant to this Section 2.2 involves an
Underwritten Offering and the managing underwriter advises the issuer that, in
its opinion, the number of securities proposed to be included in such
registration should be limited due to market conditions, the Company will so
advise each holder of Registrable Securities that has requested registration
pursuant to Section 2.2(a) hereof, and shares shall be excluded from such
offering pro rata, based on the respective number of Registrable Securities as
--- ----
to which registration has been so requested by such Share holders, until all
such Registrable Securities shall have been so excluded; and thereafter, the
securities requested to be registered by the Company shall be excluded.
(d) In connection with any Underwritten Offering with respect to which
holders of Registrable Securities shall have requested registration pursuant to
this Section 2.2, the Company shall have the right to select the managing
underwriter with respect to the offering; provided that such
--------
9
<PAGE>
managing underwriter shall be a nationally recognized investment banking firm.
(e) The Company will pay all Registration Expenses incurred in connection
with each of the registrations of Registrable Securities effected by it pursuant
to this Section 2.2.
Section 2.3 Registration Procedures.
-----------------------
(a) If and whenever the Company is required to use its best efforts to
effect or cause the registration of any Registrable Securities under the
Securities Act as provided in Section 2.1 or 2.2 hereof, the Company will, as
expeditiously as possible:
(i) prepare and, in any event within 90 calendar days after the end
of the period within which requests for registration may be given to the
Company, file with the Commission a registration statement with respect to
such Registrable Securities and use its best efforts to cause such
registration statement to become and remain effective; provided, that the
--------
Company may discontinue any registration of its securities that is being
effected pursuant to Section 2.2 hereof at any time prior to the effective
date of the registration statement relating thereto;
(ii) prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective for such period as may be requested
by the Shareholders not exceeding nine months (or two years for a shelf
registration) and to comply with the provisions of the Securities Act with
respect to the disposition of all the shares of Common Stock covered by
such registration statement during such period in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement;
(iii) furnish to each holder of Registrable Securities covered by the
registration statement and to each underwriter, if any, of such Registrable
Securities, such number of copies of a prospectus and preliminary
prospectus for delivery in conformity with the
10
<PAGE>
requirements of the Securities Act, and such other documents, as such
Person may reasonably request, in order to facilitate the public sale or
other disposition of the Registrable Securities;
(iv) use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition of the Registrable Securities owned by such seller in such
jurisdictions, except that the Company shall not for any such purpose be
required (A) to qualify to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this Section 2.3(a)(iv), it
is not then so qualified, (B) to subject itself to taxation in any such
jurisdiction, or (C) to take any action which would subject it to general
or unlimited service of process in any such jurisdiction where it is then
so subject;
(v) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 2.3(a)(ii) hereof, if
the Company becomes aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and, at the request of any such seller,
deliver a reasonable number of copies of an amended or supplemental
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or
11
<PAGE>
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to
its security holders, in each case as soon as practicable, but not later
than 45 calendar days after the close of the period covered thereby (90
calendar days in case the period covered corresponds to a fiscal year of
the Company), an earnings statement of the Company which will satisfy the
provisions of Section 11(a) of the Securities Act;
(viii) use its best efforts in cooperation with the underwriters to
list such Registrable Securities on each securities exchange on which the
shares of Common Stock are then listed or, if the shares of Common Stock
are not then listed on a securities exchange, on each securities exchange
as the underwriters may reasonably designate;
(ix) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration
statement;
(x) in the event such registration is effected through an
Underwritten Offering, use its best efforts to obtain a "cold comfort"
letter from the independent public accountants for the Company in customary
form and covering such matters of the type customarily covered by such
letters as the holders of Registrable Securities requesting registration
may reasonably request in order to effect an underwritten public offering
of such Registrable Securities; and
(xi) execute and deliver all instruments and documents (including in
an Underwritten Offering an underwriting agreement in the form customary
for such underwriter) and take such other actions and obtain such
certificates and opinions as the holders of Registrable Securities
requesting registration may reasonably request in order to effect an
underwritten public offering of such Registrable Securities.
12
<PAGE>
(b) It shall be a condition precedent to the obligation of the Company
to take any action pursuant to this Section 2 in respect of Registrable
Securities that each holder requesting registration thereof shall furnish to the
Company such information regarding the Registrable Securities held by such
holder and the intended method of disposition thereof as the Company shall
reasonably request and as shall be required in connection with the action taken
by the Company; provided, however, that the failure of any holder of Registrable
-------- -------
Securities to furnish such information shall not affect the obligations of the
Company pursuant to this Section 2 with respect to any holder of Registrable
Securities who furnishes such information to the Company. Notwithstanding
any provision to the contrary contained herein, no holder of Registrable
Securities shall be required (i) to furnish any information to the Company or
the underwriters in connection with such registration, other than in a writing
furnished by such holder expressly for use in such registration statement which
shall be limited to matters concerning such holder's identity, its beneficial
ownership of securities of the Company, the class and number of such securities
it intends to include in such registration and its intended method of
distribution, or (ii) to make any representations or warranties to the Company,
the underwriters or any other Person (whether in the underwriting agreement
or otherwise), except with respect to the information so furnished.
(c) Each holder of Registrable Securities will, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
2.3(a)(vi) hereof, forthwith discontinue disposition of the Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 2.3(a)(vi) hereof.
(d) If a registration pursuant to Section 2.1 or 2.2 hereof involves an
Underwritten Offering, each holder of Registrable Securities agrees, whether or
not such holder's Registrable Securities are included in such registration, not
to effect any sale or distribution, including any sale pursuant to Rule 144
under the Securities Act, of any Registrable Securities, or of any security
convertible into or exchangeable or exercisable for any Registrable Securities
(other than as part of such Underwritten Offering), without the consent of the
managing underwriter, during a period
13
<PAGE>
commencing seven calendar days before and ending 180 calendar days (or such
lesser number as the managing underwriter shall designate) after the effective
date of such registration; provided, that such period shall not extend beyond
--------
the period during which the Company is subject to such a restriction.
(e) If a registration pursuant to Section 2.1 or 2.2 hereof involves an
Underwritten Offering, the Company agrees, if so required by the managing
underwriter, not to effect any sale or distribution of any of its equity or debt
securities, as the case may be, or securities convertible into or exchangeable
or exercisable for any of such equity or debt securities, as the case may be,
during a period commencing seven calendar days before and ending 180 calendar
days after the effective date of such registration, except for such Underwritten
Offering or except in connection with a stock option plan, stock purchase
plan, savings or similar plan, or an acquisition, merger or exchange offer.
(f) If a registration pursuant to Section 2.1 or 2.2 hereof involves an
Underwritten Offering, any holder of Registrable Securities requesting to be
included in such registration may elect, in writing, not less than five days
prior to the effective date of the registration statement filed in connection
with such registration, not to register such securities in connection with such
registration, unless such holder has agreed with the Company or the managing
underwriter to limit its rights under this Section 2.3.
(g) It is understood that in any Underwritten Offering in addition to any
shares of Common Stock (the "initial shares") the underwriters have committed to
purchase, the underwriting agreement may grant the underwriters an option to
purchase up to a number of additional authorized but unissued shares of Common
Stock (the "option shares") equal to 15% of the initial shares (or such other
maximum amount as the NASD may then permit), solely to cover over-allotments.
Shares of Common Stock proposed to be sold by the Company and the other sellers
shall be allocated between initial shares and option shares as agreed or, in the
absence of agreement, pursuant to Section 2.1(f) or 2.2(c) hereof, as the case
may be. The number of initial shares and option shares to be sold by requesting
holders shall be allocated pro rata among all such holders on the basis of the
--- ----
relative number of shares of Registrable Securities each
14
<PAGE>
such holder has requested to be included in such registration.
(h) If the Company shall notify pursuant to Section 2.3(a)(iv) any
Shareholder for whom a shelf registration statement has been filed and remains
effective, such Shareholder shall suspend use of such registration statement
until an appropriate prospectus supplement has been prepared and filed with the
Commission; it being understood that the Company shall make all reasonable
efforts to ensure that the time period for which use of the registration
statement is suspended does not exceed 90 days in any 12 month period.
Section 2.4 Indemnification.
---------------
(a) In the event of any registration of any securities under the Securities
Act pursuant to Section 2.1 or 2.2 hereof, the Company will, and it hereby
agrees to, indemnify and hold harmless, to the extent permitted by law, each
seller of any Registrable Securities covered by such registration statement,
its directors, officers, employees and agents, each Person who participates as
an underwriter in the offering or sale of such securities and each other Person,
if any, who controls such seller or underwriter within the meaning of the
Securities Act, as follows:
(i) against any and all loss, liability, claim, damage or expense
whatsoever arising out of or based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration statement
(or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading, or arising out of an untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any
15
<PAGE>
claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under clauses (i)
or (ii) above;
provided, however, that this indemnity does not apply to any loss, liability,
- -------- -------
claim, damage or expense to the extent arising out of an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such seller or underwriter specifically stating that it is for use
in the preparation of any registration statement (or any amendment thereto) or
any preliminary prospectus or prospectus (or any amendment or supplement
thereto); and provided, further, that the Company will not be liable (A) in the
-------- -------
case of any Underwritten Offering, to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, or (B) in the case of any offering other than an Underwritten
Offering, to any seller of Registrable Securities covered by such registration
statement or any other Person, if any, who controls such seller within the
meaning of the Securities Act, under the indemnity agreement in this Section
2.4(a) with respect to any preliminary prospectus or final prospectus or final
prospectus as amended or supplemented, as the case may be, to the extent that
any such loss, claim, damage or liability of such underwriter or controlling
Person (or seller or controlling Person, as the case may be) results from the
fact that such underwriter (or seller, as the case may be) sold Registrable
Securities to a Person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final prospectus or of the
final prospectus as then amended or supplemented, whichever is most recent, if
the Company has previously furnished copies thereof to such underwriter. Such
indemnity shall remain in
16
<PAGE>
full force and effect regardless of any investigation made by or on behalf of
such seller, director, officer, employee, agent, underwriter or controlling
Person, and shall survive the transfer of such securities by such seller.
(b) The Company may require, as a condition to including any Registrable
Securities in any registration statement filed in accordance with Section 2.1 or
2.2 hereof, that the Company shall have received an undertaking reasonably
satisfactory to it from the prospective seller of such Registrable Securities or
any underwriter, to indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 2.4(a) hereof) the Company and its
directors and officers and each other Person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained therein, or
any such amendment or supplement, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such seller or
underwriter specifically stating that it is for use in the preparation of such
registration statement, preliminary, final or summary prospectus or amendment or
supplement; provided, however, that the maximum liability of any seller of
-------- -------
Registrable Securities for such indemnification shall not exceed the net
proceeds received by such seller from the sale of such Registrable Securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling Person and shall survive the transfer of such securities by such
seller.
(c) Promptly after receipt by an indemnified party hereunder of written
notice of the commencement of any action or proceeding involving a claim
referred to in this Section 2.4, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to such indemnifying party of the commencement of such action; provided,
--------
however, that the failure of any indemnified party to give notice as provided
- -------
herein shall not relieve the indemnifying party of its obligations under this
Section 2.4, except to the extent (not including any such notice of an
underwriter) that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an
17
<PAGE>
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may
exist in respect of such claim (in which case the indemnifying party shall not
be liable for the fees and expenses of more than one counsel for the sellers of
Registrable Securities or for more than one counsel for the underwriters in
connection with any one action or separate but similar or related actions), the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof.
(d) The Company and each seller of Registrable Securities shall provide
for the foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority. The foregoing shall not limit the Company's obligations
under Section 2.3(a)(xi).
Section 2.5 Contribution. In order to provide for just and equitable
------------
contribution in circumstances under which the indemnity contemplated by Section
2.4 hereof is for any reason not available, the parties required to indemnify by
the terms thereof shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, any seller of Registrable Securities and one or more of
the underwriters, except to the extent that contribution is not permitted
under Section 11(f) of the Securities Act. In determining the amounts that
the respective parties shall contribute, there shall be considered the relative
benefits received by each party from the offering of the Registrable Securities
(taking into account the portion of the proceeds of the offering realized by
each), the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to correct
and prevent any statement or omission and any other equitable considerations
appropriate under the circumstances. The Company and each
18
<PAGE>
Person selling securities agree with each other that no seller of Registrable
Securities shall be required to contribute any amount in excess of the amount
such seller would have been required to pay to an indemnified party if the
indemnity under Section 2.4 hereof were available. The Company and each such
seller agree with each other and the underwriters of the Registrable Securities,
if requested by such underwriters, that it would not be equitable if the amount
of such contribution were determined by pro rata or per capita allocation (even
--- ----
if the underwriters were treated as one entity for such purpose) or for the
underwriters' portion of such contribution to exceed the percentage that the
underwriting discount bears to the public offering price of the Registrable
Securities. For purposes of this Section 2.5, each Person, if any, who controls
an underwriter within the meaning of the Securities Act shall have the same
rights to contribution as such underwriter, and each director and each officer
of the Company who signed the registration statement, and each Person, if any,
who controls the Company or a seller of Registrable Securities, shall have the
same rights to contribution as the Company or a seller of Registrable
Securities, as the case may be.
Section 2.6 Rule 144. If the Company shall have filed a registration
--------
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company covenants that it will file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not required to file such
reports, it will, upon the request of any holder of Registrable Securities,
make publicly available other information), and it will take such further
action as any holder of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such holder to sell shares of
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities
Act, as such Rule may be amended from time to time or (ii) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any
holder of Registrable Securities, the Company will deliver to such holder a
written statement as to whether the Company has complied with such requirements.
Section 3. Miscellaneous.
-------------
19
<PAGE>
Section 3.1 Successors and Assigns. Except as otherwise provided
----------------------
herein, all the terms and provisions of this Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the respective
successors and assigns of the parties hereto. No Shareholder may assign any of
its rights hereunder to any Person other than a transferee that has complied in
all respects with the requirements of this Agreement. The Company may not
assign any of its rights hereunder to any other Person. If any transferee of
any Shareholder shall acquire any shares of Common Stock in any manner, whether
by operation of law or otherwise, such shares shall be held subject to all of
the terms of this Agreement, and by taking and holding such shares such Person
shall be entitled to receive the benefits of and be conclusively deemed to have
agreed to be bound by and to comply with all of the terms and provisions of this
Agreement.
Section 3.2 Amendment and Modification; Waiver of Compliances; Conflicts.
------------------------------------------------------------
(a) This Agreement may be amended only by a written instrument duly
executed by all of the Shareholders and the Company.
(b) Except as otherwise provided in this Agreement, any failure of any of
the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
(c) In the event of any conflict between the provisions of this
Agreement and the provisions of any other agreement, the provisions of this
Agreement shall govern and prevail.
Section 3.3 Notices. All notices and other communications provided for
-------
hereunder shall be in writing and delivered by hand or sent by first class mail
or sent by telecopy (with such telecopy to be confirmed promptly in writing sent
by first class mail), sent as follows:
20
<PAGE>
(i) If to the Company, addressed to:
c/o XTRA Corporation
[Address]
[Address]
Attention:[
Telecopy:[ ]
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: David A. Fine, Esq.
Telecopy: (617) 951-7050
(ii) If to Apollo, addressed to:
c/o Apollo Management IV, L.P.
1301 Avenue of the Americas
38th Floor
New York, New York 10019
Attention: Michael S. Gross
Telecopy: (212) 261-4071
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: David J. Friedman, Esq.
Telecopy: (212) 735-2000
(iii) If to Interpool or Atlas, addressed to:
Interpool, Inc.
635 Third Avenue
New York, New York 10017
Attention: Martin Tuchman
Telecopy: (212) 687-8403
Atlas Capital Partners
633 Third Avenue
New York, New York 10017
Attention: Mitchell I. Gordon
Telecopy: (212) 916-3284
21
<PAGE>
with a copy to:
Camhy Karlinsky & Stein LLP
1740 Broadway
New York, New York
Attention: Daniel DeWolf, Esq.
Telecopy: (212) 977-8389
or to such other address or addresses or telecopy number or numbers as any of
the parties hereto may most recently have designated in writing to the other
parties hereto by such notice. All such communications shall be deemed to have
been given or made when so delivered by hand or sent by telecopy, or three
business days after being so mailed.
Section 3.4 Entire Agreement; Governing Law.
-------------------------------
(a) This Agreement and the other writings referred to herein or delivered
pursuant hereto which form a part hereof contain the entire agreement among the
parties hereto with respect to the subject transactions contemplated hereby and
supersede all prior oral and written agreements and memoranda and undertakings
among the parties hereto with regard to this subject matter. The Company
represents to the Share holders that the rights granted to the holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted or obligations accepted under any other agreement (including its
Certificate of Incorporation) to which the Company is a party. Neither the
Company nor any Subsidiary of the Company will hereafter enter into any
agreement with respect to its equity or debt securities which is inconsistent
with the rights granted to any Shareholder under this Agreement without
obtaining the prior written consent of the Shareholder.
(B) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW
PRINCIPLES THEREOF).
Section 3.5 Injunctive Relief. The Shareholders acknowledge and agree
-----------------
that a violation of any of the terms of this Agreement will cause the
Shareholders irreparable injury for which an adequate remedy at law is not
available. Therefore, the Shareholders agree that each Shareholder shall be
entitled to, an injunction, restraining order or
22
<PAGE>
other equitable relief from any court of competent jurisdiction, restraining
any Shareholder from committing any violations of the provisions of this
Agreement.
Section 3.6 Availability of Agreement. For so long as this Agreement
-------------------------
shall be in effect, this Agreement shall be made available for inspection by any
Shareholder upon request at the principal executive offices of the Company.
Section 3.7 Headings. The section and paragraph headings contained in
--------
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 3.8 Recapitalizations, Exchanges, Etc. Affecting the Shares of
-----------------------------------------------------------
Common Stock; New Issuances. The provisions of this Agreement shall apply, to
- ---------------------------
the full extent set forth herein with respect to the shares of Common Stock and
to any and all equity or debt securities of the Company or any successor or
assign of the Company (whether by merger, consolidation, sale of assets, or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of, such equity or debt securities and shall be appropriately
adjusted for any stock dividends, splits, reverse splits, combinations,
reclassifications, recapitalizations, reorganizations and the like occurring
after the date hereof.
Section 3.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 3.10. Effective Date. This Agreement will become effective upon,
--------------
but only upon, consummation of the Merger.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
XTRA CORPORATION
By:__________________________
Name:
Title:
APOLLO MANAGEMENT IV, L.P., on behalf of Apollo
Investment and Apollo Overseas
By:___________________________
Name:
Title:
INTERPOOL, INC.
By:___________________________
Name:
Title:
ATLAS CAPITAL PARTNERS LLC
By:___________________________
Name:
Title:
24
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
Section Heading Page
- ------- ------- ----
1. Certain Definitions.................................................. 1
2. Registration Rights.................................................. 4
2.1. Demand Registration............................................ 4
2.2. Piggyback Registrations........................................ 8
2.3. Registration Procedures........................................ 9
2.4. Indemnification................................................ 14
2.5. Contribution................................................... 18
2.6. Rule 144....................................................... 19
3. Miscellaneous........................................................ 19
3.1. Successors and Assigns......................................... 19
3.2. Amendment and Modification: Waiver of Compliances; Conflicts... 20
3.3. Notices........................................................ 20
3.4. Entire Agreement: Governing Law................................ 22
3.5. Injunctive Relief.............................................. 22
3.6. Availability of Agreement...................................... 22
3.7. Headings....................................................... 22
3.8. Recapitalizations, Exchanges, Etc. Affecting the Shares of
Common Stock; New Issuances................................... 23
3.9. Counterparts................................................... 23
3.10. Effective Date................................................. 23
<PAGE>
EXHIBTI 10.21
MANAGEMENT CONSULTING AGREEMENT
BETWEEN
XTRA CORPORATION
AND
APOLLO MANAGEMENT IV, L.P.
Dated as of _______________, 1998
<PAGE>
MANAGEMENT CONSULTING AGREEMENT, dated as of _____________________,
1998 (this "Agreement"), between XTRA CORPORATION, a Delaware corporation (the
"Company"), and APOLLO MANAGEMENT IV, L.P., a Delaware limited partnership
(Apollo").
WHEREAS, the Company desires to avail itself of Apollo's expertise and
consequently has requested Apollo to make such expertise available from time to
time in rendering certain management consulting and advisory services related to
the business and affairs of the Company and its respective subsidiaries and
affiliates and the review and analysis of certain financial and other
transactions. Apollo and the Company agree that it is in their respective best
interests to enter into this Agreement whereby, for the consideration specified
herein, Apollo has provided and shall provide such services as independent
consultant to the Company.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the Company and Apollo agree as follows:
SECTION 1. RETENTION OF APOLLO.
-------------------
The Company hereby retains Apollo, and Apollo accepts such retention, upon
the terms and conditions set forth in this Agreement.
SECTION 2. TERM.
----
This Agreement shall commence on the date hereof and, unless earlier
terminated pursuant to the final sentence of this Section 2, shall terminate on
September __, 2008 (the "Initial Term"). Notwithstanding the foregoing, the
------------
Company may terminate this Agreement concurrently with any sale of the Company
as a going concern to an unaffiliated third party (whether by merger, sale of
substantially all of its assets or otherwise), if after such transaction none
of Apollo, any affiliate of Apollo, any limited or general partner of Apollo or
any of their respective Affiliates owns, directly or indirectly, individually or
in the aggregate, more than five percent of the equity interest in the Company
or the Company's purchaser.
2
<PAGE>
SECTION 3. MANAGEMENT CONSULTING SERVICES.
------------------------------
(a) Apollo shall advise and assist the Company concerning such
management matters that relate to proposed financial transactions, acquisitions
and other senior management matters related to the business, administration and
policies of the Company and its subsidiaries and affiliates, in each case as the
Company shall reasonably and specifically request by way of written notice to
Apollo, which notice shall specify the services required of Apollo and shall
include all background material necessary for Apollo to complete such services.
Apollo shall devote such time to any such written request as Apollo shall deem,
in its discretion, necessary. Such consulting services, in Apollo's discretion,
shall be rendered in person or by telephone or other communication. Apollo
agrees to perform the services requested by the Company in a professional manner
as it shall reasonably determine in order for the Company to analyze the matter
for which Apollo's services were requested.
(b) The Company acknowledges and agrees that Apollo (i) has
structured the recapitalization and the other transactions contemplated by the
Agreement and Plan of Merger and Recapitalization, dated as of June 18, 1998, as
amended (the "Recapitalization Merger Agreement"), between Wheels MergerCo LLC
---------------------------------
and the Company, (ii) has arranged for financing in connection with the
recapitalization, and (iii) has provided other services in connection with the
transactions contemplated by the Recapitalization Merger Agreement. Apollo
agrees to continue to provide services to the Company in connection with the
consummation of the transactions contemplated by the Merger Agreement.
(c) Apollo shall perform all services to be provided hereunder as an
independent contractor to the Company and not as an employee, agent or
a representative of the Company. Apollo shall have no authority to act
for or to bind the Company, without its prior written consent.
(d) This Agreement shall in no way prohibit Apollo or any of its
partners or Affiliates or any director, officer, partner or employee of Apollo
or any of its partners or Affiliates from engaging in other activities, whether
or not competitive with any business of the Company or any of its respective
subsidiaries or Affiliates.
SECTION 4. COMPENSATION.
------------
3
<PAGE>
(a) As consideration for Apollo's agreement to render the services
set forth in Section 3(a) of this Agreement and as compensation for any such
services rendered by Apollo, the Company agrees to pay to Apollo an annual fee
of $1,000,000 payable in equal quarterly installments of $250,000 each on the
first day of each fiscal quarter (or, if such date is not a business day, on the
next business day thereafter).
(b) As consideration for services rendered and Apollo's agreement to
render services as set forth in Section 3(b), the Company (on behalf of itself
and the Surviving Corporation) agrees to pay to Apollo a fee of $12,500,000
which shall be earned upon consummation of the transactions contemplated by the
Recapitalization Merger Agreement.
(c) Upon presentation by Apollo to the Company of such documentation
as may be reasonably requested by the Company, the Company shall reimburse
Apollo for all out-of-pocket expenses, including, without limitation, legal fees
and expenses, and other disbursements incurred by Apollo, its Affiliates or any
if its Affiliates' directors, officers, employees or agents in the performance
of Apollo's obligations hereunder, whether incurred on or prior to the date
hereof, including, without limitation, out-of-pocket expenses incurred in
connection with the transactions contemplated by the Recapitalization Merger
Agreement.
(d) Nothing in this Agreement shall have the effect of prohibiting
Apollo or any of its Affiliates from receiving from the Company or any of its
subsidiaries of Affiliates any other fees, including any fee payable pursuant to
Section 6.
SECTION 5. INDEMNIFICATION.
---------------
The Company agrees that it shall indemnify and hold harmless Apollo, its
Affiliates and its Affiliates' directors, officers, employees and agents
(collectively, the "Indemnified Persons") on demand from and against any and all
-------------------
liabilities, costs, expenses and disbursements (collectively, "Claims") of any
------
kind with respect to or arising from this Agreement or the performance by any
Indemnified Person of any services in connection herewith. Notwithstanding the
foregoing provision, the Company shall not be liable for any Claim under this
Section 5 arising from the willful misconduct of any Indemnified Person.
SECTION 6. OTHER SERVICES.
--------------
4
<PAGE>
If the Company shall determine that it is advisable for the Company to hire
a financial advisor, consultant, investment banker or any similar agent in
connection with any merger, acquisition, disposition, issuance of securities,
financing or any similar transaction, it shall notify Apollo of such
determination in writing. Promptly thereafter, upon the request of Apollo, the
parties shall negotiate in good faith to agree upon appropriate services,
compensation and indemnification for the Company to hire Apollo or its
Affiliates for such services. The Company may not hire any person, other than
Apollo or its Affiliates, for any services, unless (a) the parties are unable to
agree after 30 days following receipt by Apollo of such written notice, (b) such
other person has a reputation that is at least equal to the reputation of Apollo
in respect of such services, (c) ten business days shall have elapsed after the
Company provides a written notice to Apollo of its intention to hire such other
person, which notice shall identify such other person and shall describe in
reasonable detail the nature of the services to be provided, the compensation to
be paid and the indemnification to be provided and (d) the compensation to be
paid is not more than Apollo was willing to accept in the negotiations described
above, and (e) the idemnification to be provided is not more favorable to the
Company than the indemnification that Apollo was willing to accept in the
negotiations described above.
SECTION 7. NOTICES.
-------
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed sufficient if personally delivered, sent by
nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to Apollo, to:
Apollo Management IV, L.P.
1301 Avenue of the Americas
38/th/ Floor
New York, New York 10019
Attention: Mr. Andrew Africk
Telecopier: (212) 261-4071
5
<PAGE>
if to the Company:
XTRA Corporation
1801 Park 270 Drive,
Suite 400
St. Louis, MO 63146
Telecopier: (314) 579-9300
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of nationally-
recognized overnight courier, on the next business day after the date when sent,
(c) in the case of telecopy transmission, when received, and (d) in the case of
mailing, on the third business day following that on which the piece of mail
containing such communication is posted.
SECTION 8. BENEFITS OF AGREEMENT.
---------------------
This Agreement shall bind and inure to the benefit of Apollo, the Company,
the Indemnified Persons and any successors to or assigns of Apollo and the
Company; provided, however, that this Agreement may not be assigned by either
-------- -------
party hereto without the prior written consent of the other party, which consent
will not be unreasonably withheld in the case of any assignment by Apollo. The
foregoing notwithstanding, Apollo may assign a portion of its fees hereunder to
any person assisting Apollo in the performance of its duties hereunder.
SECTION 9. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York (without giving effect to
principles of conflicts of laws).
SECTION 10. HEADINGS.
--------
Section headings are used for convenience only and shall in no way affect
the construction of this Agreement.
6
<PAGE>
SECTION 11. ENTIRE AGREEMENT; AMENDMENTS.
----------------------------
This Agreement contains the entire understanding of the parties with
respect to its subject matter, and neither it nor any part of it may in any way
be altered, amended, extended, waived, discharged or terminated except by a
written agreement signed by each of the parties hereto.
SECTION 12. COUNTERPARTS.
------------
This Agreement may be executed in counterparts, and each such counterpart
shall be deemed to be an original instrument, but all such counterparts together
shall constitute but one agreement.
SECTION 13. WAIVERS.
-------
Any party to this Agreement may, by written notice to the other party,
waive any provision of this Agreement. The waiver by any party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
SECTION 14. AFFILIATES.
----------
For purposes of this Agreement, the term "Affiliate," with respect to
Apollo, shall include, without limitation, Apollo Investment Fund IV, L.P.,
Apollo Overseas Partners IV, L.P., (collectively, the "Funds"), Apollo Advisors
IV, L.P., the general partner of Apollo, the general partner of each of the
Funds and each person controlling, controlled by or under common control with
any of the foregoing persons.
7
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Management
Consulting Agreement as of the date first above written.
XTRA CORPORATION
By:___________________________
Name:
Title:
APOLLO MANAGEMENT IV, L.P.
By:___________________________
Name:
Title:
8
<PAGE>
EXHIBIT 11.1
XTRA CORPORATION
STATEMENT OF THE CALCULATION OF EARNINGS PER SHARE
FOR THE NINE MONTHS ENDED JUNE 30, 1998, AND YEARS ENDED SEPTEMBER 30, 1997,
1996, AND 1995 (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
NINE MONTHS ENDED SEPTEMBER 30,
JUNE 30, -----------------------
1998 1997 1996 1995
----------------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (numerator).............. $ 41 $ 43 $ 41 $ 57
======= ======= ======= =======
Computation of Basic Shares Out-
standing
(in thousands, except per share
amounts)
Weighted average number of basic
common shares outstanding
(denominator)...................... 15,301 15,268 16,027 16,849
======= ======= ======= =======
Earnings per basic common share..... $ 2.69 $ 2.79 $ 2.56 $ 3.40
======= ======= ======= =======
Computation of Diluted Shares
Outstanding
(in thousands, except per share
amounts)
Weighted average common shares
outstanding........................ 15,301 15,268 16,027 16,849
Common stock equivalents for diluted
EPS:............................... 71 18 25 76
------- ------- ------- -------
Weighted average number of diluted
common shares outstanding
(denominator)...................... 15,372 15,286 16,052 16,925
======= ======= ======= =======
Earnings per diluted common share... $ 2.68 $ 2.78 $ 2.56 $ 3.39
======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated November 12, 1997 included in or made a part of this registration
statement on Form S-4 and to all references to our Firm included in this
Registration Statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts
October 28, 1998
<PAGE>
EXHIBIT 23.4
[Goldman, Sachs & Co. Letterhead Appears Here]
PERSONAL AND CONFIDENTIAL
June 18, 1998
Board of Directors
XTRA Corporation
60 State Street
Boston, MA 02109-1826
Re: Proxy Statement of XTRA Corporation; Registration Statement
Gentlemen:
Attached is our opinion letter dated June 18, 1998, with respect to the
fairness from a financial point of view to the holders of the outstanding
shares of common stock, par value $0.50 per share (the "Shares"), of XTRA
Corporation (the "Company") of the aggregate consideration to be received by
the holders pursuant to the Agreement and Plan of Merger and Recapitalization,
dated June 18, 1998, by and between Wheels MergerCo LLC ("MergeCo"), a limited
liability company organized at the direction of Apollo Management, L.P. and
its investing affiliates, and the Company (the "Agreement"). The Agreement
provides for the merger of MergeCo with and into the Company pursuant to which
each holder of a Share shall be entitled either (i) to retain such Share or
(ii) to receive $65.00 in cash for such Share, subject to certain election and
proration procedures set forth in the Agreement, as to which we express no
view.
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of the Company in connection with its consideration of
the transaction contemplated therein and may not be disclosed to any third
party or used, circulated, quoted or otherwise referred to for any other
purpose, nor may it be filed with, included in or referred to in whole or in
part in any registration statement, proxy statement or any other document,
except in accordance with our prior written consent. We understand that the
Company has determined to include our opinion in the above-referenced Proxy
Statement and Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "SUMMARY--The Merger," "THE MERGER--Background of the
Merger," "THE MERGER--Recommendation of the Board of Directors," "THE MERGER--
Reasons for the Merger," and "THE MERGER--Opinion of the Company's Financial
Advisor" and to the inclusion of the foregoing opinion in the above-mentioned
Proxy Statement included in the above-mentioned Registration Statement. In
giving such consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Goldman, Sachs & Co.
Goldman, Sachs & Co.
<PAGE>
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS EXHIBIT 99.1
OF XTRA CORPORATION
NOVEMBER 27, 1998
The undersigned hereby constitutes and appoints Robert B. Goergen and Lewis
Rubin, and each of them with full power of substitution, as proxies to vote and
act at the Special Meeting of Stockholders of XTRA Corporation (the "Company")
initially called to be held on November 27, 1998 at 10:00 a.m. Eastern Standard
Time at the offices of Ropes & Gray, 36th Floor, One International Place,
Boston Massachusetts, and at any adjournments or postponements thereof with
respect to the number of shares of capital stock of the Company as to which the
undersigned may be entitled to vote or act. The undersigned instructs such
proxy, or any substitute (i) to vote on the proposals specified below as
directed below by the undersigned, all such matters being as described in the
accompanying Proxy Statement/Prospectus, dated [ ], receipt of which is
acknowledged and (ii) to vote on any matters which may come before the meeting,
in such manner as they may determine. All proxies heretofore given by the
undersigned in respect of said Special Meeting are hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS OTHERWISE
SPECIFIED IN THE BOXES PROVIDED BELOW, THIS PROXY WILL BE VOTED FOR APPROVAL OF
EACH OF THE PROPOSALS, AND, IN THE DISCRETION OF THE NAMED PROXIES, AS TO ANY
OTHER MATTER THAT MAY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENTS
THEREOF.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT.
1. To approve and adopt an Agreement and Plan of Merger and Recapitalization
(the "Recapitalization Merger Agreement") dated as of June 18, 1998, as
amended and restated as of July 31, 1998, by and between Wheels MergerCo LLC
("MergerCo") and the Company, the merger of MergerCo with and into the
Company contemplated thereby and other such matters as are reasonably
necessary or advisable for the consummation of the transactions contemplated
in the Recapitalization Merger Agreement. The Recapitalization Merger
Agreement provides, among other things, that the owner of each outstanding
share of common stock, par value $.50 per share, of the Company (the
"Company Common Stock") issued and outstanding immediately prior to the
effective time of the Merger (other than shares of Company Common Stock
owned by the Company or any subsidiary of the Company, which will be
cancelled and retired, and other than shares of Company Common Stock subject
to appraisal rights) can elect either to receive $65.00 in cash (the "Cash
Consideration") for that share or to retain that share, with cash to be paid
in lieu of fractional shares of Company Common Stock. This election is
subject to proration so that upon consummation of the Merger, the existing
holders of the Company Common Stock will retain 500,000 shares of the
Company Common Stock (constituting approximately 3% of shares currently
outstanding and 10% of the Company Common Stock after the Merger) and will
receive $65.00 per share in cash for the balance of the Company Common Stock
(approximately 97% of shares currently outstanding). Holders of Company
Common Stock electing to retain shares of Company Common Stock will have to
properly complete and sign a form of election (the "Form of Election") and
such Form of Election, together with all certificates representing shares of
Company Common Stock, must be received by Boston Equiserve by 5:00 p.m.,
Boston time, on the second business day next preceding the date of the
Special Meeting.
FOR AGAINST ABSTAIN
[_] [_] [_]
2. To approve the 1998 XTRA Corporation Stock Option and Incentive Award Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
Please sign exactly as your name(s) appears on your stock certificate. When
signing as attorney, executor, administrator, trustee, or guardian, please sign
your name and full title as such. Each joint owner should sign.
- -------------------------------- Date: ______________________________________
Name of Stockholder (please print)
Signature(s): ______________________________
<PAGE>
EXHIBIT 99.2
FORM OF ELECTION/LETTER OF TRANSMITTAL
TO ACCOMPANY CERTIFICATES FOR SHARES OF COMMON STOCK OF
XTRA CORPORATION
TO MAKE AN ELECTION IN CONNECTION WITH THE PROPOSED MERGER
BY AND BETWEEN XTRA CORPORATION AND WHEELS MERGERCO LLC
AN ENTITY FORMED BY
APOLLO MANAGEMENT IV, L.P., ON BEHALF OF ITS MANAGED FUNDS, AND
ATLAS CAPITAL PARTNERS LLC, AN AFFILIATE OF INTERPOOL, INC.
TYPE OF ELECTION (SEE SECTION B OF INSTRUCTIONS)
- -------------------------------------------------------------------------------
SHARES SUBMITTED (ATTACH SEPARATE SIGNED LIST IF NECESSARY)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL
NUMBER
OF SHARES NUMBER NUMBER
SHARE REPRESENTED OF SHARES OF SHARES
CERTIFICATE BY SHARE TO BE FOR CASH
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) NUMBER(1) CERTIFICATE RETAINED ELECTION
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
TOTAL
SHARES
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Stockholders who hold XTRA Common Stock in book-entry form, should list
their account number.
This Form of Election/Letter of Transmittal is being delivered to you in
connection with the proposed merger (the "Merger") by and between XTRA
Corporation ("XTRA") and Wheels MergerCo LLC ("MergerCo"), an entity formed by
Apollo Management IV, L.P. ("Apollo"), on behalf of its managed funds, and
Atlas Capital Partners LLC, an affiliate of Interpool, Inc. ("Interpool"),
pursuant to an Agreement and Plan of Merger and Recapitalization, dated as of
June 18, 1998, and amended and restated as of July 31, 1998 (the
"Recapitalization Merger Agreement"), and must be completed by holders of
certificates for shares (the "Share Certificates") of XTRA Common Stock, par
value $0.50 per share ("Shares" or "XTRA Common Stock"), who wish to make an
Election (as defined herein) whether to retain their Shares or receive $65.00
per share in cash.
For an election to be effective, this Form of Election/Letter of
Transmittal, properly completed, together with Share Certificates as to which
an Election is being made (or guarantee of delivery as provided herein) or, if
delivery of Shares is to be made by book-entry transfer to the account of
Boston EquiServe, L.P. (the "Exchange Agent") at The Depository Trust Company
("Book-Entry Transfer Facility"), by book-entry transfer procedures, and,
together with all other required documents, are to be delivered to the
Exchange Agent by 5:00 p.m., Eastern Standard time, on November 25, 1998,
unless extended (the "Election Deadline") in order to effect an Election. Such
Election is subject to the terms, conditions and limitations set forth in (a)
the Proxy Statement/Prospectus, dated , 1998, relating to the Merger (the
"Proxy Statement/Prospectus"), (b) the Recapitalization Merger Agreement,
attached as Annex A to the Proxy Statement/Prospectus and (c) the accompanying
instructions.
Questions and requests for assistance or additional copies of the Proxy
Statement/Prospectus or this Form of Election/Letter of Transmittal may be
directed to the Exchange Agent at the address set forth below.
<PAGE>
The Exchange Agent for the Merger is:
BOSTON EQUISERVE, L.P.
By Hand: By Overnight Courier: By Mail:
Securities Transfer Boston EquiServe, L.P. Boston EquiServe, L.P.
& Reporting Services, Corporate Reorganization Corporate Reorganization
Inc. 40 Campanelli Drive P.O. Box 9573
c/o Boston EquiServe Braintree, MA 02184 Boston, MA 02205-9573
L.P.
100 William Street,
Galleria
New York, NY 10038
----------------
DELIVERY OF THIS FORM OF ELECTION/LETTER OF TRANSMITTAL TO AN ADDRESS, OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN
THIS FORM OF ELECTION/LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE
THE FORM W-9 PROVIDED WITH THIS FORM OF ELECTION/LETTER OF TRANSMITTAL.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS FORM
OF ELECTION/LETTER OF TRANSMITTAL IS COMPLETED.
THE DEADLINE FOR SUBMITTING THIS FORM OF ELECTION/LETTER OF TRANSMITTAL TO
THE EXCHANGE AGENT, TOGETHER WITH YOUR SHARE CERTIFICATES (OR GUARANTEES OF
DELIVERY OF SHARE CERTIFICATES) AND ALL OTHER REQUIRED DOCUMENTS, IS 5:00
P.M., EASTERN STANDARD TIME, ON NOVEMBER 25, 1998, UNLESS EXTENDED.
2
<PAGE>
PLEASE RETURN THIS ENTIRE FORM OF ELECTION/LETTER OF TRANSMITTAL
XTRA stockholders whose Share Certificates are not immediately available
or who cannot deliver their Share Certificates and all other documents
required hereby to the Exchange Agent prior to the Election Deadline, and
who wish to make an Election (as defined herein) must do so pursuant to the
guaranteed delivery procedure described in Section A of the Instructions
and the procedures for lost Share Certificates described in Section C of
the Instructions.
REGISTERED HOLDERS OF XTRA COMMON STOCK MAY ELECT TO EITHER RETAIN THE
COMMON SHARES OR TO RECEIVE CASH CONSIDERATION (AS DEFINED HEREIN) WITH
RESPECT TO ALL OR ANY PORTION OF THE SHARES HELD BY SUCH HOLDERS (THE "CASH
ELECTION").
[_]CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
EXCHANGE AGENT'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES
AND COMPLETE THE FOLLOWING:
Name of Electing Institution: ____________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
[_]The Depository Trust Company [_]Philadelphia Depository Trust
Company
Account Number _____________________ Transaction Code Number ____________
[_]CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY INCLUDED WITH THIS FORM OF ELECTION/LETTER OF
TRANSMITTAL AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): __________________________________________
Date of Execution of Notice of Guaranteed Delivery: ______________________
Name of Eligible Institution that Guaranteed Delivery: ___________________
If Shares are to be delivered by Book-Entry Transfer, check box of Book-
Entry Transfer Facility: _________________________________________________
[_]The Depository Trust Company [_]Philadelphia Depository Trust
Company
Account Number _____________________ Transaction Code Number ____________
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
---------------
List below the Share Certificates to which this Form of Election/Letter
of Transmittal relates. If the space provided below is inadequate, the
information shown in the space below with respect to the Share Certificates
and the type of election should be listed on a separate signed schedule
affixed hereto.
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS
SET FORTH IN THIS FORM OF ELECTION/LETTER OF TRANSMITTAL CAREFULLY.
Ladies and Gentlemen:
In connection with the proposed Merger of MergerCo with and into XTRA, the
undersigned hereby submits the Share Certificates evidencing the Shares listed
above, or hereby transfers ownership of such Share Certificates on the account
books maintained by a Book-Entry Transfer Facility, and elects, subject to the
proration and other limitations set forth below and as more fully described in
the Recapitalization Merger Agreement (the "Election"), to either retain the
XTRA Common Stock or convert each share of XTRA Common Stock represented by
such Share Certificates into the right to receive $65.00 in cash, without any
interest thereon (the "Cash Consideration"). Pursuant to this Election 500,000
shares of XTRA Common Stock, which amounts to 10% ownership of XTRA, will be
retained by the existing shareholders and Apollo and Interpool will hold the
remaining ownership interest. It is understood that the following Election is
subject to (a) the terms, conditions and limitations set forth in the Proxy
Statement/Prospectus, receipt of which is hereby acknowledged by the
undersigned, (b) the terms, conditions and limitations set forth in the
Recapitalization Merger Agreement and (c) the instructions herein. XTRA's
acceptance of Shares delivered pursuant to this Form of Election/Letter of
Transmittal will constitute a binding agreement between the undersigned and
XTRA upon the terms and subject to the conditions of (a), (b) and (c) listed
above.
The total number of shares of XTRA Common Stock to be retained by XTRA
stockholders is limited to 500,000 Shares. Accordingly, there can be no
assurance that a holder of Shares making an Election will retain all of such
holder's Shares. Stockholders who do not return a properly completed and
validly executed Form of Election/Letter of Transmittal prior to the Election
Deadline or who make no election will retain their Shares and will be deemed
to have made an Election to receive the Cash Consideration for all of their
Shares. However, because of proration, such stockholders may retain some of
their Shares. None of MergerCo, Apollo and Interpool, XTRA, the managers of
MergerCo, the XTRA Board of Directors or the Apollo and Interpool Board of
Directors makes any recommendation as to whether holders of XTRA Common Stock
should elect either to retain their Shares or to receive the Cash
Consideration in the Merger. Each stockholder must make his or her own
decision with respect to any such Election.
The undersigned authorizes and instructs you, as Exchange Agent, to deliver
the Share Certificates listed above and to receive on behalf of the
undersigned, in exchange for the Shares represented thereby, any check for the
cash issuable in the Merger.
The undersigned represents and warrants that the undersigned has full power
and authority to surrender the Share Certificate(s) surrendered herewith or
covered by a guarantee of delivery, free and clear of any liens, claims,
charges or encumbrances whatsoever. The undersigned understands and
acknowledges that the method of delivery of the Share Certificate(s) and all
other required documents is at the option and risk of the undersigned and that
the risk of loss and title to such Share Certificate(s) shall pass only after
the Exchange Agent has actually received the Share Certificate(s). All
questions as to the Election revocation, change and form of any Election and
surrender of Share Certificates hereunder shall be determined by the Exchange
Agent in its reasonable discretion and in accordance with the Recapitalization
Agreement, and such determination shall be binding and conclusive. The
undersigned, upon request, shall execute and deliver all additional documents
deemed by the Exchange Agent, XTRA or MergerCo to be necessary or desirable to
complete the sale, assignment, transfer, cancellation and retirement of the
Shares delivered herewith. No authority hereby conferred or agreed to be
conferred hereby shall be affected by, and all such authority shall survive,
the death or incapacity of the undersigned. All obligations of the undersigned
hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
Subject to the proration and other limitations described below and as more
fully described in Article 2 of the Recapitalization Merger Agreement, the
Exchange Agent will honor the Cash Elections made by holders of Shares when it
issues the Cash Consideration after the Effective Time (as defined in the
Recapitalization Merger Agreement).
4
<PAGE>
- ----------------------------------- ---------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS) (SEE INSTRUCTIONS)
To be completed ONLY if the To be completed ONLY if the
check is to be made payable to, check or the certificates for
or the certificates for shares of shares of XTRA Common Stock are
XTRA Common Stock are to be reg- to be mailed to someone other
istered in, the name of someone than the undersigned or to the
other than the undersigned. undersigned at an address other
than that shown under "Type of
Election."
Name _____________________________ Mail check and/or certificates to:
(PLEASE PRINT)
Name _____________________________
Address __________________________
__________________________________
__________________________________ (PLEASE PRINT)
(ZIP CODE) Address __________________________
__________________________________
(TAXPAYER IDENTIFICATION OR __________________________________
SOCIAL SECURITY NUMBER) (ZIP CODE)
(SEE SUBSTITUTE FORM W-9 BELOW)
- ----------------------------------- ----------------------------------
- -----------------------------------------------------------------------------
SIGN HERE
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 BELOW
____________________________________ Name(s): _________________________
____________________________________ __________________________________
(SIGNATURE(S) OF HOLDER(S)) (PLEASE PRINT)
Capacity (full title): ___________
Must be signed by registered
owner(s) exactly as name(s) Address: _________________________
appear(s) on stock certificate(s)
or by person(s) authorized to __________________________________
become registered holder(s) by (ZIP CODE)
certificates and documents
transmitted herewith. If signature __________________________________
is by attorney, executor, (AREA CODE AND TELEPHONE NUMBER)
administrator, trustee or guardian
or others acting in a fiduciary __________________________________
capacity, set forth full title and (TAX IDENTIFICATION OR SOCIAL
see Instructions. SECURITY NO.)
Dated: ___________________________
GUARANTEE OF SIGNATURES(S)
If you have filled out the
Special Payment Instructions Authorized Signature: ____________
above, you must have your
signature(s) guaranteed. (See Name: ____________________________
Instructions) (PLEASE PRINT)
Dated: _____________________, 1998 Firm: ____________________________
Address: _________________________
__________________________________
(ZIP CODE)
__________________________________
(AREA CODE AND TELEPHONE NUMBER)
(Also complete enclosed Form W-9 and return with this Form of Election/Letter
of Transmittal to the Exchange Agent)
- -----------------------------------------------------------------------------
5
<PAGE>
The undersigned understands that in lieu of any fractional share of XTRA
Common Stock retained after the Merger, there will be paid to each existing
shareholder of XTRA who otherwise would be entitled to receive a fractional
share of XTRA Common Stock an amount in cash determined by multiplying such
fraction by the Cash Consideration amount.
Unless otherwise indicated in the box entitled "Special Payment
Instructions," the undersigned understands and agrees that the Exchange Agent
will issue any check and register any certificate for shares of XTRA Common
Stock in the name of the registered holder(s) of the Shares appearing above
under "Type of Election." Similarly, unless otherwise indicated in the box
entitled "Special Delivery Instructions," the undersigned understands and
agrees that the Exchange Agent will mail any check and any certificate for
shares of XTRA Common Stock to the registered holder(s) of the Shares at the
address(es) of the registered holder(s) appearing above under "Type of
Election." In the event that the boxes entitled "Special Payment Instructions"
and "Special Delivery Instructions" are both completed, the undersigned
understands and agrees that the Exchange Agent will issue any check and any
certificate for shares of XTRA Common Stock in the name(s) of, and mail such
check and such certificate to, the person(s) so indicated.
6
<PAGE>
IMPORTANT TAX INFORMATION
In order to ensure compliance with federal income tax requirements, each
holder of Shares is requested to provide the Exchange Agent with his or her
correct Taxpayer Identification Number and to certify whether he or she is
subject to backup federal income tax withholding by completing and signing the
Substitute Form W-9 below. See Instruction C6 and accompanying Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9.
PAYER'S NAME: ________________________
- -------------------------------------------------------------------------------
SUBSTITUTE PART IX--Please provide
FORM W-9 your TIN in box at right ---------------------------
and certify by signing and Social Security Number
DEPARTMENT OF dating below. For
THE TREASURY individuals, this is your OR
INTERNAL social security number.
REVENUE ---------------------------
SERVICE PART 2X--Awaiting TIN [_] Employer Identification
Number
------------------------------------------------------------
PAYER'S REQUEST CERTIFICATION--Under penalties of perjury, I certify that:
FOR TAXPAYER
IDENTIFICATION (1) the number shown on this form is my correct taxpayer
NUMBER (TIN) identification number (or I am waiting for a number
to be issued to me) and
(2) I am not subject to backup withholding either because
(a) I am exempt from backup withholding, (b) I have
not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding as a
result of the failure to report all interest or
dividends, or (c) the IRS has notified me that I am
no longer subject to backup withholding.
------------------------------------------------------------
You must cross out item (2) above if you have been noti-
fied by the IRS that you are currently subject to backup
withholding because of under reporting interest or divi-
dends on your tax return. However, if after being noti-
fied by the IRS that you were subject to backup withhold-
ing, you receive another notification from the IRS that
you are no longer subject to backup withholding, do not
cross out such item (2).
Signature __________________ Date ______________________
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE IRS AND BACKUP WITHHOLDING OF 31% OF ANY CASH PAYMENTS
MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 2 OF THE SUBSTITUTE FORM W-9.
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TIN HAS NOT BEEN ISSUED TO
ME, AND EITHER THAT (I) I HAVE MAILED OR DELIVERED AN APPLICATION TO
RECEIVE A TIN TO THE APPROPRIATE IRS CENTER OR SOCIAL SECURITY
ADMINISTRATION OFFICE OR (II) I INTEND TO MAIL OR DELIVER AN APPLICATION IN
THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TIN BY THE TIME OF
PAYMENT, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME WILL BE WITHHELD, BUT
THAT SUCH AMOUNTS WILL BE REFUNDED TO ME IF I THEN PROVIDE A TIN WITHIN
SIXTY (60) DAYS.
Signature __________________________ Date _______________________________
- -------------------------------------------------------------------------------
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE MERGER
A. FORM OF ELECTION/LETTER OF TRANSMITTAL
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Form of Election/Letter of Transmittal must be guaranteed
by a firm which is a recognized member of a Medallion Signature Guarantee
Program, which members include any registered national securities exchange or
a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company in the United States (each, an "Eligible
Institution"). No signature guarantee is required on this Form of
Election/Letter of Transmittal if (a) this Form of Election/Letter of
Transmittal is signed by the registered holder(s) (which term, for purposes of
this document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares) of
Shares delivered herewith, unless such holder(s) has completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the above hereof. If a Share Certificate is registered in the
name of a person other than the signer of this Form of Election/Letter of
Transmittal, or if checks or certificates are to be payable to the order of or
registered in the name of a person other than the registered holder(s), then
the Share Certificate must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered
holder(s) appear(s) on the Share Certificate, with the signature(s) on such
Share Certificate or stock powers guaranteed as described above.
2. Delivery of Form of Election/Letter of Transmittal and Share
Certificates; Notice of Guaranteed Delivery. This Form of Election/Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith, if Shares are to be delivered by book-entry transfer pursuant to
book-entry transfer procedures, or if delivery of Shares is to be guaranteed.
Share Certificates evidencing all delivered Shares, or confirmation of a book-
entry transfer of such Shares, if such procedure is available, into the
Exchange Agent's account at one of the Book-Entry Transfer Facilities pursuant
to book-entry transfer procedures together with a properly completed and duly
executed Form of Election/Letter of Transmittal (or facsimile thereof) with
any required signature guarantees (or, in the case of a book-entry transfer,
an Agent's Message, as defined below) and any other documents required by this
Form of Election/Letter of Transmittal, must be received by the Exchange Agent
at its address set forth on the reverse hereof prior to the Election Deadline.
If Share Certificates are forwarded to the Exchange Agent in multiple
deliveries, a properly completed and duly executed Form of Election/Letter of
Transmittal must accompany each such delivery. XTRA stockholders whose Share
Certificates are not immediately available and who cannot deliver their Share
Certificates and all other required documents to the Exchange Agent prior to
the Election Deadline or who cannot complete the procedure for delivery by
book-entry transfer on a timely basis may deliver their Shares pursuant to the
guaranteed delivery procedure. Pursuant to such procedures: (i) any such
delivery must be made by or through an Eligible Institution; (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in
the form provided herewith, must be received by the Exchange Agent prior to
the Election Deadline; and (iii) in the case of a guarantee of Shares, the
Share Certificate, in proper form for transfer, or a confirmation of a book-
entry transfer of such Shares, if such procedure is available, into the
Exchange Agent's account at one of the Book-Entry Transfer Facilities,
together with a properly completed and duly executed Form of Election/Letter
of Transmittal (or manually signed facsimile thereof) with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message), and any other documents required by this Form of Election/Letter of
Transmittal, must be received by the Exchange Agent within three trading days
after the date of execution of such Notice of Guaranteed Delivery. The term
"Agent's Message" means a message, transmitted by a Book-Entry Transfer
Facility to, and received by, the Exchange Agent and forming a part of a book-
entry confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility delivering the Shares, that such participant has received
and agrees to be bound by the terms of this Form of Election/Letter of
Transmittal and that XTRA and MergerCo may enforce such agreement against the
participant.
Registered holders of Shares who are nominees only may submit a separate
Form of Election/Letter of Transmittal for each beneficial owner for whom such
registered holder is a nominee; provided, however, that at the request of the
Exchange Agent, such registered holder shall certify to the satisfaction of
the Exchange Agent that such registered holder holds such XTRA Common Stock as
a nominee for the beneficial owner thereof. Each beneficial owner for which a
Form of Election/Letter of Transmittal is submitted will be treated as a
separate holder of XTRA Common Stock.
8
<PAGE>
XTRA stockholders who do not submit an effective Form of Election/Letter of
Transmittal or whose Forms of Election/Letters of Transmittal and Share
Certificates (or appropriate Notices of Guaranteed Delivery), are not received
prior to the Election Deadline or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis will be, under conditions
set forth in Section B1and B2 of Instructions, deemed to have made a "Non-
Election" with respect to their Shares (each such Share, a "Non-Electing
Share") and will not be entitled to make an Election and may retain some of
such holders XTRA Common Stock or receive the Cash Consideration for all of
their Shares.
THE METHOD OF DELIVERY OF THIS FORM OF ELECTION/LETTER OF TRANSMITTAL, SHARE
CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE
STOCKHOLDER, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
3. Inadequate Space. If the space provided herein under "Type of Election"
is inadequate, the Share Certificate numbers, the number of Shares evidenced
by such Share Certificates and the number of Shares delivered should be listed
on a separate signed schedule and attached hereto.
4. Change or Revocation of Election. Any holder of Shares may at any time up
to and immediately prior to the Election Date revoke or change his or her
Election by written notice received by the Exchange Agent prior to the
Election Date accompanied by a properly completed and signed, revised Form of
Election/Letter of Transmittal or by withdrawal of his or her Share
Certificates or of the Notice of Guaranteed Delivery of such certificates,
previously deposited with the Exchange Agent. Such revocation can also be made
after the Election Date if the Exchange Agent is legally required to do so,
provided that the Effective Time shall not have occurred prior to the
revocation. Once a revocation is made, the Exchange Agent will return all
Share Certificates that pertain to such revocation to the stockholder.
5. Automatic Revocations of Elections. All Elections will be revoked
automatically if the Exchange Agent is notified in writing by XTRA and
MergerCo that the Merger has been abandoned, and Share Certificates
represented by Forms of Election/Letters of Transmittal will be promptly
returned without charge to the persons who have submitted this Form of
Election/Letter of Transmittal upon written request to that effect from each
holder of XTRA Common Stock who has submitted this Form of Election/Letter of
Transmittal.
B. ELECTION AND ALLOCATION PROCEDURES
1. Elections. By completing the appropriate box above and completing this
Form of Election/Letter of Transmittal in accordance with the instructions
herein and delivering the Share Certificates and any other required documents,
an XTRA stockholder will be entitled to make either an Election to retain the
Shares or receive the Cash Consideration with respect to all or any portion of
the Shares held by such holder.
For each Share with respect to which an Election to retain such Share has
been made and not revoked (the "Potential Election Shares") and which is to be
retained in accordance with the proration provisions of the Recapitalization
Merger Agreement, the holder of such Share will receive a right to retain such
fully paid and nonassessable Share (an "Election Share"). For each Share which
was not a Potential Election Share, but which is to be retained in accordance
with the proration provisions of the Recapitalization Agreement, the holder of
such Share will receive the right to retain such fully paid and nonassessable
Share (a "Non--Election Share"). The sum of the Non-Election Shares and
Election Shares, which will equal 500,000 Shares, is called herein the
"Retained Shares." For each Share other than Retained Shares and Dissenting
Shares (herein defined), the holder of such Share will receive in the Merger
the right to the Cash Consideration equal to $65.00 upon surrender of such
Share Certificate.
Each XTRA stockholder should consult such stockholder's own financial
advisor and tax advisor as to the specific consequences of the Merger and
Election to such stockholder.
No alternative, conditional or contingent Elections will be accepted.
2. Proration. The "Retained Shares Number" will be 500,000. If the number of
Potential Election Shares is greater than the Retained Share Number, (i) a
proration factor shall be determined by dividing the Retained Share Number by
the
9
<PAGE>
total number of Potential Election Shares, (ii) the number of Potential
Election Shares covered by each Election to be retained as Election Shares
shall be determined by multiplying the proration factor by the total number of
Potential Election Shares covered by such Election, and (iii) all Potential
Election Shares other than those retained in (ii) will be converted into the
Cash Consideration.
If the Number of Potential Election Shares is less than or equal to the
Retained Share Number, (i) a proration factor shall be determined by dividing
(x) the difference between the Retained Share Number and the number of
Potential Election Shares, by (y) the number of the Common Shares other than
the Potential Election Shares and the Dissenting Shares (the "Potential Cash
Shares"), (ii) the number of Potential Cash Shares held by each stockholder to
be retained as Non-Election Shares shall be determined by multiplying the
proration factor by the total number of Potential Cash Shares, and (iii) all
Potential Cash Shares other than those retained in (ii) shall be converted
into the Cash Consideration.
3. Election Deadline. The Election Deadline for submitting this Form of
Election/Letter of Transmittal to the Exchange Agent is 5:00 p.m., Eastern
Standard time, on November 25, 1998, unless extended. MergerCo and XTRA may
jointly extend the Election Deadline to a later date so long as such later
date is no later than the date on which the Merger is consummated. If the
Election Deadline is extended, MergerCo and XTRA will announce such extension
in a news release delivered to the Dow Jones News Service.
* * *
A more complete description of the election and allocation procedures is set
forth in the Proxy Statement/Prospectus under "The Merger--Procedures for
Exchange of Certificates" and in Article 2 of the Recapitalization Merger
Agreement. All Elections are subject to compliance with the election
procedures provided for in the Recapitalization Merger Agreement. In
connection with making any Election, each XTRA stockholder should read
carefully, among other matters, the description and statement of the
information contained in the Proxy Statement/Prospectus under "The Merger--
Material Federal Income Tax Consequences."
C. RECEIPT OF MERGER CONSIDERATION, SIGNATURES, SPECIAL INSTRUCTIONS, TAXES
AND ADDITIONAL COPIES
1. Receipt of Merger Consideration. After the Effective Time and upon the
surrender of Share Certificates by the shareholders, the Exchange Agent will
pay the holder of such Certificates, who elected to receive the Cash
Consideration, the Cash Consideration multiplied by the number of cashed
Shares. The Exchange Agent will also deliver to the holders of Share
Certificates, who elected to retain XTRA Common Stock or who because of
proration will receive Retained Shares, a certificate representing the number
of Retained Shares which such holders have the right to receive and cash in
lieu of fractional retained Shares. Upon such exchange the Certificates that
the holders had surrendered will be cancelled.
Promptly following the date which is 180 days after the Effective Time the
Exchange Agent will deliver to XTRA all cash, Share Certificates and other
documents related to the transaction set forth in this Form of Election.
Thereafter the Exchange Agent's duty will be terminated.
2. Signatures on Form of Election/Letter of Transmittal; Stock Powers and
Endorsements. (a) If this Form of Election/Letter of Transmittal is signed by
the registered holder(s) of the Shares delivered herewith, the signature(s)
must correspond with the name(s) as written on the face of the Share
Certificates evidencing such Shares without alteration, enlargement or any
other change whatsoever.
(b) If any Share delivered herewith is owned of record by two or more
persons, all such persons must sign this Form of Election/Letter of
Transmittal.
(c) If any of the Shares delivered herewith are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Forms of Election/Letters of Transmittal as there are different
registrations of such Shares.
(d) If this Form of Election/Letter of Transmittal is signed by the
registered holder(s) of the Shares delivered herewith, no endorsements of
Share Certificates or separate stock powers are required, unless checks are to
be payable to the order of
10
<PAGE>
or certificates evidencing shares of XTRA Common Stock are to be registered in
the name of, a person other than the registered holder(s), in which case, the
Share Certificate(s) evidencing the Shares delivered herewith must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as
the name(s) of the registered holder(s) appear(s) on such Share
Certificate(s). Signatures on such Share Certificate(s) and stock powers must
be guaranteed by an Eligible Institution (unless signed by an Eligible
Institution).
(e) If this Form of Election/Letter of Transmittal is signed by a person
other than the registered holder(s) of the Shares delivered herewith, the
Share Certificate(s) evidencing the Shares delivered herewith must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as
the name(s) of the registered holder(s) appear(s) on such Share
Certificate(s). Signatures on such Share Certificate(s) and stock powers must
be guaranteed by an Eligible Institution (unless signed by an Eligible
Institution).
(f) If this Form of Election/Letter of Transmittal or any Share Certificate
or stock power is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person should so indicate when
signing, and proper evidence satisfactory to XTRA and MergerCo of such
person's authority so to act must be submitted.
3. Special Payment and Delivery Instructions. If any check or certificates
evidencing shares of XTRA Common Stock are to be payable to the order of, or
registered in the name of, a person other than the person(s) signing this Form
of Election/Letter of Transmittal or if such checks or such certificates are
to be sent to someone other than the person(s) signing this Form of
Election/Letter of Transmittal or to the person(s) signing this Form of
Election/Letter of Transmittal but at an address other than that shown in the
box entitled "Type of Election," the appropriate boxes on this Form of
Election/Letter of Transmittal must be completed.
4. Withholding. XTRA and the Exchange Agent will be entitled to deduct and
withhold from the Merger Consideration such amounts as XTRA and the Exchange
Agent are required to deduct and withhold pursuant to the Internal Revenue
Code of 1986, as amended (the "Code") or any state, local or foreign tax law.
To the extent that amounts are so withheld by XTRA or the Exchange Agent, as
the case may be, such withheld amounts shall be treated for all purposes of
the Recapitalization Merger Agreement as having been paid to the holder of the
Shares in respect of which such deduction and withholding was made by XTRA or
the Exchange Agent, as the case may be.
5. Stock Transfer Taxes. XTRA will bear the liability for any state stock
transfer taxes applicable to the issuance and delivery of checks and
certificates in connection with the Merger, provided, however, that if any
such check or certificate is to be issued in a name other than that in which
the Shares Certificates surrendered in exchange therefor are registered, it
shall be a condition of such exchange that the person requesting such exchange
shall pay the amount of any stock transfer taxes (whether imposed on the
registered holder or such person), payable on the account of the transfer to
such person, to the Exchange Agent or satisfactory evidence of the payment of
such taxes, or exemption therefrom, shall be submitted to the Exchange Agent
before any such check or certificate is issued. Except as provided in this
instruction C5, it will not be necessary for transfer tax stamps to be affixed
to the Share Certificates evidencing the Shares delivered herewith.
6. Requests for Assistance or Additional Copies. Requests for assistance or
additional copies of the Proxy Statement/Prospectus may be directed to Boston
EquiServe at (800) 736-3001.
7. Form W-9. Under the federal income tax law, a stockholder who delivers
Shares is required by law to provide the Exchange Agent (as payor) with such
stockholder's correct Taxpayer Identification Number ("TIN") on Form W-9. If
such stockholder is an individual, the TIN is such stockholder's social
security number. If the Exchange Agent is not provided with the correct TIN,
the stockholder may be subject to a $50 penalty imposed by the IRS. In
addition, payments of Cash Consideration that are made to such stockholder
with respect to Shares purchased pursuant to the Merger may be subject to
backup withholding of 31%. Certain stockholders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such individual must submit a statement,
signed under penalties of perjury, attesting to such individual's exempt
status. Forms of such statements can be obtained from the Exchange Agent. See
the instructions on the enclosed Form W-9 for additional information. If
backup withholding applies with respect to a stockholder, the Exchange Agent
is
11
<PAGE>
required to withhold 31% of any cash payments made to such stockholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained
form the Internal Revenue Service (the "IRS").
To prevent backup withholding on payments of Cash Consideration that are
made to a stockholder with respect to Shares delivered herewith, the
stockholder is required to notify the Exchange Agent of such stockholder's
correct TIN by completing the enclosed Form W-9 certifying (a) that the TIN
provided on Form W-9 is correct (or that such stockholder is awaiting a TIN)
and (b) that (i) such stockholder has not been notified by the IRS that such
stockholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the IRS has notified such stockholder
that such stockholder is no longer subject to backup withholding.
The stockholder is required to give the Exchange Agent the TIN of the
registered holder of the Shares tendered hereby. If the Shares are in more
than one name or are not in the name of the actual owner, consult the enclosed
Form W-9 for additional guidance on which TIN to report. If the stockholder
has not been issued a TIN and has applied for a TIN or intends to apply for a
TIN in the near future, the stockholder should check the box in Part 2,
complete Part III (the "Certification") and sign and date the Form W-9.
Notwithstanding that the Certification is completed, the Exchange Agent will
withhold 31% of all payments of Cash Consideration to such stockholder until a
properly certified TIN is provided to the Exchange Agent.
8. Cancellation. Each Share held in the treasury of XTRA and each Share
owned by any subsidiary of XTRA will, by the virtue of the Merger and without
any action on the holders of those Shares, cease to be outstanding, be
canceled and retired without payment of any consideration.
9. Dissenter's Rights. Shares that have not been voted for adoption of the
Merger and the Recapitalization Agreement and with respect to which appraisal
had been properly demanded ("Dissenting Shares") shall not be converted into
the right to receive the Merger Consideration unless the holder of such Shares
withdraws the demand of appraisal or becomes ineligible for such appraisal.
10. Lost, Destroyed or Stolen Share Certificates. If any XTRA stockholder's
Share Certificate(s) representing Shares have been mutilated, lost, destroyed
or stolen prior to the Effective Time, such stockholder should promptly notify
Boston EquiServe, L.P. (the "Transfer Agent") for XTRA. The XTRA stockholder
will then be instructed as to the steps that must be taken in order to replace
the Share Certificate(s). In such an event, XTRA or the Exchange Agent will
issue in exchange of such lost, stolen or destroyed Certificates, upon the
making of an affidavit from the holder, such Merger Consideration set forth in
this Form of Election. However, XTRA may in its discretion require the owner
of such lost, stolen and destroyed Certificates to deliver a bond in such sum
as it may reasonably direct as indemnity against any claim that may be made
against MergerCo or the Exchange Agent with respect to the Certificates.
ANY XTRA STOCKHOLDER WHOSE SHARE CERTIFICATES HAVE BEEN LOST, DESTROYED OR
STOLEN SHOULD ALLOW FOR SUFFICIENT TIME TO REPLACE SUCH SHARE CERTIFICATES AND
ARE URGED TO CONTACT THE TRANSFER AGENT AS PROMPTLY AS POSSIBLE AFTER
RECEIVING THIS FORM OF ELECTION/LETTER OF TRANSMITTAL.
12
<PAGE>
EXHIBIT 99.4
CONSENT
I hereby consent to the reference to me in the Schedule 14A of XTRA
Corporation (the "Company") and in the Proxy Statement/Prospectus forming a
part of the Registration Statement on Form S-4 of the Company relating to the
merger of Wheels MergerCo LLC ("MergerCo"), a newly organized Delaware limited
liability company formed solely for the purpose of consummating the
transactions contemplated by the Agreement and Plan of Merger and
Recapitalization, dated as of June 18, 1998, as amended and restated as of
July 31, 1998, between the Company and MergerCo, with and into the Company.
/s/ Andrew Africk
-------------------------------------
Andrew Africk
October 16, 1998
1
<PAGE>
EXHIBIT 99.5
CONSENT
I hereby consent to the reference to me in the Schedule 14A of XTRA
Corporation (the "Company") and in the Proxy Statement/Prospectus forming a
part of the Registration Statement on Form S-4 of the Company relating to the
merger of Wheels MergerCo LLC ("MergerCo"), a newly organized Delaware limited
liability company formed solely for the purpose of consummating the
transactions contemplated by the Agreement and Plan of Merger and
Recapitalization, dated as of June 18, 1998, as amended and restated as of
July 31, 1998, between the Company and MergerCo, with and into the Company.
/s/ Michael Gross
-------------------------------------
Michael Gross
October 16, 1998
1
<PAGE>
EXHIBIT 99.6
CONSENT
I hereby consent to the reference to me in the Schedule 14A of XTRA
Corporation (the "Company") and in the Proxy Statement/Prospectus forming a
part of the Registration Statement on Form S-4 of the Company relating to the
merger of Wheels MergerCo LLC ("MergerCo"), a newly organized Delaware limited
liability company formed solely for the purpose of consummating the
transactions contemplated by the Agreement and Plan of Merger and
Recapitalization, dated as of June 18, 1998, as amended and restated as of
July 31, 1998, between the Company and MergerCo, with and into the Company.
/s/ Martin Tuchman
-------------------------------------
Martin Tuchman
October 20, 1998
1
<PAGE>
EXHIBIT 99.7
CONSENT
I hereby consent to the reference to me in the Schedule 14A of XTRA
Corporation (the "Company") and in the Proxy Statement/Prospectus forming a
part of the Registration Statement on Form S-4 of the Company relating to the
merger of Wheels MergerCo LLC ("MergerCo"), a newly organized Delaware limited
liability company formed solely for the purpose of consummating the
transactions contemplated by the Agreement and Plan of Merger and
Recapitalization, dated as of June 18, 1998, as amended and restated as of
July 31, 1998, between the Company and MergerCo, with and into the Company.
/s/ Raoul Witteveen
-------------------------------------
Raoul Witteveen
October 20, 1998
1
