SCHEDULE 14A INFORMATION
Soliciting Materials Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No............]
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement (Revocation of Consent)
/ / Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement (Revocation of Consent Statement)
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
WISCONSIN CENTRAL TRANSPORTATION CORPORATION
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(Name of Registrant as specified in its charter)
(Name of person(s) filing proxy statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_______________________
2) Aggregate number of securities to which transaction applies:
_______________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined): _______________________
4) Proposed maximum aggregate value of transaction:
_______________________
5) Total fee paid: _______________________
/ / Fee paid previously by written preliminary materials.
/ / Check box if any part of the fee is offset as provided in Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ________________________________________
2) Form, Schedule or Registration Statement No.: __________________
3) Filing Party: __________________________________________________
4) Date Filed: ____________________________________________________
Sch 14A - Cover Page
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INSTITUTIONAL
SHAREHOLDER SERVICES
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THOMPSON FINANCIAL
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Proxy Analysis:
WISCONSIN CENTRAL
TRANSPORTATION CORP.
Ticker: WCLX
Proxy Contest Meeting: December 15, 2000
Record Date: October 22, 2000
Security ID: 2973698 (SEDOL), 5469543 (SEDOL), 976592105 (CUSIP)
<TABLE>
<CAPTION>
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MEETING AGENDA
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<S> <C> <C> <C> <C>
Item Code Proposals Mgt. Rec. ISS REC.
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Management Proxy (BLUE CARD)
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| | 1 S0201 Declassify the Board of Directors Against None
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| | 2 S0233 Amend Articles/Bylaws/Charter - Filling Vacancies Against None
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| | 3 S0234 Amend Articles/Bylaws/Charter - Removal of Directors Against None
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| | 4 S0214 Remove Existing Directors Against None
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| | 5 M0225 Elect Directors (Opposition Slate) Against None
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| | 6 S0810 Repeal Bylaws Adopted Subsequent to May 20, 1999 Against None
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Dissident Proxy (WHITE CARD)
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| | 1 S0201 Declassify the Board of Directors For FOR
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| | 2 S0233 Amend Articles/Bylaws/Charter - Filling Vacancies For FOR
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| | 3 S0234 Amend Articles/Bylaws/Charter - Removal of Directors For FOR
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| | 4 S0214 Remove Existing Directors For WITHHOLD
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| | 5 M0225 Elect Directors (Opposition Slate) For WITHHOLD
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| | 6 S0810 Repeal Bylaws Adopted Subsequent to May 20, 1999 For FOR
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<FN>
* To follow ISS's recommendations, shareholders should execute their votes on
the dissident's WHITE consent card. Please note that we recommend "consents" for
Items 1, 2, 3, and 6 and "withhold consent" for Items 4 and 5.
</FN>
</TABLE>
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FINANCIAL SUMMARY
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INCOME STATEMENT SUMMARY (amounts in millions except per share data)
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1996 1997 1998 ACG*
---- ---- ---- ----
Operating Revenues $265.12 $333.51 $344.06 13.92%
Net Income 48.43 77.43 76.29 25.51%
EPS (Basic) 0.96 1.52 1.49 24.58%
Dividend 0.00 0.00 0.00 NMF
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* Annual Compound Growth
Fiscal Year Ended December 31
Source: 10-K
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PERFORMANCE SUMMARY
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1-Year 3-Year 5-Year
------ ------ ------
Total shareholder returns, company -7.6% -26.0% -8.6%
Total shareholder returns, index 31.4% 19.3% 21.5%
Total shareholder returns, peer group -7.6% 8.4% 17.2%
--------------------------
Source: Bloomberg Business News
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BUSINESS: Provider of railroad transportation services
STATE OF INCORPORATION: Delaware
ACCOUNTANTS: KPMG LLP
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CORPORATE GOVERNANCE PROFILE
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GOVERNANCE PROVISIONS
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Blank check preferred stock (Charter)
Classified board (Charter)
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GOVERNANCE MILESTONES
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None
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SEVERANCE AGREEMENTS
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Executive severance agreements triggered by termination of employment following
a change in control
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STATE STATUTES: Delaware
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Labor contract provision
Three-year freezeout provision
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DIRECTOR PROFILES
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Name Classification Term Dir. No
Ends Since Stock
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INCUMBENT DIRECTORS
Carl Ferenbach1 AO 2003 1987
J. Reilly McCarren I 2003 1998
Roland V. McPherson IO 2003 1987
A. Francis Small IO 2003 1996
Thomas E. Evans IO 2001 1998
Thomas F. Power, Jr. I 2001 1987
Robert H. Wheeler2 AO 2001 1987
Thomas W. Rissman3 AO 2002 1992
John W. Rowe IO 2002 1998
DISSIDENT NOMINEES
John W. Barriger IO 2001 2000
Edward A. Burkhardt IO 2001 2000
Robert E. Dowdy IO 2001 2000
Aaron J. Gellman IO 2001 2000
Michael W. Howell IO 2001 2000
Henry Posner III IO 2001 2000
Andy Sze IO 2001 2000
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Classified board: Yes CEO as chairman: No
Current nominees: None Retired CEO on board: No
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COMPOSITION OF COMMITTEES
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Audit Type Compensation Type Nominating Type
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Roland V. McPherson IO Carl Ferenbach AO
Thomas W. Rissman AO Thomas E. Evans IO
John W. Rowe IO Robert H. Wheeler AO
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Committee Name Assigned by Company:
Audit: Audit Committee
Compensation: Compensation Committee
Nominating: None
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EQUITY CAPITAL
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Type Votes Per Share Issued Authorized
Common stock 1.00 46,541,357 150,000,000
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Ownership - Common stock Number of Shares % of Class
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Officer & Director 4,855,613 10.43
Institutions 35,943,890 77.23
Dissident Group 3,539,254 7.61
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As of October 22, 2000
Sources: Proxy Statement, Bloomberg Business News, Special Proxy Statement
Note: As of Oct. 30, 2000, Southeastern Asset Management, Inc., beneficially
owned 15.2 percent of the company's voting stock.
Proxy Contest
Wisconsin Central Transportation Co. faces a written consent proxy contest from
a dissident group of shareholders called the Wisconsin Central Shareholders
Committee to Maximize Value. The primary driving force behind the Committee is
Edward Burkhardt, former CEO of the company and the beneficial owner of
approximately 7.5 percent of the company's common stock. The dissidents are
soliciting votes to declassify the company's board, to amend certain charter
provisions, and to replace the current members of the board with the Committee's
director nominees. Is successful, the Committee will appoint Mr. Burkhardt CEO
of the company.
In evaluating the contest, ISS spoke to Thomas Power, president and CEO, and
Robert Wheeler, chairman of the company. Mr. Burkhardt spoke on behalf of the
dissidents.
Wisconsin Central is a holding company that conducts railway transportation
business in North America, the United Kingdom, New Zealand, and Australia. The
company operates four main segments: Wisconsin Central System (WCS), Tranz Rail
Holdings Ltd., Australian Transport Network (ATN), and English Welsh & Scottish
Railway (EWS). The company was founded by Mr. Burkhardt, Mr. Powers, Mr.
Wheeler, Richard Ogilvie, and Donald McLachlan in 1987 with the purchase of two
railroad systems of approximately 2,000 route miles in Wisconsin, the upper
peninsula of Michigan, northeastern Illinois, and eastern Minnesota. In 1993,
the company made its first foray into the international market with the purchase
of an equity stake in Tranz Rail,
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a New Zealand railroad which operates a 2,400 route mile freight and passenger
rail business, an interisland ferry business, and a trucking business in New
Zealand. Based upon the success of this venture, in 1996 the company purchased a
40-percent equity stake in EWS, which operates trains through the English
Channel tunnel and carries freight mail for the Royal Mail. The last
international acquisition of the company took place in 1997, with the purchase
of an equity stake in ATN which serves as commercial rail freight service in
Tasmania operating a 550 route mile rail system. Currently, the company owns
42.5 percent, 23.7 percent, and 33 percent, respectively, of EWS, Tranz Rail,
and ATN. The venture capital firms Fay Richwhite and Berkshire Partners also
have equity stakes in EWS, Tranz Rail, and ATN. Berkshire Partners owns 22
percent, four percent, and 20 percent, respectively, in EWS, Tranz Rail, and
ATN. Fay Richwhite owns 17 percent of EWS, 18 percent of Tranz Rail, and 20
percent of ATN.
For close to a decade the company experienced growing revenues and profits. From
1990 to 1998 the company's revenues, net income, and earnings per share
increased at an average rate of return by 25.5 percent, 114.7 percent, and 42.2
percent, respectively. In addition, shareholder returns equaled 25.8 percent per
year from May 31, 1991, through Dec. 31, 1998. However, in 1998 and 1999
revenues, profits, and stock price all experienced significant declines.
Consequently, the board asked and received Mr. Burkhardt's resignation.
In the 16 months since Mr. Burkhardt's resignation, the financial situation of
the company has not improved. In response to this situation, Mr. Burkhardt
initiated the written consent proceedings on Oct. 23, 2000, and stated his
intent to sell the company. On Nov. 3, 2000, the company announced that it had
hired Goldman Sachs & Co. to explore strategic alternatives and that it had
retained Deutsche Bank AG to assist in the sale of the company's equity stake in
Tranz Rail.
Dissidents
The goal of the dissidents is to maximize shareholder value through the sale or
merger of the company. Although management states that it also shares the same
goal, Mr. Burkhardt believes that the dissidents are better suited to accomplish
this task.
From the date of Mr. Burkhardt's resignation in July 1999 to the announcement of
the proxy contest, the company's share price declined by 43 percent.
Furthermore, for the nine-month period ended September 30, 2000, diluted net
income per share, excluding special items, decreased to $0.87 from $0.93 over
the same period in 1999. According to Mr. Burkhardt, the primary causes for the
company's poor performance are the underperformance of the international
holdings and slow growth of the domestic operations. During the third quarter
ended Sept. 30, the company's equity in the net income of its international
affiliates, excluding special items, was $1.5 million, which compares with $5.6
million over the same period in 1999. Specifically, EWS, Tranz Rail, and ATN
earnings for the third quarter were down 68 percent, 99 percent, and 98 percent,
respectively, when compared over the same period the previous year.
The company's domestic operations have also stagnated during this time period.
For example, Mr. Burkhardt notes that during the 12 months ended June 30, 2000,
the company's revenues have
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increased by 3.8 percent while the company's net income has declined by 26.8
percent over the same period. Mr. Burkhardt states that under his management,
revenues increased at an average rate of 25.5 percent while company shareholder
returns equaled 25.8 percent per year from 1991 to 1998.
In order to prepare the company for eventual sale, the Committee has designed a
platform to:
1) Improve the company's domestic operations
2) Discontinue efforts to invest in international privatizations
3) Liquidate or spin off existing international investments
4) Increase the company's share repurchase program
5) Position domestic operations for a strategic sale
6) Improve corporate governance
The Committee also questions the board's commitment to selling the company. Mr.
Burkhardt states that management has had an "11th hour conversion" and has
adopted the Committee's platform as their own in a last ditch effort to save
their jobs. In support of this claim, Mr. Burkhardt notes that management
announced the hiring of Goldman Sachs and Deutsche Bank only after certain
institutional investors publicly announced their decision to side with the
dissidents. As a result, Mr. Burkhardt believes that management has no real
commitment to this "new strategy" and refers to the board's change of heart as a
"deathbed recantation."
The dissidents also maintain that certain conflicts of interests will prevent
the board from actively pursuing the sale of the company. The dissidents believe
that seven of the company's nine directors are effectively company insiders
while only two can be considered as independent outsiders. Furthermore, several
members of the board have affiliations with law firms or financial advisors,
which receive payments from the company. If the company were sold continuance of
such payments would more than likely cease. Moreover, director Carl Ferenbach is
a managing director of Berkshire Partners one of the two venture capital firms
that have an equity stake in the company's over seas investments. It is the
dissidents' contention that the goals and objectives of Fay Richwhite and
Berkshire Partners differ from the interests of the company's. Mr. Burkhardt
believes Berkshire Partners and Fay Richwhite are interested in short-term goals
designed to maximize the value of theses investments without any concern for
long-term implications. Also, Mr. Burkhardt believes that the interests of the
two venture capital firms would preclude divestiture or the sale of the
international holdings at this time.
Finally, the dissidents question whether Goldman Sachs will effectively
represent the interests of Wisconsin Central shareholders. Goldman Sachs serves
as the financial advisor for Canadian National Railroad, which the dissidents
believe is the most likely bidder for the company. In addition, Goldman Sachs is
a shareholder in Tranz Rail and EWS and has a board representative on EWS.
Because of Goldman Sach's relationship with these companies, the dissidents
believe that Goldman Sachs may have interests that differ from those of
Wisconsin shareholders.
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Management
Management agrees with the dissident position that the company should be sold;
however, management believes they have already demonstrated by their actions
their commitment to sell the company.
The board contends the current financial crisis is directly attributable to Mr.
Burkhardt's stewardship of the company. Specifically, they note that the
company's share price declined over the last two years of Mr. Burkhardt's tenure
from a high of $44.00 per share to a low of $12.38 per share. Also, the board
states that the company's recent decline in the stock price mirrors the industry
as a whole. From July 1999 (the month of Burkhardt's resignation) to Oct. 20,
2000, the company's stock price declined by 37 percent versus a 38-percent
decline over a peer group North American railroads.
Since Mr. Burkhardt's departure, the company has actively sought ways to
increase shareholder value. In September 1999, the company formed a Board
Evaluation Committee to explore a variety of strategic scenarios involving
spinoffs, leveraged buyouts, recapitalizations, as well as the sale of all or
parts of the company. A variety of firms (such as KMPG and Goldman Sachs)
conducted studies regarding various strategic initiatives. Based upon the Board
Evaluation Committee's recommendations, management initiated a program designed
to strengthen the company's position for a strategic sale in March 2000. The
goals of the program are to:
1) stabilize the company and all its affiliates
2) add executive talent
3) increase positive cash flow
Specifically, the company has initiated a stock repurchase program which the
board notes is one of Mr. Burkhardt's six points. Since March 2000, the company
has repurchased close to ten percent its shares. In an effort to improve the
company's international holdings, the company has instituted a new management
structure designed to grant each business unit with the authority to make
decisions. Currently, the Surface Transportation Board has placed a moratorium
on Class I railroad mergers until June 2001. Because of the initiatives started
by the company, the board believes that it can effect a merger shortly after the
moratorium.
The company had not publicly announced its strategy in an effort to avoid
putting the company into play at a time when the company's stock price was
historically depressed. According to management, all actions taken by the board
were aimed to quietly strengthen the company's balance sheet in an effort to get
the best price available for its assets. However, Mr. Burkhardt's actions forced
the board to announce its intentions before it was ready to do so.
Management is also perplexed by Mr. Burkhardt's own "11th hour conversion." Mr.
Burkhardt criticizes the current board for maintaining transactional
relationships between the company and affiliates of board members. However,
management notes that Mr. Burkhardt in fact approved all such transactions.
Moreover, Mr. Burkhardt likewise approved all arrangements with the venture
capital firms Fay Richwhite and Berkshire Partners. Finally, the board states
that
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Goldman Sachs served as the lead underwriter for the company's initial and
secondary public offerings in 1991 and 1993, all of which took place while Mr.
Burkhardt was CEO.
Analysis
In essence, the central issue of the proxy contest revolves around which group
is better suited to carry out the sale of the company. The dissidents argue that
the current board would not effectively implement this strategy due to the
board's lack of commitment to sale or merger of the company and the various
conflicts of interests of the board members. The reality of the situation is,
however, quite different. Since September 1999, management has considered a
variety of alternatives to maximize shareholder value. For example, the company
has conducted studies with KPMG and three nationally recognized investment
banks, such as Goldman Sachs. These actions lend credibility to the board's
claims.
Moreover, the various potential conflicts of interest do not appear significant
enough to justify the removal of the board and management. Based upon previous
experience, Mr. Burkhardt believes that the venture capital firms will stonewall
management's attempts to divest from the international holdings. However, the
company has diligently pursued these options over the course of the last year
and thus has acted in a manner consistent with the goal of maximizing
shareholder value. While Mr. Burkhardt may question the tactics of the board,
there is no evidence that board has acted against the interests of Wisconsin
Central shareholders.
In conclusion, management has demonstrated its commitment to a sale of the
company having been involved in the process for over a year. Removal of the
board and management may only impose delay in this process. Unfortunately, there
were no negotiations between the two parties prior to the proxy contest. If
meetings had taken place both sides would have realized that they share not only
the same goals but the same strategy as well. Finally, the dissidents seek a
change in control of the company without any premium being paid to the
shareholders.
Management Proxy (BLUE CARD)
| | Item 1: Declassify the Board of Directors
The Committee has submitted this shareholder proposal calling for the
repeal of the company's classified board structure and for the annual
election of all directors.
The board currently compromises three directors classes, each of which
serves a three-year term.
The ability to elect directors is the single most important use of the
shareholder franchise, and all directors should be accountable on an annual
basis. Management believes that staggered boards provide continuity, but
empirical evidence has suggested that such a structure is not in
shareholders' best interests from a financial perspective.
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A classified board can entrench management and effectively preclude most
takeover bids or proxy contests. Board classification forces dissidents and
would-be acquirers to negotiate with the incumbent board, which has the
authority to decide on offers without a shareholder vote.
We recommend NO vote for Item 1.
| | Item 2: Amend Articles/Bylaws/Charter - Filling Vacancies
This proposal seeks shareholder approval to amend the company's bylaws to
modify the company's provision for filling board vacancies. The amendment
which recognizes the elimination of the company's classified board is
contingent upon shareholder approval of Item 1.
We recommend NO vote for Item 2.
| | Item 3: Amend Articles/Bylaws/Charter - Removal of Directors
This proposal seeks shareholder approval to amend the company's bylaws to
allow for the removal of directors with or without cause. Currently,
directors may be removed only for cause by a majority of the shareholders.
We recommend NO vote for Item 3.
| | Item 4: Remove Existing Directors
See discussion of proxy contest.
We recommend NO vote for Item 4.
| | Item 5: Elect Directors (Opposition Slate)
See proxy contest above.
We recommend NO vote for Item 5.
| | Item 6: Repeal Bylaws Adopted Subsequent to May 20, 1999
The Committee is proposing to repeal any bylaw amendments adopted by the
board between May 20, 1999, and Dec. 15, 2000. The Committee is unaware of
Wisconsin Central's
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adoption of any such bylaw amendments; however, the purpose of this item is
to prevent the company's current board from interfering with the
implementation of the dissident proposals.
We recommend NO vote for Item 6.
DISSIDENT PROXY (WHITE CARD)
| | ITEM 1: Declassify the Board of Directors
See Item 1 above.
We recommend a vote FOR Item 1.
| | Item 2: Amend Articles/Bylaws/Charter - Filling Vacancies
See Item 2 above.
We recommend a vote FOR Item 2.
| | Item 3: Amend Articles/Bylaws/Charter - Removal of Directors
See Item 3 above.
We recommend a vote FOR Item 3.
| | Item 4: Remove Existing Directors
See Item 4 above.
We recommend WITHHOLDING a vote for Item 4.
| | Item 5: Elect Directors (Opposition Slate)
See Item 5 above.
We recommend WITHHOLDING a vote for Item 5.
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| | Item 6: Repeal Bylaws Adopted Subsequent to May 20, 1999
See Item 6 above.
We recommend a vote FOR Item 6.
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Wisconsin Central Transportation Corp.
One O'Hare Centre
6250 North River Road
Suite 90
Rosemont, Illinois 60018
(847) 318-4600
Company Solicitor: D.F. King & Co. (212) 269-5550
Shareholder Proposal Deadline: December 31, 2000
This proxy analysis has not been submitted to, or received approval from, the
Securities and Exchange Commission. While ISS exercised due care in compiling
this analysis, we make no warranty, express or implied, regarding accuracy,
completeness, or usefulness of this information and assume no liability with
respect to the consequences of relying on this information for investment or
other purposes.
Endnotes
1. Affiliates of Berkshire Partners LLC granted the company options to purchase
shares of ATN in connection with the investments by the investments by the
company and Berkshire in ATN. Mr. Ferenbach is anexecutive officer of that
company. Source: Wisconsin Central Transportation Corp. 2000 Proxy Statement, p.
15
2. Oppenheimer Wolff & Donnelly provides legal services to the company. Mr.
Wheeler is of counsel of that firm. Source: Wisconsin Central Transportation
Corp. 2000 Proxy Statement, p. 15.
3. McLachlan, Rissman & Doll provides legal and other services to the company.
Mr. Rissman is a partner of that firm. Source: Wisconsin Central Transportation
Corp. 2000 Proxy Statement, p. 15.
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Wisconsin Central Institutional
Transportation Corp. - December 4, 2000 Shareholder Services
Anthony Davidson, Analyst Phone: 301/545-4555
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