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SCHEDULE 14A INFORMATION
PROXY STATEMENT 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:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
MOTIVEPOWER INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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 with preliminary materials.
/ / Check box if any part of the fee is offset as provided by 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:
/X/ No fee required
<PAGE> 2
PRELIMINARY COPY
MOTIVEPOWER INDUSTRIES, INC.
TWO GATEWAY CENTER, 14TH FLOOR
PITTSBURGH, PENNSYLVANIA 15222
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 1999
As a stockholder of MOTIVEPOWER INDUSTRIES, INC. (the "Company"), you
are invited to be present, or represented by proxy, at the Annual Meeting of
Stockholders, to be held at the Doubletree Club Hotel Riverside, Boise, Idaho on
April 27, 1999 at 11 a.m., Boise time, for the following purposes:
1. To elect John C. Pope and Nicholas J. Stanley to the Board of
Directors of the Company, each for terms of three (3) years
expiring in 2002. See "Proposal No. 1 -- Election of Directors"
in the Proxy Statement.
2. To ratify the appointment of Deloitte & Touche LLP as the
Company's independent certified public accountants for the fiscal
year ending December 31, 1999. See "Proposal No. 2 -- Selection
of Auditors" in the Proxy Statement.
3. To approve the reincorporation of the Company as a Pennsylvania
corporation. See "Proposal No. 3 -- To Approve The Reincorporation
of the Company as a Pennsylvania Corporation" in the Proxy
Statement.
4. To transact such other business as may properly be brought before
the meeting or any adjournment thereof.
Stockholders of record at the close of business on February 26, 1999
are entitled to vote at the Annual Meeting of Stockholders and all adjournments
thereof. Since a majority of the outstanding shares of the Company's Common
Stock must be represented at the meeting in order to constitute a quorum, all
stockholders are urged either to attend the meeting or to be represented by
proxy.
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED REPLY ENVELOPE. Your vote is
important regardless of the number of shares you own. If you later find that you
can be present and you desire to vote in person or, for any other reason, desire
to revoke your proxy, you may do so at any time before the voting.
By Order of the Board of Directors,
Jeannette Fisher-Garber, Secretary
March -, 1999
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PRELIMINARY COPY
MOTIVEPOWER INDUSTRIES, INC.
TWO GATEWAY CENTER, 14TH FLOOR
PITTSBURGH, PENNSYLVANIA 15222
ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 1999
PROXY STATEMENT
This Proxy Statement and the Notice of Annual Meeting and Form of Proxy
accompanying this Proxy Statement, which will be mailed on or about March 18,
1999, are furnished in connection with the solicitation by the Board of
Directors of MotivePower Industries, Inc. ("MPO" or the "Company") of proxies to
be voted at the annual meeting of stockholders to be held at the Doubletree Club
Hotel Riverside, Boise, Idaho on April 27, 1999 at 11 a.m., Boise time, and any
adjournments thereof.
Stockholders of record at the close of business on February 26, 1999
(the "record date") will be entitled to one vote at the meeting or by proxy for
each share then held. On the record date, there were ___________shares of Common
Stock of MPO outstanding. All shares represented by proxy will be voted in
accordance with the instructions, if any, given in such proxy. A stockholder may
abstain from voting or may withhold authority to vote for the nominees by
marking the appropriate box on the accompanying proxy card, or may withhold
authority to vote for an individual nominee by drawing a line through such
nominee's name in the appropriate place on the accompanying proxy card. UNLESS
INSTRUCTIONS TO THE CONTRARY ARE GIVEN, EACH PROPERLY EXECUTED PROXY WILL BE
VOTED, AS SPECIFIED BELOW, TO (i) ELECT JOHN C. POPE AND NICHOLAS J. STANLEY AS
DIRECTORS, (ii) RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, AND (iii) APPROVE THE REINCORPORATION
OF THE COMPANY AS A PENNSYLVANIA CORPORATION.
All proxies may be revoked, and execution of the accompanying proxy
will not affect a stockholder's right to revoke it, by giving written notice of
revocation to the Secretary at any time before the proxy is voted or by the
mailing of a later-dated proxy. Any stockholder attending the meeting in person
may vote his or her shares even though he or she has executed and mailed a
proxy. A majority of all of the issued and outstanding shares of the Company's
Common Stock is required to be present in person or by proxy to constitute a
quorum. Directors are elected by a plurality. The favorable vote of the holders
of a majority of the shares of Common Stock represented in person or by proxy at
the meeting is required to ratify the appointment of Deloitte & Touche LLP and
approve the reincorporation.
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THIS PROXY STATEMENT IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF
MPO. The expense of making this solicitation is being paid by the Company and
consists of the preparing, assembling and mailing of the Notice of Annual
Meeting, Proxy Statement and Proxy, tabulating returns of proxies, and charges
and expenses of brokerage houses and other custodians, nominees or fiduciaries
for forwarding documents to stockholders. In addition to solicitation by mail,
officers and regular employees of the Company may solicit proxies by telephone,
telegram or in person without additional compensation.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
Two directors are to be elected at the annual meeting each for terms of
three (3) years expiring in 2002. The Board of Directors has nominated John C.
Pope and Nicholas J. Stanley for election as directors. See "Information
Concerning Directors and Nominees" for a description of the business experience
of and other information concerning the nominees.
To be eligible for election as a director, persons nominated by any
stockholder must be nominated in accordance with procedures set forth in the
Company's bylaws. Those procedures require that written notice of the nomination
be given to the Secretary of the Company at least 60 days prior to the meeting
at which the election is to be held, or, if the meeting is not announced at
least 75 days in advance, not later than the 10th business day following the
announcement of the meeting. The Company bylaws further require that the
stockholder's notice include certain information concerning the nominee as would
be required to be included in the Proxy Statement. The Chairman may decline to
acknowledge a nomination not made in compliance with the requirements of the
bylaws.
Unless you indicate to the contrary, the persons named in the
accompanying proxy will vote it for the election of the nominees named above.
If, for any reason, a nominee should be unable to serve as a director at the
time of the meeting, which is not expected to occur, the persons designated
herein as proxies may not vote for the election of any other person not named
herein as a nominee for election to the Board of Directors. See "Information
Concerning Directors and Nominees."
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF
THIS PROPOSAL UNLESS A CONTRARY VOTE OR AUTHORITY WITHHELD IS SPECIFIED.
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INFORMATION CONCERNING DIRECTORS AND NOMINEES
DIRECTORS AND NOMINEES
The Company's Certificate of Incorporation and bylaws provide that the
directors of the Company are to be classified into three classes, with the
directors in each class serving for three-year terms until their successors are
elected. The bylaws of the Company require from three to fifteen directors as
fixed by the Board. The Board has currently been fixed at seven members. The
terms of the persons currently serving on the Board expire at the annual meeting
of stockholders for the years indicated: John C. Pope and Nicholas J. Stanley
(1999); Gilbert E. Carmichael, Ernesto Fernandez Hurtado and Michael A. Wolf
(2000); Lee B. Foster II and James P. Miscoll (2001).
Set forth below is information concerning each director and nominee for
director of the Company, including his business experience during the past five
years, his positions with the Company and certain directorships held by him.
There are no family relationships among directors, nor, except as may be
described herein, are there any arrangements or understandings between any
director and another person pursuant to which he was selected as a director or
nominee.
Nominees for Terms Expiring in 2002
John C. Pope, age 49, has served as the Company's Chairman since
January 1, 1996, having previously served as a Director of the Company since
April 1995. Mr. Pope also serves as a Director of Federal-Mogul Corporation
(automotive parts), Wallace Computer Services, Inc. (business forms and
commercial printing), Medaphis Corporation (health care information services),
Lamalie Associates, Inc. (executive recruitment), Waste Management, Inc. (waste
management and disposal), and Dollar Thrifty Automotive Group, Inc. (car
rental). Mr. Pope held various positions with UAL Corporation and United
Airlines, Inc., including President and Chief Operating Officer from 1992 to
1994 and Director from 1988 to 1994, Vice Chairman from 1989 to 1992, Executive
Vice President of Marketing and Planning and Chief Financial Officer from 1989
to 1990, and Executive Vice President of Finance and Chief Financial Officer
from 1988 to 1989. Prior thereto, Mr. Pope served as Senior Vice President and
Chief Financial Officer of AMR Corporation (commercial airline holding company)
and American Airlines, Inc. (commercial airline).
Nicholas J. Stanley, age 34, has served as a Director of the Company
since April 1994. Mr. Stanley has served as the President of Stanley Investment
& Management (international business network) since 1990, as the President and
Chief Executive Officer of Fine Arts Graphics, Inc. (stationery printing) since
1994, and as a Principal of the Titan Group (real estate investment) since 1990.
Mr. Stanley also serves as Honorary Consul to the Kingdom of Thailand.
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Current Directors with Terms Expiring in 2000
Gilbert E. Carmichael, age 71, has served as a Vice Chairman of the
Company since January 1996, and as a Director of the Company since April 1994.
He retired as an employee of the Company in April 1997. He served as Vice
Chairman of the Board from April 1994 until March 1995 and as the Company's
Chairman from March 1995 until January 1, 1996. Mr. Carmichael also served as
Senior Vice President of Morrison Knudsen Corporation (engineering and
construction) from 1993 until March 1995. Prior to joining Morrison Knudsen, Mr.
Carmichael served as Administrator of the Federal Railroad Administration from
1989 to 1993. Mr. Carmichael currently serves on the board of directors of Great
Southern National Bank (banking).
Ernesto Fernandez Hurtado, age 77, has served as a Director of the
Company since December 1996. He served as governor of Mexico's Central Bank from
1970 to 1976. He also served as director general of Banco BCH, S.A. from 1977 to
1982 and Bancomer, S.A. from 1982 to 1988. In addition, he has served in various
governmental capacities, including as a member of the Board of Governors of the
International Monetary Fund and a member of the International Monetary
Conference.
Michael A. Wolf, age 55, has served as the President and Chief
Executive Officer ("C.E.O.") of the Company since July 1996 and as a Director
since August 1996. Prior thereto, he served as President and Chief Executive
Officer of Pandrol Jackson, Inc. (railroad equipment and contract services) from
1994 to June 1996, as President and Chief Operating Officer of Hobart Brothers
Company (welding and laser manufacturing) from 1992 to 1994, and as the
Executive Vice President of Case Corporation (agricultural equipment) from 1988
to 1992. In addition, from 1972 to 1988, Mr. Wolf held various management
positions with increasing responsibility, including as Executive Vice President,
at Firestone/Bridgestone, Inc. (manufacturer of tires and automotive parts).
Current Directors with Terms Expiring in 2001
Lee B. Foster II, age 51, has served as a Director of the Company since
August 1996. Mr. Foster has held various positions with L. B. Foster Company
(rail, construction, and tubular products) since 1973, including as President
and Chief Executive Officer since 1990.
James P. Miscoll, age 64, has served as a Director of the Company since
September 1994. Mr. Miscoll held various positions with Bank of America from
1962 until his retirement in 1992, including Vice Chairman from 1984 to 1992,
Executive Officer, Southern California from 1985 to 1992, member of the
Management Committee from 1982 to 1992 and other executive management positions
for the bank in New York City, Asia and Europe. Mr. Miscoll currently serves on
the boards of directors of Chela Financial (financial institution), U.S. Food
Service, Inc. (foodstuffs company), MK Gold Company (mining), American
International Group, Inc. (insurance and finance), and 20th Century Insurance
Company (insurance).
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MEETINGS OF THE BOARD OF DIRECTORS
In 1998, the Board of Directors of the Company conducted seven
meetings. Each director of the Company has attended at least 75% of the meetings
held during the time he has served as a director.
COMMITTEES
There are four active committees of the Board: the Executive and
Finance Committee, the Audit and Corporate Responsibility Committee, the
Compensation and Management Development Committee, and the Nominating and
Corporate Governance Committee.
The Executive and Finance Committee has all authority, consistent with
the Delaware General Corporation Law, as may be granted to it by the Board.
Accordingly, the Executive and Finance Committee may have and may exercise all
the powers and authority of the Board in the oversight of the management of the
business and affairs of the Company, except that the Executive and Finance
Committee will not have the power (except to the extent authorized by a
resolution of the Board) to amend the Company's Certificate of Incorporation or
bylaws, to fix the designations, preferences, and other terms of any preferred
stock of the Company, to adopt an agreement of merger or consolidation, to
authorize the issuance of stock, to declare a dividend or to recommend to the
stockholders of the Company the sale, lease or exchange of all or substantially
all of the Company's property and assets, a dissolution of the Company or a
revocation of such a dissolution. John C. Pope, Michael A. Wolf and Gilbert E.
Carmichael currently serve as members of the Executive and Finance Committee.
Mr. Pope is the Chairman of this Committee. The Executive and Finance Committee
met once in 1998.
The Audit and Corporate Responsibility Committee has the primary
responsibility for reviewing the Company's policies relating to business conduct
and corporate relationships, including relationships with governmental agencies,
the independent certified public accountants and the general public in addition
to the responsibility for reviewing the professional services to be provided by
the Company's independent auditors, the scope of the audit by the Company's
independent auditors, the annual financial statements of the Company, the
Company's system of internal accounting controls and such other matters with
respect to the accounting, auditing and financial reporting practices and
procedures of the Company as it finds appropriate or as is brought to its
attention. Three of the Company's independent directors, James P. Miscoll,
Ernesto Fernandez Hurtado and Nicholas J. Stanley, currently serve as members of
the Audit and Corporate Responsibility Committee. Mr. Miscoll is the Chairman of
this Committee. The Audit and Corporate Responsibility Committee met six times
in 1998.
The Compensation and Management Development Committee has the primary
responsibility for establishing and administering the Company's compensation
program for the top 10 highest-paid employees and for overseeing the Company's
compensation program for the top 50 highest-impact positions of the Company
("key management"); overseeing selection and professional development and
succession planning of the Company's key management; and regularly consulting
with the Company's management regarding compensation policies, benefits plans,
best practices and benchmarking. Three of the Company's independent directors,
Lee B. Foster II, Nicholas J. Stanley and James P. Miscoll, currently serve as
members of the Compensation and Management Development Committee. Mr. Stanley is
the Chairman of this Committee. The Compensation and Management Development
Committee met six times in 1998.
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The Nominating and Corporate Governance Committee has the primary
responsibility for monitoring and making recommendations to the Board with
respect to developments in the area of corporate governance and Board policies;
annually evaluating the performance of the Board; identifying, evaluating and
recommending to the Board candidates for Board membership; and evaluating the
Company's President and Chief Executive Officer and planning for succession in
that position. John C. Pope, Gilbert E. Carmichael and Lee B. Foster II
currently serve as members of the Nominating and Corporate Governance Committee.
Mr. Pope is the Chairman of this Committee. The Nominating and Corporate
Governance Committee did not meet in 1998.
PROPOSAL NO. 2 -- SELECTION OF AUDITORS
THE PROPOSAL
The Board of Directors appointed Deloitte & Touche LLP, independent
certified public accountants, to audit the financial statements of the Company
and its wholly owned subsidiaries for the fiscal year ending December 31, 1999.
This appointment is being presented to stockholders for ratification. Deloitte &
Touche LLP audited the Company's financial statements for the year ended
December 31, 1998.
A representative of Deloitte & Touche LLP is expected to attend the
meeting and will be afforded an opportunity to make a statement if he or she
desires to do so. This representative is also expected to be available to
respond to appropriate questions.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF
THIS PROPOSAL UNLESS A CONTRARY VOTE OR AUTHORITY WITHHELD IS SPECIFIED.
PROPOSAL NO. 3 -- TO APPROVE THE REINCORPORATION OF THE COMPANY AS A
PENNSYLVANIA CORPORATION
THE PROPOSAL
At the annual meeting, the stockholders will vote upon a proposal to
change the state of incorporation of the Company from Delaware to Pennsylvania
(commonly characterized as a "reincorporation"). If approved, this
reincorporation will be effected by merging (the "Merger") the Company into a
wholly-owned Pennsylvania subsidiary which was recently formed solely for the
purpose of effecting the reincorporation. The surviving corporation will be
MotivePower Industries, Inc., a Pennsylvania corporation ("MotivePower-PA").
Upon consummation of the Merger, each share of Common Stock of the Company, par
value $.01 per share, will be automatically converted into one share of Common
Stock of MotivePower-PA, par value $.01 per share, and will continue to be
quoted without interruption on the New York Stock Exchange under the same
symbol, "MPO." IT WILL NOT BE NECESSARY FOR STOCKHOLDERS OF THE COMPANY TO
EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES OF
MOTIVEPOWER-PA.
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The proposed Merger will be effected pursuant to the terms and
conditions of a Plan of Merger, a copy of which is included as Appendix A. By
virtue of the Merger, the Company will cease to exist as a Delaware corporation
the stockholders of the Company will become shareholders of MotivePower-PA.
MotivePower-PA and will succeed to all of the assets, liabilities, subsidiaries
and other properties of the Company to the full extent provided by law, and the
rights of the shareholders and internal affairs of the Company will be
governed by the articles of incorporation (the "MotivePower-PA charter") and
bylaws of MotivePower-PA and by the Pennsylvania Business Corporation Law of
1988, as amended (the "Pennsylvania BCL"), rather than the certificate of
incorporation (the "Company charter") and bylaws of the Company and the Delaware
General Corporation Law (the "Delaware GCL"). A copy of the MotivePower-PA
charter is included as Appendix B. Copies of the Company charter and bylaws as
currently in effect and of the full text of the bylaws of MotivePower-PA are
available for inspection at the headquarters of the Company and will be sent to
shareholders without cost upon request.
There will be no change in the name, business, management, benefit
plans, location, assets, liabilities or net worth of the Company as a result of
the reincorporation. While the rights of shareholders under the Pennsylvania BCL
and the Delaware GCL differ in a number of respects, the MotivePower-PA charter
and bylaws, considered together, have been designed to minimize these
differences. For example, as a result of provisions included in the
MotivePower-PA charter, the material anti-takeover provisions in the
Pennsylvania BCL will not be applicable to the Company after the
reincorporation. See "Statutory Anti-takeover Provisions." The material changes
in stockholder rights, corporate governance and other matters resulting from the
reincorporation are discussed below. The Delaware GCL refers to "stockholder"
whereas the Pennsylvania BCL uses the term "shareholder." The term shareholder
is used throughout the discussion because stockholder and shareholder have the
same meaning under those statutes.
The Merger is intended to constitute a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended.
Accordingly, shareholders will not recognize gain or loss for Federal income tax
purposes as a result of the Merger and the automatic conversion of their shares
into shares of MotivePower-PA. Each shareholder's basis in shares of
MotivePower-PA will be the same as his or her basis in the shares of the
Company, and the holding period for shares of MotivePower-PA will include the
holding period for shares of the Company held as capital assets. No information
is provided herein with respect to the consequences to shareholders, if any,
under applicable state, local or foreign laws. Shareholders are advised to
consult their personal tax advisors as to any tax consequences arising from
individual circumstances.
The Plan of Merger was approved by the Board of Directors of the
Company on December 11, 1998. Under Delaware law, consummation of the Merger
will require that the Plan of Merger be adopted by the affirmative vote of the
holders of record of a majority of the outstanding shares of Common Stock of the
Company entitled to vote thereon. The Merger and reincorporation will be
effected as soon as practicable after the shareholders have adopted the Plan of
Merger. However, the Merger and reincorporation may be abandoned or the Plan of
Merger amended, either before or after shareholder adoption of the Plan of
Merger (except that the principal terms may not be amended
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without shareholder approval) if in the opinion of the Board of Directors of the
Company circumstances arise that make it inadvisable to proceed. If the Plan of
Merger is not adopted by the shareholders, the reincorporation will not be
consummated and the Company will remain a Delaware corporation.
Shareholders of the Company who vote against adoption of the Plan of
Merger or who abstain from voting will not be entitled to appraisal rights as a
result of the Merger.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
PROPOSAL TO CHANGE THE STATE OF INCORPORATION OF THE COMPANY FROM DELAWARE TO
PENNSYLVANIA. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR
OF THIS PROPOSAL UNLESS A CONTRARY VOTE OR AUTHORITY WITHHELD IS SPECIFIED.
REASONS FOR THE REINCORPORATION
The principal reason for reincorporating the Company in Pennsylvania is
to eliminate the Company's annual liability under the Delaware franchise tax. As
a Pennsylvania corporation, the Company would no longer be subject to the
Delaware franchise tax.
In recommending that the Company change its corporate domicile to
Pennsylvania, the Board of Directors also considered that the reason for having
incorporated the Company in Delaware has been largely abrogated by the adoption
in 1988 and subsequent years of important amendments to the Pennsylvania BCL.
The Company historically has maintained its corporate headquarters in
Pennsylvania and has had virtually no business operations in Delaware. It was
incorporated in Delaware, however, because the Delaware GCL was commonly viewed
as more modern and less restrictive than the corporation laws of Pennsylvania
then in effect. The differences between the Delaware and Pennsylvania
corporation laws, however, were largely eliminated in 1988 when Pennsylvania
adopted sweeping changes in the Pennsylvania BCL which afforded Pennsylvania
corporations significant operating flexibility and even certain advantages over
the Delaware GCL.
As a result of the large number of corporations incorporated in
Delaware, the Delaware courts have developed a considerable expertise in dealing
with corporate issues and a substantial body of case law has developed
construing Delaware law and establishing public policies with respect to
Delaware corporations. The Board believes, however, that the tax savings and
other advantages of reincorporating in Pennsylvania outweigh these benefits of
being domiciled in Delaware.
NO CHANGE IN MANAGEMENT
Upon consummation of the Merger, the Board of Directors of
MotivePower-PA will be composed of those persons elected to the Board of
Directors of the Company at the annual meeting held on April 27, 1999. Those
persons will continue to serve as directors of MotivePower-PA for the ensuing
year and until their successors are elected and qualified. It is expected that
the first annual meeting of the MotivePower-PA shareholders will be held in
April or May 2000.
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The persons who currently serve as executive officers of the Company
will serve as the executive officers of MotivePower-PA following the Merger.
BENEFIT PLANS TO CONTINUE
The Company's retirement plans and all other employee benefit plans
will not be changed in any material respect by the Merger. The options to
acquire Common Stock of the Company under the Company's Long-Term Incentive Plan
which are outstanding immediately prior to the Merger will be converted into
options to purchase the same number of shares of MotivePower-PA Common Stock on
the same terms and conditions as those in effect immediately prior to the
Merger, and future options granted under that plan will be for shares of
MotivePower-PA Common Stock.
CAPITALIZATION
COMMON STOCK. The Company is authorized to issue up to 55,000,000
shares of Common Stock, par value $.01 per share. As of December 31, 1998,
17,941,118 shares were issued and outstanding, 1,258,680 shares were issued and
held in the Company's treasury and 3,329,475 shares were reserved for issuance
upon the exercise of stock options. The holders of Common Stock are entitled to
one vote per share on all matters to be voted upon by the shareholders, and
there is no cumulative voting in the election of directors, nor are there
preemptive rights upon the issuance of additional shares. Upon dissolution of
the Company (which does not include the Merger), the holders of Common Stock
will be entitled to a ratable portion of any assets remaining after payment of
all priority claims.
MotivePower-PA is also authorized to issue up to 55,000,000 shares of
Common Stock, par value $.01 per share. One share has been issued to the Company
but will be canceled upon consummation of the Merger. With the exceptions noted
in "Comparative Rights of Shareholders Before and After the Merger," the voting
and other rights of the holders of the Common Stock are essentially the same as
those of the holders of the Company's Common Stock. MotivePower-PA is not
authorized to issue any other classes of common stock.
At the effective time of the Merger, each share of Common Stock of the
Company (including the shares held in the treasury) will be automatically
converted into one share of MotivePower-PA Common Stock, and the number of
shares of Common Stock reserved for future issuance will be the same as the
number of shares of Common Stock then reserved by the Company for future
issuance.
ChaseMellon Shareholder Services, L.L.C. ("ChaseMellon") serves as the
transfer agent and registrar for the Company's Common Stock and will serve in
the same capacity for the Common Stock of MotivePower-PA.
PREFERRED STOCK. The Company is currently authorized to issue
10,000,000 shares of Preferred Stock, par value $.01 per share, 1,600,000 shares
of which have been designated Series C Junior Participating Preferred Stock
("Series C Preferred Stock") for issuance in connection with the Company's
Shareholder Rights Plan. (See below ). The MotivePower-PA charter also
authorizes the Company to issue up to 10,000,000 shares of Preferred Stock, par
value $.01 per share, 1,600,000 shares of which have also been designated Series
C Preferred Stock for issuance in connection with
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the Company's Shareholder Rights Plan. In each case, the Board of Directors is
authorized to issue shares of Preferred Stock in classes or series and to
determine for any such class or series its voting rights, preferences,
limitations and any special rights. Such action may be taken by the Board at any
time and without shareholder approval.
While management has no current understandings, plans or agreements for
the issuance of preferred stock, the shares of preferred stock may be used in
connection with the raising of additional capital, future acquisitions, and for
other corporate purposes. In addition, some or all of the preferred stock could
be used in connection with the shareholder rights plan described below. The
Board believes that it is in the Company's best interest that such stock be made
available for issuance, without the need to seek shareholder approval for
individual amendments to the MotivePower-PA charter, as opportunities arise, so
that it may avoid the expense and possible delay involved in obtaining such
approval. The newly authorized shares of preferred stock will not have
preemptive rights under Pennsylvania law.
If the merger is consummated, the Board will have the power to issue
shares of preferred stock having dividend, voting or conversion rights that
could discourage or deter a future unsolicited attempt to gain control of the
Company or to acquire substantial ownership of its stock, even if the terms of
the unsolicited transaction might prove advantageous to some or many of the
shareholders. However, the Company's shareholder rights plan has similar
anti-takeover effects.
SHAREHOLDER RIGHTS PLAN
On January 19, 1996 (the "Rights Dividend Declaration Date"), the Board
of Directors of the Company adopted a Shareholder Rights Plan (the "Rights
Plan"), which has been subsequently amended by the Board, and declared that a
dividend of one share purchase unit ("Right") be distributed on each outstanding
share of Common Stock to shareholders of record as of the close of business on
January 30, 1996. Each Right entitles the registered holder to purchase from the
Company one one-hundredth of a share of Series C Preferred Stock, par value
$0.01 per share, or, in certain circumstances, shares of Common Stock, other
securities, and/or cash or other property, at a Purchase Price of $80 per share
of Series C Preferred Stock (or, when applicable, Common Stock, securities,
cash, and/or other property), subject to adjustment. The complete terms and
conditions of the Rights are set forth in a Rights Agreement dated as of January
19, 1996 (the "Rights Agreement") between the Company and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent. An amended summary of which was
previously mailed to the shareholders.
All shares of Common Stock currently outstanding have received Rights.
In addition, all shares of Common Stock issued prior to the Distribution Date
will be issued with Rights. Initially, the Rights attached to the outstanding
shares of Common Stock without a separate distribution of Right Certificates.
The Rights will detach from the outstanding shares of Common Stock and separate
Right Certificates will be issued when there is a Distribution Date. A
"Distribution Date" will occur on (i) the 10th day following a public
announcement that a person has become an Acquiring Person (the date of such
public announcement being the "Stock Acquisition Date"), or (ii) if earlier, the
tenth business day (or such later date as may be determined by the Board of
Directors prior to such time as any person becomes an Acquiring Person)
following the commencement or announcement of a tender or exchange offer that
would result in a person or group of affiliated or
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<PAGE> 13
associated persons becoming the Beneficial Owner of 10% or more of the
outstanding shares of Common Stock. Subject to certain limitations and
exceptions, an "Acquiring Person" is a person or group of affiliated or
associated persons that Beneficially Owns 10% or more of the outstanding shares
of Common Stock. The Rights are not exercisable until the Distribution Date and
will expire at the close of business on January 30, 2006 (the "Final Expiration
Date"), unless the Final Expiration Date is extended or unless the Rights are
earlier redeemed or exchanged by the Company.
Once a person has become an Acquiring Person, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
Beneficially Owned by an Acquiring Person will be null and void. In the event
that, at any time after a person becomes an Acquiring Person, (i) the Company is
acquired in a merger or other business combination, or (ii) 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
is sold or otherwise transferred, proper provision will be made so that each
holder of a Right (other than a Right that is or was Beneficially Owned by an
Acquiring Person that has become null and void pursuant to the terms of the
Rights Agreement) shall thereafter have the right to receive upon exercise of
such Right, in lieu of shares of Series C Preferred Stock, shares of common
stock of the acquirer then having a current market value equal to two times the
then-current Purchase Price.
At any time prior to the time any person becomes an Acquiring Person,
the Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $0.001 per Right, subject to adjustment (the "Redemption
Price"). The redemption of the Rights may be made effective at such time, on
such basis, and with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price. Until a Right is exercised, the
holder thereof, as such, will have no rights as a shareholder of the Company,
including, without limitation, the right to vote or to receive dividends.
The Rights Plan will be preserved by MotivePower-PA. The Pennsylvania
law explicitly approves such rights plans, but specific plans will probably
still be subject to evaluation on a case-by-case basis. In that regard,
differences between Delaware's and Pennsylvania's court systems and legal
precedents could potentially affect the outcome of any legal challenge to the
Rights Plan. See "Comparative Rights of Shareholders Before and After the
Merger--General." The Rights Plan was primarily written to meet the standards
established in Delaware case law.
COMPARATIVE RIGHTS OF SHAREHOLDERS BEFORE AND AFTER THE MERGER
GENERAL
The rights of shareholders of Pennsylvania and Delaware business
corporations are governed by and subject to the provisions of the Pennsylvania
BCL and the Delaware GCL, respectively. If the Merger is consummated, the
shareholders of the Company will become shareholders of MotivePower-PA, and
their rights will be governed by and subject to the provisions of the
Pennsylvania BCL rather than the Delaware GCL. The rights of the Company's
shareholders following the Merger will also be governed by the MotivePower-PA
charter and bylaws rather than the provisions of the Company charter and bylaws.
The following is a summary of certain differences in the rights of shareholders
before and after the Merger and is qualified in its entirety by reference to the
relevant provisions of the Delaware GCL, the Pennsylvania BCL, the Company
charter and bylaws and the MotivePower-PA charter and bylaws.
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<PAGE> 14
Although the Pennsylvania BCL and the Delaware GCL are similar in most
respects, there are a number of differences between the two statutes that should
be carefully considered by the shareholders in evaluating the proposed Merger.
The following summary does not purport to be a complete statement of all
differences, nor does it purport to be a complete statement of the provisions of
the two statutes which it compares; nonetheless, the following discussion does
set forth all material differences between the statutory rights of holders of
common stock of a Delaware corporation and those of holders of common stock of a
Pennsylvania corporation.
In addition, there is a substantial body of case law in Delaware
interpreting the corporation laws of that state. A comparable body of judicial
interpretations does not exist in Pennsylvania. Delaware also has established a
system of Chancery Courts to adjudicate matters arising under its corporation
law. Pennsylvania has considered but has not yet established an equivalent court
system. As a result of these factors there may be less certainty as to the
outcome of matters governed by Pennsylvania corporation law or by the charter of
a Pennsylvania corporation (and therefore it may be more difficult to obtain
legal guidance as to such matters) than would be the case under Delaware law.
AMENDMENTS TO CHARTER; FUNDAMENTAL CORPORATE TRANSACTIONS
The Company's charter requires the approval of the holders of 66-2/3%
of the outstanding stock entitled to vote on the matter, voting as a single
class, to amend certain critical provisions of the Company's charter. In order
to provide for comparable rights in the MotivePower-PA's charter, such approval
will be required to amend critical provisions of MotivePower-PA's charter,
including the provisions of Article 7 (which governs adoption and amendment of
bylaws), Article 8 (which includes requiring that shareholders act not by
consent but only at duly called meetings) and Article 9 (which relates to the
nomination, election and removal of directors).
It will generally be less difficult under Pennsylvania law to amend
other provisions of the MotivePower-PA charter and to engage in fundamental
corporate transactions than it is for the Company currently under Delaware law.
The Pennsylvania BCL only requires the affirmative vote of a majority of the
votes actually cast, at a meeting of shareholders at which a quorum is present,
in order to amend the articles of incorporation or engage in fundamental
corporate transactions, such as mergers, sales of substantially all of the
assets or dissolution of the corporation. The Delaware GCL requires the
affirmative vote of the holders of a majority of the outstanding shares entitled
to vote in order to take those actions. Also, the Pennsylvania BCL does not
require shareholder approval of certain non-material amendments to the articles,
such as changing the corporate name or increasing the number of authorized
shares to effectuate a stock dividend where the corporation has only one class
of shares outstanding.
AMENDMENTS TO BYLAWS
The bylaws of both the Company and MotivePower-PA require the approval
of the holders of 66-2/3% of the outstanding stock entitled to vote on the
matter, voting as a single class, to amend certain critical provisions of the
bylaws. The Board of MotivePower-PA will have less authority to
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<PAGE> 15
adopt or amend other provisions of the bylaws than the Board of the Company has
currently. Under Pennsylvania law, the power of the board of directors to adopt
or amend bylaw provisions on certain specified subjects is limited. Delaware
law, on the other hand, permits a board to make changes in the bylaws if the
certificate of incorporation confers on the board the power to amend the bylaws.
The Company charter grants the Board the power to amend or repeal the bylaws of
the Company.
SHAREHOLDER ACTION BY CONSENT
Both the Company's charter and MotivePower-PA's charter expressly
provide that shareholders may not act by consent in lieu of a meeting. In the
absence of such a charter provision, Pennsylvania law would not permit the
shareholders of a Pennsylvania corporation that has a class of stock registered
under the Securities Exchange Act of 1934 (a "registered" corporation") to act
without a meeting by less than unanimous written consent unless the articles of
incorporation afford them that right. In contrast, Delaware law would permit the
shareholders to act without a meeting, by written consent of the holders of the
number of shares required to take the action at a meeting, unless the
certificate of incorporation restricts such action.
DIVIDENDS
Under Pennsylvania law, a corporation has the power, subject to
restrictions in its bylaws, to pay dividends or make other distributions to its
shareholders unless after giving effect thereto (i) the corporation would not be
able to pay its debts as they become due in the usual course of business or (ii)
the corporation's assets would be less than the sum of its total liabilities
plus the amount that would be needed upon the dissolution of the corporation to
satisfy the preferential rights, if any, of shareholders having superior
preferential rights to the shareholders receiving the distribution. The
MotivePower-PA bylaws contain no limitations on such powers.
Under Delaware law, directors may, subject to any restrictions in the
corporation's certificate of incorporation, declare and pay dividends either (i)
out of its surplus or (ii) in case there is no surplus, out of the net profits
for the fiscal year in which the dividend is declared and/or the preceding
fiscal year. The directors of a Delaware corporation may not declare a dividend
out of net profits, however, if the capital of the corporation is less than the
aggregate amount of capital represented by the issued and outstanding stock of
all classes having a preference upon the distribution of assets. The Company
charter does not restrict the payment of dividends.
DISSENTERS' OR APPRAISAL RIGHTS
The rights of shareholders to demand payment in cash by a corporation
of the fair value of their shares in the event of certain fundamental corporate
transactions are called dissenters' rights in Pennsylvania and appraisal rights
in Delaware. The Pennsylvania BCL does not provide dissenters' rights to holders
of shares that are listed on a national securities exchange or held of record by
more than 2,000 shareholders. In contrast, the Delaware GCL does not afford
appraisal rights to holders of shares which are listed on a national securities
exchange, quoted on the Nasdaq National Market or held of record by more than
2,000 shareholders when the plan of merger or consolidation converts such shares
into stock of the surviving corporation or stock of another corporation which is
listed on a national securities exchange, quoted on the Nasdaq National Market
or held of record by more than 2,000 shareholders. The meaning of "fair value"
under the Pennsylvania BCL and the Delaware GCL is substantially the same.
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<PAGE> 16
SHAREHOLDERS' MEETINGS
Pennsylvania law provides that if the annual meeting for election of
directors is not called and held within six months after the date designated as
provided in or fixed pursuant to the authority granted in a Pennsylvania
corporation's bylaws, any shareholder may call the meeting at any time
thereafter. Special meetings of shareholders of a registered corporation may be
called by (i) the board of directors, (ii) shareholders entitled to cast at
least 20% of the votes entitled to be cast at the meeting, but only if the
shareholders are accorded that right in the articles of incorporation, and (iii)
such officers or other persons as may be provided in the bylaws.
Under Delaware law, if the annual meeting for the election of directors
is not held within 30 days after the date by or in the manner provided in a
Delaware corporation's bylaws, or if no date has been designated for a period of
13 months after the organization of the corporation or after its last annual
meeting, the Court of Chancery may summarily order a meeting to be held upon the
request of any shareholder or director. Special meetings of shareholders may be
called by the board of directors or by such persons as may be authorized by the
certificate of incorporation or bylaws.
The bylaws of both MotivePower-PA and the Company provide that annual
meetings of the shareholders to elect the directors shall be held at a date,
time and place fixed by the Board of Directors and that special meetings of the
shareholders may be called by the president for any purpose and shall be called
by the president or secretary if directed by the board of directors. The
shareholders do not have the right to call special meetings, and they will not
have that right after the reincorporation.
DERIVATIVE SUITS
Under Pennsylvania law, a shareholder may maintain a derivative suit,
even if the shareholder was not a shareholder at the time of the alleged
wrongdoing, if there is a strong prima facie case in favor of the claim asserted
and if the court determines in its discretion that serious injustice would
result without such suit. Under Delaware law, however, a shareholder may bring a
derivative suit only if he or she was a shareholder at the time of the alleged
wrongdoing or the stock thereafter devolved upon him or her by operation of law.
FIDUCIARY DUTY OF DIRECTORS
Both Pennsylvania and Delaware law provide that the board of directors
has the ultimate responsibility for managing the business and affairs of a
corporation. In discharging this function, directors of Pennsylvania and
Delaware corporations owe fiduciary duties of care and loyalty to the
corporations for which they serve as directors. Directors of Delaware
corporations also owe fiduciary duties of care and loyalty to the shareholders.
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<PAGE> 17
A director of a Pennsylvania business corporation stands in a fiduciary
relationship to the corporation and must perform his or her duties as a
director, in good faith, in a manner he or she reasonably believes to be in the
best interests of the corporation and with such care, including reasonable
inquiry, skill and diligence, as a person of ordinary prudence would use under
similar circumstances. In performing these duties, the director is entitled to
rely, in good faith, on information, opinions, reports or statements, including
financial statements and other financial data, in each case prepared by any of
the following: (i) one or more officers or employees whom the director
reasonably believes to be reliable and competent in the matters presented; (ii)
counsel, public accountants or other persons as to matters which the director
reasonably believes to be within the professional competence of such persons;
and (iii) a committee of the board upon which he or she does not serve, duly
designated in accordance with law, as to matters within its designated
authority, which committee the director reasonably believes to merit confidence.
A director will not be considered to be acting in good faith if he or she has
knowledge concerning the matter in question which would cause his or her
reliance to be unwarranted.
Delaware courts have held that the directors of a Delaware corporation
are required to exercise an informed business judgment in the performance of
their duties. An informed business judgment means that the directors have
informed themselves of all material information reasonably available to them.
Delaware courts have also imposed a heightened standard of conduct upon
directors in matters involving a contest for control of the corporation. A
director of a Delaware corporation, in the performance of his or her duties, is
fully protected in relying, in good faith, upon the records of the corporation
and upon such information, opinions, reports or statements presented to the
corporation by any of the corporation's officers or employees, or committees of
the board of directors, or by any other person as to matters he or she
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
corporation.
The Pennsylvania BCL provides that in discharging the duties of their
respective positions, the board of directors, committees of the board and
individual directors of a business corporation may, in considering the best
interests of the corporation, consider the effects of any action upon employees,
upon suppliers and customers of the corporation and upon communities in which
offices or other establishments of the corporation are located and all other
pertinent factors. Absent breach of fiduciary duty, lack of good faith or
self-dealing, actions taken as a director are presumed to be in the best
interests of the corporation. In contrast, the Delaware GCL does not contain any
statutory provision permitting the board of directors, committees of the board
and individual directors, when discharging the duties of their respective
positions, to consider the interests of any constituencies other than the
corporation or its shareholders.
It is unclear under the current state of development of Delaware law
whether and the extent to which the board of directors, committees of the board
and individual directors of a Delaware corporation may, in considering what is
in the corporation's best interests or the effects of any action on the
corporation, take into account the interests of any constituency other than the
shareholders of the corporation. In contrast, Pennsylvania law provides that a
director of a Pennsylvania corporation owes a duty only to the corporation, and
in considering what is in the best interests of the corporation may choose to
consider the effects of any action upon the shareholders, employees, suppliers,
customers or creditors of the corporation and upon the communities in which
offices of the corporation. Consequently, the fiduciary duty provisions of the
Pennsylvania BCL may provide significantly broader discretion, and increased
protection from liability, to directors in exercising their fiduciary duties,
particularly in the context of a threatened change in control.
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<PAGE> 18
LIMITATION OF DIRECTOR LIABILITY
The charter of both MotivePower-PA and the Company contain similar
provisions that limit the monetary liability of directors. As a result of the
provision in the charter at MotivePower-Pa, as permitted by Pennsylvania law, a
director of MotivePower-PA will not be personally liable, as such, for monetary
damages for any action taken, or any failure to take any action, unless the
director has breached or failed to perform the duties of his or her office and
the breach or failure to perform constitutes self-dealing, willful misconduct or
recklessness. Such limitation does not apply to the responsibility or liability
of a director pursuant to any criminal statute or the liability of a director
for the payment of taxes. Under Delaware law and the provision in the charter of
the Company, a director is excused from monetary liability for breach of
fiduciary duty as a director unless the liability is for breach of the duty of
loyalty, for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, for a willful or negligent payment of
an unlawful dividend or unlawful stock purchase or redemption, or for any
transaction from which the director derived an improper personal benefit.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Both Pennsylvania and Delaware law permit a corporation to indemnify
its directors and officers against expenses, judgments, fines and amounts paid
in settlement incurred by them in connection with any pending, threatened or
completed action or proceeding, and permit such indemnification against expenses
incurred in connection with any pending, threatened or completed derivative
action, if the director or officer has acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. Under both laws, court
approval is required with respect to any payment made with respect to a
derivative action. Furthermore, both the Pennsylvania BCL and the Delaware GCL
provide that expenses incurred in defending any action or proceeding may be paid
by the corporation in advance of the final disposition upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if it
is ultimately determined that the director or officer is not entitled to be
indemnified by the corporation.
In both Pennsylvania and Delaware the statutory provisions for
indemnification and advancement of expenses are non-exclusive of any other
rights, such as rights under contract, a bylaw or by vote of shareholders or
disinterested directors, to which a person seeking indemnification or
advancement of expenses may be entitled.
Like the Company's bylaws, the bylaws of MotivePower-PA require
indemnification of directors and officers to the fullest extent permitted by
law. At the present time, these boundaries in the MotivePower-PA bylaws would be
dictated by the Pennsylvania BCL, which prohibit indemnification where the
conduct is determined by a court to constitute willful misconduct or
recklessness. The Delaware GCL does not contain such an express restriction on
indemnification, although the Delaware courts have held that indemnification
cannot be given with respect to willful and intentional misconduct.
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<PAGE> 19
The directors and officers of MotivePower-PA would be entitled to the
benefits of the indemnification provisions of the MotivePower-PA bylaws. Because
such persons have a financial interest in these arrangements, their adoption
could be deemed an interested transaction under the Pennsylvania BCL, which
provides that an interested transaction will not be void or voidable as such if
the material facts as to such interest and such transaction are disclosed or are
known to the shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the shareholders.
The text of Section 32 of the MotivePower-PA bylaws, providing for
indemnification of its directors and officers, is set forth in Appendix C. A
vote in favor of the Merger will also be deemed to be a vote in favor of Section
32 of the MotivePower-PA bylaws. Thus, the adoption of the MotivePower-PA bylaws
will not be subject to challenge as an interested transaction if shareholder
approval of the Merger is obtained, and such approval will estop a shareholder
or third party from later challenging the validity or enforceability of such
provisions of the bylaws on other grounds. The indemnification provisions of the
MotivePower-PA bylaws have not been adopted in response to any recent, pending
or threatened litigation.
The Board of Directors of MotivePower-PA also reserves the right to
enter into indemnification agreements in the future with its directors and
officers and to designate other persons who will be entitled to the expanded
indemnification rights. Approval of such actions is not required by the
shareholders.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors or officers, the Company and
MotivePower-PA are aware that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in that
Act and is therefore unenforceable. Under certain circumstances, MotivePower-PA
might be required to submit to a court the question of whether indemnification
is permissible before it could indemnify directors or officers for such
liabilities.
Both Pennsylvania and Delaware law permit a corporation to purchase and
maintain insurance on behalf of any director or officer of the corporation
against any liability asserted against the director or officer and incurred in
such capacity, whether or not the corporation would have the power to indemnify
the director or officer against such liability. The directors and officers of
the Company are currently covered as insureds under directors and officers
liability insurance maintained by the Company which would not be affected by the
Merger. Such insurance, subject to annual renewal and certain rights of the
insurer to terminate, provides an aggregate maximum of $10 million of coverage
for directors and officers of the Company and its subsidiaries, including
MotivePower-PA, against claims made during the policy period.
STATUTORY ANTI-TAKEOVER PROVISIONS
Certain provisions of the Delaware GCL and Pennsylvania BCL, summarized
in the following paragraphs, may be considered to have an anti-takeover effect
and may delay, deter or prevent a tender offer, proxy contest or other takeover
attempt that a stockholder might consider to be in such stockholder's best
interest, including such an attempt as might result in payment of a premium over
the market price for shares held by stockholders.
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<PAGE> 20
TO THE FULL EXTENT POSSIBLE, MOTIVEPOWER-PA HAS OPTED OUT OF THE
SPECIFIC ANTI-TAKEOVER PROVISIONS INCLUDED IN THE PENNSYLVANIA BCL. In lieu of
those provisions, MotivePower-PA's charter incorporates the provisions of
Section 203 of the Delaware GCL as currently in effect (and which is currently
applicable to the Company). Section 203 of the Delaware GCL prohibits a public
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 such person became an interested stockholder unless (i)
prior to such date, the Board of Directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; or (ii) upon becoming an interested stockholder the
stockholder then owned at least 85% of the voting stock, as defined in Section
203; or (iii) subsequent to such date, the business combination is approved by
both the Board of Directors and by at least 66-2/3 of the corporation's
outstanding voting stock, excluding shares owned by the interested stockholder.
For these purposes, the term "business combination" includes mergers, asset
sales and other similar transactions with an "interested stockholder." 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.
The Pennsylvania BCL's anti-takeover provisions that do not apply to
MotivePower-PA are Sections 1715 and 2538 and Subchapters 25E, 25F, 25G and 25H.
Section 1715, expressly states that the fiduciary duty of the directors does not
require them to redeem any rights under or render inapplicable any shareholder
rights plan (such as the Company's) or certain of the anti-takeover provisions
of the Pennsylvania BCL. Section 2538 requires that fundamental corporate
transactions, such as mergers and share exchanges, be approved by a majority
vote of the disinterested shareholders. Subchapter 25E with certain exceptions
entitles the shareholders to be paid the fair value of their shares by anyone
who acquires 20% or more of the outstanding voting power of the corporation;
Subchapter 25F imposes certain financial requirements and restrictions on
business combinations with interested shareholders; Subchapter 25G, relating to
so-called control share acquisitions, with certain exceptions limits the voting
rights of persons who have acquired 20% or more of the outstanding voting power
of the corporation; and Subchapter 25H requires disgorgement of certain profits
made by "controlling shareholders" following their attempts to gain control of
the corporation.
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<PAGE> 21
INFORMATION CONCERNING EXECUTIVE OFFICERS
INFORMATION CONCERNING EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES
Set forth below is information concerning each executive officer and
certain key employees of the Company, including his or her business experience
during the past five years, his or her positions with the Company and certain
directorships held by him or her and his or her age as of the date of the annual
meeting. Officers are appointed annually by the Board of Directors of the
Company and serve, at the pleasure of the Board, until the appointment of their
successors. There are no family relationships among the officers, nor, except as
may be described herein, are there any arrangements or understandings between
any officer and another person pursuant to which he or she was appointed to
office.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Executive Officers and
Other Key Employees
John C. Pope 50 Chairman of the Board
Michael A. Wolf 56 President, Chief Executive Officer and Director
Joseph S. Crawford Jr. 54 Executive Vice President and Chief Operating Officer
William F. Fabrizio 51 Senior Vice President and Chief Financial Officer
Jeannette Fisher-Garber 47 Vice President, General Counsel and Secretary
David L. Bonvenuto 31 Vice President, Controller and Principal Accounting Officer
Phillip L. Brown 46 President, Power Parts Company
Jack E. Floyd 48 President, Boise Locomotive Company,
G&G Locotronics Company, Q-Tron Company, Microphor Company
James E. Lindsay 45 President, Engine Systems Company, Touchstone Company
Thomas P. Lyons 35 Vice President and Treasurer
Jeffrey A. Plut 38 Vice President, Corporate Development
Gerald M. Rowe 49 President, MPI de Mexico S.A. de C.V., MPI Noreste
Scott E. Wahlstrom 35 Vice President, Human Resources and Administration
Timothy R. Wesley 37 Vice President, Investor and Public Relations
Fred M. Young Jr. 58 President, Young Radiator Company
</TABLE>
EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES
John C. Pope. See "Information Concerning Directors and Nominees" for a
description of Mr. Pope's relevant business experience.
Michael A. Wolf. See "Information Concerning Directors and Nominees"
for a description of Mr. Wolf's relevant business experience.
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<PAGE> 22
Joseph S. Crawford Jr. has served as Executive Vice President and Chief
Operating Officer ("C.O.O.") of the Company since October 1998. Prior thereto,
he served as President of the Company's Boise Locomotive subsidiary from
December 1995 to October 1998, as the Company's Executive Vice President,
Locomotive Group from September 1994 to December 1995 and as Senior Vice
President, Operations and Maintenance of the Company from May 1994 to September
1994. From 1988 to May 1994, Mr. Crawford served as Senior Vice President and
General Manager of New Jersey Transit Rail Corporation (transit and rail
operations).
William F. Fabrizio has served as Senior Vice President and Chief
Financial Officer ("C.F.O.") of the Company since November 1996. From 1995 to
November 1996, Mr. Fabrizio served as Chief Financial Officer of Lear
Corporation's Automotive Industries Division (automotive parts), which had
acquired Automotive Industries Holdings, Inc. (automotive parts) in 1995, for
which he had also served as Chief Financial Officer during 1995. Prior thereto,
from 1989 to 1994, he served as the Chief Financial Officer of Rockwell
International Corporation's Automotive Group (automotive parts).
Jeannette Fisher-Garber has served as Vice President, General Counsel
and Secretary of the Company since October 1996. Prior thereto, Ms.
Fisher-Garber served as Corporate Counsel for Federated Investors (mutual funds)
from 1987 to October 1996, as a staff attorney for Joy Manufacturing Company
(manufacturing) from 1979 to 1987 and as a financial analyst for Rockwell
International Corporation (manufacturing) from 1976 to 1979.
David L. Bonvenuto has served as Vice President, Controller and
Principal Accounting Officer of the Company since October 1998, having
previously held the position of Assistant Controller with the Company from 1997
to October 1998. Prior thereto, Mr. Bonvenuto was employed at the public
accounting firm of KPMG Peat Marwick LLP for eight years.
Phillip L. Brown has served as President of the Company's Power Parts
subsidiary since August 1997. Prior thereto, Mr. Brown held various executive
positions with Pandrol Jackson, Inc. (railroad equipment and contract services)
from 1985 to 1997. Prior thereto, Mr. Brown held various positions with Tamper
Inc. (railroad equipment and contract services) from 1974 to 1985.
Jack E. Floyd has served as President of the Company's Boise Locomotive
Company subsidiary since October 1998. He previously served as President of the
Company's Touchstone Company subsidiary and as Vice President and Controller of
Boise Locomotive Company from 1996 to 1997, and Controller of Boise Locomotive
Company from 1995 to 1996. Prior thereto, Mr. Floyd served in various executive
management positions with General Electric Co. (manufacturing) from 1978
to 1995.
James E. Lindsay has served as President of the Company's Engine
Systems Company subsidiary since 1994. He also served as a Senior Vice President
of the Company from 1994 to August 1996 and as Senior Vice President Marketing
of MK Engine Systems Company, Inc. (formerly Arrowsmith) from 1989 to 1994.
Prior thereto, from 1978 to 1989, Mr. Lindsay served in various engineering and
marketing capacities with the Electro-Motive Division of General Motors
Corporation (locomotive manufacturing).
21
<PAGE> 23
Thomas P. Lyons has served as Vice President & Treasurer of the Company
since February 1997, having previously served as Treasurer of the Company since
August 1996. Prior thereto, Mr. Lyons served as the Company's Project Finance
Manager from September 1994 to July 1996 and its Senior Financial Analyst from
June 1994 to September 1994.
Jeffrey A. Plut has served as Vice President, Corporate Development of
the Company since October 1998, previously having served as Vice President of
Finance and Administration for the Company's Locomotive Group since October
1997. Prior thereto, Mr. Plut served as Vice President and Controller of the
Company's Motor Coils Manufacturing Company subsidiary from December 1994 to
October 1997. Prior thereto, Mr. Plut was employed at the public accounting firm
of Deloitte and Touche LLP for four years.
Gerald M. Rowe has served as President of the Company's MPI de Mexico
S.A. de C.V. subsidiary since October 1998. He previously served as Vice
President, Corporate Development of MotivePower Industries since December 1997.
Prior thereto, Mr. Rowe held various executive positions with Valeo S.A.
(automotive parts) from 1988 to 1997. Prior thereto, from 1983 to 1988, he
served as Manager-Product Planning for Firestone Tire and Rubber Company
(manufacturer of tires and automotive parts).
Scott E. Wahlstrom has served as Vice President, Human Resources and
Administration of the Company since August 1996. Prior thereto, he served as the
Company's Corporate Director, Human Resources from August 1995 to August 1996
and as its Corporate Manager, Human Resources from 1994 to August 1995. He
previously served as Manager of International Compensation at Morrison Knudsen
(engineering and construction) from 1992 to 1994. In addition, from 1991 to
1992, Mr. Wahlstrom served as Senior Analyst at Walt Disney Company
(entertainment). Prior thereto, Mr. Wahlstrom was employed at the public
accounting firm of Deloitte Haskins and Sells.
Timothy R. Wesley has served as Vice President, Investor and Public
Relations of the Company since August 1996. Prior thereto, he served as the
Company's Director, Investor and Public Relations from February 1995 to August
1996. Previously, Mr. Wesley served as Director, Investor and Public Relations
from 1993 to February 1995 and as Public Relations Manager from 1992 to 1993 at
Michael Baker Corporation (engineering and construction).
Fred M. Young Jr. has served as President of Young Radiator Company
since 1983 and was the principal owner of Young Radiator Company until which
time it was acquired by the Company in November 1998.
COMPENSATION
DIRECTOR COMPENSATION
Effective July 1, 1996, the Company pays each director who is not a
full-time employee of the Company $12,000 per year for his services as a
director. In addition, each director is entitled to receive $1,000 for each
meeting of the Board attended by such director, and $1,000 for each Committee
meeting attended by a director that serves on either the Nominating and
Corporate Governance Committee, Compensation and Management Development
Committee, Audit and
22
<PAGE> 24
Corporate Responsibility Committee, or Executive and Finance Committee. In
addition, each Committee Chairman receives $1,000 annually for serving as the
Chairman. All directors are reimbursed for their out-of-pocket expenses incurred
in connection with attendance at meetings of, and other activities relating to
serving on, the Board or any Board Committee and receive compensation of $1,000
per day plus out-of-pocket expenses for performing business functions at the
request of the Chairman or Chief Executive Officer.
In addition, the Company adopted a Stock Option Plan for Non-Employee
Directors to encourage the highest level of performance for members of the Board
of Directors who are not employees of the Company, by providing such directors
with a proprietary interest in the financial success of the Company. Under the
Plan, each non-employee director is entitled to receive options to purchase
12,000 shares of the Company's Common Stock upon his election to the Board at an
exercise price equal to the average of the high and low price of the stock
traded on the date awarded and 2,000 options to be awarded at the average of the
high and low price of the stock traded on January 2 of each year. During 1997,
the Company engaged a consultant to benchmark the compensation of the board of
directors to similar size companies within the industry. The result of the study
showed that the Board's compensation was in the range paid by similar size
companies within the manufacturing sector. As a result of the study, the Board
resolved that beginning in 1998 it would cease the practice of discounting
initial options by 50%and increase the annual grant of options from 1,500 to
2,000.
EXECUTIVE COMPENSATION
CASH COMPENSATION. The following table describes the compensation paid
by the Company or its subsidiaries to (i) the individual serving as the
Company's Chief Executive Officer for the Company's fiscal year ending as of
December 31, 1998; and (ii) the four most highly compensated key employees or
officers of the Company for the Company's fiscal year ending as of December 31,
1998.
Persons identified under "Information Concerning Executive Officers"
are deemed to be executive officers for purposes of the disclosure under
"Executive Compensation."
23
<PAGE> 25
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-------------------------------------
LONG TERM COMPENSATION
------------------------- -----------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- ------------------------- ------- ------------
OTHER RESTRICTED ALL
ANNUAL STOCK OPTIONS/ LTIP OTHER
SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
NAME AND POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ---------------------------- ---- ------ ----- ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael A. Wolf 1998 406,890 0(1) 0(2) 0(7) 0 -- 0
President & CEO 1997 380,961 424,875(4) 212,438(5) 0 0 -- 7,330(3)
1996 173,077 100,000(6) 0 575,000(7) 400,000(8) -- 4,130(3)
John C. Pope 1998 384,538 0(1) 0(2) 0(10) 0 -- 0
Chairman 1997 360,067 396,550(4) 198,275(9) 0 300,000(12) 203,125(10) 3,200(11)
1996 336,539 0(1) 0(1) 0 0 -- 0(1)
Joseph S. Crawford Jr. 1998 227,365 0(1) 0(2) 0 20,000(13) -- 0
Executive V.P. and 1997 208,655 160,650(4) 80,325(5) 0 50,000(14) -- 3,200(11)
Chief Operating Officer 1996 200,000 200,000(15) 0 0 50,000(16) -- 0(1)
William F. Fabrizio 1998 196,500 0(1) 0(2) 0 0 -- 0
Senior Vice President 1997 183,021 93,500(4) 46,750(5) 0 25,000(14) -- 69,579(17)
& CFO 1996 17,308 50,000(18) 0 0 75,000(19) -- 0(1)
TO BE DETERMINED 1998 -- -- -- -- -- -- --
1997 -- -- -- -- -- -- --
1996 -- -- -- -- -- -- --
</TABLE>
(1) This amount represents payments made in February 1999 under the Company's
Executive Incentive Plan for the fiscal year ended December 31, 1998 based on
the performance of the Company and the participant during 1998 versus the
quantifiable measures established in the beginning of the year, part of which
was deferred by the participants into Company stock as part of the Company's
deferred compensation program. THE BOARD OF DIRECTORS HAS SCHEDULED A MEETING
FOR FEBRUARY 15, 1999 TO CONSIDER THE AWARD OF BONUSES UNDER THE EXECUTIVE
INCENTIVE PLAN FOR SERVICES PERFORMED BY EXECUTIVES IN 1998. IF BONUSES ARE
AWARDED, THEY WOULD BE SHOWN IN THE DEFINITIVE PROXY STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
(2) This amount represents an additional discretionary bonus the Board approved
under the Company's Executive Incentive Plan. This was awarded on a
discretionary basis due to the extraordinary performance of the Company during
1998 and such award was deferred into Company stock as part of the Company's
deferred compensation program. THE BOARD OF DIRECTORS HAS SCHEDULED A MEETING
FOR FEBRUARY 15, 1999 TO CONSIDER THE AWARD OF BONUSES UNDER THE EXECUTIVE
INCENTIVE PLAN FOR SERVICES PERFORMED BY EXECUTIVES IN 1998. IF BONUSES ARE
AWARDED, THEY WOULD BE SHOWN IN THE DEFINITIVE PROXY STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
24
<PAGE> 26
(3) The amount shown for 1998 and 1997 represents Company contributions of
$3,200 to the 401(k) savings plan and $4,130 for the payment of annual insurance
premiums for term life insurance. The amount shown for 1997 is for the payment
of annual insurance premiums for term life insurance.
(4) This amount represents payments made in February 1998 under the Company's
Executive Incentive Plan for the fiscal year ended December 31, 1997 based on
the performance of the Company and the participant during 1997 versus the
quantifiable measures established in the beginning of the year, part of which
was deferred by the participants into Company stock as part of the Company's
deferred compensation program.
(5) This amount represents an additional discretionary bonus the Board approved
in February 1998 under the Company's Executive Incentive Plan. This was awarded
on a discretionary basis due to the extraordinary performance of the Company
during 1997 and such award was deferred into Company stock as part of the
Company's deferred compensation program.
(6) Under the terms of his employment agreement dated July 1, 1996, Mr. Wolf
received a one-time lump sum bonus of $100,000.
(7) Under the terms of Mr. Wolf's employment agreement dated July 1, 1996 and
amendments thereto, Mr. Wolf received 100,000 shares of common stock restricted
as to their ability to be sold. The $575,000 in 1996 represents the value as of
the date of grant ($5.75 per share) of 100,000 shares of restricted stock which
had a fair market value of $3,219,000 as of December 31, 1998. The restrictions
will lapse at the close of business on June 30, 2001, so long as Mr. Wolf is
still in the employ of the Company on that date, or upon the earlier occurrence
of certain change of control events. If the Company meets certain performance
goals relating to achievement of earnings per share targets in 1998 (which have
been met) and 1999, the Company will accelerate the restrictions to lapse on or
before June 30, 1999 for 50,000 shares and June 30, 2000 for 50,000 shares. See
"Employment Agreements." Dividends would be paid on the restricted stock to the
same extent paid on the Company's common stock.
(8) Mr. Wolf was granted 400,000 SARs on May 13, 1996 with a grant price of
$5.25 per share. The SARs vest in 20% increments with the first 20% having
become exercisable on July 1, 1997 and each remaining 20% increment to become
exercisable on July 1 of each of the subsequent four years. As permitted under
the terms of the original grant of SARs, on October 31, 1996, the Company (i)
limited the price at which the SARs can be exercised to $7.78 per share (which
was the average of the high and low prices at which the Company's common stock
was traded on October 31, 1996) and (ii) issued an equivalent number of
non-qualified stock options on October 31, 1996 at the same price and subject to
the same vesting schedule, effectively converting the SARs to stock options. If
the Company meets certain performance goals relating to achievement of earnings
per share targets in 1998 (which have been met) and 1999, the Company will
accelerate by one year the time of vesting of the awarded stock options exercise
dates for 240,000 common shares, with the options for 120,000 shares to vest on
July 1, 1999 and the options for the remaining 120,000 shares to vest on July 1,
2000.
25
<PAGE> 27
(9) This amount represents payments made in February 1998 under the Company's
Executive Incentive Plan for the fiscal year ended December 31, 1997 based on
the performance of the Company and Mr. Pope's performance during 1997 versus the
quantifiable measures established in the beginning of the year. The amount was
deferred into the Company's deferred compensation plan under which he elected
Company stock.
(10) Under the terms of Mr. Pope's employment agreement dated December 29, 1995,
Mr. Pope was granted 50,000 shares (grant date value $3.81 per share) of common
stock restricted as to their ability to be sold. The restrictions lapsed on
25,000 shares on January 1, 1997 and as a result Mr. Pope was deemed to have
received $203,125 in compensation. The remaining 25,000 shares of restricted
stock had a fair market value on December 31, 1998 of $804,750. The restrictions
lapse on these remaining shares on January 1, 2007 if the Chairman is still in
the employ of the Company or earlier upon the Chairman's termination of
employment with the Company other than for cause or the occurrence of certain
change of control events. Dividends would be paid on the Restricted Stock to the
same extent paid on the Company's common stock.
(11) This amount represents the Company's contribution to the 401(k) savings
plan.
(12) Mr. Pope was granted SARs at a grant price of $3.81 per share on
December 29, 1995 with respect to 300,000 shares (190,000 shares of which were
awarded under the Company's Stock Incentive Plan and the balance outside of such
plan). The SARs with respect to 150,000 shares became exercisable on December
29, 1996. The SARs with respect to the remaining 150,000 shares became
exercisable on December 29, 1997. On March 25, 1997 the Compensation and
Management Development Committee of the Board of Directors and Mr. Pope agreed
(i) to limit the price at which the SARs can be exercised to $10.72 (which was
the average of the high and low prices at which the Company's Common Stock was
traded on March 25, 1997) and (ii) that the Company would grant to Mr. Pope an
equivalent number of non-qualified stock options at an exercise price of $10.72
and subject to the same vesting schedule, effectively converting the SARs to
stock options.
(13) The options shown are options to purchase the Company's common stock at an
exercise price of $23.9063 per share. These are non-qualified options granted
under the Company's Stock Incentive Plan and will become exercisable with
respect to 25% of the shares in equal increments on August 28, 1999, August 28,
2000, August 28, 2001 and August 28, 2002 unless earlier terminated. These
options terminate August 28, 2008, subject to earlier termination upon cessation
of employment with the Company.
(14) The options shown are options to purchase the Company's common stock at an
exercise price of $10.75 per share. These are non-qualified options granted
under the Company's Stock Incentive Plan and have become exercisable with
respect to 50% of the shares and will become exercisable with respect to the
balance of the shares in equal increments on February 10, 2000, and February 10,
2001, unless earlier terminated. These options terminate February 10, 2007,
subject to earlier termination upon cessation of employment with the Company.
(15) The amount shown in this column represents a bonus paid pursuant to a
retention program adopted by the Company in an effort to maintain the then
current management team in the face of uncertainties created by its efforts
during 1995 to sell the Company.
26
<PAGE> 28
(16) The options shown are options to purchase the Company's common stock at an
exercise price of $5 per share. These options were granted under the Company's
Stock Incentive Plan and have become exercisable with respect to 50% of the
shares and will become exercisable with respect to the balance of the shares in
equal increments on March 31, 1999 and March 31, 2000 unless earlier terminated.
These options terminate April 10, 2006, subject to earlier termination upon
cessation of employment with the Company.
(17) This amount represents $3,053 for the Company's contribution to the 401(k)
savings plan and $66,526 relating to Company paid relocation expenses.
(18) This amount represented a signing bonus paid to Mr. Fabrizio when he joined
the Company in November 1996.
(19) The options shown are options to purchase the Company's common stock at an
exercise price of $7.75 per share. These are non-qualified options granted under
the Company's Stock Incentive Plan and have become exercisable with respect to
50% of the shares and will become exercisable with respect to the balance of the
shares in equal increments on October 29, 1998, and October 29, 2000, unless
earlier terminated. These options terminate October 29, 2006, subject to earlier
termination upon cessation of employment with the Company.
27
<PAGE> 29
OPTION/SAR AWARDS. The following table sets forth information concerning options
to purchase the Company's Common Stock or SARs with respect to the Company's
Common Stock granted to named executives in 1998.
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN FISCAL YEAR 1998
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
- -------------------------------------------------------------------------------------------- ---------------------------
% OF TOTAL
OPTIONS/
NUMBER OF SARS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
NAME OPTION/SARS IN FISCAL PRICE EXPIRATION
GRANTED (#)(1) YEAR ($/SH) DATE 5% ($) 10% ($)
- -------------------------------------------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph S. Crawford Jr. 20,000 7.11% $23.90 8/28/08 300,612 761,809
</TABLE>
(1) See the notes to the Summary Compensation Table above for a description
of the terms of the options/SARs listed in this table.
(2) The potential realizable value shown is calculated based upon
appreciation of the Common Stock issuable under options, calculated over the
full term of the options assuming 5% and 10% annual appreciation in the fair
market value of the Company's Common Stock from the date of grant, net of the
exercise price of the options.
28
<PAGE> 30
OPTION/SAR VALUES. The following table sets forth information concerning the
options and SARs held or exercised by named executives.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1998
AND FY-END OPTION/SAR VALUES
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR END (#)(1) FISCAL YEAR END ($)(1)
----------------------------------- -------------------------------
SHARES
ACQUIRED
ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
(#) ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John C. Pope 0 0 300,000 0 6,459,000 0
Michael A. Wolf 0 202,500(2) 160,000 24,000 3,915,200 5,872,800
Joseph S. Crawford Jr. 0 0 116,000 70,000 2,257,125 1,385,624
William F. Fabrizio 0 0 50,000 50,000 1,187,500 1,187,500
</TABLE>
(1) The information is presented as of December 31, 1998. See the notes to
the "Summary Compensation Table" above for a description of the terms of the
options listed in this table.
(2) Represents amounts deposited in a deferred compensation plan in which
Mr. Wolf elected solely Company stock upon exercise of a SAR. See Note 8 to the
"Summary Compensation Table" for a description of this transaction.
EMPLOYMENT AGREEMENTS. Effective as of December 29, 1995, the Company
entered into an employment agreement with John C. Pope for a term of two years
commencing January 1, 1996, subject to automatic one-year extensions (unless
notice of termination is given), under which Mr. Pope agreed to serve as
Non-Executive Chairman of the Board of the Company. In December 1997, the
parties amended the agreement. Under the terms of his employment agreement, Mr.
Pope will be expected to devote on average no more than three days per week to
the business and affairs of the Company. The agreement provides for payment to
Mr. Pope of a minimum annual base salary of $350,000 and the provision of a
secretary for a maximum of 25 hours per week. The agreement also provides for a
restricted stock award to him under the Company's Stock Incentive Plan of 50,000
shares of the Company's Common Stock. The sale restrictions lapsed on 25,000 of
the shares on January 1, 1997, and will lapse on the remaining 25,000 shares on
January 1, 2007, so long as the Chairman is still in the employ of the Company
on that date, or upon the earlier occurrence of certain change in control
events, or upon the Chairman's earlier termination of employment with the
Company other than for cause. The agreement also provides for the following in
the event that the Chairman's employment is terminated upon the occurrence of
certain change of control events or other than for cause: i) a lump sum payment
equal to two times the sum of a) the Chairman's annual base salary, and b) the
amount of the Chairman's annual bonus compensation; and ii) for a period of two
years after the Chairman's employment is terminated, the Corporation shall
provide Chairman with health insurance, a secretary and reimbursement of certain
business expenses.
29
<PAGE> 31
Effective as of July 1, 1996, the Company entered into an employment
agreement with Michael A. Wolf for a term of two years commencing July 1, 1996,
subject to automatic two year extensions (unless notice of termination is
given), under which Mr. Wolf has agreed to serve as President and Chief
Executive Officer of the Company. In February 1998, the parties amended the
agreement. The agreement provides for payment to Mr. Wolf of a minimum annual
base salary of $375,000. The agreement also provides for a restricted stock
award to him under the Company's Stock Incentive Plan of 100,000 shares of the
Company's Common Stock, with the sale restrictions to lapse as to all shares at
the close of business on June 30, 2001 or earlier if certain performance
thresholds are met (See NOTE 7 to "Summary Compensation Table" for a description
of restricted stock), so long as Mr. Wolf is still in the employ of the Company
or upon the earlier occurrence of certain change of control events or upon Mr.
Wolf's earlier termination of employment with the Company for other than cause.
In addition, Mr. Wolf received SARs in respect of 400,000 shares of the
Company's Common Stock. (SEE NOTE 8 to "Summary Compensation Table" for a
description of such SARs.) The agreement also provides for the following in the
event that the Chief Executive Officer's employment is terminated upon the
occurrence of certain change of control events or other than for cause: (i) a
lump sum payment in cash or stock equal to two times the sum of a) the Chief
Executive Officer's annual base salary, and b) the amount of the Chief Executive
Officer's annual bonus compensation; (ii) for a period of two years after the
Chief Executive Officer's with health insurance and reimbursement of certain
business expenses; and (iii) a relocation fee in the amount of $50,000 less
$10,000 for each full year of employment with the Company. The agreement also
contains a non-competition provision which generally restricts Mr. Wolf from
competing with the Company for two years following the termination of his
employment from the Company.
The Company may also enter into employment agreements with other
executive officers of the Company from time to time.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, Lee B. Foster II, Nicholas J. Stanley and James P. Miscoll
served as the Compensation and Management Development Committee. There are no
interlocking relationships, as defined in the regulation of the Securities &
Exchange Commission involving any of these individuals.
REPORT OF THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
The Compensation and Management Development Committee has the overall
responsibility to review and monitor executive compensation for the top 50
highest-impact ("key managers") positions and to review and administer the total
compensation of the 10 highest-paid positions of the Company. This includes
administration of the Executive Incentive Plan, a merit appraisal program for
key management and the Stock Incentive Plan. No awards under these plans can be
made without the approval and authorization of the Compensation and Management
Development Committee. In addition, the Compensation and Management Development
Committee consults with the Company's management on a regular basis regarding
succession planning, the Company's employee insurance programs, the Company's
401(k) plan savings, compensation policies, deferred compensation, sales
incentive plans and other employee-related benefits.
30
<PAGE> 32
PHILOSOPHY. The Company's policies on executive compensation are
designed to (i) provide compensation to employees at such levels as will enable
the Company to attract and retain employees of the highest caliber, (ii)
compensate employees in a "pay for performance" manner best calculated to
recognize individual, group and subsidiary company performances, and (iii) seek
to align the interests of the employees with the interests of the Company's
stockholders.
COMPONENTS OF EXECUTIVE COMPENSATION. Executive compensation includes
base salary, benefits and incentive compensation in the form of awards of stock,
stock options, stock appreciation rights and cash bonuses, as fixed pursuant to
certain plans or employment agreements. Through the compensation plans described
below, the Company seeks to reward its key management for the Company's "pay for
performance" compensation linked to stockholder value.
SALARY AND MERIT APPRAISAL PLAN. The Company conducts formal annual
performance and career development reviews under a formal merit appraisal
program. During 1998 such reviews were conducted for all executive officers and
salary adjustments were made in accordance with these reviews. During the 1999
fiscal year, key managers will be considered for salary or wage adjustment based
on performance, with the aggregate amount of base salary adjustments to be
limited to 3% over 1998 levels.
EXECUTIVE INCENTIVE PLAN. During 1998, the Company had in effect an
Executive Incentive Plan (the "Plan") which had been approved by the
Compensation and Management Development Committee of the Board of Directors.
Under the Plan, up to 50 key senior management employees are eligible to share
in a cash award funding pool determined by the Compensation and Management
Development Committee not to exceed 12% of the Company's operating income for
the year. The Plan provides that the Compensation and Management Development
Committee is to establish minimum threshold levels of performance before any
incentives are paid. These threshold levels are determined by a mix of financial
results, principally earnings per share and the net change in economic value
added. For 1998, no bonuses could be paid under the Plan unless the Company
achieved its minimum thresholds of performance which was established for 1998 by
the Compensation Committee to be a minimum earnings per share level of $1.32 per
share on a basic basis and $1.25 per share on a diluted basis. The minimum
threshold level for economic value added for 1998 was established to be a net
increase of $3.5 million. The Company's actual performance for 1998 exceeded the
minimum threshold levels which allowed for the Plan to be fully funded. Once the
Plan received full funding, the subsidiaries, group and individuals each were
measured by their actual performance versus the quantifiable measures
established at the beginning of the Plan year.
The Board of Directors has scheduled a meeting for February 15, 1999 to
consider the award of bonuses under the Executive Incentive Plan for services
performed by executives in 1998 and to establish plan thresholds for 1999 the
Plan year.
STOCK INCENTIVE PLAN. The Company's Stock Incentive Plan ("Stock
Incentive Plan"), provides for awards of incentive stock options, non-qualified
stock options, stock appreciation rights, restricted stock awards, performance
share awards, phantom stock units and similar awards to key management personnel
and thereby provide additional incentives for such persons to devote themselves
to the maximum extent practicable to the business of the Company. The Stock
Incentive
31
<PAGE> 33
Plan is also intended to aid in attracting persons of outstanding ability to
enter and remain in the employ of the Company.
During 1998, non-qualified stock options were awarded to specific key
managers based on: (i) the salary ranges applicable to such officers and
employees at the time of the award; and (ii) various subjective factors such as
the executive's responsibilities, individual performance and anticipated
contribution to the Company's performance.
SALES INCENTIVE PLAN. During 1998, the Compensation and Management
Development Committee approved various sales incentive plans designed to
compensate sales employees for achieving sales levels above certain thresholds.
The sales levels for payouts under the plans were consistent with the Company's
planned growth requirements, and total subsidiary sales goals were reached
before any individual payouts were made.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. On July 1, 1996, Michael
A. Wolf became the President and Chief Executive Officer of the Company. Mr.
Wolf's compensation during 1996 was fixed pursuant to the terms of an employment
agreement he entered into with the Company (see "Executive Compensation
Employment Agreements"). This employment agreement was negotiated on an
arms-length basis by the Company's Chairman and Mr. Wolf. The Compensation and
Management Development Committee consulted with an executive compensation
consulting firm, before entering into negotiations with Mr. Wolf. The
Compensation and Management Development Committee has since engaged a
compensation consultant to benchmark the compensation levels for executives for
similar sized companies. The results of the study concluded that the
compensation paid to Mr. Wolf is comparable to other executives in similar sized
companies.
DEDUCTIBILITY OF COMPENSATION. The Internal Revenue Service, under
Section 162(m) of the Revenue Code, will generally deny the deduction of
compensation paid to certain executives to the extent such compensation exceeds
$1 million, subject to an exception for compensation that meets certain
"performance-based" requirements. Whether the Section 162(m) limitation with
respect to an executive will be exceeded and whether the Company's deductions
for compensation paid in excess of the $1 million cap will be denied will depend
upon the resolution of various factual and legal issues that cannot be resolved
at this time. As to other compensation, while it is not expected that
compensation to executives of the Company will exceed the Section 162(m)
limitation in the foreseeable future (and no officer of the Company received
compensation in 1997 which resulted under Section 162(m) in the
non-deductibility of such compensation to the Company), various relevant
considerations will be reviewed from time to time, taking into account the
interests of the Company and its stockholders, in determining whether to
endeavor to cause such compensation to be exempt from the Section 162(m)
limitation.
SUBMISSION OF REPORT. This report is submitted by the members of the
Compensation and Management Development Committee, Lee B. Foster II, Nicholas J.
Stanley and James P. Miscoll.
32
<PAGE> 34
PERFORMANCE INFORMATION
Set forth in the table below is a comparison of the total stockholder
return (annual change in share price plus dividends paid, assuming reinvestment
of dividends when paid) assuming an investment of $100 on the starting date for
the period shown for the Company, the Russell 2000 Index (a broad equity market
index of small cap companies which includes the stock of companies traded on the
New York Stock Exchange) and a peer group consisting of L.B. Foster Company,
Johnstown America Industries, Inc., ABC Rail Products Corporation, Greenbrier
Corporation, Harmon Industries, Inc. and Westinghouse Air Brake Company, the
business of each of which includes the manufacture of products for the rail
industry. The peer group results have been weighted based on the constituents'
respective market capitalizations, as required by the rules of the Securities
and Exchange Commission, and in the case of two companies reflects opening of
trading on July 14, 1994 and June 16, 1995, respectively. The Russell 2000 Index
reflects results from April 30, 1994. Except as noted, the return shown in the
table is based on the percentage change from April 26, 1994 (the date of the
Company's commencement of its initial public offering) to December 31, 1994,
1995, 1996, 1997 and 1998.
<TABLE>
<CAPTION>
MotivePower Industries Inc (MPO)
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------------
4/26/94 12/94 12/95 12/96 12/97 12/98
<S> <C> <C> <C> <C> <C> <C>
MOTIVEPOWER INDUSTRIES, INC. 100 67 24 50 147 204
PEER GROUP 100 90 67 69 117 114
RUSSELL 2000 100 101 130 151 185 184
</TABLE>
SECURITY OWNERSHIP
As of December 31, 1998, there were 17,774,093 shares of the Company's
Common Stock issued and outstanding. The following table sets forth the number
and percentage of the Company's Common Stock known by management of the Company
to be beneficially owned as of December 31, 1998 by (i) all stockholders who own
5% or more of the Company's Common Stock, (ii) all directors of the Company,
(iii) each current or former executive officer included in the Summary
Compensation Table and (iv) all directors and executive officers of the Company
as a group. Unless stated otherwise, each person so named exercises sole voting
and investment power as to the shares of Common Stock so indicated. Persons
identified as key employees under "Information Concerning Executive Officers"
are deemed to be executive officers for purposes of the disclosure under
"Security Ownership."
33
<PAGE> 35
<TABLE>
<CAPTION>
Amount and
Name and Address of Nature of Beneficial Percent of
Beneficial Owner Ownership(1) Shares Outstanding
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Chilton Investment Partners, L.P.(2) 1,847,000 10.4%
Pilgram Baxter & Associates, Ltd.(3) 1,572,000 8.8%
Credit Suisse First Boston Inc.(4) 1,411,174 7.9%
Michael A. Wolf(6) 531,389 3.0%
John C. Pope(5) 528,581 3.0%
Joseph S. Crawford Jr.(7) 154,070 *
Gilbert E. Carmichael(8) 114,257 *
William F. Fabrizio(9) 78,974 *
James P. Miscoll(10) 17,666 *
Lee B. Foster II(11) 12,666 *
Nicholas J. Stanley(12) 6,866 *
Ernesto Fernandez Hurtado(13) 9,666 *
All Directors and Executive Officers as a Group(14)
</TABLE>
* Indicates that the percentage of shares beneficially owned does not exceed 1%
of the class.
(1) For purposes of this table, shares are considered "beneficially" owned
if the person directly or indirectly has the sole or shared power to vote or
direct the voting of the securities or the sole or shared power to dispose of or
direct the disposition of the securities. A person is also considered to
beneficially own shares that such person has the right to acquire within 60
days, and options exercisable within such period are referred to herein as
"currently exercisable."
(2) The address of Chilton Investment Partners, L.P. is 320 Park Avenue,
22nd Floor, New York, NY 10022. These shares are owned of record by Chilton
Investment Partners, L.P.
(3) The address of Pilgram Baxter & Associates, Ltd. is 823 Duportail Road,
Wayne, PA 19087. The shares are beneficially owned of record by Pilgram Baxter &
Associates, Ltd.
(4) The address of Credit Suisse First Boston Inc. is 11 Madison Avenue,
Fourth Floor, New York, NY 10010. These shares are owned of record by Credit
Suisse First Boston Inc.
(5) The shares beneficially owned by Mr. Pope consist of 63,471 shares
owned of record by him or held in a 401(k) plan and of which he is the
beneficiary; and 300,000 shares issuable to him upon the exercise of a currently
exercisable option at an exercise price of $10.72 per share, which option
expires on December 29, 2005; and 165,110 shares held in a deferred compensation
plan as to which he bears the economic risk of ownership.
(6) The shares beneficially owned by Mr. Wolf consist of 100,198 shares
owned of record by him or held in a 401(k) plan and of which he is the
beneficiary; 109,700 shares held in a personal revocable trust; 15,000 shares
held in an IRA account; and 104,200 shares held in a personal revocable trust of
his spouse. Mr. Wolf also has 160,000 shares issuable to him upon the exercise
of a currently exercisable option at an exercise price of $7.78125, which option
expires on May 2, 2006; and 42,291 shares held in a deferred compensation plan
as to which he bears the economic risk of ownership. The options were awarded to
Mr. Wolf under the Company's Stock Incentive Plan.
34
<PAGE> 36
(7) The shares beneficially owned by Mr. Crawford consist of 20,645 shares
owned of record by him or held in a 401(k) plan and of which he is the
beneficiary; 12,500 shares issuable to him upon the exercise of a currently
exercisable option at an exercise price of $5 per share, which option expires on
April 10, 2006; 41,000 shares issuable to him upon the exercise of a currently
exercisable option at an exercise price of $10.13 per share, which option
expires on November 29, 2004; 50,000 shares issuable to him upon the exercise of
a currently exercisable option at an exercise price of $16 per share, which
option expires on April 26, 2004; 25,000 shares issuable to him upon the
exercise of a currently exercisable option at an exercise price of $10.75 per
share, which option expires on February 10, 2007; and 4,925 shares held in a
deferred compensation plan as to which he bears the economic risk of ownership.
The options were awarded to Mr. Crawford under the Company's Stock Incentive
Plan.
(8) The shares beneficially owned by Mr. Carmichael consist of 5,591 shares
owned of record by him or held in a 401(k) plan and of which he is the
beneficiary; 20,000 shares issuable to him upon the exercise of a currently
exercisable option at an exercise price of $3.81 per share, which option expires
on March 31, 1999; 40,000 shares issuable to him upon the exercise of a
currently exercisable option at an exercise price of $5.38 per share, which
option expires on June 12, 2005; and 40,000 shares issuable to him upon the
exercise of a currently exercisable option at an exercise price of $16 per
share, which option expires on April 26, 2004. These options were awarded to Mr.
Carmichael under the Company's Stock Incentive Plan. In addition, Mr. Carmichael
was awarded options under the Company's Stock Option Plan for Non-Employee
Directors, of which 8,000 shares are currently exercisable at an exercise price
of $5.44 per share, which option expires April 1, 2007; and 666 shares are
currently exercisable at an exercise price of $24.34, which option expires
January 2, 2008.
(9) The shares beneficially owned by Mr. Fabrizio consist of 27,069 shares
owned of record by him or held in a 401(k) plan and of which he is the
beneficiary; 12,500 shares issuable to him upon the exercise of a currently
exercisable option at an exercise price of $10.75 per share, which option
expires on February 10, 2007; 37,500 shares issuable to him upon the exercise of
a currently exercisable option at an exercise price of $7.75, which option
expires on October 29, 2006; and 1,905 shares held in a deferred compensation
plan as to which he bears the economic risk of ownership. The options were
awarded to Mr. Fabrizio under the Company's Stock Incentive Plan.
(10) The shares beneficially owned by Mr. Miscoll consist of 12,000 shares
issuable to him upon the exercise of an option awarded to him under the
Company's Stock Option Plan for Non-Employee Directors at an exercise price of
$4.75 per share, which option is currently exercisable and expires November 10,
2004; and 1,000 shares issuable to him upon the exercise of an option awarded
under the Company's Stock Option Plan for Non-Employee Directors at an exercise
price of $7.94 per share, which option is currently exercisable and expires
January 2, 2007; and 666 shares issuable upon the exercise of an option awarded
to him under the Company's Stock Option Plan for Non-Employee Directors at an
exercise price of $24.34 per share, which option is currently exercisable
expires January 2, 2008; and 4,000 shares owned of record by the James P.
Miscoll and Ingeburg W. Miscoll Trust, James P. and Ingeburg W. Miscoll,
trustees, under which Mr. Miscoll, as trustee, shares voting and investment
power.
35
<PAGE> 37
(11) The shares beneficially owned by Mr. Foster consist of 3,000 shares
held of record by him; 8,000 shares issuable to him upon the exercise of an
option awarded to him at an exercise price of $2.84 per share, which option is
currently exercisable and expires August 22, 2006; and 1,000 shares issuable
upon the exercise of an option awarded to him at an exercise price of $7.94 per
share which option is currently exercisable and expires January 2, 2007; and 666
shares issuable to him upon the exercise of an option awarded to him under the
Company's Stock Option Plan for Non-Employee Directors at an exercise price of
$24.34 per share, which option is currently exercisable and expires January 2,
2008.
(12) The shares beneficially owned by Mr. Stanley consist of 5,200 shares
owned of record by him 1,000 shares issuable to him upon the exercise of a
currently exercisable option awarded under the Company's Stock Option Plan for
Non-Employee Directors at an exercise price of $7.94 per share, which option
expires January 2, 2007; and 666 shares issuable to him upon the exercise of an
option awarded to him under the Company's Stock Option Plan for Non-Employee
Directors at an exercise price of $24.34 per share, which option is currently
exercisable and expires January 2, 2008.
(13) The shares beneficially owned by Mr. Fernandez Hurtado consist of
8,000 shares issuable to him upon the exercise of an option awarded to him at an
exercise price of $3.63 per share, which option is currently exercisable and
expires December 19, 2006; 1,000 shares issuable to him upon the exercise of an
option awarded at an exercise price of $7.94 which option is currently
exercisable and expires February 2, 2007; and 666 shares issuable to him upon
the exercise of an option awarded to him under the Company's Stock Option Plan
for Non-Employee Directors at an exercise price of $24.34 per share, which
option is currently exercisable and expires January 2, 2008.
(14) The shares beneficially owned by all directors and executive officers
as a group include shares owned of record as well as shares issuable to the
beneficial owners upon the exercise of options awarded under either the
Company's Stock Incentive Plan or the Company's Stock Option Plan for
Non-Employee Directors, which options are exercisable currently or within 60
days. Persons who were not serving as directors or executive officers as of
February 26, 1999 are not included in this group. THE COMPANY HAS NOT YET
COMPLETED THE COMPILATION OF THIS INFORMATION.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain of its officers and persons who own more than 10%
of the Company's common stock to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Such persons
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company and written representations that no other forms are required, the
Company believes that during 1998 all Section 16(a) filing requirements
applicable to its directors, officers and 10% stockholders during 1998 were
complied with.
36
<PAGE> 38
STOCKHOLDERS' PROPOSALS
To be considered for inclusion in the Company's Proxy Statement for the
next Annual Meeting of Stockholders, stockholder proposals must be sent to the
Company (directed to the attention of Vice President, Investor and Public
Relations) at Two Gateway Center, 14th Floor, Pittsburgh, Pennsylvania 15222,
for receipt not later than January 1, 2000.
GENERAL AND OTHER MATTERS
Management knows of no matters, other than those referred to in this
Proxy Statement, which will be presented to the meeting. However, if any other
matters properly come before the meeting or any adjournment, the persons named
in the accompanying proxy will vote it in accordance with their best judgment on
such matters.
The Company will bear the expense of preparing, printing and mailing
this Proxy Statement, as well as the cost of any required solicitation. In
addition to the solicitation of proxies by use of the mails, the Company may use
regular employees, without additional compensation, to request, by telephone or
otherwise, attendance or proxies previously solicited.
UPON WRITTEN REQUEST TO THE COMPANY (DIRECTED TO THE ATTENTION OF VICE
PRESIDENT, INVESTOR AND PUBLIC RELATIONS AT TWO GATEWAY CENTER, 14TH FLOOR,
PITTSBURGH, PENNSYLVANIA 15222) BY ANY STOCKHOLDER WHOSE PROXY IS SOLICITED
HEREBY, THE COMPANY WILL FURNISH A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1998 AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, TOGETHER WITH FINANCIAL STATEMENTS AND SCHEDULES THERETO, WITHOUT
CHARGE TO THE STOCKHOLDER REQUESTING THE SAME.
By the Order of the Board of Directors
Jeannette Fisher-Garber, Secretary
Pittsburgh, Pennsylvania
March -- , 1999
37
<PAGE> 39
Appendix A
PLAN OF MERGER
MERGING
MOTIVEPOWER INDUSTRIES, INC.
(A DELAWARE CORPORATION)
INTO
MOTIVEPOWER INDUSTRIES MERGER SUBSIDIARY, INC.
(A PENNSYLVANIA CORPORATION)
RECITALS
A. MotivePower Industries, Inc. ("MotivePower-DE") is a Delaware
corporation whose shares are traded on the New York Stock Exchange ("NYSE").
B. MotivePower Industries Merger Subsidiary, Inc. ("MotivePower-PA") is
a Pennsylvania corporation and wholly-owned subsidiary of MotivePower-DE.
C. In order to allow MotivePower-DE to be governed by the corporate
laws of the state in which MotivePower-DE has its corporate headquarters and
substantial properties and business operations, MotivePower-DE has organized
MotivePower-PA for the purpose of effecting the merger of MotivePower-DE with
and into MotivePower-PA pursuant to the terms and subject to the conditions set
forth herein.
D. The parties to this Plan of Merger desire to merge into a single
corporation pursuant to Section 253 of the General Corporation Law of Delaware
and 15 Pa.C.S. Subch. 19C.
TERMS AND CONDITIONS
1. THE MERGER. At the Effective Time (as defined in Section 2),
MotivePower- DE (the "merged corporation") shall be merged (the "Merger") into
MotivePower- PA (the "surviving corporation") which shall be the surviving
corporation.
2. EFFECTIVE TIME. The Merger shall become effective (the "Effective
Time") at the close of business on ________________, 1999 or such later time as
there shall have been filed both Articles of Merger with the Department of State
of the Commonwealth of Pennsylvania and a Certificate of Merger and Ownership
with the Secretary of State of the State of Delaware.
<PAGE> 40
3. STOCKHOLDER APPROVAL. Subsequent to the approval of this Plan of
Merger by the board of directors of MotivePower-DE, MotivePower-DE shall submit
the Merger to its stockholders for their approval pursuant to Section 253(a) of
the General Corporation Law of Delaware. Pursuant to 15 Pa.C.S. (Section)
1924(b)(1)(ii), MotivePower-PA shall not be required to obtain the approval of
its initial sole shareholder.
4. TERMS AND CONDITIONS. The terms and conditions of the Merger are as
follows:
(a) The name of the surviving corporation shall be
"MotivePower Industries, Inc."
(b) The articles of incorporation of the surviving corporation
as in effect immediately prior to the Effective Time shall
continue in full force and effect as the articles of
incorporation of the surviving corporation.
(c) The bylaws of the surviving corporation as in effect
immediately prior to the Effective Time shall continue in full
force and effect as the bylaws of the surviving corporation.
(d) The directors of the surviving corporation shall continue
in office until their respective terms have expired and until
their successors shall have been elected and qualified or
until their earlier death, resignation or removal, with
Gilbert E. Carmichael, Ernesto Fernandez Hurtado and Michael
A. Wolf as Class I directors, Lee B. Foster II and James P.
Miscoll as Class II directors and [names of Directors elected
at 1999 Annual Meeting of MotivePower-DE] as Class III
directors.
(e) The officers of the surviving corporation shall continue
in office until their successors shall have been elected or
appointed or until their earlier death, resignation or
removal.
5. PRO RATA ISSUANCE OF STOCK. As more fully set forth in Sections 6
and 7, the stock of MotivePower-PA shall be issued to the holders of the stock
of MotivePower-DE on a pro rata basis on surrender of any certificates therefor.
6. CONVERSION OF STOCK. At the Effective Time:
(a) MotivePower-DE Common Stock. Each share of the Common
Stock, par value $.01 per share, of MotivePower-DE
("MotivePower-DE Common Stock") issued and outstanding
immediately prior to the Effective Time shall, without any
action
<PAGE> 41
on the part of the holder thereof, become and be converted
into one validly issued, fully paid and non-assessable share
of the Common Stock, par value $.01 per share, of
MotivePower-PA ("MotivePower-PA Common Stock"), and any and
all rights affixed to the MotivePower-DE Common Stock,
including without limitation, rights arising under that
certain Rights Agreement dated January 19, 1996 by and between
MotivePower-DE, then known as MK Rail Corporation, and
Chemical Mellon Shareholder Services, L.L.C., now known as
ChaseMellon Shareholder Services, L.L.C., as amended, will,
upon such conversion, be affixed to the MotivePower-PA Common
Stock. The shares of MotivePower-DE Common Stock so converted
shall cease to exist as such, and shall exist only as shares
of MotivePower-PA Common Stock. Each share of MotivePower-DE
Common Stock held in the treasury of MotivePower-DE shall be
converted to into one validly issued share of the
MotivePower-PA Common Stock and shall continue to be held in
the treasury of MotivePower-PA.
(b) The shares of MotivePower-PA Common Stock issued and
outstanding immediately prior to the Effective Time shall be
canceled and retired and resume the status of authorized and
unissued shares of MotivePower-PA Common Stock, and no shares
of MotivePower-PA Common Stock or other securities of
MotivePower-PA shall be issued in respect thereof.
7. STATUS OF SECURITIES AFTER EFFECTIVE TIME. No exchange of
certificates representing shares of MotivePower-DE Common Stock converted
pursuant to Section 6 shall be required, and from and after the Effective Time
and until certificates representing such MotivePower-DE Common Stock are
presented for exchange or registration of transfer, all such certificates shall
be deemed for all purposes to represent the same number of shares of
MotivePower-PA Common Stock into which they were so converted. After the
Effective Time, whenever certificates which formerly represented shares of
MotivePower-DE Common Stock are presented for exchange or registration of
transfer, MotivePower-PA shall cause to be issued in respect thereof,
certificates representing an equal number of shares of MotivePower-PA Common
Stock.
8. STOCK INCENTIVE PLAN. At the Effective Time, MotivePower-PA shall
automatically and without further action on its part adopt and assume the rights
and obligations of MotivePower-DE under the Stock Incentive Plan effective April
1, 1994, as amended, (the "Incentive Plan") as then in effect. The Incentive
Plan shall, pursuant to its terms, thereafter apply only to shares of
MotivePower-PA Common Stock. Approval of the Merger by the stockholders of
MotivePower-DE shall be deemed to be approval of the Incentive Plan by the
initial
<PAGE> 42
sole shareholder of MotivePower-PA. At the Effective Time, each right to acquire
MotivePower-DE Common Stock then outstanding under the Incentive Plan, shall,
automatically and without further action on the part of the holder thereof, be
converted into a right to acquire the same number of shares of MotivePower-PA
Common Stock under the same terms and conditions as contained under the right
outstanding under the Incentive Plan immediately prior to the Effective Time.
9. TERMINATION AND AMENDMENT. Notwithstanding stockholder approval of
the Merger, this Plan of Merger may be terminated and abandoned by the board of
directors of either constituent corporation at any time prior to the Effective
Time. The boards of directors of the constituent corporations may amend this
Plan of Merger at any time prior to the Effective Time in any fashion permitted
by applicable law.
10. STATUTORY FILINGS. Subject to the terms and conditions herein
provided, Articles of Merger, complying with the applicable provisions of the
Pennsylvania Business Corporation Law, and a Certificate of Ownership and
Merger, complying with the applicable provisions of the Delaware General
Corporation Law, shall be duly executed and filed with the Department of State
of the Commonwealth of Pennsylvania and the Secretary of State of the State of
Delaware, respectively.
11. CONDITIONS TO MERGER. Consummation of the Merger is subject to the
satisfaction of the following conditions on or before the Effective Time;
(a) STOCKHOLDER APPROVAL. The Merger shall have received the
requisite approval of the stockholders of MotivePower-DE;
(b) LISTING ON NYSE. The MotivePower-PA Common Stock to be
issued or reserved for issuance shall have been approved for
listing, upon notice of issuance, by NYSE.
The condition set forth in subparagraph (b) above may be waived in the
discretion of the Board of Directors of MotivePower-DE.
12. FURTHER ASSURANCES. MotivePower-DE shall at any time, or from time
to time, as and when requested by MotivePower-PA, or by its successors or
assigns, execute and deliver, or cause to be executed and delivered, in the name
of MotivePower-DE by its last acting officers, or by the corresponding officers
of MotivePower-PA, all such conveyances, assignments, transfers, deeds or other
instruments, and shall take or cause to be taken such further action as
MotivePower-PA, its successors and assigns, may deem necessary or desirable in
order to evidence the transfer, vesting or devolution of any property, right,
privilege or franchise or to vest or perfect in or confirm to MotivePower-PA,
its successors and assigns, title to and possession of all of the property,
rights, privileges, powers, immunities, franchises and interests of
MotivePower-DE and otherwise to carry out the intent and purposes of the Merger.
<PAGE> 43
Appendix B
ARTICLES OF INCORPORATION
OF
MOTIVEPOWER INDUSTRIES MERGER SUBSIDIARY, INC.
(A PENNSYLVANIA COMPANY)
ARTICLE 1: The name of the Company is MotivePower Industries Merger
Subsidiary, Inc.
ARTICLE 2: The address of the registered office of the Company in the
Commonwealth of Pennsylvania is Two Gateway Center, 14th Floor, Pittsburgh, PA
15222.
ARTICLE 3: The Company is incorporated under the provisions of the
Pennsylvania Business Company Law of 1988 ( the "BCL") with the purpose to
engage in any lawful act or activity for which companies may be organized under
the BCL.
ARTICLE 4:
Section 1. Authorized Capital Stock. The Company is authorized
to issue Sixty-Five Million (65,000,000) shares of capital stock, consisting of
Fifty-Five Million (55,000,000) shares of Common Stock, par value $0.01 per
share, and Ten Million (10,000,000) shares of Preferred Stock, par value $0.01
per share.
Section 2. Preferred Stock Designations and Number. The
Preferred Stock may be issued in one or more series. The Board of Directors of
the Company (the "Board") is hereby authorized to issue the shares of Preferred
Stock in such series and to fix from time to time the number of shares to be
included in any such series and the voting rights, designation, preferences,
limitations, and special rights of all shares of such series.
Section 3. Series C Junior Participating Preferred Stock..
There is hereby designated a series of Preferred Stock as "Series C Junior
Participating Preferred Stock" (the "Series C Preferred Stock") and the number
of shares constituting the Series C Preferred Stock shall be One Million Six
Hundred Thousand (1,600,000). Such number of shares may be increased or
decreased by resolution of the Board; provided, that no decrease shall reduce
the number of shares of Series C Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights, warrants or upon the
conversion of any outstanding securities issued by the Company convertible into
Series C Preferred Stock. The Series C Preferred Stock shall have the following
voting rights, preferences, limitations and other rights:
<PAGE> 44
(a) Dividends and Distributions.
(i) Subject to the rights of the holders of
any shares of any other series of Preferred Stock,
par value $0.01 per share, of the Company (or any
similar stock) ranking prior and superior to the
Series C Preferred Stock with respect to dividends,
the holders of shares of Series C Preferred Stock, in
preference to the holders of Common Stock, par value
$0.01 per share (the "Common Stock"), of the Company,
and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board out of
funds legally available for the purpose, quarterly
dividends payable in cash on the first day of March,
June, September, and December in each year (each such
date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series
C Preferred Stock, in an amount per share (rounded to
the nearest cent) equal to the greater of (a) $1.00
or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than
a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the
Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of
Series C Preferred Stock. In the event the
Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by
payment of a dividend in shares
<PAGE> 45
of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the
amount to which holders of shares of Series C
Preferred Stock were entitled immediately prior to
such event under clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after
such event and the denominator of which is the number
of shares of Common Stock that were outstanding
immediately prior to such event.
(ii) The Company shall declare a dividend or
distribution on the Series C Preferred Stock as
provided in paragraph (i) of this Section 3(a)
immediately after it declares a dividend or
distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall
have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date
and the next subsequent Quarterly Dividend Payment
Date, a dividend of $1.00 per share on the Series C
Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(iii) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series C
Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to
the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record
date for the determination of holders of shares of
Series C Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series C Preferred
Stock in an amount less than the total amount of such
dividends at the time accrued and payable on
<PAGE> 46
such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the
time outstanding. The Board may fix a record date for
the determination of holders of shares of Series C
Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which
record date shall be not more than 60 days prior to
the date fixed for the payment thereof.
(b) Voting Rights. The holders of shares of Series C
Preferred Stock shall have the following voting
rights:
(i) Subject to the provision for adjustment
hereinafter set forth, each share of Series C
Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the
shareholders of the Company. In the event the Company
shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each
such case the number of votes per share to which
holders of shares of Series C Preferred Stock were
entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of
Common Stock outstanding immediately after such event
and the denominator of which is the number of shares
of Common Stock that were outstanding immediately
prior to such event.
(ii) Except as otherwise provided herein, in
any Statement of Designations creating a series of
Preferred Stock, par value $0.01 per share, or any
similar stock, or by law, the holders of shares of
Series C Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the
Company having general voting rights shall vote
together as one class on all matters submitted to a
vote of shareholders of the Company.
<PAGE> 47
(iii) Except as set forth herein, or as
otherwise provided by law, holders of Series C
Preferred Stock shall have no special voting rights
and their consent shall not be required (except to
the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any
corporate action.
(c) Certain Restrictions.
(i) Whenever quarterly dividends or other
dividends or distributions payable on the Series C
Preferred Stock as provided in Section 3(a) above are
in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not
declared, on shares of Series C Preferred Stock
outstanding shall have been paid in full, the Company
shall not:
(A) declare or pay dividends, or
make any other distributions, on any shares of stock
ranking junior (either as to dividends or upon
liquidation, dissolution, or winding up) to the
Series C Preferred Stock;
(B) declare or pay dividends, or
make any other distributions, on any shares of stock
ranking on a parity (either as to dividends or upon
liquidation, dissolution, or winding up) with the
Series C Preferred Stock, except dividends paid
ratably on the Series C Preferred Stock and all such
parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(C) redeem or purchase or otherwise
acquire for consideration shares of any stock ranking
junior (either as to dividends or upon liquidation,
dissolution, or winding up) to the Series C Preferred
Stock, provided that the Company may at any time
redeem, purchase, or otherwise acquire shares of any
such junior stock in exchange for shares of any stock
of the Company ranking junior (either as to dividends
or
<PAGE> 48
upon dissolution, liquidation, or winding up) to the
Series C Preferred Stock; or
(D) redeem or purchase or otherwise
acquire for consideration any shares of Series C
Preferred Stock, or any shares of stock ranking on a
parity with the Series C Preferred Stock, except in
accordance with a purchase offer made in writing or
by publication (as determined by the Board) to all
holders of such shares upon such terms as the Board,
after consideration of the respective annual dividend
rates and other relative rights and preferences of
the respective series and classes, shall determine in
good faith will result in fair and equitable
treatment among the respective series or classes.
(ii) The Company shall not permit any
subsidiary of the Company to purchase or otherwise
acquire for consideration any shares of stock of the
Company unless the Company could, under subparagraph
(i) of this Section 3(a) purchase or otherwise
acquire such shares at such time and in such manner.
(d) Reacquired Shares. Any shares of Series C
Preferred Stock purchased or otherwise acquired by
the Company in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred
Stock subject to the conditions and restrictions on
issuance set forth, in this Article of Incorporation,
or in any Statement of Designations creating a series
of Preferred Stock, par value $0.01 per share, or any
similar stock or as otherwise required by law.
(e) Liquidation, Dissolution, or Winding Up. Upon any
liquidation, dissolution, or winding up of the
Company, no distribution shall be made (1) to the
holder of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution, or
winding up) to the Series C
<PAGE> 49
Preferred Stock unless, prior thereto, the holders of
shares of Series C Preferred Stock shall have
received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such
payment, provided that the holders of shares of
Series C Preferred Stock shall be entitled to receive
an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal
to 100 times the aggregate amount to be distributed
per share to holders of shares of Common Stock, or
(2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution, or winding up) with the Series C
Preferred Stock, except distributions made ratably on
the Series C Preferred Stock and all such parity
stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such
liquidation, dissolution, or winding up. In the event
the Company shall at any time declare or pay any
dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into
a greater or lesser number of shares of Common Stock,
then in each such case the aggregate amount to which
holders of shares of Series C Preferred Stock were
entitled immediately prior to such event under the
proviso in clause (1) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of
Common Stock outstanding immediately after such event
and the denominator of which is the number of shares
of Common Stock that were outstanding immediately
prior to such event.
(f) Consolidation, Merger, etc. In case the Company
shall enter into any consolidation, merger,
combination, or other transaction in which the shares
of Common Stock are exchanged for or changed into
other stock or securities, cash, and/or any other
property, then in any such case each
<PAGE> 50
share of Series C Preferred Stock shall at the same
time be similarly exchanged or changed into an amount
per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the
aggregate amount of stock, securities, cash, and/or
any other property (payable in kind), as the case may
be, into which or for which each share of Common
Stock is changed or exchanged. In the event the
Company shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into
a greater or lesser number of shares of Common Stock,
then in each such case the amount set forth in the
preceding sentence with respect to the exchange or
change of shares of Series C Preferred Stock shall be
adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of
Common Stock outstanding immediately after such event
and the denominator of which is the number of shares
of Common Stock that were outstanding immediately
prior to such event.
(g) No Redemption. The shares of Series C Preferred
Stock shall not be redeemable.
(h) Rank. The Series C Preferred Stock shall rank,
with respect to the payment of dividends and the
distribution of assets, junior to all other series of
the Company's Preferred Stock, par value $0.01 per
share.
(i) Amendment. The Article of Incorporation of the
Company shall not be amended in any manner that would
materially alter or change the powers, preferences,
or special rights of the Series C Preferred Stock so
as to affect them adversely without the affirmative
vote of the holders of at least two-thirds of the
outstanding shares of Series C Preferred Stock,
voting together as a single class.
<PAGE> 51
ARTICLE 5: The following provisions of the BCL shall not be applicable
to the Company:
(i) Section 1715 (relating to exercise of powers
generally).
(ii) Section 2538 (relating to approval of
transactions with interested shareholders).
(iii) Subchapter 25E (relating to control
transactions).
(iv) Subchapter 25F (relating to business
combinations).
(v) Subchapter 25G (relating to control-share
acquisitions).
(vi) Subchapter 25H (relating to disgorgement by
certain controlling shareholders following
attempts to acquire control).
ARTICLE 6: The shareholders of the Company shall not have the right to
cumulate their votes for the election of directors of the Company.
ARTICLE 7: The Board may make, amend, and repeal the By-Laws of the
Company. Any By-Law made by the Board under the powers conferred hereby may be
amended or repealed by the Board (except as specified in any such By-Law so made
or amended) or by the shareholders in the manner provided in the By-Laws of the
Company. Notwithstanding the foregoing and anything contained in these Articles
of Incorporation to the contrary, By-Laws 1, 3, 8, 10, 11, 12, 13, 32, 33 and 38
may not be amended or repealed by the shareholders, and no provision
inconsistent therewith may be adopted by the shareholders, without the
affirmative vote of the holders of at least 66-2/3% of the Voting Stock, voting
together as a single class. The Company may in its By-Laws confer powers upon
the Board in addition to the foregoing and in addition to the powers and
authorities expressly conferred upon the Board by applicable law. For the
purposes of this Article of Incorporation, "Voting Stock" means stock of the
Company of any class or series entitled to vote generally in the election of
Directors. Notwithstanding anything contained in this Article of Incorporation
to the contrary, the affirmative vote of the holders of at least 66-2/3% of the
Voting Stock, voting together as a single class, is required to amend or repeat
or to adopt any provision inconsistent with, this Article Seven.
ARTICLE 8: Subject to the rights of the holders of any series of
Preferred Stock:
(a) any action required or permitted to be taken by the
shareholders of the Company must be effected at a duly called annual or
<PAGE> 52
special meeting of shareholders of the Company and may not be effected
by any consent in writing of such shareholders; and
(b) special meetings of shareholders of the Company may be
called only by (i) the Chairman of the Board ("Chairman"), (ii) the
Secretary of the Company ("Secretary") within 10 calendar days after
receipt of the written request of a majority of the total number of
Directors that the Company would have if there were no vacancies
("Whole Board"), and (iii) as provided in By-Law 3.
At any annual meeting or special meeting of shareholders of the Company, only
such business will be, conducted or considered as has been brought before such
meeting in the manner provided in the By-Laws of the Company. Notwithstanding
anything contained in these Articles of Incorporation to the contrary, the
affirmative vote of at least 66-2/3% of the Voting Stock, voting together as a
single class, will be required to amend or repeal, or adopt any provision
inconsistent with, this Article Eight.
ARTICLE 9:
Section 1. Number, Election, and Terms of Directors. Subject to the
rights, if any, of the holders of any series of Preferred Stock to elect
additional Directors under circumstances specified in a Preferred Stock
Designation, the number of the Directors of the Company will not be less than
three (3) nor more than fifteen (15) and will be fixed from time to time in the
manner described in the By-Laws of the Company. The Directors, other than those
who may be elected by the holders of any series of Preferred Stock, will be
classified with respect to the time for which they severally hold office into
three classes, as nearly equal in number as possible, designated Class 1, Class
II and Class III. The Directors first appointed to Class I will hold office for
a term expiring at the annual meeting of shareholders to be held in 2000; the
Directors first appointed to Class II will hold office for a term expiring at
the annual meeting of shareholders to be held in 2001; and the Directors first
appointed to Class III will hold office for a term expiring at the annual
meeting of shareholders to be held in 2002, with the members of each class to
hold office until their successors are elected and qualified. At each succeeding
annual meeting of the shareholders of the Company, the successors of the class
of Directors whose terms expire at that meeting will be elected by plurality
vote of all votes cast at such meeting to hold office for a term expiring at the
annual meeting of shareholders held in the third year following the year of
their election. Subject to the rights, if any, of the holders of any series of
Preferred Stock to elect additional Directors under circumstances specified in
designations of rights and preferences of the Company's Preferred Stock,
Directors may be elected by the shareholders only at an annual meeting of
shareholders. Election of Directors of the Company need not be by written ballot
unless requested by the Chairman or by the holders of a majority of the Voting
Stock present in person or represented by proxy at a meeting of the shareholders
at which Directors are to be elected.
<PAGE> 53
Section 2. Nomination of Director Candidates. Advance notice of
shareholder nominations for the election of Directors must be given in the
manner provided in the By-Laws of the Company.
Section 3. Newly Created Directorship and Vacancies. Subject to the
rights, if any, of the holders of any series of Preferred Stock to elect
additional Directors under circumstances specified in designations of rights and
preferences of the Company's Preferred Stock, newly created directorships
resulting from any increase in the number of Directors and any vacancies on the
Board resulting from death, resignation, disqualification, removal, or other
cause will be filled solely by the affirmative vote of a majority of the
remaining Directors then in office, even though less than a quorum of the Board,
or by a sole remaining Director; provided, however, that at the sole option of
the Board, effected by resolution of the Board, one or more such vacancies or
newly created directorships may be filled by the shareholders at a meeting of
the shareholders called by the Board. Any Director elected in accordance with
the preceding sentence will hold office for the remainder of the full term of
the class of Directors in which the new directorship was created or the vacancy
occurred and until such Director's successor has been elected and qualified. No
decrease in the number of Directors constituting the Board may shorten the term
of any incumbent Director.
Section 4. Removal. Subject to the rights, if any, of the holders of
any series of Preferred Stock to elect additional Directors under circumstances
specified in designations of rights and preferences of the Company's Preferred
Stock, any Director may be removed from office by the shareholders only for
cause and only in the manner provided in this Section 4. At any annual meeting
or special meeting of the shareholders, the notice of which states that the
removal of a Director or Directors is among the purposes of the meeting, the
affirmative of the holders of at least 66-2/3% of the Voting Stock, voting
together as a single class, may remove such Director or Directors for cause.
Section 5. Amendment, Repeal, Etc. Notwithstanding anything contained
in these Articles of Incorporation to the contrary, the affirmative vote of at
least 66-2/3% of the Voting Stock, voting together as a single class, will be
required to amend or repeal, or adopt any provision inconsistent with, this
Article Nine.
ARTICLE 10: To the full extent permitted by the BCL or any other
applicable law currently or hereafter in effect, no Director of the Company will
be personally liable to the Company or its shareholders for or with respect to
any acts or omissions in the performance of his or her duties as a Director of
the Company. Any repeal or modification of this Article 10 will not adversely
affect any right or protection of a Director of the Company exiting prior to
such repeal or modification.
ARTICLE 11: Each person who is or was or had agreed to become a
Director or officer of the Company, and each such person who is or was serving
or who had agreed to serve at the request of the Board or an officer of the
Company as an employee or agent of the Company or as a director, officer,
employee, or agent of another
<PAGE> 54
Company, partnership, joint venture, trust or other entity, whether for profit
or not for profit (including the heirs, executors, administrators, or estate of
such person), will be indemnified by the Company to the full extent permitted by
the BCL or any other applicable law as currently or hereafter in effect and will
be entitled to advancement of expenses in connection therewith. The right of
indemnification and of advancement of expenses provided in this Article 11 (a)
will not be exclusive of any other rights to which any Person seeking
indemnification may otherwise be entitled, including without limitation pursuant
to any contract approved by a majority of the Whole Board (whether or not the
Directors approving such contract are or are to be parties to such contract or
similar contracts), and (b) will be applicable to matters otherwise within its
scope whether or not such matters arose or arise before or after the adoption of
this Article 11. Without limiting the generality of the foregoing, the Company
may adopt By-Laws, or enter into one or more agreements with any Person, which
provide for indemnification and/or advancement of expenses greater or different
than that provided in this Article 11 or the BCL. Any amendment or repeal of, or
adoption of any provision inconsistent with, this Article 11 will not adversely
affect any right or protection arising hereunder, or arising out of facts
occurring, prior to such amendment, repeat or adoption and no amendment, repeal,
or adoption, will affect the legality, validity, or enforceability of any
contract entered into or right granted prior to the effective date of such
amendment, repeal, or adoption.
ARTICLE 12:
(a) Business Combinations. Notwithstanding any other provisions of
these Articles of Incorporation, the Company shall not engage in any
Business Combination (as defined herein) with any Interested
Shareholder (as defined herein) for a period of three (3) years
following the time that such shareholder became an Interested
Shareholder, unless:
(1) prior to such time the Board approved either the Business
Combination or the transaction which resulted in the shareholder
becoming an Interested Shareholder, or
(2) upon consummation of the transaction which resulted in the
shareholder becoming an Interested Shareholder, the Interested
Shareholder owned at least 85% of the Voting Stock of the Company
outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares
owned (i) by persons who are directors and also officers and (ii)
employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or
(3) At or subsequent to such time the Business Combination is
approved by the Board and authorized at an annual or special meeting
<PAGE> 55
of shareholders, and not by written consent, by the affirmative vote of
at least 66-2/3% of the outstanding Voting Stock which is not owned by
the Interested Shareholder.
(b) The restrictions contained in this section shall not apply if:
(1) a shareholder becomes an Interested Shareholder
inadvertently and (i) as soon as practicable divests itself of
ownership of sufficient shares so that the shareholder ceases to be an
Interested Shareholder and (ii) would not, at any time within the three
(3) year period immediately prior to a Business Combination between the
Company and such shareholder, have been an Interested Shareholder but
for the inadvertent acquisition of ownership.
(2) the Business Combination is proposed prior to the
consummation or abandonment of and subsequent to the earlier of the
public announcement or the notice required hereunder of a proposed
transaction which (i) constitutes one of the transactions described in
the second sentence of this paragraph; (ii) is with or by a person who
either was not an Interested Shareholder during the previous three (3)
years or who became an Interested Shareholder with the approval of the
Company's board of directors and (iii) is approved or not opposed by a
majority of the members of the board of directors then in office (but
not less than one (1) who were directors prior to any person becoming
an Interested Shareholder during the previous three (3) years or were
recommended for election or elected to succeed such directors by a
majority of such directors. The proposed transactions referred to in
the preceding sentence are limited to (x) a merger or consolidation of
the Company (except for a merger in respect of which, pursuant to
section 1924(b) of the BCL, no vote of the shareholders of the Company
is required); (y) a sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of transactions),
whether as part of a dissolution or otherwise, of assets of the Company
or of any direct or indirect majority-owned subsidiary of the Company
(other than to any direct or indirect wholly-owned subsidiary or to the
Company) having an aggregate market value equal to 50% or more of
either that aggregate market value of all of the assets of the Company
determined on a consolidated basis or the aggregate market value of all
the outstanding stock of the Company; or (z) a proposed tender or
exchange offer for 50% or more of the outstanding Voting Stock of the
Company. The Company shall give not less then 20 days notice to all
Interested Shareholders prior to the consummation of any of the
transactions described in clauses (x) or (y) of the second sentence of
this paragraph.
(c) As used in this Article 12 only the term:
<PAGE> 56
(1) "affiliate" means a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or
is under common control with, another person.
(2) "associate," when used to indicate a relationship with any
person, means (i) any Company, partnership, unincorporated association
or other entity of which such person is a director, officer or partner
or is, directly or indirectly, the owner of 20% or more of any class of
voting stock, (ii) any trust or other estate in which such person has
at least a 20% beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, and (iii) any relative or
spouse of such person, or any relative of such spouse, who has the same
residence as such person.
(3) "Business Combination," when used in reference to the
Company and any Interested Shareholder of the Company means:
(i) any merger or consolidation of the Company or any
direct or indirect majority-owned subsidiary of the Company
with (A) the Interested Shareholder, or (B) with any other
Company, partnership, incorporated association or other entity
if the merger or consolidation is caused by the Interested
Shareholder and as a result of such merger or consolidation
subsection (a) of this section is not applicable to the
surviving entity;
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series
of transactions), except proportionately as a shareholder of
the Company, to or with the Interested Shareholder, whether as
part of a dissolution or otherwise, of assets of the Company
or of any direct or indirect majority-owned subsidiary of the
Company which assets have an aggregate market value equal to
10% or more of either the aggregate market value of all the
assets of the Company determined on a consolidated basis or
the aggregate market value of all the outstanding stock of the
Company;
(iii) any transaction which results in the issuance
or transfer by the Company or by any direct or indirect
majority-owned subsidiary of the Company of any stock of the
Company or of such subsidiary to the Interested Shareholder,
except (A) pursuant to the exercises, exchange or conversion
of securities exercisable for, exchangeable for or convertible
into stock of such Company or any such subsidiary which
securities were
<PAGE> 57
outstanding prior to the time that the Interested Shareholder
became such, (B) pursuant to a dividend or distribution paid
or made, or the exercise, exchange or conversion of securities
exercisable for, exchangeable for or convertible into stock of
the Company or any such subsidiary which security is
distributed, pro rata to all holders of a class or series of
stock of the Company subsequent to the time the Interested
Shareholder became such, (C) pursuant to an exchanged offer by
the Company to purchase stock made on the same terms to all
holders of said stock, or (D) any issuance or transfer of
stock by the Company, provided however, that in no case under
(B) - (D) above shall there be an increase in the Interested
Shareholder's proportionate share of the stock of any class or
series of the Company or of the voting stock of the Company;
(iv) any transaction involving the Company or any
direct or indirect majority-owned subsidiary of the Company
which has the effect, directly or indirectly, of increasing
the proportionate share of the stock of any class or series,
or securities convertible into the stock of any class or
series, of the Company or of any such subsidiary which is
owned by the Interested Shareholder, except as a result of
immaterial changes due to fractional share adjustments or as a
result of any purchase or redemption of any shares of stock
not caused, directly or indirectly, by the Interested
Shareholder; or
(v) any receipt by the Interested Shareholder of the
benefit, directly or indirectly (except proportionately as a
shareholder of such Company) of any loans, advances,
guarantees, pledges, or other financial benefits (other than
those expressly permitted in subparagraphs (i)-(iv) above)
provided by or through the Company or any direct or indirect
majority owned subsidiary.
(4) "control," including the term "controlling," "controlled
by" and "under common control with," means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting stock, by contract, or otherwise. A person who is the owner of
20% or more of the outstanding voting stock of any Company,
partnership, unincorporated association or other entity shall be
presumed to have control of such entity, in the absence of proof by a
preponderance of the evidence to the contrary. Notwithstanding the
foregoing, a presumption of control shall not apply where such person
holds voting stock, in good faith and not for the purpose of
<PAGE> 58
circumventing this section, as an agent, bank, broker, nominee,
custodian or trustee for one or more owners who do not individually or
as a group have control of such entity.
(5) "Interested Shareholder" means any person (other than the
Company and any direct or indirect majority-owned subsidiary of the
Company) that (i) is the owner of 15% or more of the outstanding voting
stock of the Company, or (ii) is an affiliate or associate of the
Company and was the owner of 15% or more of the outstanding voting
stock of the Company at any time within the 3-year period immediately
prior to the date on which it is sought to be determined whether such
person is an Interested Shareholder; and the affiliates and associates
of such person; provided, however, that the term "Interested
Shareholder" shall not include any person whose ownership of shares in
excess of the 15% limitation set forth herein in the result of action
taken solely by the Company provided that such person shall be an
Interested Shareholder if thereafter such person acquires additional
shares of voting stock of the Company, except as a result of further
corporate action not caused, directly or indirectly, by such person.
For the purpose of determining whether a person is an Interested
Shareholder, the voting stock of the Company deemed to be outstanding
shall include stock deemed to be owned by the person through
application of paragraph (8) of this subsection but shall not include
any other unissued stock of the Company which may be issuable pursuant
to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(6) "person" means any individual, corporation, partnership,
unincorporated association or other entity.
(7) "Stock" means, with respect to any corporation, capital
stock and, with respect to any other entity, any equity interest.
(8) "Voting Stock" means, with respect to any corporation,
stock of any class or series entitled to vote generally in the election
of directors and, with respect to any entity that is not a corporation,
any equity interest entitled to vote generally in the election of the
governing body of such entity.
(9) "owner" including the terms "own" and "owned" when used
with respect to any stock means a person that individually or with or
through any of its affiliates or associates:
(i) beneficially owns such stock, directly or
indirectly; or
<PAGE> 59
(ii) has (A) the right to acquire such stock (whether
such right is exercisable immediately or only after 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; provided,
however, that a person shall not be deemed the owner of stock
tendered pursuant to a tender or exchange offer made by such
person or any of such person's affiliates or associates until
such tendered stock is accepted for purchase or exchange; or
(B) the right to vote such stock pursuant to any agreement,
arrangement or understanding; provided, however, that a person
shall not be deemed the owner of any stock because of such
person's right to vote such stock if the agreement,
arrangement or understanding to vote such stock arises solely
from a revocable proxy or consent given in response to a proxy
or consent solicitation made to 10 or more persons; or
(iii) has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting (except voting
pursuant to a revocable proxy or consent as described in item
(B) of clause (ii) of this paragraph), or disposing of such
stock with any other person that beneficially owns, or whose
affiliates or associates beneficially own, directly or
indirectly, such stock.
ARTICLE 13: The name and address of the incorporator is:
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<PAGE> 60
MOTIVEPOWER INDUSTRIES, INC.
ANNUAL MEETING OF STOCKHOLDERS, APRIL 27, 1999
The undersigned hereby appoints Jeannette Fisher-Garber and David L. Bonvenuto,
and each with full power to act without the other, as proxies, with full power
of substitution, for and in the name of the undersigned to vote and act with
respect to all shares of common stock of MotivePower Industries, Inc. (the
"Company") standing in the name of the undersigned on February 26, 1999, or
with respect to which the undersigned is entitled to vote and act, at the
Annual Meeting of Stockholders of the Company to be held April 27, 1999 and at
any and all adjournments thereof, with all the powers the undersigned would
possess if personally present, and particularly, but without limiting the
generality of the foregoing, the matters described on the reverse side of this
Proxy. All shares represented by proxy will be voted in accordance with the
instructions, if any, given in such proxy. A stockholder may abstain from
voting on any proposal or may withhold authority to vote for any nominee(s) by
so indicating on the reverse side.
THIS PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
<PAGE> 61
The votes represented by this proxy will be voted as marked by you. However, if
you execute and return the proxy unmarked, such votes will be voted FOR all of
the proposals. Please mark each box with an "x."
The Board of Directors Recommends a Vote "For" all proposals.
1. Election of Directors: (have been nominated)
FOR Withheld Withheld for the following for all
(write the nominee's name in the
space below)
[ ] [ ]
---------------------------------
2. Approve the reincorporation of the Company as a Pennsylvania corporation.
FOR Against Abstain
[ ] [ ] [ ]
3. Ratify appointment of Deloitte & Touche LLP as independent certified public
accountants.
FOR Against Abstain
[ ] [ ] [ ]
4. In their discretion, proxies shall be authorized to vote upon such other
matters as may properly be brought before the meeting or any adjournment
thereof.
When shares are held as joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in the partnership name
by authorized person.
Dated:
--------------------------------
- --------------------------------------
Signature
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Signature if held jointly
PLEASE SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
