<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 13, 1999
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
WESTINGHOUSE AIR BRAKE COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
Delaware 3743 25-1615902
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
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1001 Air Brake Avenue
Wilmerding, Pennsylvania 15148
Telephone: (412) 825-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------
Robert J. Brooks
Chief Financial Officer and Chief Accounting Officer
1001 Air Brake Avenue
Wilmerding, Pennsylvania 15148
Telephone: (412) 825-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copies to:
<TABLE>
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Leo A. Keevican, Jr., Esq. Frederick C. Lowinger, Esq. Pasquale D. Gentile, Jr., Michael Movsovich, Esq.
David J. Hirsch, Esq. Sidley & Austin Esq. Kirkland & Ellis
Doepken Keevican & Weiss Bank One Plaza Reed Smith Shaw McClay LLP 153 East 53rd Street
58th Floor, USX Tower 10 S. Dearborn St. 435 Sixth Avenue New York, New York 10022
600 Grant Street Chicago, Illinois 60603 Pittsburgh, Pennsylvania (212) 446-4800
Pittsburgh, Pennsylvania (312) 853-7000 15219 (212) 446-4900 (fax)
15219 (312) 853-7036 (fax) (412) 288-4112
(412) 355-2600 (412) 288-3063 (fax)
(412) 355-2609 (fax)
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after the effective date of this Registration
Statement and the effective time of the merger described in this Registration
Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
under Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed under the Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED OFFERING PRICE PER SHARE AGGREGATE OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value........ 19,996,752 shares(1) $9.6875(2) $293,512,940.60(2) $81,596.60(3)
</TABLE>
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- --------------------------------------------------------------------------------
(1) Consists of (a) 17,896,368 shares of common stock, $.01 par value, of
Westinghouse Air Brake Company, issuable pursuant to the Amended and
Restated Agreement and Plan of Merger between MotivePower Industries, Inc.
and Westinghouse Air Brake upon the exchange of 27,115,710 shares of common
stock of MotivePower outstanding as of October 6, 1999 and (b) 2,100,384
shares of Westinghouse Air Brake common stock issuable in respect of
3,182,400 options of MotivePower outstanding as of October 6, 1999
converted into options of Westinghouse Air Brake pursuant to the Agreement
and Plan of Merger.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c), based on the average of the
high and low prices of the MotivePower common stock on the New York Stock
Exchange on October 6, 1999 ($9.6875). Pursuant to Rule 457(f)(1) the
proposed maximum aggregate offering price and the amount of the
registration fee are calculated based upon the 30,298,110 shares of
MotivePower common stock or stock options to be received by Westinghouse
Air Brake in the merger transaction.
(3) Pursuant to Rule 457(b), $65,709.03 of the registration fee is offset by
the filing fee previously paid by Westinghouse Air Brake in connection with
the filing of the preliminary proxy materials on October 1, 1999.
Accordingly, a registration fee of $15,887.57 is being paid herewith.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE AS MAY
BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION DATED OCTOBER 13, 1999
[MOTIVEPOWER LOGO]
[WABCO LOGO]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of MotivePower Industries, Inc. and Westinghouse
Air Brake Company have approved a merger agreement which provides for the
combination of the two companies. We believe the combined company will be able
to create greater shareholder value than could be achieved by the companies
individually.
Our combined company would be named Westinghouse Air Brake Company, with
its headquarters in the Pittsburgh, Pennsylvania area.
If the merger is completed, holders of MotivePower common stock will
receive, for each MotivePower share, 0.66 shares of WABCO common stock. WABCO
shareholders will continue to own their existing shares after the merger.
WABCO will issue approximately 17,896,368 shares of WABCO common stock to
MotivePower shareholders in the merger, based on outstanding shares on October
20, 1999.
We are asking shareholders of each of MotivePower and WABCO to approve and
adopt the merger agreement and the merger. We cannot complete the merger unless
shareholders of both companies approve it.
The dates, times and places of the meetings are:
For MOTIVEPOWER shareholders:
Friday, November 19, 1999
11:00 a.m., Local Time
Two Gateway Center
Lobby Conference Center
Pittsburgh, Pennsylvania
For WABCO shareholders:
Friday, November 19, 1999
10:00 a.m., Local Time
Westin William Penn
530 William Penn Place
Pittsburgh, Pennsylvania
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS RELATING TO THE MERGER THAT WE
DESCRIBE STARTING ON PAGE I-14 OF THIS JOINT PROXY STATEMENT/ PROSPECTUS.
/s/ John C. Pope
John C. Pope
Chairman of the Board
MotivePower Industries, Inc.
/s/ William E. Kassling
William E. Kassling
Chairman of the Board and Chief Executive Officer
Westinghouse Air Brake Company
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED THE WABCO COMMON STOCK TO BE ISSUED TO MOTIVEPOWER
SHAREHOLDERS UNDER THIS JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS
JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Joint Proxy Statement/Prospectus dated October 20, 1999,
and first mailed to shareholders on October 25, 1999.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 3
[MotivePower Logo]
MOTIVEPOWER INDUSTRIES, INC.
TWO GATEWAY CENTER, 14TH FLOOR
PITTSBURGH, PENNSYLVANIA 15222
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON NOVEMBER 19, 1999
To the Shareholders:
A special meeting of shareholders of MotivePower Industries, Inc. will be
held on Friday, November 19, 1999, at 11:00 a.m., at Two Gateway Center, Lobby
Conference Center, Pittsburgh, Pennsylvania 15222 for the purpose of considering
and voting upon a proposal to approve and adopt the Amended and Restated
Agreement and Plan of Merger, dated as of September 26, 1999, as amended,
between Westinghouse Air Brake Company and MotivePower, and the merger, as
described in the attached joint proxy statement/prospectus.
The close of business on October 20, 1999 has been fixed by the Board of
Directors as the record date for the determination of shareholders entitled to
receive notice of and to vote at the meeting, or any adjournments thereof, and
only shareholders of record on that date are entitled to receive notice of and
to vote at the meeting.
If you hold MotivePower common stock directly, you will find enclosed a
proxy card which must be completed and returned in order to vote all of the
common stock that you hold.
Please do not send any certificates for your stock at this time.
By the Order of the Board of
Directors,
/s/ Jeannette Fisher-Garber
Jeannette Fisher-Garber
Vice President, General Counsel
and Secretary
Pittsburgh, Pennsylvania
October 20, 1999
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MOTIVEPOWER
MEETING, PLEASE COMPLETE, DATE AND RETURN YOUR PROXY CARD IN THE ENCLOSED
ENVELOPE PROMPTLY.
<PAGE> 4
WABCO LOGO
WESTINGHOUSE AIR BRAKE COMPANY
1001 AIR BRAKE AVENUE
WILMERDING, PENNSYLVANIA 15148
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON NOVEMBER 19, 1999
To the Shareholders:
A special meeting of shareholders of Westinghouse Air Brake Company will be
held on Friday, November 19, 1999, at 10:00 a.m., at the Westin William Penn,
530 William Penn Place, Pittsburgh, Pennsylvania, 15219 for the purpose of
considering and voting upon a proposal to approve and adopt the Amended and
Restated Agreement and Plan of Merger, dated as of September 26, 1999, as
amended, between WABCO and MotivePower Industries, Inc. and the merger, as
described in the attached joint proxy statement/prospectus.
The close of business on October 20, 1999 has been fixed by the Board of
Directors as the record date for the determination of shareholders entitled to
receive notice of and to vote at the meeting, or any adjournments thereof, and
only shareholders of record on that date are entitled to receive notice of and
to vote at the meeting.
If you hold WABCO common stock directly, you will find enclosed a proxy
card which must be completed and returned in order to vote all of the common
stock that you hold.
By the Order of the Board of
Directors,
/s/ Robert J. Brooks
Robert J. Brooks
Chief Financial Officer and Secretary
Wilmerding, Pennsylvania
October 20, 1999
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE WABCO MEETING,
PLEASE COMPLETE, DATE AND RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE
PROMPTLY.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
CHAPTER ONE -- THE MERGER
QUESTIONS AND ANSWERS ABOUT THE
MERGER.......................... I-1
SUMMARY............................ I-3
The Companies................. I-3
Reasons for the Merger........ I-3
Merger Recommendations to
Shareholders............... I-3
The Merger.................... I-4
HISTORICAL AND PRO FORMA SELECTED
FINANCIAL DATA.................. I-8
Selected Historical Financial
Data of MotivePower........ I-9
Selected Historical Financial
Data of WABCO.............. I-11
Selected Unaudited Pro Forma
Condensed Combined
Financial Data............. I-12
Comparative Per Share Data.... I-13
RISK FACTORS....................... I-14
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS...... I-20
INFORMATION ABOUT THE MEETINGS AND
VOTING.......................... I-22
Matters Relating to the
Meetings................... I-22
Vote Necessary to Approve
MotivePower and WABCO
Proposals.................. I-24
Proxies....................... I-25
Other Business;
Adjournments............... I-26
Presence of Auditors.......... I-26
THE MERGER TRANSACTION............. I-27
General....................... I-27
Background of the Merger...... I-27
WABCO's Senior Management
Team....................... I-33
Factors Considered by, and
Recommendation of, the
MotivePower Board.......... I-33
Factors Considered by, and
Recommendation of, the
WABCO Board................ I-36
Accounting Treatment.......... I-39
Material United States Federal
Income Tax Consequences of
the Merger................. I-39
Regulatory Matters............ I-40
Appraisal Rights.............. I-41
Federal Securities Laws
Consequences; Stock
Transfer Restriction
Agreements................. I-41
COMPARATIVE PER SHARE MARKET PRICE
AND DIVIDEND INFORMATION........ I-42
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS... I-43
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL
STATEMENTS...................... I-50
OPINIONS OF FINANCIAL ADVISORS..... I-51
Opinion of MotivePower
Financial Advisor.......... I-51
Opinion of WABCO Financial
Advisor.................... I-57
INTERESTS OF CERTAIN PERSONS IN THE
MERGER.......................... I-62
Board of Directors............ I-62
Advisory Agreements........... I-63
Indemnification; Directors'
and Officers' Insurance.... I-64
Stock Options, Stock
Appreciation Rights,
Restricted Stock and Stock
Account Under Deferred
Compensation Plan.......... I-64
Employment Agreements......... I-66
Employment Continuity
Agreements................. I-68
Executive Incentive Plan...... I-69
THE MERGER AGREEMENT............... I-70
Structure of the Merger....... I-70
Timing of Closing............. I-70
Merger Consideration.......... I-70
Treatment of MotivePower Stock
Options, Stock Appreciation
Rights and Stock Account
Under Deferred Compensation
Plan....................... I-70
Exchange of Shares............ I-70
WABCO Board and Related
Matters.................... I-71
Covenants..................... I-71
Representations and
Warranties................. I-73
Conditions to the Completion
of the Merger.............. I-74
Termination of the Merger
Agreement.................. I-74
</TABLE>
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<TABLE>
<S> <C>
Expenses...................... I-76
Amendments.................... I-77
Mutual Release................ I-77
Stock Option Agreements....... I-77
Voting Agreements............. I-79
CHAPTER TWO -- LEGAL INFORMATION
COMPARISON OF SHAREHOLDER RIGHTS... II-1
Summary of Material
Differences Between Current
Rights of MotivePower
Shareholders and Rights
Those Shareholders Will
Have as WABCO Shareholders
Following the Merger....... II-1
DESCRIPTION OF WABCO CAPITAL
STOCK........................... II-12
Authorized Capital Stock...... II-12
Common Stock.................. II-12
Preferred Stock............... II-12
Transfer Agent and
Registrar.................. II-12
Certain Provisions Relating to
Changes in Control......... II-12
Stock Exchange Listing;
Delisting and
Deregistration of
MotivePower Common Stock... II-13
LEGAL MATTERS...................... II-13
EXPERTS............................ II-13
CHAPTER THREE -- ADDITIONAL INFORMATION FOR
SHAREHOLDERS
FUTURE SHAREHOLDER PROPOSALS....... III-1
MotivePower................... III-1
WABCO......................... III-1
WHERE YOU CAN FIND MORE
INFORMATION..................... III-1
</TABLE>
ANNEXES
Annex A Amended and Restated Agreement and Plan of Merger, as amended
(including Exhibits)
Annex B Amended and Restated WABCO Stock Option Agreement
Annex C Amended and Restated MotivePower Stock Option Agreement
Annex D Voting Agreement for Certain WABCO Shareholders
Annex E Voting Agreement for John C. Pope
Annex F Opinion of Wasserstein Perella & Co., Inc.
Annex G Opinion of Credit Suisse First Boston Corporation
-ii-
<PAGE> 7
CHAPTER ONE
THE MERGER
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: You originally scheduled special meetings on August 23, 1999 to vote upon the
proposed merger. Why was the WABCO meeting postponed?
A: Prior to the scheduled August 23, 1999 special meetings of WABCO and
MotivePower to approve the merger, WABCO postponed its special meeting. In a
press release dated August 20, 1999, WABCO announced that in light of the market
volatility in WABCO's and MotivePower's stock and WABCO shareholder reaction
communicated to WABCO following WABCO's and MotivePower's August 18th joint
press release, and in order to provide shareholders additional time to evaluate
information contained in that joint press release concerning the joint company's
revised financial estimates, WABCO determined to postpone its meeting of
shareholders indefinitely. A further description of why the merger was postponed
and how it was restructured is set forth in "The Merger
Transaction -- Background of the Merger" on page I-27.
Q: I have now received a new joint proxy statement/prospectus. What has changed?
A: The merger agreement has been amended and restated to provide for the merger
of MotivePower into WABCO, with MotivePower shareholders receiving 0.66 shares
of WABCO common stock for each share of MotivePower common stock. The
description of the merger transaction in this joint proxy statement/prospectus
has been modified to reflect the changes to the transaction. In certain sections
of this joint proxy statement/prospectus, where the distinction should be
highlighted, we refer to the merger agreement dated as of June 2, 1999, as
amended as of July 19, 1999, as the "original merger agreement" and the merger
contemplated by the original merger agreement as the "original merger," and we
refer to the new proposed transaction as the "revised merger" and the new
amended and restated merger agreement dated as of September 26, 1999, as amended
as of October 4, 1999, as the "revised merger agreement." Where we refer
generally to the "merger" and the "merger agreement" we are referring to the
revised merger and the revised merger agreement.
Q: When and where are the shareholder meetings?
A: Each company's meeting will take place on Friday, November 19, 1999 in the
Pittsburgh, Pennsylvania area. The address of each meeting is on page I-22.
Q: I sent in my proxy card for the prior meeting. Is it still valid?
A: No. You need to complete and return a new proxy card as described below.
Q: What do I need to do now?
A: Just mail your signed proxy card for the new meeting in the enclosed return
envelope, as soon as possible, so that your shares may be represented at your
meeting. In order to assure that your vote is obtained, please give your proxy
as instructed on your proxy card even if you currently plan to attend a meeting
in person. The board of directors of each of MotivePower and WABCO recommends
that its shareholders vote in favor of approval and adoption of the revised
merger agreement and the revised merger.
Q: What do I do if I want to change my vote?
A: Just send in a later-dated, signed proxy card to your company's corporate
secretary. Or, you can attend your meeting in person and vote. You may also
revoke your proxy by sending a notice of revocation to your company's corporate
secretary at the address under "The Companies" on page I-3.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them on the
merger. You should therefore be sure to provide your broker with instructions on
how to vote your shares.
If you are a MotivePower shareholder and do not give voting instructions to your
broker, you will not be counted as voting for purposes of the merger vote unless
you vote in person at the MotivePower meeting.
If you are a WABCO shareholder and do not give voting instructions to your
broker, you will, in effect, be voting against the merger unless you
<PAGE> 8
appear in person at the WABCO meeting and vote in favor of the merger.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed, we will send MotivePower shareholders written
instructions for exchanging their share certificates. WABCO shareholders will
keep their existing certificates.
Q: What will MotivePower common shareholders receive for their shares?
A: MotivePower shareholders will receive 0.66 shares of WABCO common stock for
each of their shares of MotivePower common stock. This exchange ratio will not
change even if the market price of MotivePower or WABCO common stock increases
or decreases between now and the date the merger is completed. Accordingly,
MotivePower shareholders will not be able to determine the precise value of the
shares of WABCO common stock they would receive in the merger at the time they
vote on the merger at their meeting. WABCO will not issue any fractional shares
in the merger. Instead, MotivePower shareholders will receive cash for any
fractional shares of WABCO common stock owed to them in an amount based on the
market value of WABCO common stock on the date on which the merger occurs.
Q: When do you expect the merger to be completed?
A: We are working towards completing the merger as quickly as possible. We hope
to complete the merger shortly after the meetings, assuming the required
shareholder approvals are obtained at the meetings.
Q: Who do I call if I have questions about the meetings or the merger?
A: MotivePower shareholders may call investor relations at (412) 201-1101.
WABCO shareholders may call investor relations at (412) 825-1000.
I-2
<PAGE> 9
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should carefully read this
entire document and the documents to which we have referred you. See "Where You
Can Find More Information" on page III-1.
THE COMPANIES
MOTIVEPOWER INDUSTRIES, INC.
Two Gateway Center
14th Floor
Pittsburgh, Pennsylvania 15222
(412) 201-1101
MotivePower is a leader in the manufacturing and distribution of products for
rail and other power-related industries, and also provides a variety of related
contract services. MotivePower provides products and services to freight and
passenger railroads, including every Class I railroad in North America,
metropolitan transit and commuter rail authorities, original equipment
manufacturers, industrial power-related markets and other customers
internationally. MotivePower has its headquarters in Pittsburgh, Pennsylvania
and approximately 2,700 employees at strategically located facilities in the
United States, Canada and Mexico.
WESTINGHOUSE AIR BRAKE COMPANY
1001 Air Brake Avenue
Wilmerding, Pennsylvania 15148
(412) 825-1000
WABCO is one of North America's largest manufacturers of value-added equipment
for locomotives, railway freight cars and passenger transit vehicles. WABCO
believes that it maintains a market share in North America in excess of 50% for
its primary braking related equipment and a significant market share in North
America for its other principal products. WABCO also sells products in Europe,
Africa, Australia, South America and Asia. WABCO's major products are intended
to enhance safety, improve productivity and reduce maintenance costs for its
customers. WABCO's major product offerings include electronic controls and
monitors, air brakes, couplers, door controls, draft gears and brake shoes.
WABCO aggressively pursues technological advances with respect to both new
product development and product enhancements.
REASONS FOR THE MERGER
We believe the merger will:
- - create a premier supplier of products and services for the railroad industry,
with combined revenues, based on 1998 results, exceeding $1 billion;
- - create significant revenue enhancement opportunities;
- - create a company with an improved cost structure that will allow for operating
cost savings;
- - create opportunities for significant financial cost savings;
- - enable us to provide our customers with a "one-stop shop" for a more complete
package of locomotive and freight car components and services;
- - create a combined company with increased financial strength to invest in new
products and technologies;
- - combine two complementary companies with leading shares of their respective
rail market segments and minimal product overlap; and
- - improve the combined company's position to make further acquisitions.
You should note, however, that achieving these objectives is subject to the
risks described on page I-14. These risks include, among others, possible
difficulties in integrating two companies that have previously operated
independently and in achieving anticipated synergies from the merger.
To review the reasons for the merger in greater detail, see pages I-33 through
I-39.
MERGER RECOMMENDATIONS TO SHAREHOLDERS
TO MOTIVEPOWER SHAREHOLDERS:
The MotivePower Board believes that the merger is fair to you and in your best
interest and recommends that you vote FOR the approval and adoption of the
merger agreement and the merger.
I-3
<PAGE> 10
TO WABCO SHAREHOLDERS:
The WABCO Board believes that the merger is fair to you and in your best
interest and recommends that you vote FOR the approval and adoption of the
merger agreement and the merger.
THE MERGER
The revised merger agreement is attached as Annex A to this joint proxy
statement/prospectus. We encourage you to read the revised merger agreement as
it is the legal document that governs the merger.
WHAT MOTIVEPOWER SHAREHOLDERS WILL RECEIVE (SEE PAGE I-70)
As a result of the merger, MotivePower shareholders will receive, for each share
of MotivePower common stock, together with any associated stock purchase right,
0.66 shares of WABCO common stock.
WABCO will not issue any fractional shares. MotivePower shareholders will
receive cash for any fractional shares of WABCO common stock owed to them in an
amount based on the market value of WABCO common stock on the date on which the
merger occurs.
Example:
- - If you currently own 75 shares of MotivePower common stock, then after the
merger you will receive 49 shares of WABCO common stock and a check in an
amount equal to .5 multiplied by the closing price of the WABCO common stock
on the date of the merger, rounded to the nearest one cent. The value of the
stock that you will receive will fluctuate as the price of WABCO common stock
changes prior to and after the merger.
On October 8, 1999 the last per share price of WABCO common stock reported on
the New York Stock Exchange was $17.625. Applying the 0.66 exchange ratio to the
WABCO last reported price on that date, each holder of MotivePower common stock
would be entitled to receive WABCO common stock with a market value of
approximately $11.63 for each share of MotivePower common stock, together with
any associated stock purchase right. However, the market prices for WABCO and
MotivePower common stock are likely to change between now and the merger. You
are urged to obtain current price quotes for WABCO and MotivePower common stock.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
MotivePower and WABCO common stock are both listed on the New York Stock
Exchange. On September 24, 1999, the last full trading day prior to the public
announcement of the revised merger, MotivePower closed at $10.88 and WABCO
closed at $19.88. On October 8, 1999, MotivePower closed at $9.8125 and WABCO
closed at $17.625.
LISTING OF WABCO COMMON STOCK
The shares of WABCO common stock will be listed on the New York Stock Exchange
under the ticker symbol "WAB".
OWNERSHIP OF WABCO AFTER THE MERGER
WABCO will issue approximately 17,896,368 shares of WABCO common stock to
MotivePower shareholders in the merger. The shares of WABCO common stock to be
issued to MotivePower shareholders in the merger will represent approximately
34.4% of the outstanding WABCO common stock after the merger. This information
is based on the number of MotivePower and WABCO shares outstanding on October 8,
1999 and does not take into account stock options or other equity-based awards.
SHARE OWNERSHIP OF OFFICERS AND DIRECTORS (SEE PAGE I-24)
As of October 8, 1999, directors and executive officers of MotivePower and their
affiliates owned and were entitled to vote approximately 2,085,025 shares of
MotivePower common stock, or approximately 7.21% of the shares of MotivePower
common stock outstanding as of October 8, 1999, including exercisable options.
As of October 8, 1999, directors and executive officers of WABCO and their
affiliates beneficially owned and were entitled to vote 9,759,706 shares of
WABCO common stock, or approximately 28.6% of the shares of WABCO common stock
outstanding as of October 8, 1999, including exercisable options.
SHAREHOLDER VOTE REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
MERGER
For MotivePower shareholders: Approval and adoption of the merger agreement and
the merger
I-4
<PAGE> 11
requires a majority of the votes cast at the meeting by holders of MotivePower
common stock.
For WABCO shareholders: Approval and adoption of the merger agreement and the
merger requires a majority of the votes represented by the outstanding shares of
WABCO common stock.
APPRAISAL RIGHTS (SEE PAGE I-41)
The holders of MotivePower and WABCO common stock do not have any "dissenters'
rights" or rights to an appraisal of the value of their shares in connection
with the merger.
BOARD OF DIRECTORS OF WABCO AND RELATED MATTERS AFTER THE MERGER (SEE PAGE I-71)
Following the merger, the board of directors of WABCO will have twelve members
comprised of the eight WABCO directors currently on WABCO's board of directors
and four nonemployee directors currently on MotivePower's board of directors.
INTEREST OF OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE I-62)
MotivePower and WABCO shareholders should note that a number of directors and
executive officers and certain shareholders of MotivePower and WABCO may have
interests in the merger that are different from, or in addition to, the
interests of shareholders generally.
ACCOUNTING TREATMENT (SEE PAGE I-39)
We expect the merger to qualify as a pooling of interests, which means that we
will treat our companies as if they had always been combined for accounting and
financial reporting purposes.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE
I-39)
It is a condition of the merger that MotivePower and WABCO each receive an
opinion to the effect that the merger constitutes a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, and that, among other
things, for federal income tax purposes, no gain or loss will be recognized by
MotivePower or WABCO as a result of the merger and no gain or loss will be
recognized by the shareholders of MotivePower upon the conversion of their
shares of MotivePower common stock into shares of WABCO common stock pursuant to
the merger, except with respect to cash, if any, received in lieu of fractional
shares of WABCO common stock.
The federal income tax consequences of the merger are discussed more fully on
pages I-39 through I-40. The consequences described herein do not address tax
consequences which may vary with, or may be contingent upon, individual
circumstances. In particular, the federal income tax consequences described
herein may not apply to individuals who received MotivePower common stock as
compensation or to shareholders who or which for United States federal income
tax purposes are nonresident alien individuals, foreign corporations, foreign
partnerships, foreign trusts or foreign estates. We strongly urge each
shareholder of MotivePower to consult the shareholder's tax advisor to determine
the shareholder's particular United States federal, state, local or foreign
income or other tax consequences resulting from the merger, in light of
individual circumstances.
CONDITIONS TO THE COMPLETION OF THE MERGER (SEE PAGE I-74)
The completion of the merger depends upon meeting a number of conditions,
including the following:
- - approval and adoption of the revised merger agreement and the revised merger
by the shareholders of MotivePower and WABCO;
- - absence of legal prohibitions on completion of the merger;
- - receipt of letters from the independent public accountants of MotivePower and
WABCO to the effect that the merger will qualify for "pooling of interests"
accounting treatment;
- - receipt of opinions of MotivePower's and WABCO's legal counsel that, for
federal income tax purposes, the merger will qualify as a reorganization; and
- - material accuracy as of the closing of the merger of the representations and
warranties made by each party.
REGULATORY APPROVALS (SEE PAGE I-40)
The merger is subject to regulatory approval. On June 22, 1999, MotivePower and
WABCO each filed notification and report forms under the Hart-Scott-Rodino
Antitrust Improvements Act with the FTC and the Antitrust Division of the U.S.
Department of Justice. On July 19, 1999, Motive-
I-5
<PAGE> 12
Power and WABCO received notice of early termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act. MotivePower and WABCO do not
believe any further filing is required with respect to the revised merger.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE I-74)
The Board of Directors of both our companies can jointly agree to terminate the
merger agreement at any time without completing the merger. Either company can
terminate the merger agreement if:
- - the merger is not completed by January 31, 2000;
- - the shareholders of either company fail to adopt and approve the merger
agreement and the merger;
- - there is a permanent legal prohibition to closing the merger;
- - the other party materially breaches any of the representations or warranties
it made or materially fails to comply with any of its obligations under the
merger agreement;
- - the other party's Board does not recommend or modifies its recommendation of
its merger proposal to its shareholders in a manner materially adverse to the
company seeking to terminate the merger agreement;
- - the other party materially and knowingly breaches the covenant restricting its
ability to negotiate with a third party concerning an alternative transaction;
or
- - on or prior to the earlier of the date of the shareholders meetings and
November 10, 1999, either company's Board determines to recommend an
acquisition proposal made by a third party and to enter into a written
agreement concerning the acquisition proposal after determining that the
proposal is more favorable than the merger.
TERMINATION FEES (SEE PAGE I-76)
WABCO must pay MotivePower up to $2 million of its out-of-pocket fees and
expenses incurred in connection with the merger plus a termination fee of $15
million in cash if the merger agreement is terminated because (1) the WABCO
Board has not recommended or has modified in a manner materially adverse to
MotivePower its recommendation of the merger agreement or merger, (2) WABCO has
materially and knowingly breached the covenant restricting its ability to
negotiate with a third party concerning an alternative transaction or (3) the
WABCO Board has determined on or prior to the earlier of the date of the WABCO
shareholders meeting and November 10, 1999 to recommend a more favorable
proposal and to enter into an agreement with respect to that proposal.
WABCO must also pay MotivePower up to $2 million of its out-of-pocket fees and
expenses incurred in connection with the merger plus a termination fee of $15
million in cash if its shareholders do not approve and adopt the merger
agreement and the merger after either a third party has made an acquisition
proposal to WABCO or the WABCO Board has not recommended or has modified in a
manner materially adverse to MotivePower its recommendation of the merger
agreement or the merger.
MotivePower must pay WABCO up to $2 million of its out-of-pocket fees and
expenses incurred in connection with the merger plus a termination fee of $15
million in cash if the merger agreement is terminated because (1) the
MotivePower Board has not recommended or has modified in a manner materially
adverse to WABCO its recommendation of the merger agreement or merger, (2)
MotivePower has materially and knowingly breached the covenant restricting its
ability to negotiate with a third party concerning an alternative transaction or
(3) the MotivePower Board has determined on or prior to the earlier of the date
of the MotivePower shareholders meeting and November 10, 1999 to recommend a
more favorable proposal and to enter into an agreement with respect to that
proposal.
MotivePower must also pay WABCO up to $2 million of its out-of-pocket fees and
expenses incurred in connection with the merger plus a termination fee of $15
million in cash if its shareholders do not approve and adopt the merger
agreement and the merger after either a third party has made an acquisition
proposal to MotivePower or the MotivePower Board has not recommended or has
modified in a manner materially adverse to WABCO its recommendation of the
merger agreement and the merger.
STOCK OPTION AGREEMENTS (SEE PAGE I-77)
In connection with the merger agreement, MotivePower and WABCO entered into the
amended and restated WABCO stock option agreement under which WABCO granted to
MotivePower an option
I-6
<PAGE> 13
to purchase approximately 19% of WABCO's outstanding common stock, at a price of
$19.875 per share which is adjustable in specified events. The option is
exercisable under the same circumstances in which WABCO is required to pay to
MotivePower the $15 million termination fee referred to above. MotivePower and
WABCO also entered into the amended and restated MotivePower stock option
agreement under which MotivePower granted to WABCO an option to purchase
approximately 19% of MotivePower's outstanding common stock, at a price of
$13.12 per share which is adjustable in specified events. The option is
exercisable under the same circumstances in which MotivePower is required to pay
to WABCO the $15 million termination fee referred to above. Each stock option
agreement provides that the maximum profit to the applicable beneficiary will
not exceed $7.5 million. These amended and restated stock option agreements are
attached as Annex B and Annex C. We encourage you to read these agreements.
VOTING AGREEMENTS (SEE PAGES I-79)
In connection with the revised merger agreement, John Pope, as a shareholder of
MotivePower, entered into a voting agreement with WABCO and William E. Kassling,
Robert J. Brooks, Harvard Private Capital Holdings, Inc. and Vestar Equity
Partners, L.P., as shareholders of WABCO, entered into a voting agreement with
MotivePower. In each case the shareholders have agreed, subject to certain
limited exceptions, to vote their shares in favor of the merger and not to take
any action that would impede or prevent the merger. The voting agreements also
provide that these shareholders will not solicit other competing takeover
proposals. These voting agreements are attached as Annex D and E. We encourage
you to read these agreements.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGES I-51 THROUGH I-62)
In deciding to approve the merger, each board considered the opinion of its
financial advisor. MotivePower received an opinion from Wasserstein Perella &
Co., Inc. as to the fairness from a financial point of view of the exchange
ratio to the holders of MotivePower common stock as of September 26, 1999, and
WABCO received an opinion from Credit Suisse First Boston Corporation as to the
fairness from a financial point of view of the exchange ratio to WABCO as of
September 26, 1999. These opinions are attached as Annex F and Annex G. We
encourage you to read these opinions.
I-7
<PAGE> 14
HISTORICAL AND PRO FORMA SELECTED FINANCIAL DATA
HOW WE PREPARED THE FINANCIAL STATEMENTS
We are providing the following information to aid you in your analysis of
the financial aspects of the merger. We derived this information from the
MotivePower and WABCO audited financial statements for the years ended December
31, 1994 through 1998 and the unaudited financial statements for the six months
ended June 30, 1999 and 1998. The information is only a summary and you should
read it together with our historical financial statements and related notes
contained in the annual and quarterly reports and other information that we have
filed with the SEC. See "Where You Can Find More Information" on page III-1.
POOLING OF INTERESTS ACCOUNTING TREATMENT
We expect that the merger will be accounted for as a "pooling of
interests." This means that, for accounting and financial reporting purposes, we
will treat our companies as if they had always been combined. For a more
detailed description of pooling of interests accounting, see "The Merger
Transaction -- Accounting Treatment" on page I-39.
We have presented unaudited pro forma condensed combined financial
information that reflects the pooling of interests method of accounting to give
you a better picture of what our businesses might have looked like had they been
combined since the beginning of the periods presented. We prepared the unaudited
pro forma condensed combined statements of income and unaudited pro forma
condensed combined balance sheet by adding or combining the historical amounts
of each company. The accounting policies of MotivePower and WABCO are
substantially comparable. However, an adjustment was made to conform the
classification of amortization expense in the unaudited pro forma condensed
combined financial statements. The WABCO and MotivePower combined company may
have performed differently had they always been combined. The unaudited pro
forma condensed combined financial information may not be indicative of the
historical results that would have been achieved had the companies always been
combined or the future results that the combined company will experience after
the merger. See "Unaudited Pro Forma Condensed Combined Financial Statements" on
page I-43.
MERGER-RELATED EXPENSES
We estimate that merger-related fees and expenses, consisting primarily of
SEC filing fees, fees and expenses of investment bankers, attorneys and
accountants, and financial printing and other related charges, will be
approximately $20-25 million. See note 5 on page I-50.
INTEGRATION-RELATED EXPENSES
We estimate that costs of approximately $35-40 million will be incurred for
severance and other integration-related expenses, including the elimination of
duplicate facilities and excess capacity, operational realignment and related
workforce reductions. See note 5 on page I-50.
PERIODS COVERED
The selected unaudited pro forma condensed combined financial data combines
MotivePower's and WABCO's results for the years ended December 31, 1996 through
1998 and the six months ended June 30, 1999 and 1998, and give effect to the
merger as if it had occurred at the beginning of the periods presented. The
combined balance sheet data in the table below combines the balance sheets of
MotivePower and WABCO as of December 31, 1996 through 1998 and as of June 30,
1999 and 1998.
I-8
<PAGE> 15
HISTORICAL AND PRO FORMA SELECTED FINANCIAL DATA
SELECTED HISTORICAL FINANCIAL DATA OF MOTIVEPOWER
The following selected historical financial data as of and for each of the
years ended December 31, 1994 through 1998 has been derived from MotivePower's
audited consolidated financial statements. The following selected historical
financial data as of and for the six months ended June 30, 1999 and 1998 has
been derived from MotivePower's unaudited consolidated financial statements.
This information is only a summary and you should read it together with
MotivePower's historical financial statements and related notes contained in the
Annual Report on Form 10-K and Quarterly Report on Form 10-Q and other
information that we have filed with the SEC. See "Where You Can Find More
Information" on page III-1.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- --------- -------- -------- -------- --------
(UNAUDITED) (THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA:
Net sales............ $205,937 $171,314 $ 365,218 $305,930 $291,407 $263,718 $368,537
Gross profit
(loss)............. 55,209 42,692 81,322 72,342 56,847 (5,167) (5,478)
Operating income
(loss)............. 30,973 22,195 40,363 34,618 24,232 (51,113) (49,977)
Net income (loss).... 17,085 14,518 32,197 20,276 11,509 (40,414) (42,793)
Diluted earnings per
share(1)(2)........ $0.61 $0.52 $1.15 $0.74 $0.44 $(1.56) $(1.65)
Cash flow provided by
(used in) operating
activities......... 13,036 13,686 31,344 35,452 43,368 (21,743) (85,141)
Cash flow provided by
(used in) investing
activities......... (39,188) (11,687) (102,324) (22,472) 12,407 (15,408) (36,941)
Cash flow provided by
(used in) financing
activities......... 27,000 (11,387) 59,743 (1,319) (56,235) 30,388 120,463
Cash dividends per
share(1)(3)........ 0.00 0.00 0.00 0.00 0.00 0.03 2.21
OTHER DATA:
EBITDA(4)............ 38,688 27,392 51,770 44,585 34,589 (39,781) (38,345)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.......... $405,917 $291,854 $371,198 $283,102 $234,044 $280,948 $311,297
Total debt............ 132,527 38,833 105,798 50,507 49,592 120,118 108,176
Shareholders'
equity.............. 196,126 159,509 177,929 144,548 120,980 94,527 114,124
</TABLE>
- ---------------
(1) Reflects a three-for-two common stock split in the form of a 50 percent
stock dividend effective April 2, 1999.
(2) The diluted loss per share for 1994 is a supplemental Pro Forma amount.
(3) Includes a special dividend to Morrison Knudsen Corporation of $2.13 per
share on 16,724,000 shares paid in 1994.
I-9
<PAGE> 16
(4) EBITDA is defined as operating income plus depreciation and amortization.
EBITDA should not be construed as a substitute for income from operations,
net income, or cash flow from operating activities, for the purpose of
analyzing operating performance, financial position and cash flows. EBITDA
measures are calculated differently by other companies. As such, the EBITDA
measures presented may not be comparable to other similarly titled measures
of other companies. EBITDA has been presented because it is commonly used by
investors to analyze companies on the basis of operating performance and to
determine a company's ability to service debt.
I-10
<PAGE> 17
SELECTED HISTORICAL FINANCIAL DATA OF WABCO
The following selected historical financial data as of and for each of the
years ended December 31, 1994 through 1998 has been derived from WABCO's audited
consolidated financial statements. The following selected historical financial
data as of and for the six months ended June 30, 1999 and 1998 has been derived
from WABCO's unaudited consolidated financial statements. This information is
only a summary and you should read it together with WABCO's historical financial
statements and related notes contained in the Annual Report on Form 10-K and
Quarterly Report on Form 10-Q and other information that we have filed with the
SEC. See "Where You Can Find More Information" on page III-1.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- --------- -------- -------- -------- --------
(UNAUDITED) (THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA:
Net sales............ $385,185 $330,188 $ 670,909 $564,441 $453,512 $424,959 $347,469
Gross profit......... 124,877 106,843 219,179 186,118 153,349 146,058 117,925
Operating income..... 59,144 50,839 104,666 89,975 79,718 89,302 73,638
Net income........... 25,133 19,828 41,654 37,263 32,725 33,725 36,841
Diluted earnings per
share.............. $0.97 $0.77 $1.62 $1.42 $1.15 $1.27 $0.92
Cash flow provided by
operating
activities......... 31,572 20,626 42,067 66,974 58,911 45,881 43,711
Cash flow used in
investing
activities......... (12,631) (28,519) (141,471) (42,688) (91,745) (71,105) (12,853)
Cash flow provided by
(used in) financing
activities......... (16,555) 12,463 102,198 (22,439) 32,507 24,261 (29,810)
Cash dividends per
share.............. 0.02 0.02 0.04 0.04 0.04 0.01 0.00
OTHER DATA:
EBITDA(1)............ 71,802 63,838 129,874 114,599 101,967 107,936 89,695
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets......... $606,442 $457,439 $ 596,184 $410,879 $363,236 $263,407 $187,728
Total debt........... 450,219 376,239 467,817 364,934 341,690 305,935 78,060
Shareholders' equity
(deficit).......... (2,494) (56,591) (33,853) (79,263) (76,195) (108,698) 46,797
</TABLE>
- ---------------
(1) EBITDA is defined as operating income plus depreciation and amortization.
EBITDA should not be construed as a substitute for income from operations,
net income, or cash flow from operating activities, for the purpose of
analyzing operating performance, financial position and cash flows. EBITDA
measures are calculated differently by other companies. As such, the EBITDA
measures presented may not be comparable to other similarly titled measures
of other companies. EBITDA has been presented because it is commonly used by
investors to analyze companies on the basis of operating performance and to
determine a company's ability to service debt.
I-11
<PAGE> 18
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following selected unaudited pro forma condensed combined financial
data has been derived from and should be read with the Unaudited Pro Forma
Condensed Combined Financial Statements and related notes on page I-43 through
page I-50. This information is based on the historical consolidated balance
sheets and related historical consolidated statements of income of MotivePower
and WABCO giving effect to the merger using the pooling of interests method of
accounting for business combinations. This information is for illustrative
purposes only. The companies may have performed differently had they always been
combined. The selected unaudited pro forma condensed combined financial data may
not be indicative of the historical results that would have been achieved had
the companies always been combined or the future results that the combined
company will experience after the merger.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------
1999 1998 1998 1997 1996
----------- --------- ----------- --------- ---------
(UNAUDITED) (THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
FINANCIAL DATA:
Net sales............................. $591,122 $501,502 $1,036,127 $870,371 $744,919
Gross profit.......................... 180,086 149,535 300,501 258,460 210,196
Operating income...................... 90,117 73,034 145,029 124,593 103,950
Income before extraordinary item...... 42,687 37,548 79,196 57,539 45,298
Diluted earnings per common share
before extraordinary item(1)(2)..... $0.96 $0.85 $1.79 $1.30 $0.99
Cash flow provided by operating
activities.......................... 44,608 34,312 73,411 102,426 102,279
Cash flow used in investing
activities.......................... (51,819) (40,206) (243,795) (65,160) (79,338)
Cash flow provided by (used in)
financing activities................ 10,445 1,076 161,941 (23,758) (23,728)
Cash dividends per share(1)(2)........ 0.01 0.01 0.02 0.02 0.02
OTHER DATA:
EBITDA(3)............................. 110,490 91,230 181,644 159,184 136,556
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------------- --------------------------------
1999 1998 1998 1997 1996
---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.......................... $1,012,359 $749,293 $967,382 $693,981 $597,280
Total debt............................ 582,746 415,072 573,615 415,441 391,282
Shareholders' equity(4)............... 152,632 102,918 144,076 65,285 44,785
</TABLE>
- ---------------
(1) Reflects a three-for-two common stock split of MotivePower common stock in
the form of a 50 percent stock dividend effective April 2, 1999.
(2) Reflects the exchange of 0.66 shares of WABCO common stock for each share of
MotivePower common stock outstanding, together with any associated stock
purchase rights.
(3) EBITDA is defined as operating income plus depreciation and amortization.
EBITDA should not be construed as a substitute for income from operations,
net income, or cash flow from operating activities, for the purpose of
analyzing operating performance, financial position and cash flows. EBITDA
measures are calculated differently by other companies. As such, the EBITDA
measures presented may not be comparable to other similarly titled measures
of other companies. EBITDA has been presented because it is commonly used by
investors to analyze companies on the basis of operating performance and to
determine a company's ability to service debt.
(4) A one-time merger-related charge of $41 million has been reflected in the
Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 1999.
See Note 5 on page I-50. The book value per share calculation at June 30,
1999 includes the effect on shareholders' equity of the $41 million charge.
I-12
<PAGE> 19
COMPARATIVE PER SHARE DATA
Set forth below are the net income, cash dividends and book value per
common share data separately for MotivePower and WABCO on a historic basis, for
WABCO on a pro forma combined basis and on a pro forma combined basis per
MotivePower equivalent share for each of the years ended December 31, 1998, 1997
and 1996 and for the six months ended June 30, 1999 and 1998. The exchange ratio
for the business combination is 0.66 shares of WABCO common stock for each share
of MotivePower common stock.
The WABCO pro forma data was derived by combining the historic consolidated
financial information of MotivePower and WABCO using the pooling of interests
method of accounting for business combinations as described under "Unaudited Pro
Forma Condensed Combined Financial Statements" beginning on page I-43. The
MotivePower historic per share information is restated to reflect a
three-for-two common stock split in the form of a 50 percent stock dividend
effective April 2, 1999.
The MotivePower equivalent share pro forma information shows the effect of
the merger from the perspective of an owner of MotivePower common stock. The
information was computed by multiplying the WABCO pro forma information by the
exchange ratio of 0.66.
You should read the information below together with our historical
financial statements and related notes contained in the annual and quarterly
reports and other information that we have filed with the SEC. See "Where You
Can Find More Information" on page III-1. The unaudited pro forma combined data
below is for illustrative purposes only. The companies may have performed
differently had they always been combined. This information may not be
indicative of the historical results that would have been achieved had the
companies always been combined or the future results that the combined company
will experience after the merger.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ ---------------
1998 1997 1996 1999 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
WABCO Historic per Common Share Data:
Income before extraordinary item--basic...... $ 1.79 $ 1.45 $ 1.15 $ 1.01 $ 0.90
Income before extraordinary item--assuming
dilution.................................. 1.75 1.42 1.15 0.99 0.88
Cash dividends............................... 0.04 0.04 0.04 0.02 0.02
Book value................................... (1.34) (3.18) (2.67) (0.10) (2.25)
WABCO Pro Forma Combined per Common Share Data:
Income before extraordinary item--basic...... $ 1.85 $ 1.33 $ 0.99 $ 0.99 $ 0.88
Income before extraordinary item--assuming
dilution.................................. 1.79 1.30 0.99 0.96 0.85
Cash dividends............................... 0.02 0.02 0.02 0.01 0.01
Book value(1)................................ 3.36 1.54 0.97 3.53 2.41
MotivePower Historic per Common Share Data:
Income before extraordinary item--basic...... $ 1.28 $ 0.76 $ 0.48 $ 0.63 $ 0.56
Income before extraordinary item--assuming
dilution.................................. 1.23 0.74 0.48 0.61 0.54
Cash dividends............................... 0.00 0.00 0.00 0.00 0.00
Book value................................... 6.70 5.42 4.59 7.25 5.97
MotivePower Pro Forma Combined Equivalent
Common Share Data:
Income before extraordinary item--basic...... $ 1.22 $ 0.88 $ 0.65 $ 0.65 $ 0.58
Income before extraordinary item--assuming
dilution.................................. 1.18 0.86 0.65 0.63 0.56
Cash dividends............................... 0.01 0.01 0.01 0.01 0.01
Book value(1)................................ 2.22 1.02 0.64 2.33 1.59
</TABLE>
- ---------------
(1) A one-time merger-related charge of $41 million has been reflected in the
Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 1999.
See Note 5 on page I-50. The book value per share calculation at June 30,
1999 includes the effect on shareholders' equity of the $41 million charge.
I-13
<PAGE> 20
RISK FACTORS
In addition to the information included or incorporated by reference in
this joint proxy statement/prospectus, you should consider the following
matters in considering whether to vote in favor of the revised merger and
revised merger agreement.
WABCO AND MOTIVEPOWER SHAREHOLDERS WILL NOT BE ABLE TO DETERMINE THE VALUE OF
WABCO STOCK AT THE TIME THAT THEY VOTE ON THE MERGER.
Each share of MotivePower common stock, together with any associated stock
purchase rights, other than shares owned directly or indirectly by MotivePower
or WABCO, will be converted at the effective time of the merger into 0.66 shares
of WABCO common stock. Cash will be paid in lieu of any fractional shares of
WABCO common stock that would otherwise be issuable. The exchange ratio is a
fixed number and will not be adjusted in the event of any increases or decreases
in the price of either MotivePower common stock or WABCO common stock.
Accordingly, MotivePower shareholders will not be able to determine the value of
the WABCO common stock they would receive in the merger at the time they vote on
the merger, and WABCO shareholders will not be able to determine the value of
the WABCO common stock to be issued to the MotivePower shareholders. In
addition, neither party will have the right to terminate the merger agreement or
elect not to consummate the merger as a result of changes in the market prices
of either company's common stock. The prices of MotivePower common stock and
WABCO common stock at the effective time may vary from their respective prices
at the date of this joint proxy statement/prospectus and at the date of the
shareholder meetings, each to be held on November 19, 1999. These variations may
be the result of:
- changes in the business, operations or prospects of MotivePower or
WABCO,
- market assessments of the likelihood that the merger will be
consummated,
- the timing of the merger and the prospects of the merger and
post-merger operations,
- regulatory considerations, and
- general market and economic conditions and other factors.
Because the effective time of the merger may occur at a date later than the
date on which the shareholder meetings occur, the prices of MotivePower common
stock and WABCO common stock on the date of the shareholder meetings may not be
indicative of their respective prices at the effective time of the merger.
MotivePower and WABCO shareholders are urged to obtain current market quotations
for MotivePower common stock and WABCO common stock. See "The Merger
Agreement -- Merger Consideration" on page I-70.
TERMINATION FEES AND RECIPROCAL STOCK OPTION AGREEMENTS COULD DETER ALTERNATIVE
TRANSACTIONS BY MAKING THEM MORE DIFFICULT OR EXPENSIVE.
MotivePower or WABCO must pay to the other a termination fee of $15 million
plus up to $2 million in expenses if the merger agreement terminates under
specified circumstances. MotivePower and WABCO have also entered into reciprocal
stock option agreements which provide MotivePower and WABCO the right to acquire
up to 19% of the other's outstanding common stock under specified conditions,
with the profit either party can derive from the option limited to $7.5 million.
The termination fees and the stock option agreements could deter either
MotivePower or WABCO from entering into an alternative transaction by making an
alternative transaction more difficult or expensive. Among other effects, the
stock option agreements could prevent an alternative business combination with
WABCO or MotivePower from being accounted for as a "pooling of interests." The
stock option agreements may therefore discourage proposals for alternative
business combinations with WABCO or MotivePower, even if a third party were
prepared to offer shareholders of WABCO or MotivePower consideration with a
higher market value than the value of the WABCO stock to be received in exchange
for MotivePower stock in the merger. For a further discussion of these matters,
see "The Merger Agreement -- Termination of Merger Agreement -- Termination Fees
I-14
<PAGE> 21
Payable by WABCO" and "-- Termination Fees Payable by MotivePower" on page I-76
and "The Merger Agreement -- Stock Option Agreements" on page I-77.
THE COMBINED COMPANY MAY NOT BE ABLE TO REALIZE THE COST SAVINGS AND OTHER
SYNERGIES OF THE MERGER OR SUCCESSFULLY INTEGRATE THE OPERATIONS OF MOTIVEPOWER
AND WABCO.
The merger involves the integration of two companies that have previously
operated independently. WABCO and MotivePower expect to realize significant cost
savings and other synergies from the merger, but the combined company may not be
able to achieve these synergies or cost savings. Further, the costs of achieving
these synergies may be significantly greater than we anticipate. MotivePower and
WABCO estimate that the direct costs of the merger will be approximately $20-25
million. These costs are not included in the unaudited pro forma condensed
combined statements of income. See note 5 on page I-50. MotivePower and WABCO
also estimate that WABCO will incur integration-related expenses, including
severance, of approximately $35-40 million. These costs are not included in the
unaudited pro forma condensed combined statements of income. See note 5 on page
I-50. These expenses may impact the combined company going forward. In addition,
if these costs and expenses are higher than estimated, the merger benefits may
be reduced. MotivePower and WABCO will also need to integrate numerous systems,
including management information, purchasing, accounting and finance, sales,
billing and payroll, which will require substantial attention from management.
Diversion of management attention to and difficulties associated with
integrating MotivePower and WABCO could harm the operating results of the
combined company and impact the value of its common stock.
THE COMBINED COMPANY'S ABILITY TO EXPAND ITS INTERNATIONAL OPERATIONS MAY BE
LIMITED BY THE NEED TO OBTAIN ADDITIONAL REGULATORY APPROVALS IN FOREIGN
JURISDICTIONS AND THE NEED TO MEET LOCAL EQUIPMENT REQUIREMENTS.
MotivePower and WABCO conduct international operations through a variety of
wholly-owned subsidiaries, majority-owned subsidiaries and equity interests
located in the United States, Canada, Mexico, Europe, Australia and Asia.
MotivePower and WABCO are also exploring the possibility of expansion into other
international markets. The combined company's ability to expand sales of its
products internationally, in particular its locomotive and freight braking
products, is limited by the necessity of obtaining regulatory approval in new
jurisdictions. For example, local regulatory approval is required in order to
market WABCO's brake shoes in India. The combined company's international growth
strategy can also be hampered by the additional expense of modifying products to
comply with local railroad equipment requirements.
THE COMBINED COMPANY'S FINANCIAL PERFORMANCE ON A U.S. DOLLAR-DENOMINATED BASIS
MAY BE SIGNIFICANTLY AFFECTED BY FLUCTUATIONS IN CURRENCY EXCHANGE RATES.
The combined company's international operations also pose risks due to
currency exchange rates. The combined company's financial performance is
reported on a U.S. dollar-denominated basis. However, MotivePower's and WABCO's
international operations are generally conducted in the currencies of the
countries in which such operations are located. Fluctuations in currency
exchange rates can negatively impact the combined company's financial results.
FLUCTUATIONS IN CUSTOMER ORDERS IN THE RAILWAY INDUSTRY DUE TO ECONOMIC
CONDITIONS AND ALTERNATE FORMS OF TRANSPORTATION CAN REDUCE THE COMBINED
COMPANY'S REVENUES AND HARM ITS FINANCIAL RESULTS.
The railway industry has historically been subject to significant
fluctuations due to overall economic conditions and the level of use of
alternate methods of transportation. In economic downturns, railroads may defer
some expenditures in order to conserve cash in the short term and reductions in
freight traffic may reduce demand for the combined company's products. This
could reduce the combined company's revenues without a corresponding decrease in
its fixed costs. This can negatively impact the combined company's financial
results. We cannot assure you that economic conditions will not deteriorate or
that there will not be significant fluctuations adversely affecting the industry
as a whole and, as a result, the combined company. In
I-15
<PAGE> 22
this regard, participants in the industry, including MotivePower and WABCO, have
observed some indications of near-term softness in the North American freight
market.
CYCLICALITY IN THE PASSENGER TRANSIT INDUSTRY CAN REDUCE THE COMBINED COMPANY'S
REVENUES AND HARM ITS FINANCIAL RESULTS.
Although many industries tend to be cyclical, the passenger transit railway
industry is particularly so. New passenger transit car orders vary from year to
year and are influenced greatly by major replacement programs and by the
construction or expansion of transit systems by transit authorities. Although
the combined company's revenues may be reduced at any time due to lack of orders
from the passenger transit industry, its fixed costs which are necessary to be
prepared for busy periods may stay the same. This can negatively impact the
combined company's financial results.
BECAUSE A MATERIAL PORTION OF THE COMBINED COMPANY'S FUTURE NET SALES WILL BE
DERIVED FROM GOVERNMENTAL OR OTHER PUBLIC ENTITIES, AND NOT PRIVATE COMPANIES,
IT CAN BE NEGATIVELY AFFECTED BY CHANGES IN POLITICAL, ECONOMIC OR SIMILAR
CONDITIONS.
A substantial portion of WABCO's net sales have been, and WABCO and
MotivePower expect that a substantial portion of the combined company's future
net sales may be, derived from contracts with metropolitan transit and commuter
rail authorities and Amtrak. To the extent that future funding for proposed
public projects is curtailed or withdrawn altogether as a result of changes in
political, economic, fiscal or other conditions beyond the combined company's
control, these projects may be delayed or canceled, resulting in a potential
loss of new business.
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS MAY REQUIRE THE COMBINED COMPANY TO
USE ITS CASH TO PAY FOR LEGAL FEES AND SETTLEMENTS OR JUDGMENTS.
The combined company may be the subject of intellectual property
infringement claims by third parties. Any infringement claims, even if
meritless, will be costly and time-consuming to defend. GE Harris Railway
Electronics, LLC and GE Harris Railway Electronic Services, LLC have brought
suit against WABCO for alleged patent infringement and unfair competition
related to a communications system installed in one of WABCO's products. These
GE Harris entities are seeking to prohibit WABCO from future infringement and
are seeking an unspecified amount of money damages to recover, in part,
royalties. WABCO is defending, and the combined company will continue to defend,
these claims. However, if the combined company is not successful, it may require
the combined company to use its cash to pay for legal fees and settlements or
judgments.
YEAR 2000 ISSUES MAY NEGATIVELY AFFECT THE COMBINED COMPANY'S OPERATIONS AND THE
COMBINED COMPANY'S SUPPLIERS OR CUSTOMERS IN A MANNER WHICH COULD IMPACT THE
COMBINED COMPANY'S BUSINESS.
The Year 2000 problem is the result of computer programs using two digits
rather than four to define the applicable year. Any of MotivePower's and WABCO's
computer programs that use two digits rather than four digits to specify the
year will be unable to interpret dates beyond December 31, 1999. This problem
could result in a system failure or miscalculations causing disruptions of
operations. The three major areas that could be critically affected are
financial and information system applications, manufacturing operations and
third-party relationships with vendors and with customers. MotivePower and WABCO
have developed plans to address this exposure. MotivePower and WABCO have
assessed financial and operational systems and manufacturing equipment,
developed and continue to develop detailed plans and have commenced conversion
efforts. Each of MotivePower and WABCO believes that its present remediation and
replacement programs will adequately address the Year 2000 problems with respect
to their internal systems in all material respects. However, the combined
company may experience minor disruptions with respect to the remediation and
replacement programs that are currently operating. In addition, MotivePower's
and WABCO's vendors, suppliers and other service providers may not successfully
resolve their own Year 2000 problems in a manner which avoids significant impact
to MotivePower and WABCO. MotivePower and WABCO have received written assurances
from some of their suppliers and customers and other providers acknowledging the
Year
I-16
<PAGE> 23
2000 problems and stating their present intention to be compliant. MotivePower
and WABCO have not received assurances from all of their suppliers and other
providers and one or more key suppliers and other providers could fail to become
compliant in time to avoid a disruption to the combined company's business.
A Year 2000 failure of the combined company's systems, or those of key
suppliers or other providers, could cause disruptions of its business. These
disruptions could include a slowdown or shutdown of production, an inability to
invoice or collect from customers, an inability to receive critical supplies or
a reduction in customer orders. Any one or more of these could harm the combined
company's financial results.
MotivePower's and WABCO's products are generally sold with a limited
warranty for defects. MotivePower and WABCO have reviewed their products
currently in use by their customers or being sold and do not believe that there
will be material increases in warranty or liability claims arising out of Year
2000 non-compliance. However, a material increase in such claims could require
the combined company to apply substantial amounts of money or time to correct
any defects.
FOLLOWING THE MERGER THE COMBINED COMPANY WILL HAVE SUBSTANTIAL INDEBTEDNESS AND
SERVICING DEBT WILL REQUIRE A SUBSTANTIAL PORTION OF THE COMBINED COMPANY'S CASH
FLOWS.
Following the merger, the aggregate indebtedness of the combined company
will be significantly greater than that of MotivePower on a stand-alone basis.
On a pro forma basis, after giving effect to the merger, total indebtedness of
the combined company as of June 30, 1999 would have been $582.7 million
resulting in pro forma total capitalization of the combined company of
approximately 75% debt and 25% book equity, exclusive of the effect of any
prepayment premiums, costs of refinancing or costs of the merger, compared with
MotivePower total indebtedness of $132.5 million and total capitalization of 40%
debt and 60% equity as of June 30, 1999. The combined company's indebtedness
will require it to dedicate a substantial portion of its future cash flow to the
payment of principal and interest on this indebtedness, thereby reducing funds
available for capital expenditures and future business opportunities. The
combined company may choose to refinance a significant portion of WABCO's and
MotivePower's outstanding long-term debt. In addition, management has plans to
reduce indebtedness, but we cannot be certain that we will be successful in
either refinancing or reducing the indebtedness of the combined company. The
high level of debt may
- limit the combined company's ability to fund future working capital,
capital expenditures, research and development costs and other general
corporate requirements,
- increase the combined company's vulnerability to adverse economic and
industry conditions,
- limit the combined company's flexibility in planning for, or reacting to,
changes in the combined company's business and the industry,
- place the combined company at a competitive disadvantage compared to its
competitors that have less debt, and
- limit the combined company's ability to borrow additional funds.
CURRENT CREDIT FACILITIES OF WABCO AND MOTIVEPOWER LIMIT ITS ABILITY TO TAKE
CERTAIN ACTIONS WHICH MAY REQUIRE ACCELERATED REPAYMENT OF INDEBTEDNESS AFTER
THE MERGER AND WILL LIMIT THE COMBINED COMPANY'S ABILITY TO ENTER INTO SOME
TRANSACTIONS AND TO INCUR ADDITIONAL INDEBTEDNESS AFTER THE MERGER.
Indebtedness under WABCO's current credit agreement is guaranteed by all of
WABCO's domestic subsidiaries and secured by substantially all of WABCO's and
its domestic subsidiaries' assets. WABCO's current credit agreement contains
covenants that, among other things, limit the payment of dividends and the
incurrence of additional debt and restricts mergers, acquisitions and sales of
assets or sales of the stock of WABCO's subsidiaries. WABCO is also required to
maintain specified financial ratios and meet other financial tests. Although
WABCO and MotivePower believe that the combined company will be able to maintain
compliance with the financial tests contained in WABCO's current credit
agreement, there can be no
I-17
<PAGE> 24
assurance that it will be able to do so. The restrictions imposed by these
covenants may adversely affect the combined company's ability to make
acquisitions or take advantage of favorable business opportunities.
WABCO believes that the proposed merger with MotivePower will require a
waiver from its lenders under WABCO's credit agreement but not directly under
either of its indentures. WABCO anticipates receiving a waiver or renegotiating
or refinancing its credit agreement concurrent with the merger. However, WABCO
may not receive this waiver or renegotiate or refinance the credit agreement on
favorable terms. If WABCO does not receive a waiver or successfully renegotiate
or refinance the credit agreement concurrent with the merger, a portion of
WABCO's indebtedness would be payable.
The indentures under which WABCO's 9 3/8% Notes due 2005 were issued also
contain covenants that, among other things, limit the ability of WABCO and some
of its subsidiaries to:
- incur indebtedness,
- pay dividends on and redeem capital stock,
- create restrictions on investments in unrestricted subsidiaries,
- make distributions from some subsidiaries,
- use proceeds from the sale of assets and subsidiary stock,
- enter into transactions with affiliates,
- create liens and
- enter into sale/leaseback transactions.
WABCO's requirement to meet the foregoing covenants impacts the manner in which
it operates its business and will limit the manner in which the combined company
operates after the merger. It could limit the combined company's ability to
spend money on capital projects, research and development costs, or similar
items. It could also make the combined company unable to complete acquisitions
or to take advantage of favorable business opportunities. Further, the combined
company's failure to meet any of the foregoing covenants could trigger defaults
under the WABCO credit facilities. The documents for the WABCO credit facilities
are cross-defaulted, so that defaults in one document would trigger defaults in
others and could cause the related indebtedness to become payable.
MotivePower believes that the merger, as it is proposed, may qualify as a
change of control as that term is defined in MotivePower's two $175 million
revolving credit agreements. MotivePower's credit agreements require MotivePower
to obtain certain approvals from its lenders before consummating any transaction
that would be considered a change of control. Therefore, in order to complete
the merger without violating the terms of its credit agreements, MotivePower
will seek to refinance its debt under a new facility structured to support the
combined companies, or, as an alternative, will seek to amend its existing
credit agreements to permit the merger. However, there is no assurance that
MotivePower can refinance its debt under favorable terms in the time allowed, or
that MotivePower's lenders will grant the approvals or amendments necessary to
allow MotivePower to consummate the merger.
WABCO IS CURRENTLY INVOLVED IN ASBESTOS LITIGATION WHICH COULD, UNDER CERTAIN
CIRCUMSTANCES, REQUIRE THE COMBINED COMPANY TO USE SUBSTANTIAL AMOUNTS OF CASH
FOR LEGAL FEES AND SETTLEMENTS OR JUDGMENTS.
WABCO and Railroad Friction Products Corporation and Vapor Corporation,
each wholly-owned subsidiaries of WABCO, are defendants in asbestos bodily
injury actions pending in various state and federal jurisdictions. WABCO
believes that pursuant to the asset purchase agreement by which it acquired the
North American operations of the railway products group of American Standard,
Inc., American Standard remains liable for all asbestos claims filed against
WABCO. Although WABCO believes that American Standard is willing and able to
fulfill its indemnity obligation, there can be no assurance that American
Standard will not dispute or become unable to perform its obligations. If this
occurs, the combined company would be required to use its cash to pay for legal
fees and settlements or judgments related to the asbestos claims.
I-18
<PAGE> 25
With respect to asbestos claims against Railroad Friction Products
Corporation, WABCO believes that the American Standard asset purchase agreement
requires American Standard to indemnify WABCO and Railroad Friction Products
Corporation for 50% of any liability and defense costs Railroad Friction
Products Corporation may incur with respect to asbestos claims. The remaining
costs are covered by insurance. American Standard's indemnity obligation with
respect to Railroad Friction Products Corporation claims expires in March 2000
in connection with claims that are initiated after that date. Again, although
WABCO believes that American Standard is willing and able to fulfill its
indemnity obligation with respect to Railroad Friction Products Corporation
asbestos claims, there can be no assurance that American Standard will not
dispute or become unable to perform its obligations. In addition, claims may be
made after American Standard's indemnification obligations expire and/or the
coverage afforded by insurance may at some time in the future be exhausted or
unavailable. If this occurs, the combined company would be required to use its
cash to pay for legal fees and settlements or judgments related to the asbestos
claims.
Finally, WABCO believes that Mark IV Industries, Inc., the former owner of
Vapor is obligated to indemnify WABCO and Vapor for asbestos claims against
Vapor. Although WABCO believes that Mark IV is willing and able to fulfill its
indemnity obligation with respect to Vapor asbestos claims, there can be no
assurance that Mark IV will not dispute or become unable to perform its
obligations. If this occurs, the combined company would be required to use its
cash to pay for legal fees and settlements or judgments related to the asbestos
claims.
WABCO'S ANTI-TAKEOVER DEFENSE PROVISIONS MAY DETER POTENTIAL ACQUIRORS AND MAY
DEPRESS ITS STOCK PRICE.
WABCO's certificate of incorporation and bylaws, as well as Delaware law,
contain provisions that could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of WABCO. These provisions allow WABCO to issue preferred stock
with rights senior to those of its common stock and impose various procedural
and other requirements that could make it more difficult for WABCO shareholders
to effect some corporate actions.
As of December 31, 1998, current WABCO management and WABCO's Employee
Stock Ownership Plan, which we sometimes refer to in this joint proxy
statement/prospectus as "WABCO's ESOP", held approximately 55% of the issued and
outstanding shares of WABCO. Following the issuance of the shares of WABCO
common stock to MotivePower shareholders in connection with the revised merger,
current WABCO management and WABCO's ESOP will still hold approximately 36% of
the issued and outstanding shares of WABCO common stock. The concentration of
this large percentage of shares with management and WABCO's ESOP could make it
more difficult for a third party to acquire control of WABCO.
I-19
<PAGE> 26
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document that are subject
to risks and uncertainties. Forward-looking statements include the information
in this document regarding:
- synergies
- efficiencies
- cost savings
- revenue enhancements
- capital productivity
- capital spending
- the timetable for closing the merger
The sections of this document which contain forward-looking statements
include "Questions and Answers About the Merger," "Summary," "Historical and Pro
Forma Selected Financial Data -- Merger-Related Expenses," "Historical and Pro
Forma Selected Financial Data -- Integration-Related Expenses," "Risk Factors,"
"The Merger Transaction -- Background of the Merger," "The Merger Transaction --
Factors Considered by, and Recommendation of, the MotivePower Board," "The
Merger Transaction -- Factors Considered by, and Recommendation of, the WABCO
Board," "Unaudited Pro Forma Condensed Combined Financial Statements," "Notes to
Unaudited Pro Forma Condensed Combined Financial Statements -- Merger-Related
and Integration-Related Expenses" and "Opinions of Financial Advisors." Our
forward-looking statements are also identified by words such as "believes,"
"expects," "anticipates," "intends," "estimates" or similar expressions.
For those statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.
You should understand that the following important factors, in addition to
those discussed elsewhere in this document and in the documents which are
incorporated by reference, could affect the future results of MotivePower and
WABCO, and of the combined company after the closing, and could cause those
results or other outcomes to differ materially from those expressed in our
forward-looking statements:
Economic and Industry Conditions
- materially adverse changes in economic or industry conditions
generally or in the markets served by our companies, including North
America, South America, Europe, Australia and Asia
- demand for services in the freight and passenger rail industry
- consolidations in the rail industry
- demand for our products and services
- continued outsourcing by our customers
- demand for freight cars, locomotives, passenger transit cars and buses
- industry demand for faster and more efficient braking equipment
- fluctuations in interest rates
Operating Factors
- supply disruptions
- technical difficulties
- changes in operating conditions and costs
- successful introduction of new products
- labor relations
I-20
<PAGE> 27
- completion and integration of additional acquisitions
- the development and use of new technology
- year 2000 disruptions
Competitive Factors
- the actions of competitors
Political/Governmental Factors
- political stability in relevant areas of the world
- future regulation/deregulation of our customers and/or the rail
industry
- governmental funding for some of our customers
- political developments and laws and regulations, such as forced
divestiture of assets, restrictions on production, imports or
exports, price controls, tax increases and retroactive tax claims,
expropriation of property, cancellation of contract rights, and
environmental regulations
Transaction or Commercial Factors
- the outcome of negotiations with partners, governments, suppliers,
customers or others
- our ability to integrate the businesses of MotivePower and WABCO
successfully after the merger
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<PAGE> 28
INFORMATION ABOUT THE MEETINGS AND VOTING
MotivePower's Board is using this joint proxy statement/prospectus to
solicit proxies from the holders of MotivePower common stock for use at the
MotivePower meeting. WABCO's Board is also using this document to solicit
proxies from the holders of WABCO common stock and for use at the WABCO meeting.
We are first mailing this joint proxy statement/prospectus and accompanying form
of proxy to MotivePower and WABCO shareholders on or about Monday, October 25,
1999.
MATTERS RELATING TO THE MEETINGS
<TABLE>
<CAPTION>
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MOTIVEPOWER MEETING WABCO MEETING
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<S> <C> <C>
Time and Place: November 19, 1999 November 19, 1999
11:00 a.m., Local Time 10:00 a.m., Local Time
Two Gateway Center Westin William Penn
Lobby Conference Center 530 William Penn Way
Pittsburgh, PA 15222 Pittsburgh, PA 15219
- -------------------------------------------------------------------------------------------------------------
Purpose of To approve and adopt the revised merger To approve and adopt the revised merger
Meeting is to agreement and the revised merger, as agreement and the revised merger, as
Vote on the described under "The Merger described under "The Merger
Following Item: Transaction -- General" on page I-27. Transaction -- General" on page I-27.
- -------------------------------------------------------------------------------------------------------------
Record Date: The record date for shares entitled to The record date for shares entitled to
vote is October 20, 1999. vote is October 20, 1999.
- -------------------------------------------------------------------------------------------------------------
Outstanding As of October 20, 1999, there were As of October 20, 1999, there were
Shares Held on approximately 27,115,710 shares of approximately 34,111,550 shares of
Record Date: MotivePower common stock outstanding. WABCO common stock outstanding
(including shares held by WABCO's
ESOP).
- -------------------------------------------------------------------------------------------------------------
Shares Entitled Shares entitled to vote are MotivePower Shares entitled to vote are WABCO
to Vote: common stock held at the close of common stock held at the close of
business on the record date, October business on the record date, October
20, 1999. 20, 1999.
Each share of MotivePower common stock Each share of WABCO common stock that
that you own entitles you to one vote. you own entitles you to one vote.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 29
<TABLE>
<CAPTION>
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MOTIVEPOWER MEETING WABCO MEETING
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<S> <C> <C>
Shares Entitled Shares held by MotivePower in Each participant in WABCO's ESOP
to Vote: its treasury are not voted. has the right, subject to
(continued) applicable law, to instruct the
trustee of WABCO's ESOP how to
vote the shares allocated to his
or her account in WABCO's ESOP.
As to unallocated shares, the
trustee, pursuant to WABCO's
ESOP Trust Agreement, and
subject to applicable law, votes
these shares in the same
proportion as it votes all the
allocated shares as to which it
has timely received voting
instructions. As to the
allocated shares with respect to
which the trustee does not
timely receive voting
instructions, the WABCO ESOP
Committee, pursuant to WABCO's
ESOP Trust Agreement, has the
right, subject to applicable
law, to instruct the trustee how
to vote these shares, and this
committee intends to instruct
the trustee to vote these shares
in the same proportion as it
votes all of the allocated
shares as to which it has timely
received voting instructions.
Shares held by WABCO in its
treasury are not voted.
- ------------------------------------------------------------------------------------------------------------
Quorum Requirement: A quorum of shareholders is A quorum of shareholders is
necessary to hold a valid necessary to hold a valid
meeting. meeting.
The presence in person or by The presence in person or by
proxy at the meeting of holders proxy at the meeting of holders
of shares representing a of shares representing a
majority of the votes of the majority of the votes of the
MotivePower common stock WABCO common stock entitled to
entitled to vote at the meeting vote at the meeting is a quorum.
is a quorum. Abstentions count Abstentions count as present for
as present for establishing a establishing a quorum. Broker
quorum. Broker "non-votes" and "non-votes" and shares held by
shares held by MotivePower in WABCO in its treasury do not
its treasury, if any, do not count toward a quorum.
count toward a quorum.
A broker non-vote occurs on an A broker non-vote occurs on an
item when a broker is not item when a broker is not
permitted to vote on that item permitted to vote on that item
without instruction from the without instruction from the
beneficial owner of the shares beneficial owner of the shares
and no instruction is given. and no instruction is given.
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</TABLE>
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<PAGE> 30
<TABLE>
<CAPTION>
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MOTIVEPOWER MEETING WABCO MEETING
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<S> <C> <C>
Shares Beneficially Owned by 486,691 shares of MotivePower 9,618,206 shares of WABCO com-
MotivePower and WABCO common stock or 2,085,025 shares mon stock or 9,759,706 shares of
Directors and Executive of MotivePower common stock, WABCO common stock, including
Officers as of October 1, including exercisable options. exercisable options. These
1999: These shares represent in total shares represent in total
approximately 1.79% of the approximately 28.2% of the
voting power of MotivePower's voting power of WABCO's voting
voting securities or 7.21% securities or 28.6% including
including exercisable options. exercisable options.
John C. Pope has entered into a William E. Kassling, Robert J.
voting agreement dated as of Brooks, Harvard Private Capital
September 26, 1999 with WABCO. Holdings, Inc. and Vestar Equity
The voting agreement provides Partners, L.P., as shareholders
that, subject to certain limited of WABCO, have entered into a
exceptions, Mr. Pope will vote voting agreement dated as of
his shares in favor of the September 26, 1999 with
revised merger and will not take MotivePower. The voting
any action that would impede or agreement provides that, subject
prevent the merger. The voting to certain limited exceptions,
agreement also restricts Mr. those WABCO shareholders will
Pope from soliciting other com- vote their shares in favor of
peting takeover proposals. the revised merger and will not
take any action that would
impede or prevent the merger.
The voting agreement also
restricts these shareholders
from soliciting other competing
takeover proposals.
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</TABLE>
VOTE NECESSARY TO APPROVE MOTIVEPOWER AND WABCO PROPOSALS
<TABLE>
<CAPTION>
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ITEM VOTE NECESSARY*
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Merger Proposals MotivePower: Approval and adoption of the merger
agreement and the merger requires a
majority of the votes cast by holders of
the MotivePower common stock present in
person or by proxy at the special meeting.
Abstentions and broker "non-votes" have no
effect on the vote to approve the merger
and the merger agreement.
WABCO: Approval and adoption of the merger
agreement and the merger requires the
affirmative vote of a majority of the votes
of all outstanding shares of WABCO common
stock, whether or not present in person or
by proxy at the special meeting.
Abstentions and broker "non-votes" have the
same effect as a vote against the merger
and the merger agreement.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* Under NYSE rules, if your broker holds your shares in its name, your broker is
not permitted to vote your shares on the merger proposals if it does not
receive voting instructions from you. Without your voting instructions, a
broker non-vote will occur on the merger proposals, which will (1) have no
effect on the vote to approve and adopt the merger agreement and the merger in
the case of MotivePower and (2) have the effect of a vote against approval and
adoption of the merger agreement and the merger in the case of WABCO. The
differences in the effect of abstentions and broker "non-votes" for
MotivePower and WABCO are due to differences in state corporate law in
Pennsylvania, where MotivePower is incorporated, and Delaware, where WABCO is
incorporated.
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<PAGE> 31
PROXIES
Voting Your Proxy. You may vote in person at your meeting or by proxy. We
recommend you vote by proxy even if you plan to attend your meeting. You can
always change your vote at the meeting. IF YOU SUBMITTED A PROXY CARD FOR THE
SHAREHOLDERS MEETINGS SCHEDULED FOR AUGUST 23, 1999, THAT CARD IS NO LONGER
VALID AND YOU NEED TO COMPLETE AND RETURN A NEW PROXY CARD.
Voting instructions are included on your proxy card. If you properly give
your proxy and submit it to us in time to vote, one of the individuals named as
your proxy will vote your shares as you have directed.
How to Vote by Proxy
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
MOTIVEPOWER WABCO
- --------------------------------------------------------------------------------------------------------
<S> <C>
Complete, sign, date and return your proxy card Complete, sign, date and return your proxy card
in the enclosed envelope. in the enclosed envelope.
- --------------------------------------------------------------------------------------------------------
</TABLE>
If you submit your proxy but do not make specific choices, your proxy will
follow the Board's recommendations and vote your shares:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
MOTIVEPOWER WABCO
- --------------------------------------------------------------------------------------------------------
<S> <C>
- "FOR" approval and adoption of the merger - "FOR" approval and adoption of the merger
agreement and the merger. agreement and the merger.
- In its discretion as to any other business as - In its discretion as to any other business as
may properly come before the MotivePower may properly come before the WABCO meeting.
meeting.
- --------------------------------------------------------------------------------------------------------
</TABLE>
Revoking Your Proxy. You may revoke your proxy before it is voted by:
- submitting a new proxy with a later date,
- notifying your company's corporate secretary in writing before the
meeting that you have revoked your proxy, or
- voting in person at the meeting.
Voting in person. If you plan to attend a meeting and wish to vote in
person, we will give you a ballot at the meeting. However, if your shares are
held in the name of your broker, bank or other nominee, you must bring an
account statement or letter from the nominee indicating that you are the
beneficial owner of the shares on October 20, 1999, the record date for voting.
People with disabilities. We can provide reasonable assistance to help you
participate in the meeting if you tell us about your disability and your plan to
attend. Please call or write the corporate secretary of your company at least
two weeks before your meeting at the number or address under "Summary -- The
Companies" on page I-3.
Proxy solicitation. We will pay our own costs of soliciting proxies.
In addition to this mailing, MotivePower and WABCO employees may solicit
proxies personally, electronically or by telephone. MotivePower has retained
Georgeson & Company, Inc. to aid in the solicitation of proxies from its
shareholders. MotivePower will pay these solicitors customary fees and expense
reimbursement for their services.
The extent to which these proxy soliciting efforts will be necessary
depends entirely upon how promptly proxies are submitted. You should send in
your proxy by mail without delay. We reimburse brokers and other nominees for
their expenses in sending these materials to you and getting your voting
instructions.
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<PAGE> 32
Do not send in any stock certificates with your proxy cards. The exchange
agent will mail transmittal forms with instructions for the surrender of stock
certificates for MotivePower common stock to former MotivePower shareholders as
soon as practicable after the completion of the merger.
OTHER BUSINESS; ADJOURNMENTS
We are not currently aware of any other business to be acted upon at either
meeting.
Adjournments may be made for the purpose of, among other things, soliciting
additional proxies. Any adjournment may be made from time to time by approval of
the holders of shares representing a majority of the votes present in person or
by proxy at the meeting, whether or not a quorum exists, without further notice
other than by an announcement made at the meeting. Neither of us currently
intends to seek an adjournment of our meeting.
PRESENCE OF AUDITORS
Representatives of Deloitte & Touche LLP will be present at the MotivePower
meeting to respond to appropriate questions from those of you attending the
meeting and to make statements as they may desire.
Representatives of Arthur Andersen LLP will be present at the WABCO meeting
to respond to appropriate questions from those of you attending the meeting and
to make statements as they may desire.
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<PAGE> 33
THE MERGER TRANSACTION
GENERAL
MotivePower's Board is using this joint proxy statement/prospectus to
solicit proxies from the holders of MotivePower common stock for use at the
MotivePower meeting. WABCO's Board is also using this document to solicit
proxies from the holders of WABCO common stock for use at the WABCO meeting.
MotivePower Proposal
At the MotivePower meeting, holders of MotivePower common stock will be
asked to vote upon approval and adoption of the revised merger agreement and the
revised merger.
WABCO Proposal
At the WABCO meeting, holders of WABCO common stock will be asked to vote
upon approval and adoption of the revised merger agreement and the revised
merger.
BACKGROUND OF THE MERGER
The management of each of MotivePower and WABCO continually review their
company's respective positions as leaders in the rail products and service
industry with the objective of determining what alternatives are available to
further enhance shareholder value in the competitive environment of the
industry. While both companies believe they have positive future prospects on a
stand-alone basis, in recent years, the managements of both MotivePower and
WABCO have had conversations with a number of other companies regarding a range
of options to improve their competitive positions, including acquisitions or
dispositions of assets, possible partnerships, alliances or other significant
transactions.
Original Merger
In March 1998, WABCO and MotivePower formed a joint venture in Mexico to
build locomotive and railcar components. In September 1998, WABCO and
MotivePower expanded their joint venture to include the repair and maintenance
of some of the electronics equipment manufactured by WABCO. On October 26 and
27, 1998, John C. Pope, Chairman of the Board of MotivePower, Michael A. Wolf,
President and Chief Executive Officer of MotivePower, Joseph S. Crawford,
Executive Vice President and Chief Operating Officer of MotivePower, William E.
Kassling, Chairman and Chief Executive Officer of WABCO, and Gregory T.H.
Davies, President and Chief Operating Officer of WABCO, attended a ribbon
cutting ceremony for the Mexican joint venture. At the ribbon cutting ceremony,
the parties discussed the positive aspects of their joint venture and agreed to
explore the possibility of expanding and enhancing the joint venture product
offerings and pursuing joint opportunities.
On March 15 and 16, 1999, Messrs. Kassling and Davies participated in tours
of MotivePower's plants in Chicago and Boise with Messrs. Pope, Wolf and
Crawford. The primary purpose of these tours was to allow Messrs. Kassling and
Davies to obtain a better understanding of MotivePower's business, including
obtaining an understanding of existing commercial arrangements with customers
and suppliers and the products and services offered by MotivePower in order to
consider the addition of new product lines to the joint venture.
On March 19, 1999, Messrs. Pope and Kassling met to discuss the cultural
and philosophical differences and similarities of each of the companies.
On April 8 and 9, 1999, Messrs. Pope, Wolf and Crawford participated in
tours of WABCO's plants in Spartanburg, Germantown, Hamilton and Chicago with
Messrs. Kassling and Davies. The primary purpose of these tours was to allow
Messrs. Pope, Wolf and Crawford to obtain a better understanding of WABCO's
business, including obtaining an understanding of existing commercial
arrangements with customers and suppliers and the products and services offered
by WABCO in order to consider the addition of new product lines to the joint
venture.
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<PAGE> 34
At a special meeting of the MotivePower Board on April 12, 1999, Mr. Pope
briefed the MotivePower Board on the WABCO and MotivePower plant tours and the
possibility of a combination transaction between MotivePower and WABCO. The
MotivePower Board discussed the issues regarding a possible merger and
authorized Mr. Pope to continue to pursue discussions with WABCO. At the April
12 meeting, the MotivePower Board created a special committee comprised of James
P. Miscoll, Lee B. Foster II and Mr. Pope to investigate, analyze and negotiate
any potential business combination.
On April 13, 1999, Messrs. Pope, Wolf, Crawford, Kassling, William
Fabrizio, Chief Financial Officer of MotivePower, Alvaro Garcia-Tunon, Vice
President-Treasurer of WABCO, and George A. Socher, Vice President-Corporate
Controller of WABCO, attended a meeting where presentations relating to the
businesses of each of MotivePower and WABCO were made by each company. A
reciprocal confidentiality agreement was entered effective March 15, 1999.
On April 14, 1999, MotivePower entered into an engagement letter relating
to the retention of Wasserstein Perella as MotivePower's financial advisor for
the proposed transaction with WABCO.
On April 26, 1999, the special committee of the MotivePower Board met to
discuss strategic issues related to a possible merger between MotivePower and
WABCO. Also, on April 26, 1999, at a regular meeting of the MotivePower Board,
Mr. Pope updated the MotivePower Board on the discussions with WABCO.
On April 29, 1999, MotivePower management and MotivePower's financial and
legal advisors and independent accountants met with WABCO management and WABCO's
financial and legal advisors and independent accountants. At the meeting,
MotivePower management and WABCO management each gave a presentation relating to
their respective businesses and strategic plans. At the meeting, the parties
discussed the legal, business, accounting and financial due diligence process
and general structuring issues.
On May 5 and 6, 1999, senior members of MotivePower management and
MotivePower's financial advisors met with senior members of WABCO management and
WABCO's financial advisors to discuss some due diligence issues.
On May 10, 1999, the special committee of the MotivePower Board met to
discuss the progress WABCO and MotivePower had made in their discussions during
the last few weeks.
On May 12, 1999, the special committee of the MotivePower Board met to
discuss issues relating to the structuring of a combination between MotivePower
and WABCO. In addition, the special committee discussed some of the terms of the
first draft of a merger agreement prepared by MotivePower's legal counsel,
including provisions relating to termination, break-up fees and the right of
MotivePower to consider and enter into an alternate transaction.
On May 13, 1999, MotivePower's legal counsel delivered a first draft of the
merger agreement to WABCO and its advisors. On May 21, WABCO's legal counsel
provided written comments on this draft to MotivePower and its advisors.
Thereafter, until the execution of the original merger agreement on June 2,
MotivePower and WABCO and their advisors continued to negotiate the provisions
of this agreement. On May 25, a draft of a form of the original stock option
agreement was provided to WABCO and its advisors.
On May 13, 1999, WABCO entered into an engagement letter relating to the
retention of Credit Suisse First Boston Corporation, which we also refer to as
CSFB in this joint proxy statement/prospectus, as WABCO's financial advisor for
the proposed transaction with MotivePower.
At a special meeting of the MotivePower Board on May 18, 1999,
MotivePower's directors were briefed on the objectives and strategic benefits,
both near-term and longer-term, from a merger with WABCO and the possibility of
further enhancing shareholder value over what could be achieved on a stand-alone
basis, as well as on the status of the discussions with WABCO. MotivePower
management and MotivePower's financial and legal advisors and its independent
accountants reported on their due diligence review of WABCO. MotivePower's
financial advisor then presented its preliminary financial analysis of the
merger. MotivePower's independent public accountants discussed accounting
matters relating to the merger. MotivePower's legal counsel reviewed legal
matters pertaining to the proposed transaction. The MotivePower Board authorized
MotivePower management to continue discussions with WABCO.
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<PAGE> 35
On May 18, 1999, WABCO's financial, accounting and legal counsel made a
presentation to all WABCO directors regarding the proposed transaction and the
status of due diligence. After this presentation, the WABCO Board held a special
meeting to discuss the proposed transaction. At this meeting the WABCO Board
discussed the status of due diligence, corporate governance issues and the
proposed transaction structure. Management of WABCO was authorized and directed
to continue to finalize due diligence and to further negotiate corporate
governance, transaction structure and pricing issues.
On May 19, 1999, Messrs. Pope and Kassling spoke by telephone to discuss
strategic and corporate governance issues.
On May 20, 1999, Mr. Pope and Mr. Kassling spoke by telephone and continued
their discussion regarding strategic and corporate governance issues.
At a meeting of the MotivePower special committee held on May 25, 1999,
MotivePower management and MotivePower's financial and legal advisors and its
independent accountants updated the special committee on further due diligence
performed with respect to WABCO and the status of the discussions pertaining to
the proposed merger.
On May 26, 1999, MotivePower's financial and legal advisors had a telephone
conference with WABCO's financial and legal advisors. On the telephone
conference the parties discussed due diligence issues and some of the open
issues in the original merger agreement.
On May 27, 1999, the MotivePower Board held a special meeting at which it
was updated on due diligence performed with respect to WABCO, the status of
discussions between MotivePower and WABCO and various financial, accounting and
legal considerations of the proposed transaction.
On May 27, 1999, the WABCO Board held a special meeting to discuss the
status of due diligence, deal structure and the progress of the negotiations. At
this meeting, WABCO's legal counsel made a presentation about the terms and
conditions of the original merger agreement and the original stock option
agreements.
On the evening of May 27, Messrs. Kassling, Pope and James P. Kelley, a
director of WABCO, met and discussed some unresolved terms of the original
merger, including board composition and the exchange ratio.
On June 1, 1999, Messrs. Kassling and Pope had telephone conversations
where they discussed board representation and the composition and function of
some of the committees of the MotivePower Board. Messrs. Kassling and Pope also
discussed Mr. Pope's duties, responsibilities and powers as Chairman of
MotivePower and Mr. Kassling's future duties, responsibilities and powers as
Chief Executive Officer of MotivePower.
On June 1, 1999, the WABCO Board held a special meeting to discuss the
status of due diligence, corporate governance issues, acceptable exchange ratios
and the proposed transaction generally.
At a special meeting held on the morning of June 2, 1999, the MotivePower
Board was updated on due diligence performed with respect to WABCO and reviewed
with its legal and financial advisors the principal terms of the original merger
agreement and the original stock option agreements and various financial, legal,
accounting and other issues relating to the original merger. The MotivePower
Board discussed possible exchange ratios.
At a special meeting of the WABCO Board on June 2, 1999, WABCO's legal
counsel reviewed legal matters pertaining to the proposal transaction. The WABCO
Board also discussed and identified the parameters of the original exchange
ratio within which it would be prepared to authorize WABCO to enter into the
original merger agreement and the original stock option agreements. CSFB orally
delivered its fairness opinion to the WABCO Board. After due consideration, the
WABCO Board unanimously approved the original merger agreement, the original
stock option agreements and the related merger matters described in this
document and determined to recommend that the WABCO shareholders adopt and
approve the original merger agreement and the original merger, all subject to
negotiation of an exchange ratio within the parameters specified by the WABCO
Board. The WABCO Board authorized WABCO's financial advisor and some of the
members of management to negotiate an exchange ratio within the approved
parameters.
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<PAGE> 36
Promptly after the conclusion of the special meeting of the WABCO Board,
WABCO's financial advisor telephoned MotivePower's financial advisor to further
negotiate the exchange ratio. The result of these negotiations was that WABCO's
financial advisor and Mr. Kassling advised MotivePower's financial advisors and
Mr. Pope, respectively, that WABCO would not be willing to enter into the
proposed transactions at an exchange ratio of less than 1.3, which ratio was
within the parameters approved by the WABCO Board and was consistent with CSFB's
fairness opinion.
At a special meeting of the MotivePower Board held late in the afternoon on
June 2, 1999 to consider the original merger, the MotivePower Board discussed
the exchange ratio that had been proposed by the WABCO Board. The MotivePower
Board then reviewed the terms of the proposed merger agreement and stock option
agreements. MotivePower's legal advisors reviewed various legal considerations
relating to the proposed merger. The MotivePower Board then received a financial
presentation from and the oral fairness opinion of Wasserstein Perella.
Following these presentations, and a discussion regarding the strategic benefits
of the proposed merger and of the terms and conditions of the original merger
agreement and the original stock option agreements, the MotivePower Board
unanimously approved the original merger agreement and the original stock option
agreements and determined to recommend that the MotivePower shareholders adopt
and approve the original merger agreement and original merger.
Following the approval of their Boards, MotivePower and WABCO executed the
original merger agreement and the original stock option agreements, and issued a
joint press release promptly thereafter prior to the opening of NYSE trading.
On July 19, 1999, MotivePower and WABCO amended the original merger
agreement in certain minor respects.
Revised Merger
On August 6, 1999, MotivePower and WABCO exchanged updated financial
information regarding each company's year to date operating results and
preliminary revised forecasts for the remainder of 1999. Motive Power's and
WABCO's management analyzed this information during the following days.
On August 10, 1999, Mr. Kassling and Mr. Robert J. Brooks, Chief Financial
Officer of WABCO, met with Mr. David Bonvenuto, Controller of MotivePower, and
(by telephone) Messrs. Wolf, Fabrizio and Tim Wesley, Vice President Investor
Relations, of MotivePower, to discuss this updated financial information.
During the period from August 10, 1999 to August 16, 1999, the members of
senior management of WABCO engaged in multiple telephonic meetings with WABCO's
financial and legal advisors and independent accountants to evaluate the impact
of the financial information on the combined company and the proposed merger. In
addition, members of WABCO senior management and MotivePower senior management
had several discussions during this period, including discussions regarding
potential public disclosure of the new information.
At a special meeting of the WABCO Board on August 12, 1999, Messrs.
Kassling, Brooks and Davies reviewed with the Board the financial information
received from MotivePower management and the August 10, 1999 meeting between Mr.
Kassling and Mr. Brooks and MotivePower management and the other communications
with MotivePower management. WABCO's legal advisors discussed legal matters with
the WABCO Board. The WABCO Board directed WABCO management to promptly contact
senior management of MotivePower in order to conduct further due diligence and
to further discuss the financial information.
On August 15, 1999, the MotivePower Board held a special meeting at which
it was updated on the recent discussions between the two companies.
On August 16, 1999, at the offices of Reed Smith Shaw & McClay LLP, Messrs.
Kassling, Brooks, Davies, Kim Davis, a WABCO Board member, and representatives
of WABCO's financial advisors met with Messrs. Pope, Wolf, Crawford, Fabrizio,
Bonvenuto and representatives of MotivePower's financial advisor, to discuss
WABCO's and MotivePower's operations and the financial information presented on
August 6, 1999. During this meeting, MotivePower's senior management and WABCO's
senior management exchanged additional detail regarding financial and operating
performance, including revised forecasts for the remainder
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<PAGE> 37
of 1999. The participants discussed the information. The senior management of
the companies also discussed the advisability of making a joint disclosure of
revised financial performance expectations for the combined company in light of
the upcoming shareholders meetings regarding the original merger.
Later that day, the Board of WABCO held a special meeting to consider the
possibility of a joint press release disclosing the change in the expected
financial performance of the combined company following the original merger. The
WABCO Board also reaffirmed its commitment to the original merger.
That evening Messrs. Pope and Kassling, and a representative of each of
their financial advisors met to discuss the joint press release to be issued on
August 18, 1999.
On August 17, 1999, the companies prepared and evaluated with their
respective advisors the content of a draft joint press release. The joint press
release was issued on August 18, 1999 disclosing the revised earnings
expectations for the combined company in 1999 and that management believed this
was due primarily to the timing of deliveries under certain contracts, such as
MotivePower's sale of certain switcher locomotives. Subsequent to the press
release, the stock of each company traded substantially lower and continued to
trade lower during the following three trading days.
Following the joint press release, WABCO was contacted by several of its
largest shareholders who expressed concern with the content of the joint press
release and with its timing in light of the scheduled August 23 shareholders
meeting.
On August 19, 1999, the WABCO Board met to discuss the then recent
developments. WABCO management reported on the multiple communications received
by various members of management and the WABCO Board from shareholders as a
result of the joint press release. In light of the circumstances and in order to
provide WABCO's shareholders sufficient time to evaluate the new information and
WABCO sufficient time to solicit proxies in favor of the transaction, WABCO's
Board determined that it was advisable to postpone the scheduled shareholders
meeting. The WABCO Board instructed Mr. Kassling to contact MotivePower and
request that the companies jointly postpone the meetings of their respective
shareholders that were scheduled to be held on August 23, 1999 to a date in the
future. Later that day, Mr. Kassling received a letter from Mr. Pope in which
MotivePower indicated, among other things, that it declined to postpone its
shareholders meeting and that it believed a postponement by WABCO of its
stockholders meeting would be inconsistent with the terms of the original merger
agreement. In a letter sent to Mr. Pope early the following week, Mr. Kassling
responded by stating the reasons why WABCO believed that the postponement of the
stockholders meeting was consistent with its obligation under the original
merger agreement.
On August 19, 1999, the MotivePower Board held a special meeting at which
it was updated on the recent discussions between the two companies and the
market developments following the issuance of the joint press release on August
18, 1999.
At a special meeting of the WABCO Board on the morning of August 20, 1999,
WABCO's Board again instructed Mr. Kassling to communicate to MotivePower that
WABCO wanted MotivePower to postpone its shareholders meeting and to inform
MotivePower of the WABCO Board's decision to postpone its shareholders meeting.
Later that day, Mr. Pope contacted Mr. Kassling and proposed to postpone
the MotivePower shareholders meeting for two days in order to provide each of
the company's shareholders additional time to evaluate the recently released
information, provided that several inside shareholders of WABCO commit to vote
in favor of the merger. WABCO did not believe that a two day postponement would
provide its shareholders adequate opportunity to evaluate and act upon the new
information and WABCO did not believe that it was in a position to deliver the
requested shareholder commitments. Later that day WABCO issued a press release
announcing the postponement of its August 23, 1999 shareholders meeting.
Following the issuance of WABCO's press release, MotivePower issued a press
release on August 20, 1999 in which it announced that it still intended to hold
its shareholders meeting on August 23, 1999.
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<PAGE> 38
MotivePower also indicated in the release that it had informed WABCO that
MotivePower believed WABCO had the obligation under the original merger
agreement to hold its shareholders meeting as scheduled.
On August 23, 1999, MotivePower held its shareholders meeting. The
MotivePower shareholders approved the original merger and original merger
agreement.
Over the next two weeks the senior management of WABCO and MotivePower
communicated on several occasions to discuss alternatives for proceeding with
the merger. As senior management of WABCO continued to communicate with its
shareholders to solicit proxies for the merger, a substantial portion of WABCO's
largest shareholders suggested that they might not vote in favor of the original
merger.
On September 1, 1999, Messrs. Pope and Kassling met to discuss how the
companies could proceed with the merger. They mutually agreed to provide each
other with updated financial and contract information reflecting August results
and other requested information. They also agreed to meet again after each
company's review of that information. Such information was exchanged on
September 9 and September 10, 1999.
On September 10, 1999, the MotivePower Board held a special meeting at
which it was updated on the recent discussions and the exchange of information
between the two companies. In addition, counsel advised the Board with regard to
certain legal matters concerning the pending merger. Later on September 10th,
Messrs. Pope, Bonvenuto, Fabrizio and Crawford met with WABCO's accounting
advisors, and Messrs. Brooks and Davies met with MotivePower's accounting
advisors, to discuss the supplemental information. Members of WABCO's and
MotivePower's senior management and their respective advisors independently
analyzed the supplemental information during the subsequent weekend.
On September 13, 1999, Messrs. Bonvenuto and Crawford met with Mr. Brooks
and WABCO's financial advisors to discuss the supplemental information. That
afternoon, senior management of WABCO held a telephonic conference with WABCO's
financial and legal advisors to discuss the conclusions from the updated
information and legal due diligence and alternatives for proceeding with the
merger.
At a special meeting of the WABCO Board on September 14, 1999, WABCO's
senior management reported to the Board on the most recent due diligence and
alternatives for proceeding with the transaction. WABCO's legal and financial
advisors advised the WABCO Board on matters related to the transaction. The
WABCO Board resolved to continue discussions with MotivePower to determine if
the parties could proceed with the merger and authorized Mr. Kassling to
promptly meet with Mr. Pope to discuss the terms under which the WABCO Board
believed proceeding with a merger would gain WABCO stockholder approval.
On September 15, 1999, Mr. Kassling met with Mr. Pope to discuss proceeding
with a merger under the modified terms. They were unable to agree to modified
terms.
At a special meeting of the WABCO Board on September 16, 1999, WABCO's
financial advisors made a presentation to the WABCO Board regarding possible
modified terms of the transaction. WABCO's legal advisors reviewed legal matters
pertaining to the possible modified terms of the merger. The WABCO Board
discussed and established parameters for the terms of a revised merger agreement
and instructed Mr. Kassling to negotiate such terms with Mr. Pope.
On September 16, 1999, Mr. Kassling and Mr. Pope met to discuss the
transaction but were again unable to agree to modified terms.
On September 17, 1999, WABCO's financial advisor spoke by telephone with
MotivePower's financial advisors to discuss possible terms for a revised merger
agreement. They spoke again by telephone on September 20, 1999.
On September 24, 1999, Messrs. Kassling and Pope spoke by telephone and
tentatively agreed to the terms of the revised merger agreement subject to
approval by the board of directors of each company. Mr. Pope and Mr. Kassling
instructed their legal advisors to prepare and negotiate a revised merger
agreement and related agreements. MotivePower's legal advisors delivered a first
draft of the revised merger agreement, the revised stock option agreements and
the voting agreements to WABCO and its advisors on
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<PAGE> 39
Friday evening. From the evening of September 24, 1999 the parties and their
legal counsel continued negotiations of and revised those agreements until they
were executed by the parties early in the morning of September 27, 1999.
On September 24, 1999, the MotivePower Board held a special meeting at
which it reviewed and discussed the possible terms of a revised merger,
including the possible exchange ratio. The MotivePower Board directed
MotivePower's representatives to continue negotiating the terms of definitive
agreements relating to the revised merger.
At a special meeting of the MotivePower Board held in the evening of
September 26, 1999, the MotivePower Board reviewed the course of negotiations
and events relating to the possible change in the terms of the merger. The Board
reviewed the terms of the revised merger agreement, the revised stock option
agreements and the voting agreements. MotivePower's legal advisors reviewed
various legal considerations relating to the proposed restructuring of the
merger. The MotivePower Board then received a financial presentation from and
the oral fairness opinion of Wasserstein Perella. Following these presentations,
and a discussion regarding the strategic benefits of the proposed merger and the
terms and conditions of the definitive agreements, the MotivePower Board
approved the revised merger agreement and related agreements. Of the six
directors participating in the meeting, all, except Mr. Wolf, voted to recommend
that the MotivePower shareholders adopt and approve the revised merger agreement
and revised merger. Mr. Wolf voted against based on reservations concerning
financial and other terms.
At a special meeting of the WABCO Board on September 26, 1999, the Board
reviewed the terms of the revised merger agreement and related documents. During
this meeting, the Board reviewed certain financial terms of the transaction with
its financial advisor and received the opinion of CSFB regarding the fairness of
the revised merger to WABCO. WABCO's legal advisors reviewed the terms of the
revised merger agreement and legal considerations of the proposed revised
transactions with WABCO's Board. Following extensive consideration and
discussion, the WABCO Board unanimously approved the revised merger agreement,
the revised stock option agreements, the voting agreements and the related
merger matters described in this document. A joint press release was issued on
September 27, 1999 announcing the revised merger agreement.
MotivePower and WABCO amended the revised merger agreement as of October 4,
1999, in order, among other things, to make certain changes to the proposed
by-laws of the combined company that were viewed by the parties as helpful to
assuring the intended accounting treatment of the merger. The amendment also
consisted of certain technical revisions to the merger agreement. The amendment
to the revised merger agreement was approved at a special meeting of the
MotivePower board held on October 4, 1999 and was within the parameters of the
approval granted by the WABCO Board on September 26, 1999.
WABCO'S SENIOR MANAGEMENT TEAM
Our senior management team is expected to consist of the 6 individuals
named below.
<TABLE>
<S> <C>
William E. Kassling Chief Executive Officer and Chairman of the
Board
Gregory T.H. Davies President and Chief Operating Officer
Howard S. Bromberg Executive Vice President, Friction Products
Joseph S. Crawford, Jr. Executive Vice President, Railroad
John M. Meister Executive Vice President, Transit
Robert J. Brooks Senior Vice President, Chief Financial
Officer and Secretary
</TABLE>
FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE MOTIVEPOWER BOARD
At a meeting of the MotivePower Board held on September 26, 1999, after due
consideration, the MotivePower Board:
(1) determined that the revised merger agreement, the revised merger,
the revised MotivePower stock option agreement, the revised WABCO stock
option agreement and the voting agreements and the
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related transactions are advisable, consistent with, in furtherance of and
otherwise in the best interests of MotivePower and its shareholders,
(2) approved the revised merger agreement, the revised merger, the
revised stock option agreements and the voting agreements and the related
transactions, and
(3) determined to recommend that the shareholders of MotivePower
approve and adopt the revised merger agreement and the revised merger.
Accordingly, the MotivePower Board recommends that the MotivePower
shareholders vote "FOR" the approval and adoption of the revised merger
agreement and the revised merger.
In approving the revised transaction and making these recommendations, the
MotivePower Board consulted with MotivePower's management as well as its outside
legal counsel and financial advisor, and considered, among other things, the
following material factors:
(1) the business, operations, financial condition, earnings and
prospects of each of MotivePower and WABCO; in making its determination,
the MotivePower Board took into account its familiarity with, and the
results of MotivePower's due diligence review of, WABCO's business,
operations, financial condition, earnings and prospects;
(2) the anticipated scale, scope and strength of the operations of the
combined company, which will create a premier supplier of products and
services for the railroad industry;
(3) the competitive advantage that the combined company could achieve
through the combination of WABCO's technological strengths as a designer
and producer of electronic controls, monitors and air brakes with
MotivePower's strengths as a producer and servicer of locomotives along
with the minimal product overlap between the two companies;
(4) the further competitive advantage that the combined company would
have as a result of incorporating WABCO's considerable process technology
and know-how in production of products made by MotivePower;
(5) the benefits that the combined company could achieve by
cross-selling products and services to the customers of the other with
minimal existing product overlap;
(6) the anticipated financial impact of the proposed transaction on
the combined company's future financial performance;
(7) the expectation that the revised merger would create opportunities
for significant operational and financial cost savings, including
significant operating advantages relative to competitors and to MotivePower
on a stand-alone basis;
(8) the possibility, as alternatives to the revised merger, of
pursuing an acquisition of or a business combination or joint venture with
an entity other than WABCO and the MotivePower Board's conclusion that a
transaction with WABCO is more feasible, and is expected to yield greater
benefits, than the likely alternatives; the MotivePower Board reached this
conclusion for reasons such as WABCO's interest in pursuing a transaction
with MotivePower, and MotivePower management's assessment of the
alternatives and the expected benefits of the revised merger and
compatibility of the companies as described above;
(9) the fact that WABCO shareholders would hold approximately 58.9% of
the outstanding stock of the combined company after the revised merger, on
a fully diluted basis, excluding shares held by the WABCO ESOP that are not
allocated to WABCO employees;
(10) the intended accounting of the revised merger as a pooling of
interests which results in combined financial statements prepared on a
basis consistent with the underlying view that shareholder interests in the
two companies have simply been combined, and in the preservation of the
historical cost approach for both MotivePower and WABCO;
(11) the ability to complete the revised merger as a tax-free
reorganization for U.S. federal income tax purposes;
(12) the terms and conditions of the revised merger agreement,
including the fact that WABCO would be the surviving corporation in the
merger, that, subject to specified limitations, each company
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<PAGE> 41
may provide information to interested third-party bidders if its board
determines in good faith after consultation with legal counsel that it is
necessary to do so to avoid a breach of its fiduciary duties to the company
or its shareholders, that although the revised merger agreement may be
terminated after January 31, 2000 due to the failure of the conditions to
the revised merger to be met, the revised merger agreement provides for its
earlier termination on or prior to the earlier of the date of the
respective shareholders meeting and November 10, 1999 to enable either
party to enter into an alternative transaction, and each party's agreement
to pay the other a $15 million break-up fee and specified out-of-pocket
expenses under specified circumstances and to enter into the revised stock
option agreements (see "The Merger Agreement -- Conditions to the
Completion of the Merger" on page I-74, "The Merger
Agreement -- Termination of the Merger Agreement" on page I-74 and "The
Merger Agreement -- Stock Option Agreements" on page I-77);
(13) the grant to MotivePower of an option to acquire WABCO common
stock exercisable under specified circumstances pursuant to the revised
WABCO stock option agreement (see "The Merger Agreement -- Stock Option
Agreements" on page I-77);
(14) the grant to WABCO of an option to acquire MotivePower common
stock exercisable under specified circumstances pursuant to the revised
MotivePower stock option agreement (see "The Merger Agreement -- Stock
Option Agreements" on page I-77);
(15) the voting agreement to be entered into between John C. Pope, as
a shareholder of MotivePower, and WABCO, pursuant to which Mr. Pope agreed,
subject to certain limited exceptions, to vote his shares in favor of the
revised merger and not to take any action that would impede or prevent the
revised merger (see "The Merger Agreement -- Voting Agreements" on page
I-79);
(16) the voting agreement to be entered into between William E.
Kassling, Robert J. Brooks, Harvard Private Capital Holdings, Inc. and
Vestar Equity Partners, L.P., as shareholders of WABCO, and MotivePower,
pursuant to which these WABCO shareholders agreed, subject to certain
limited exceptions, to vote their shares in favor of the revised merger and
not to take any action that would impede or prevent the revised merger (see
"The Merger Agreement -- Voting Agreements" on page I-79);
(17) that while the termination payment provisions of the revised
merger agreement could have the effect of discouraging alternative
proposals for a business combination with MotivePower and that the revised
MotivePower stock option agreement could prevent an alternative business
combination with MotivePower from being accounted for as a pooling of
interests, these provisions would not preclude bona fide alternative
proposals, and that the size of the reduced termination fee was reasonable
in light of the size and benefits of the transaction;
(18) the role that MotivePower's current management is expected to
have in the management of the combined company;
(19) the corporate governance structure reflected in the revised
merger agreement, including that immediately after the revised merger the
WABCO Board would be comprised of the eight current members of the WABCO
Board and four current nonemployee directors of the MotivePower Board, as
described under "The Merger Agreement -- WABCO Board and Related Matters"
on page I-71, and the other provisions of the WABCO governance documents
that will remain or become effective upon the consummation of the revised
merger;
(20) the interests that executive officers and directors of
MotivePower may have with respect to the revised merger in addition to
their interests as shareholders of MotivePower generally (see "Interests of
Certain Persons in the Merger" on page I-62);
(21) the analyses and presentations of Wasserstein Perella, and
Wasserstein Perella's written opinion to the effect that, as of September
26, 1999, and based upon and subject to the various considerations set
forth in its opinion, the exchange ratio was fair from a financial point of
view to MotivePower;
(22) the challenges of combining the businesses and cultures of two
corporations of this size and the attendant risk of not achieving the
expected cost savings and revenue synergies, as discussed under "Risk
Factors" beginning on page I-14 and "Cautionary Statement Concerning
Forward-Looking
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<PAGE> 42
Statements" on page I-20, and of diverting management focus and resources
from other strategic opportunities and operational matters for an extended
period of time;
(23) the amount of WABCO's outstanding indebtedness and the fact that
the combined company would be more highly leveraged than MotivePower on a
stand-alone basis;
(24) the fact that the number of shares of WABCO common stock to be
issued to the shareholders of MotivePower in the revised merger is a fixed
number of shares per share of MotivePower common stock that will not
fluctuate due to changes in the share price of WABCO;
(25) the increased market capitalization and public stockholding that
the combined company would have in contrast to that of either company
individually which should provide greater liquidity to each company's
shareholders;
(26) the lack of availability of dissenters' rights; and
(27) the likelihood of consummation of the revised merger.
In view of the wide variety of factors considered in connection with its
evaluation of the revised merger and the complexity of these matters, the
MotivePower Board did not find it useful to and did not attempt to quantify,
rank or otherwise assign relative weights to these factors. The MotivePower
Board relied on the experience and expertise of Wasserstein Perella, its
financial advisor, for quantitative analysis of the financial terms of the
revised merger. See "Opinions of Financial Advisors -- Opinion of MotivePower
Financial Advisor" on page I-51. In addition, the MotivePower Board did not
undertake to make any specific determination as to whether any particular
factor, or any aspect of any particular factor, was favorable or unfavorable to
the MotivePower Board's ultimate determination, but rather the MotivePower Board
conducted an overall analysis of the factors described above, including through
discussions with and questioning of MotivePower's management and legal,
financial and accounting advisors. In considering the factors described above,
individual members of the MotivePower Board may have given different weight to
different factors.
The MotivePower Board considered all these factors as a whole, and overall
considered the factors to be favorable to and to support its determination.
However, the general view of the MotivePower Board was that portions of items 9,
12, 14, 18, 19, 22, 23 and 26 above were unfavorable factors relating to the
transaction, and that the other reasons and factors described above were
generally considered favorable.
FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE WABCO BOARD
At a meeting of the WABCO Board held on September 26, 1999, after due
consideration, the WABCO Board unanimously:
(1) determined that the revised merger agreement, the revised merger,
the revised MotivePower stock option agreement, the revised WABCO stock
option agreement and the voting agreements and the related transactions are
advisable, consistent with, in furtherance of and otherwise in the best
interests of WABCO and its shareholders,
(2) approved the revised merger agreement, the revised merger, the
revised stock option agreements, the voting agreements and the related
transactions, and
(3) determined to recommend that the shareholders of WABCO approve and
adopt the revised merger agreement and the revised merger.
Accordingly, the WABCO Board recommends that the WABCO shareholders vote
"FOR" the approval and adoption of the revised merger agreement and the revised
merger.
In approving the revised transaction and making these recommendations, the
WABCO Board consulted with WABCO's management as well as its outside legal
counsel and financial advisor, and considered the following material factors:
(1) the business, operations, financial condition, earnings and
prospects of each of MotivePower and WABCO; in making its determination,
the WABCO Board took into account its familiarity with, and the results of
WABCO's due diligence review of, MotivePower's business, operations,
financial condition, earnings and prospects;
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<PAGE> 43
(2) the anticipated scale, scope and strength of the operations of the
combined company, which will create a premier supplier of products and
services for the railroad industry;
(3) the competitive advantage that the combined company could achieve
through the combination of WABCO's technological strengths as a designer
and producer of electronic controls, monitors and air brakes with
MotivePower's strengths as a producer and servicer of locomotives along
with the minimal product overlap between the two companies;
(4) the further competitive advantage that the combined company would
have as a result of incorporating WABCO's considerable process technology
and know-how in production of products made by MotivePower;
(5) the benefits that the combined company could achieve by marketing
the combined company's products and services to the customers of the other
with minimal existing product overlap;
(6) the anticipated financial impact of the proposed transaction on
the combined company's future financial performance;
(7) the expectation that the revised merger would create opportunities
for significant operational and financial cost savings, including
significant operating advantages relative to competitors and to WABCO on a
stand-alone basis;
(8) the possibility, as alternatives to the revised merger, of
pursuing an acquisition of or a business combination or joint venture with
an entity other than MotivePower and the WABCO Board's conclusion that a
transaction with MotivePower is more feasible, and is expected to yield
greater benefits, than the likely alternatives; the WABCO Board reached
this conclusion for reasons including MotivePower's interest in pursuing a
transaction with WABCO, and WABCO management's assessment of the
alternatives and the expected benefits of the revised merger and
compatibility of the companies as described above;
(9) the fact that WABCO shareholders would hold approximately 58.9% of
the outstanding stock of the combined company after the revised merger, on
a fully diluted basis, excluding shares held by the WABCO ESOP that are not
allocated to WABCO employees;
(10) the intended accounting of the revised merger as a pooling of
interests which results in combined financial statements prepared on a
basis consistent with the underlying view that shareholder interests in the
two companies have simply been combined, and in the preservation of the
historical cost approach for both MotivePower and WABCO;
(11) the ability to complete the revised merger as a tax-free
reorganization for U.S. federal income tax purposes;
(12) the terms and conditions of the revised merger agreement,
including the fact that shares of WABCO common stock are being issued in
the revised merger, that, subject to specified limitations, each company
may provide information to interested third-party bidders if its board
determines in good faith after consultation with legal counsel that it is
necessary to do so to avoid a breach of its fiduciary duties to the company
or its shareholders, that although the revised merger agreement may be
terminated after January 31, 2000 due to the failure of the conditions to
the revised merger to be met, the revised merger agreement provides for its
earlier termination on or prior to the earlier of the date of the
respective shareholders meeting and November 10, 1999 to enable either
party to enter into an alternative transaction, and each party's agreement
to pay the other a $15 million break-up fee and specified out-of-pocket
expenses under specified circumstances and to enter into the revised stock
option agreements (see "The Merger Agreement -- Conditions to the
Completion of the Merger" on page I-74, "The Merger
Agreement -- Termination of the Merger Agreement" on page I-74 and "The
Merger Agreement -- Stock Option Agreements" on page I-77);
(13) the grant to MotivePower of an option to acquire WABCO common
stock exercisable under specified circumstances pursuant to the revised
WABCO stock option agreement (see "The Merger Agreement -- Stock Option
Agreements" on page I-77);
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<PAGE> 44
(14) the grant to WABCO of an option to acquire MotivePower common
stock exercisable under specified circumstances pursuant to the MotivePower
stock option agreement (see "The Merger Agreement -- Stock Option
Agreements" on page I-77);
(15) the voting agreement to be entered into between John C. Pope, as
a shareholder of MotivePower, and WABCO, pursuant to which Mr. Pope agreed,
subject to certain limited exceptions, to vote his shares in favor of the
revised merger and not to take any action that would impede or prevent the
revised merger (see "The Merger Agreement -- Voting Agreements" on page
I-79);
(16) the voting agreement to be entered into between William E.
Kassling, Robert J. Brooks, Harvard Private Capital Holdings, Inc. and
Vestar Equity Partners, L.P., as shareholders of WABCO, and MotivePower,
pursuant to which these WABCO shareholders agreed, subject to certain
limited exceptions, to vote their shares in favor of the revised merger and
not to take any action that would impede or prevent the revised merger (see
"The Merger Agreement -- Voting Agreements" on page I-79);
(17) that while the termination payment provisions of the revised
merger agreement could have the effect of discouraging alternative
proposals for a business combination with WABCO and that the revised WABCO
stock option agreement could prevent an alternative business combination
with WABCO from being accounted for as a pooling of interests, these
provisions would not preclude bona fide alternative proposals, and that the
size of the reduced termination fee was reasonable in light of the size and
benefits of the transaction;
(18) the role that WABCO's and MotivePower's current management is
expected to have in the management of the combined company;
(19) the corporate governance structure reflected in the revised
merger agreement, including that immediately after the revised merger the
WABCO Board would be comprised of the eight current members of the WABCO
Board and four current nonemployee directors of the MotivePower Board, as
described under "The Merger Agreement -- WABCO Board and Related Matters"
on page I-71, and the other provisions of the WABCO governance documents
that will remain or become effective upon the consummation of the revised
merger;
(20) the interests that some executive officers and directors of WABCO
may have with respect to the merger in addition to their interests as
shareholders of WABCO generally (see "Interests of Certain Persons in the
Merger" on page I-62);
(21) the analyses and presentations of Credit Suisse First Boston, and
Credit Suisse First Boston's written opinion to the effect that, as of
September 26, 1999, and based upon and subject to the various
considerations set forth in its opinion, the exchange ratio was fair from a
financial point of view to WABCO;
(22) the challenges of combining the businesses and cultures of two
corporations of this size and the attendant risk of not achieving the
expected cost savings and revenue synergies, as discussed under "Risk
Factors" beginning on page I-14 and "Cautionary Statement Concerning
Forward-Looking Statements" on page I-20 and of diverting management focus
and resources from other strategic opportunities and operational matters
for an extended period of time;
(23) the amount of WABCO's outstanding indebtedness and the fact that
the combined company would be less highly leveraged than WABCO on a
stand-alone basis;
(24) the fact that the number of shares of WABCO common stock to be
issued to the shareholders of MotivePower in the merger is a fixed number
of shares per share of MotivePower common stock that will not fluctuate due
to changes in the share price of WABCO;
(25) the increased market capitalization and public stockholding that
the combined company would have in contrast to that of either company
individually which should provide greater liquidity to each company's
shareholders;
(26) the lack of availability of dissenters' rights; and
(27) the likelihood of consummation of the revised merger.
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<PAGE> 45
In view of the wide variety of factors considered in connection with its
evaluation of the revised merger and the complexity of these matters, the WABCO
Board did not find it useful to and did not attempt to quantify, rank or
otherwise assign relative weights to these factors. The WABCO Board relied on
the experience and expertise of Credit Suisse First Boston, its financial
advisor, for quantitative analysis of the financial terms of the merger. See
"Opinions of Financial Advisors -- Opinion of WABCO Financial Advisor" on page
I-57. In addition, the WABCO Board did not undertake to make any specific
determination as to whether any particular factor, or any aspect of any
particular factor, was favorable or unfavorable to the WABCO Board's ultimate
determination, but rather the WABCO Board conducted an overall analysis of the
factors described above, including thorough discussions with and questioning of
WABCO's management and legal, financial and accounting advisors. In considering
the factors described above, individual members of the WABCO Board may have
given different weight to different factors.
The WABCO Board considered all these factors as a whole, and overall
considered the factors to be favorable to and to support its determination.
However, the general view of the WABCO Board was that items 13, 16, 22 and 26
above were unfavorable factors relating to the transaction, and that the other
reasons and factors described above were generally considered favorable.
ACCOUNTING TREATMENT
MotivePower and WABCO intend for the merger to be accounted for under the
"pooling of interests" method under the requirements of Opinion No. 16 (Business
Combinations) of the Accounting Principles Board of the American Institute of
Certified Public Accountants, the Financial Accounting Standards Board, and the
rules and regulations of the SEC. Management of MotivePower and WABCO expect
that the merger will be treated as a pooling of interests transaction for
accounting purposes.
The receipt of letters from Deloitte & Touche LLP and Arthur Andersen LLP
dated as of the closing date of the merger to the effect that the merger will
qualify for pooling of interests accounting treatment is a condition to the
closing of the merger.
Under the pooling of interests accounting method, the reported balance
sheet amounts and results of operations of the separate companies for prior
periods will be combined, reclassified and conformed, as appropriate, to reflect
the combined financial position and results of operations for WABCO. See
"Unaudited Pro Forma Condensed Combined Financial Statements on page I-43."
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material United States federal
income tax consequences of the merger. The discussion that follows is based on
and subject to the Internal Revenue Code, Treasury Regulations under the
Internal Revenue Code, existing administrative interpretations and court
decisions in effect as of the date of this proxy statement/prospectus, all of
which are subject to change, possibly with retroactive effect, and all of which
are subject to differing interpretation. The following discussion does not
address the effects of the merger under any state, local or foreign tax laws.
The tax treatment of a MotivePower shareholder may vary depending upon the
shareholder's particular situation, and certain MotivePower shareholders,
including insurance companies, tax-exempt organizations, financial institutions,
broker dealers, persons who do not hold MotivePower common stock as capital
assets, employees of MotivePower, and individuals who hold MotivePower common
stock as part of a straddle or conversion transaction, may be subject to special
rules not discussed below. Each MotivePower shareholder is urged to consult his
or her tax advisor with respect to the specific tax consequences of the merger,
including the effect of United States federal, state and local, and foreign and
other tax rules, and the effect of possible changes in tax laws.
It is a condition to the obligation of MotivePower to effect the merger
that MotivePower receive an opinion from its counsel, Sidley & Austin, and it is
a condition to the obligation of WABCO to effect the merger that WABCO receive
an opinion from its counsel, Kirkland & Ellis, in each case to the effect that
the
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<PAGE> 46
merger constitutes a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code for federal income tax purposes, and in each case to the
following effect:
Tax Consequences to MotivePower and WABCO. For federal income tax
purposes, no gain or loss will be recognized by MotivePower or WABCO as a
result of the merger.
Tax Consequences to MotivePower Shareholders. For federal income tax
purposes, (1) no gain or loss will be recognized by the shareholders of
MotivePower upon the conversion of their shares of MotivePower common stock
into shares of WABCO common stock pursuant to the merger, except with
respect to cash, if any, received in lieu of fractional shares of WABCO
common stock, (2) the aggregate tax basis of the shares of WABCO common
stock received in exchange for shares of MotivePower common stock pursuant
to the merger, including a fractional share of WABCO common stock for which
cash is paid, will be the same as the aggregate tax basis of those shares
of MotivePower common stock, (3) the holding period for shares of WABCO
common stock received in exchange for shares of MotivePower common stock
pursuant to the merger will include the holder's holding period for those
shares of MotivePower common stock, provided those shares of MotivePower
common stock were held as capital assets by the holder at the effective
time of the merger, and (4) a shareholder of MotivePower who receives cash
in lieu of a fractional share of WABCO common stock will recognize gain or
loss equal to the difference, if any, between that shareholder's basis in
the fractional share (determined under clause (2) above) and the amount of
cash received.
The opinions described above may not apply to individuals who received
MotivePower common stock as compensation or to shareholders who or which, for
United States federal income tax purposes, are nonresident alien individuals,
foreign corporations, foreign partnerships, foreign trusts or foreign estates.
Moreover, the opinions described above will be based on some assumptions,
and both Sidley & Austin and Kirkland & Ellis will receive and rely upon
representations, unverified by counsel, contained in certificates of
MotivePower, WABCO and possibly others. The inaccuracy of any of those
assumptions or representations might jeopardize the validity of the opinions
rendered. Those opinions will neither bind the IRS nor preclude the IRS from
adopting positions contrary to those expressed above, and no assurance can be
given that contrary positions will not be successfully asserted by the IRS or
adopted by a court if the issues are litigated. Neither MotivePower nor WABCO
intends to obtain a ruling from the IRS with respect to the tax consequences of
the merger.
Under the merger agreement, MotivePower or, after the effective time of the
merger, WABCO, as the surviving corporation, on behalf of MotivePower, will pay
or cause to be paid any real property transfer, gains or similar taxes imposed
as a result of the merger. Although the matter is not free from doubt, because
of the absence of legislative, judicial or administrative, or other authority
directly on point, in the event that the MotivePower shareholders are held to be
liable for any transfer and gains taxes, payment of such taxes by MotivePower or
WABCO, as the surviving corporation, on behalf of MotivePower might be
characterized as a dividend taxable to the MotivePower shareholders for federal
income tax purposes.
WE INTEND THIS DISCUSSION TO PROVIDE ONLY A SUMMARY OF THE MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER. WE DO NOT INTEND THAT IT BE A COMPLETE
ANALYSIS OR DESCRIPTION OF ALL POTENTIAL FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER. IN ADDITION, AS NOTED ABOVE, WE DO NOT ADDRESS TAX CONSEQUENCES WHICH
MAY VARY WITH, OR ARE CONTINGENT UPON, INDIVIDUAL CIRCUMSTANCES. WE STRONGLY
URGE YOU TO CONSULT YOUR TAX ADVISOR TO DETERMINE YOUR PARTICULAR UNITED STATES
FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES RESULTING FROM
THE MERGER, IN LIGHT OF YOUR INDIVIDUAL CIRCUMSTANCES.
REGULATORY MATTERS
U.S. Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the related rules, the merger may not be completed until
notifications have been given, required information has been furnished to the
FTC and specified waiting period requirements have been satisfied. On June 22,
1999, MotivePower and WABCO each filed the required notification and report
forms under the HSR Act with the
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<PAGE> 47
FTC and the Antitrust Division of the United States Department of Justice. On
July 19, 1999, MotivePower and WABCO received notice of early termination of the
waiting period under the HSR Act. MotivePower and WABCO do not believe any
further filing is required with respect to the revised merger. At any time
before or after the consummation of the merger, the FTC could take action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the merger or seeking
divestiture of substantial assets of MotivePower and WABCO. At any time before
or after the consummation of the merger and notwithstanding that the HSR Act
waiting period has expired, any state could take action under the antitrust laws
as it deems necessary or desirable for the public interest. This action could
include seeking to enjoin the consummation of the merger or seeking divestiture
of MotivePower or businesses of MotivePower or WABCO. Private parties may also
seek to take legal action under the antitrust laws under specified
circumstances.
Other Laws. MotivePower and WABCO conduct operations in a number of
jurisdictions where other regulatory filings or approvals may be required or
advisable in connection with the completion of the merger. MotivePower and WABCO
are currently in the process of reviewing whether other filings or approvals may
be required or desirable in these other jurisdictions. We recognize that some of
these filings may not be completed before the closing, and that some of these
approvals, which are not as a matter of practice required to be obtained prior
to effectiveness of a merger transaction, may not be obtained prior to the
closing.
APPRAISAL RIGHTS
Holders of MotivePower common stock are not entitled to dissenters'
appraisal rights under Pennsylvania law in connection with the merger because
the shares of WABCO common stock that they will be entitled to receive in the
merger will be listed on the NYSE at the closing. Holders of WABCO common stock
are not entitled to dissenters' appraisal rights under Delaware law in
connection with the merger. See "Comparison of Shareholder Rights -- Appraisal
Rights" on page II-8.
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTION AGREEMENTS
This joint proxy statement/prospectus does not cover any resales of the
WABCO common stock to be received by the shareholders of MotivePower upon
completion of the merger, and no person is authorized to make any use of this
joint proxy statement/prospectus in connection with any resale.
All shares of WABCO common stock received by MotivePower shareholders in
the merger will be freely transferable, except that shares of WABCO common stock
received by persons who are deemed to be "affiliates" of MotivePower under the
Securities Act of 1933, as amended, at the time of the MotivePower meeting may
be resold by them only in transactions permitted by Rule 145 under the 1933 Act
or as otherwise permitted under the 1933 Act. Persons who may be deemed to be
affiliates of MotivePower for these purposes generally include individuals or
entities that control, are controlled by or are under common control with
MotivePower and include directors and executive officers of MotivePower. The
merger agreement requires MotivePower to use its reasonable best efforts to
cause each affiliate to execute a written agreement to the effect that they will
not offer, sell or otherwise dispose of any of the shares of WABCO common stock
issued to them in the merger in violation of the 1933 Act or the related SEC
rules.
In addition, each of the directors and some of the executive officers of
MotivePower and WABCO have executed written agreements prohibiting them from
selling, transferring or otherwise disposing of, or acquiring or selling any
options or other securities relating to, securities of MotivePower or WABCO that
would be intended to reduce the individual's risk relative to any shares of
MotivePower common stock or WABCO common stock beneficially owned by him or her
during the period beginning 30 days prior to the closing and ending at the time
when financial results covering at least 30 days of combined operations of
MotivePower and WABCO have been publicly released by WABCO after the merger.
I-41
<PAGE> 48
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
MotivePower common stock and WABCO common stock are each listed on the
NYSE. MotivePower's ticker symbol on the NYSE is "MPO" and WABCO's ticker symbol
on the NYSE is "WAB." The following table shows, for the periods indicated, the
high and low of the last reported closing prices per share of MotivePower common
stock and WABCO common stock, as reported on the Consolidated Tape, and the
dividends per share. The MotivePower information has been restated to reflect
the effects of a three-for-two common stock split in the form of a 50 percent
stock dividend effective April 2, 1999.
<TABLE>
<CAPTION>
MOTIVEPOWER COMMON STOCK WABCO COMMON STOCK
-------------------------- --------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter......................... $ 7.59 $ 5.17 $-- $14.25 $12.25 $0.01
Second Quarter........................ 10.75 7.17 -- 20.00 12.75 0.01
Third Quarter......................... 18.17 10.17 -- 23.13 17.88 0.01
Fourth Quarter........................ 19.25 13.17 -- 27.88 21.88 0.01
1998
First Quarter......................... $18.67 $13.17 $-- $29.81 $23.00 $0.01
Second Quarter........................ 19.33 18.71 -- 29.81 24.00 0.01
Third Quarter......................... 19.92 13.17 -- 26.75 17.13 0.01
Fourth Quarter........................ 21.50 11.04 -- 24.81 19.25 0.01
1999
First Quarter......................... $21.54 $15.09 $-- $23.63 $17.75 $0.01
Second Quarter........................ 20.13 14.38 -- 25.94 20.31 0.01
Third Quarter......................... 20.00 9.63 -- 25.75 18.13 --
Fourth Quarter (through October 8,
1999).............................. 10.75 9.50 -- 18.19 16.91 --
</TABLE>
- ---------------
On September 24, 1999, the last full trading day before the public
announcement of the revised proposed merger, the last reported closing price was
$10.88 for MotivePower common stock and $19.88 for WABCO common stock. On
October 8, 1999, the most recent practicable date prior to the printing of this
joint proxy statement/prospectus, the last reported closing price was $9.8125
for MotivePower common stock and $17.625 for WABCO common stock. We urge you to
obtain current market quotations prior to making any decision with respect to
the merger.
Following the merger, WABCO common stock will be traded on the NYSE under
the ticker symbol "WAB."
The merger agreement permits WABCO to pay, prior to the closing, regular
quarterly cash dividends to shareholders. MotivePower has not historically paid
a dividend.
After completion of the merger, WABCO's Board will review and vote on
whether to pay a quarterly dividend on WABCO's common stock. We advise you that
the Board may choose to no longer pay a dividend on shares of WABCO common
stock.
I-42
<PAGE> 49
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
combine the historical consolidated balance sheets and statements of income of
MotivePower and WABCO giving effect to the merger using the pooling of interests
method of accounting for a business combination.
We are providing the following information to aid you in your analysis of
the financial aspects of the merger. We derived this information from the
audited consolidated financial statements of MotivePower for the years ended
December 31, 1998, 1997 and 1996 and the unaudited consolidated financial
statements for the six months ended June 30, 1999 and 1998 and from the audited
consolidated financial statements of WABCO for the years ended December 31,
1998, 1997 and 1996 and the unaudited consolidated financial statements for the
six months ended June 30, 1999 and 1998. The information is only a summary and
you should read it in conjunction with our historical financial statements and
related notes contained in the annual reports and other information that we have
filed with the SEC. See "Where You Can Find More Information" on page III-1.
The unaudited pro forma condensed combined statements of income for the
years ended December 31, 1998, 1997 and 1996 and for the six months ended June
30, 1999 and 1998 assume the merger was effected on January 1, 1996. The
unaudited pro forma condensed combined balance sheet gives effect to the merger
as if it had occurred on June 30, 1999. The accounting policies of MotivePower
and WABCO are substantially comparable. However, adjustments were made to
conform the classification of amortization expense in the unaudited pro forma
condensed combined financial statements.
The unaudited pro forma combined financial information is for illustrative
purposes only. The MotivePower and WABCO combined company may have performed
differently had they always been combined. The unaudited pro forma condensed
combined financial information may not be indicative of the historical results
that would have been achieved had the companies always been combined or the
future results that the combined company will experience after the merger.
I-43
<PAGE> 50
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
MOTIVEPOWER WABCO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Cash................................... $ 6,508 $ 6,487 $ $ 12,995
Accounts receivable.................... 55,417 127,964 183,381
Inventories............................ 104,759 111,444 216,203
Deferred taxes......................... 7,308 12,894 20,202
Other.................................. 5,393 9,716 15,109
-------- --------- -------- ----------
Total current assets........... 179,385 268,505 447,890
Property, plant and equipment............ 157,130 229,987 387,117
Accumulated depreciation................. (61,177) (99,502) (160,679)
-------- --------- -------- ----------
Property, plant and equipment, net..... 95,953 130,485 226,438
Other assets
Goodwill and other intangibles......... 87,724 194,547 282,271
Underbillings.......................... 28,129 -- 28,129
Other noncurrent assets................ 14,726 12,905 27,631
-------- --------- -------- ----------
Total other assets............. 130,579 207,452 338,031
-------- --------- -------- ----------
Total assets................... 405,917 606,442 1,012,359
======== ========= ======== ==========
LIABILITIES
Current portion of long-term debt...... 564 27,659 28,223
Accounts payable....................... 28,785 53,259 82,044
Accrued income taxes................... 215 9,377 9,592
Customer deposits...................... 359 18,402 18,761
Other accrued liabilities.............. 28,822 49,415 41,000 119,237
-------- --------- -------- ----------
Total current liabilities...... 58,745 158,112 41,000 257,857
Long-term debt........................... 131,963 422,560 554,523
Accrued pension and postretirement
costs.................................. -- 20,844 20,844
Commitments and contingencies............ 17,182 -- 17,182
Deferred income taxes.................... 500 3,600 4,100
Other long-term liabilities.............. 1,401 3,820 5,221
-------- --------- -------- ----------
Total liabilities.............. 209,791 608,936 41,000 859,727
SHAREHOLDERS' EQUITY
Preferred stock.......................... -- -- --
Common stock............................. 260 474 (88) 646
Additional paid-in capital............... 207,523 108,709 (5,953) 310,279
Treasury stock, at cost.................. (6,041) (186,028) 6,041 (186,028)
Unearned ESOP shares, at cost............ -- (126,892) (126,892)
Retained earnings........................ (6,169) 206,928 (41,000) 159,759
Deferred compensation.................... 5,766 (85) 5,681
Accumulated other comprehensive income
(loss)................................. (5,213) (5,600) (10,813)
-------- --------- -------- ----------
Total shareholders' equity..... 196,126 (2,494) (41,000) 152,632
-------- --------- -------- ----------
Liabilities and shareholders' equity... $405,917 $ 606,442 $ -- $1,012,359
======== ========= ======== ==========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
I-44
<PAGE> 51
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MOTIVEPOWER WABCO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales................................ $ 365,218 $ 670,909 $ $1,036,127
Cost of sales............................ (283,896) (451,730) (735,626)
--------- --------- --------- ----------
Gross profit........................ 81,322 219,179 300,501
Selling, general and administrative
expenses............................... (40,959) (76,048) 3,426 (113,581)
Engineering expenses..................... -- (30,436) (30,436)
Amortization expense..................... -- (8,029) (3,426) (11,455)
--------- --------- --------- ----------
Total operating expenses............ (40,959) (114,513) -- (155,472)
--------- --------- --------- ----------
Operating income.................... 40,363 104,666 -- 145,029
Other income (expense):
Interest expense.................... (5,894) (31,217) (37,111)
Other income -- Argentina........... 10,362 -- 10,362
Other income (expense), net......... 3,950 (919) 3,031
--------- --------- --------- ----------
Income before income taxes and
extraordinary item................ 48,781 72,530 -- 121,311
Income taxes............................. (14,554) (27,561) -- (42,115)
--------- --------- --------- ----------
Income before extraordinary item......... $ 34,227 $ 44,969 $ -- $ 79,196
========= ========= ========= ==========
Earnings per common share-basic:
Income before extraordinary item.... $ 1.28 $ 1.79 $ -- $ 1.85
========= ========= ========= ==========
Earnings per common share-diluted:
Income before extraordinary item.... $ 1.23 $ 1.75 $ -- $ 1.79
========= ========= ========= ==========
Weighted average shares outstanding:
Basic............................... 26,771 25,081 (9,102) 42,750
Diluted............................. 27,929 25,708 (9,496) 44,141
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
I-45
<PAGE> 52
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOTIVEPOWER WABCO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales................................ $ 305,930 $ 564,441 $ $ 870,371
Cost of sales............................ (233,588) (378,323) (611,911)
--------- --------- --------- ----------
Gross profit........................ 72,342 186,118 258,460
Selling, general and administrative
expenses............................... (37,724) (63,517) 3,333 (97,908)
Engineering expenses..................... -- (24,386) (24,386)
Amortization expense..................... -- (8,240) (3,333) (11,573)
--------- --------- --------- ----------
Total operating expenses............ (37,724) (96,143) -- (133,867)
--------- --------- --------- ----------
Operating income.................... 34,618 89,975 -- 124,593
Other income (expense):
Interest expense.................... (5,163) (29,729) (34,892)
Other income -- Argentina........... 2,003 -- 2,003
Other income (expense), net......... 531 344 875
--------- --------- --------- ----------
Income before income taxes and
extraordinary item................ 31,989 60,590 -- 92,579
Income taxes............................. (11,713) (23,327) -- (35,040)
--------- --------- --------- ----------
Income before extraordinary item......... $ 20,276 $ 37,263 $ -- $ 57,539
========= ========= ========= ==========
Earnings per common share-basic:
Income before extraordinary item.... $ 0.76 $ 1.45 $ -- $ 1.33
========= ========= ========= ==========
Earnings per common share-diluted:
Income before extraordinary item.... $ 0.74 $ 1.42 $ -- $ 1.30
========= ========= ========= ==========
Weighted average shares outstanding:
Basic............................... 26,541 25,693 (9,024) 43,210
Diluted............................. 27,314 26,173 (9,287) 44,200
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
I-46
<PAGE> 53
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MOTIVEPOWER WABCO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales................................ $ 291,407 $ 453,512 $ $ 744,919
Cost of sales............................ (234,560) (300,163) (534,723)
--------- --------- --------- ----------
Gross profit........................ 56,847 153,349 210,196
Selling, general and administrative
expenses............................... (32,615) (47,533) 3,407 (76,741)
Engineering expenses..................... -- (18,244) (18,244)
Amortization expense..................... -- (7,854) (3,407) (11,261)
--------- --------- --------- ----------
Total operating expenses............ (32,615) (73,631) -- (106,246)
--------- --------- --------- ----------
Operating income.................... 24,232 79,718 -- 103,950
Other income (expense):
Interest expense.................... (9,143) (26,152) (35,295)
Other income -- Argentina........... 1,565 -- 1,565
Other income (expense), net......... 3,633 82 3,715
--------- --------- --------- ----------
Income before income taxes and
extraordinary item................ 20,287 53,648 -- 73,935
Income taxes............................. (7,714) (20,923) -- (28,637)
--------- --------- --------- ----------
Income before extraordinary item......... $ 12,573 $ 32,725 $ -- $ 45,298
========= ========= ========= ==========
Earnings per common share-basic:
Income before extraordinary item.... $ 0.48 $ 1.15 $ -- $ 0.99
========= ========= ========= ==========
Earnings per common share-diluted:
Income before extraordinary item.... $ 0.48 $ 1.15 $ -- $ 0.99
========= ========= ========= ==========
Weighted average shares outstanding:
Basic............................... 26,345 28,473 (8,957) 45,861
Diluted............................. 26,349 28,473 (8,959) 45,863
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
I-47
<PAGE> 54
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
MOTIVEPOWER WABCO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales................................ $ 205,937 $ 385,185 $ $ 591,122
Cost of sales............................ (150,728) (260,308) (411,036)
--------- --------- --------- ----------
Gross profit........................ 55,209 124,877 180,086
Selling, general and administrative
expenses............................... (24,236) (42,360) 1,980 (64,616)
Engineering expenses..................... -- (18,536) (18,536)
Amortization expense..................... -- (4,837) (1,980) (6,817)
--------- --------- --------- ----------
Total operating expenses............ (24,236) (65,733) -- (89,969)
--------- --------- --------- ----------
Operating income.................... 30,973 59,144 -- 90,117
Other income (expense):
Interest expense.................... (4,610) (17,864) (22,474)
Other income (expense), net......... 228 (480) (252)
--------- --------- --------- ----------
Income before income taxes and
extraordinary item................ 26,591 40,800 -- 67,391
Income taxes............................. (9,506) (15,198) -- (24,704)
--------- --------- --------- ----------
Income before extraordinary item......... $ 17,085 $ 25,602 $ -- $ 42,687
========= ========= ========= ==========
Earnings per common share-basic:
Income before extraordinary item.... $ .63 $ 1.01 $ -- $ 0.99
========= ========= ========= ==========
Earnings per common share-diluted:
Income before extraordinary item.... $ .61 $ 0.99 $ -- $ 0.96
========= ========= ========= ==========
Weighted average shares outstanding:
Basic............................... 27,019 25,409 (9,186) 43,242
Diluted............................. 28,159 25,916 (9,574) 44,501
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
I-48
<PAGE> 55
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
MOTIVEPOWER WABCO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales................................. $ 171,314 $ 330,188 $ $ 501,502
Cost of sales............................. (128,622) (223,345) (351,967)
--------- --------- ------- ---------
Gross profit......................... 42,692 106,843 149,535
Selling, general and administrative
expenses................................ (20,497) (38,371) 1,583 (57,285)
Engineering expenses...................... -- (13,454) (13,454)
Amortization expense...................... -- (4,179) (1,583) (5,762)
--------- --------- ------- ---------
Total operating expenses............. (20,497) (56,004) -- (76,501)
--------- --------- ------- ---------
Operating income..................... 22,195 50,839 -- 73,034
Other income (expense):
Interest expense..................... (2,527) (14,898) (17,425)
Other income (expense), net.......... 3,332 443 3,775
--------- --------- ------- ---------
Income before income taxes and
extraordinary item................. 23,000 36,384 -- 59,384
Income taxes.............................. (8,010) (13,826) -- (21,836)
--------- --------- ------- ---------
Income before extraordinary item.......... $ 14,990 $ 22,558 $ -- $ 37,548
========= ========= ======= =========
Earnings per common share-basic:
Income before extraordinary item..... $ .56 $ 0.90 $ -- $ 0.88
========= ========= ======= =========
Earnings per common share-diluted:
Income before extraordinary item..... $ .54 $ 0.88 -- $ 0.85
========= ========= ======= =========
Weighted average shares outstanding:
Basic................................ 26,730 25,007 (9,088) 42,649
Diluted.............................. 27,891 25,733 (9,483) 44,141
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
I-49
<PAGE> 56
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The unaudited pro forma condensed combined statements of income are based
on the consolidated financial statements of MotivePower and WABCO for the years
ended December 31, 1998, 1997 and 1996 and for the six months ended June 30,
1999 and 1998. The unaudited pro forma condensed combined balance sheet is based
on the consolidated financial statements of MotivePower and WABCO at June 30,
1999.
MotivePower and WABCO consolidated financial statements are prepared in
conformity with generally accepted accounting principles and require MotivePower
and WABCO management to make estimates that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities. In the opinion of MotivePower and WABCO, the unaudited
pro forma condensed combined financial statements include all adjustments
necessary to present fairly the results of the periods presented. Actual results
are not expected to differ materially from these estimates.
Note 2. Accounting Policies and Financial Statement Classifications
The accounting policies of MotivePower and WABCO are substantially
comparable. The unaudited pro forma combined condensed statements of income
reflect reclassification adjustments to conform to the presentation of
amortization expense.
Certain revenues, costs and other deductions in the consolidated statements
of income for MotivePower and WABCO have been reclassified to conform to the
line item presentation in the pro forma condensed combined statements of income.
Note 3. Earnings Per Share (as reported), Pro Forma Earnings Per Share and
Dividends Per Share
The MotivePower earnings per share (as reported) have been restated to
reflect a three-for-two common stock split in the form of a 50 percent stock
dividend effective April 2, 1999.
The pro forma combined income before extraordinary item per common share is
based on income before extraordinary item and the weighted average number of
outstanding common shares. Income before extraordinary item per common
share - diluted includes the dilutive effect of stock options and restricted
stock awards. The pro forma combined weighted average number of outstanding
common shares has been adjusted to reflect the exchange ratio of 0.66 shares of
WABCO common stock for each share of MotivePower common stock.
The pro forma combined dividends per share reflect the sum of the dividends
paid by MotivePower and WABCO divided by the number of shares that would have
been outstanding for the periods, after adjusting the MotivePower shares for the
exchange ratio of 0.66 shares of WABCO common stock.
Note 4. Intercompany Transactions
Intercompany sales and purchase transactions were not material between the
two companies and therefore are not reflected as adjustments to the unaudited
pro forma condensed combined financial statements.
Note 5. Merger-Related and Integration-Related Expenses
Merger-related fees and expenses, consisting primarily of SEC filing fees,
fees and expenses of investment bankers, attorneys and accountants, and
financial printing and other related charges, are estimated to be approximately
$20-25 million.
We estimate that costs of approximately $35-40 million will be incurred for
severance and other integration-related expenses, including the elimination of
duplicate facilities and excess capacity, operational realignment and related
workforce reductions. These expenditures are necessary to reduce costs and
operate
I-50
<PAGE> 57
efficiently. The unaudited pro forma condensed combined financial statements do
not reflect the benefits from the expected synergies.
A one-time merger-related charge of $41 million has been reflected in the
Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 1999 and is
not reflected in the Unaudited Pro Forma Condensed Combined Statements of Income
due to its non-recurring nature. The $41 million charge was based on the maximum
estimate of the costs of merger-related and integration-related expenses, net of
a 37% tax effect.
Note 6. Other Pro Forma Adjustments
A pro forma adjustment has been made to reflect the cancellation of
MotivePower common stock accounted for as treasury stock and the assumed
issuance of WABCO common stock in exchange for all of the outstanding
MotivePower common stock based on the exchange ratio of 0.66. The actual number
of shares of WABCO common stock to be issued in connection with the merger will
be based on the number of shares of MotivePower common stock issued and
outstanding at the effective time.
OPINIONS OF FINANCIAL ADVISORS
We each retained our own financial advisor to assist us and our Boards in
our consideration of valuation, financial and other matters relating to the
merger. MotivePower retained Wasserstein Perella & Co., Inc. as its financial
advisor, and WABCO retained Credit Suisse First Boston Corporation as its
financial advisor.
OPINION OF MOTIVEPOWER FINANCIAL ADVISOR
The MotivePower Board retained Wasserstein Perella & Co., Inc. to provide
requested investment banking advice and services in connection with a possible
business combination between MotivePower and WABCO, including rendering its
opinion as to the fairness, from a financial point of view, of the exchange
ratio to the MotivePower shareholders. Wasserstein Perella was not requested to
recommend the amount of consideration to be received; it was requested to
evaluate, among other things, the fairness of the exchange ratio which
MotivePower and WABCO negotiated.
On September 24, 1999, MotivePower and WABCO renegotiated the terms of the
merger, including the exchange ratio. On September 26, 1999, Wasserstein Perella
orally delivered its opinion to the MotivePower Board, which it later confirmed
in a written opinion dated September 26, 1999, to the effect that as of the date
of the opinion and based upon specified assumptions, the revised exchange ratio
in the renegotiated merger of 0.66 shares of WABCO common stock for each share
of MotivePower common stock is fair, from a financial point of view, to the
MotivePower shareholders, other than WABCO and its affiliates. Wasserstein
Perella also presented to the MotivePower Board the analyses described below.
Wasserstein Perella previously had delivered an opinion to the MotivePower
Board, which it later confirmed in a written opinion dated June 2, 1999, to the
effect that, as of the date of that opinion and based upon specified
assumptions, the prior exchange ratio of 1.3 shares of MotivePower common stock
for each share of WABCO common stock was fair, from a financial point of view,
to MotivePower.
A COPY OF WASSERSTEIN PERELLA'S SEPTEMBER 26, 1999 OPINION IS ATTACHED AS
ANNEX F TO THIS JOINT PROXY STATEMENT/PROSPECTUS. SHAREHOLDERS ARE URGED TO READ
THE WASSERSTEIN PERELLA OPINION IN ITS ENTIRETY FOR INFORMATION WITH RESPECT TO
THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE
REVIEW BY WASSERSTEIN PERELLA IN RENDERING ITS OPINION. REFERENCES TO
WASSERSTEIN PERELLA'S OPINION IN THIS JOINT PROXY STATEMENT/PROSPECTUS AND THE
SUMMARY OF WASSERSTEIN PERELLA'S OPINION IN THIS SECTION OF THE JOINT PROXY
STATEMENT/PROSPECTUS ARE QUALIFIED BY REFERENCE TO THE FULL TEXT OF WASSERSTEIN
PERELLA'S OPINION. WASSERSTEIN PERELLA'S OPINION ONLY ADDRESSES THE FAIRNESS,
FROM A FINANCIAL POINT OF VIEW, OF THE EXCHANGE RATIO TO THE MOTIVEPOWER
SHAREHOLDERS, OTHER THAN WABCO AND ITS AFFILIATES, AND IT DOES NOT ADDRESS ANY
OTHER ASPECT OF THE MERGER. WASSERSTEIN PERELLA'S OPINION DOES NOT CONSTITUTE A
RECOMMENDATION TO SHAREHOLDERS TO VOTE IN FAVOR OF THE MERGER AND SHAREHOLDERS
SHOULD NOT RELY UPON IT AS A RECOMMENDATION.
I-51
<PAGE> 58
In arriving at its opinion, Wasserstein Perella reviewed, among other
things,
- the revised merger agreement;
- certain publicly available business and financial information relating to
MotivePower and WABCO which Wasserstein Perella deemed to be relevant;
- certain internal non-public financial and operating information,
including certain budgeted cashflow information and analyses prepared by
or on behalf of MotivePower and WABCO and provided orally or in writing
by or on behalf of the managements of MotivePower and WABCO to
Wasserstein Perella for purposes of its analysis;
- certain financial and stock market data relating to MotivePower and
WABCO, and compared this data with similar data for certain other
companies, the securities of which are publicly traded, that Wasserstein
Perella deemed to be relevant;
- the financial terms of the merger, and compared these terms with the
financial terms of certain other transactions in the rail supply and
service industry which Wasserstein Perella deemed to be relevant to its
inquiry; and
- the potential pro forma impact of the merger.
Wasserstein Perella had discussions with the managements of MotivePower and
WABCO and their representatives about the respective businesses, operations,
assets, financial condition and future prospects of MotivePower and WABCO.
Wasserstein Perella also performed such studies, analyses and investigations and
reviewed other information as it considered appropriate for purposes of arriving
at and preparing its opinion.
In conducting its analysis and arriving at its opinion, Wasserstein Perella
assumed and relied upon the accuracy and completeness of all financial and other
information that was provided to or discussed with it or was publicly available,
and did not assume any responsibility for independently verifying this
information. Wasserstein Perella also relied upon the reasonableness and
accuracy of the financial information and analyses provided to them and assumed
that all financial information and analyses provided by MotivePower and WABCO
were prepared in good faith and on bases reflecting the best currently available
judgments and estimates of the respective managements of MotivePower and WABCO.
Wasserstein Perella did not express any opinion with respect to such financial
information and analyses or the assumptions upon which they are based. In
addition, Wasserstein Perella did not review any of the books and records of
MotivePower or WABCO, except as described above, or assume any responsibility
for conducting a physical inspection of the properties or facilities of
MotivePower or WABCO, or for making or obtaining an independent valuation or
appraisal of the assets or liabilities of MotivePower or WABCO, and Wasserstein
Perella was not provided with any such independent valuation or appraisal.
Wasserstein Perella noted that the merger is intended to qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
and Wasserstein Perella assumed that the merger will qualify as such a
reorganization. Wasserstein Perella also assumed that the transactions described
in the merger agreement would be consummated on the terms set forth in the
merger agreement, without material waiver or modification.
Wasserstein Perella's opinion was necessarily based on economic and market
conditions and other circumstances as they existed and could be evaluated by
Wasserstein Perella on the date of its opinion. In addition, Wasserstein Perella
did not express any opinion as to the price or trading range at which the WABCO
common stock will trade following the merger.
Summary and Analysis of the Merger
During a September 26, 1999 meeting with the MotivePower Board, and
supported by materials presented to the MotivePower Board dated September 26,
1999, Wasserstein Perella reviewed with the members of the MotivePower Board
certain financial, industry and market information with respect to MotivePower
and WABCO, and the procedures used in arriving at, and the analyses underlying,
Wasserstein Perella's opinion. The following summary is not a complete
description of Wasserstein Perella's opinion or of Wasserstein Perella's
analyses relating to its opinion. The preparation of a fairness opinion is a
complex
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process that is not purely mathematical and is not necessarily susceptible to
partial analyses or summary description. Shareholders are encouraged to review
Wasserstein Perella's opinion in its entirety.
Wasserstein Perella presented a summary of the material terms of the
merger, including:
- the fact that the merger was a stock-for-stock transaction intended to be
a tax-free exchange of common stock;
- the exchange ratio;
- the conversion of rights associated with MotivePower common stock into
WABCO common stock; and
- the representation of MotivePower on the WABCO Board by a minority
consisting of only four members.
Analysis of the Exchange Ratio
Wasserstein Perella performed an analysis of the market trading multiples
as of September 24, 1999 for MotivePower and WABCO based on (1) their enterprise
values as a multiple of 1999 estimated sales, earnings before interest, taxes,
amortization and depreciation ("EBITDA") and earnings before interest and taxes
("EBIT") and (2) their equity values as a multiple of 1999 estimated net income
and book value.
Based on these calculations, Wasserstein Perella noted that (1) the
enterprise value market multiples for MotivePower were 1.1x for 1999 estimated
sales, 5.6x for 1999 estimated EBITDA and 7.2x for 1999 estimated EBIT; and (2)
the equity value market multiples were 9.1x for 1999 estimated net income and
1.6x for 1999 estimated book value. For WABCO, (1) the enterprise value market
multiples were 1.3x for 1999 estimated sales, 6.5x for 1999 estimated EBITDA and
8.1x for 1999 estimated EBIT; and (2) the equity value market multiples were
9.8x for 1999 estimated net income, but not measured for 1999 estimated book
value.
Wasserstein Perella analyzed the historical daily ratios and market trading
multiples of MotivePower and WABCO as part of its analysis of the fairness of
the exchange ratio from a financial point of view to MotivePower. Wasserstein
Perella did not determine a range of implied public market equity values for
either MotivePower or WABCO based on these analyses.
Wasserstein Perella noted that the calculation of the exchange ratio, based
on the closing price of WABCO common stock on September 24, 1999, implied a
consideration of $13.12 per share of MotivePower common stock, a premium of 21%
to the closing price of MotivePower common stock on September 24, 1999, a market
equity value of $373 million and an enterprise value of $514 million, including
a $15 million transaction fee, and would result in a pro forma direct ownership
of WABCO following the completion of the merger by the current shareholders of
MotivePower of 42.1%, excluding shares of common stock held by WABCO's ESOP, and
37.4% including shares of common stock held by WABCO's ESOP. Wasserstein Perella
reviewed the structure of the exchange ratio with the MotivePower Board.
Wasserstein Perella also noted that increases or decreases in the price of
MotivePower common stock before the completion of the merger would not affect
the pro forma percentage ownership of WABCO after the completion of the merger
by the current shareholders of MotivePower.
Adjusted Leveraged Contribution Analysis
Wasserstein Perella compared the relative contributions of the implied
equity value of MotivePower and WABCO to the combined entity based on fiscal
year 1999 and fiscal year 2000 estimated net income, EBITDA and EBIT. Based on
the median 1999 estimated comparable trading multiples, financial data and
implied equity values, MotivePower's relative contributions to net income,
EBITDA and EBIT were 39.1%, 42.0% and 41.3%, respectively. These relative
contributions implied a respective exchange ratio of 0.59, 0.66 and 0.64,
excluding shares of common stock held by WABCO's ESOP, or 0.63, 0.70 and 0.68,
including shares of common stock held by WABCO's ESOP.
Based on the median 2000 estimated comparable trading multiples, financial
data and implied equity values, MotivePower's relative contributions to net
income, EBITDA and EBIT were 39.2%, 49.1% and
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44.8%, respectively. These relative contributions implied a respective exchange
ratio of 0.59, 0.90 and 0.74, excluding shares of common stock held by WABCO's
ESOP, or 0.62, 0.90 and 0.74, including shares of common stock held by WABCO's
ESOP. Wasserstein Perella noted that the exchange ratio was within the foregoing
valuation range and that this fact supported a determination that the exchange
ratio was fair to the MotivePower shareholders, other than WABCO and its
affiliates.
Pro Forma Transaction Analysis
Wasserstein Perella analyzed the potential pro forma effect of the merger
on earnings per share with respect to the shareholders of MotivePower for fiscal
years 2000 through 2002, using the MotivePower management case and the WABCO
management case, assuming qualification of the merger for pooling-of-interests
accounting treatment and the achievement of the per-year synergy levels
estimated by MotivePower and WABCO managements and including the estimated $15
million transaction fee. In addition, Wasserstein Perella performed this pro
forma merger analysis using a sensitivity case that modified specific
assumptions made by MotivePower's and WABCO's managements in preparing their
financial projections, as well as a third analysis using an adjusted base case
which excluded certain benefits.
The base case analysis suggested that, with respect to MotivePower's
shareholders, the merger would be dilutive to earnings per share in fiscal years
2000 and 2001, but accretive in fiscal year 2002. The sensitivity case and
adjusted base case analyses suggested that, with respect to MotivePower's
shareholders, the merger would be dilutive to earnings per share in fiscal years
2000, 2001 and 2002. If the synergies expected to be achieved in the merger are
included in these analyses, the base case and sensitivity case analyses suggest
that, with respect to MotivePower's shareholders, the merger would be accretive
to earnings per share in fiscal years 2000 through 2002. The adjusted base case
analysis suggests that, with respect to MotivePower's shareholders, the merger
would be dilutive to earnings per share in fiscal year 2000, but accretive in
fiscal years 2001 and 2002. The actual results that the combined company
achieves may, however, vary from projected results and these variations may be
material.
Selected Rail Supply and Services Company Trading Analysis
To analyze the relative public market valuations of selected comparable
rail supply and services companies, Wasserstein Perella analyzed the stock price
performance and operating performance of MotivePower, WABCO, ABC-NACO Inc.,
Greenbrier Companies, Harmon Industries, Inc., L.B. Foster Co. and Trinity
Industries, Inc. Wasserstein Perella calculated market trading multiples for
each of these companies based on their (1) enterprise values as a multiple of
(a) LTM sales, EBITDA and EBIT; (b) fiscal year 1999 estimated sales, EBITDA and
EBIT; and (c) fiscal year 2000 estimated sales, EBITDA and EBIT; and (2) equity
values as a multiple of (a) LTM net income and book value; (b) fiscal year 1999
estimated net income and book value; and (c) fiscal year 2000 estimated net
income and book value.
Based on these calculations, Wasserstein Perella noted that the range of
enterprise value market multiples was 0.4x to 0.8x for LTM sales, 4.0x to 18.7x
for LTM EBITDA, 5.0x to 16.0x for LTM EBIT, 0.4x to 0.7x for 1999 estimated
sales, 4.1x to 9.5x for 1999 estimated EBITDA, 5.1x to 14.9x for 1999 estimated
EBIT, 0.4x to 0.6x for 2000 estimated sales, 4.1x to 8.2x for 2000 estimated
EBITDA and 5.1x to 11.0x for 2000 estimated EBIT. The overall median was 0.5x
for LTM sales, 6.9x for LTM EBITDA, 9.6x for LTM EBIT, 0.6x for 1999 estimated
sales, 6.4x for 1999 estimated EBITDA, 8.0x for 1999 estimated EBIT, 0.6x for
2000 estimated sales, 4.4x for 2000 estimated EBITDA and 6.4x for 2000 estimated
EBIT.
The range of equity value market multiples was 7.2x to 19.6x for LTM net
income, 0.7x to 2.7x for LTM book value, 7.1x to 22.9x for 1999 estimated net
income, 0.7x to 2.4x for 1999 estimated book value, 6.8x to 9.6x for 2000
estimated net income and 0.7x to 1.9x for 2000 estimated book value. The overall
median was 11.9x for LTM net income, 1.2x for LTM book value, 10.9x for 1999
estimated net income, 1.1x for 1999 estimated book value, 7.9x for 2000
estimated net income and 1.0x for 2000 estimated book value.
Wasserstein Perella then calculated the implied enterprise value of each of
MotivePower and WABCO based on the preceding overall medians and derived a
series of implied exchange ratios. Wasserstein Perella noted that the exchange
ratio was within the foregoing valuation range and that this fact supported a
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determination that the exchange ratio was fair to the MotivePower shareholders,
other than WABCO and its affiliates.
Review of Selected Rail Supply and Services Company Acquisitions
Wasserstein Perella reviewed certain publicly available financial and other
information relating to the following recently announced business combinations
in the rail supply and services business: Amsted Industries/Varlen Corp.,
MotivePower/Young Radiator Company, Trinity Industries, Inc./MCT Holding,
WABCO/Rockwell Collins, ABC Rail Products/NACO, Rail Acquisition Corp./Portec
Inc., Finmeccanica S.p.A./Union Switch & Signal, WABCO/Vapor Corp., Varlen
Corp./Brenco, Trinity Industries, Inc./Transcisco Industries, Inc., Trinity
plc/ML Douglas & Schopf Maschinenbau, ABC Rail Products Corp./GE Railcar Wheel &
Parts Services Corp., Harmon Industries, Inc./Transportation Division-Servo
Corp. of America and Dimeling, Schreiber & Park/VMV Enterprise Inc.
In conducting its review of each of these transactions, Wasserstein Perella
calculated the equity purchase price multiple as a multiple of LTM net income
for the calendar year in which the applicable transaction was announced, based
on the latest publicly available information as of the date of each such
transaction. The range of implied equity purchase price multiples was 9.7x to
33.1x of LTM net income for the calendar year in which the applicable
transaction was announced, and the median multiple was 12.3x of LTM net income.
Wasserstein Perella also noted that the range of adjusted purchase price
multiples was 0.5x to 1.8x of LTM sales, 4.6x to 21.0x of LTM EBITDA and 7.5x to
11.8x of LTM EBIT for the calendar year in which the applicable transaction was
announced, and the median multiple for each was, respectively, 0.9x, 7.6x and
8.8x.
Wasserstein Perella then calculated the implied enterprise value of each of
MotivePower and WABCO based on the preceding median multiples and derived a
series of implied exchange ratios. Wasserstein Perella noted that the exchange
ratio was within the foregoing valuation range and that this fact supported a
determination that the exchange ratio was fair to the MotivePower shareholders,
other than WABCO and its affiliates.
Discounted Cash Flow Analysis
Wasserstein Perella performed discounted cash flow ("DCF") analyses for
MotivePower and WABCO using financial projections for fiscal years 1999 through
2004 provided by the respective management of MotivePower and WABCO.
MotivePower's and WABCO's respective management each prepared a set of financial
projections which were based on each management's base assumptions for future
performance. In addition, Wasserstein Perella performed DCF analyses using a
sensitivity case that modified specific assumptions made by MotivePower's and
WABCO's managements in preparing their financial projections.
Wasserstein Perella aggregated the present value of the cash flows from
2000 through 2004 with the present value of a range of terminal values. All cash
flows were discounted at rates of 11.0%, 12.0% and 13.0%. The terminal values
were computed using multiples of 5.0x. 6.0x and 7.0x for fiscal year 2004 EBITDA
and perpetuity growth rates of 1.0%, 2.0% and 3.0% for fiscal year 2004 free
cash flows ("FCF"). Wasserstein Perella arrived at these discount rates based on
its judgment of the weighted average cost of capital of selected publicly-traded
rail supply and service companies, and arrived at these terminal values based on
its review of the trading characteristics of the common stock of selected
publicly-traded rail supply and service companies.
Wasserstein Perella's base case analyses indicated a range of values for
the MotivePower common stock of (1) $13.09 and $18.39 per share with a midpoint
of $15.74 per share based on fiscal year 2004 EBITDA of $103.8 million, and (2)
$12.88 and $19.36 per share with a midpoint of $16.12 per share based on fiscal
year 2004 FCF of $60.3 million. Wasserstein Perella's base case analyses
indicated a range of values for WABCO common stock of (1) $14.20 and $24.93 per
share with a midpoint of $19.57 per share based on fiscal year 2004 EBITDA of
$187.0 million, and (2) $10.81 and $22.19 per share with a midpoint of $16.50
per share based on fiscal year 2004 FCF of $92.1 million.
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Wasserstein Perella's sensitivity case analyses indicated a range of values
for the MotivePower common stock of (1) $11.45 and $16.13 per share with a
midpoint of $13.79 per share based on fiscal year 2004 EBITDA of $91.5 million,
and (2) $11.18 and $16.84 per share with a midpoint of $14.01 per share based on
fiscal year 2004 FCF of $52.6 million. Wasserstein Perella's sensitivity case
analyses indicated a range of values for WABCO common stock of (1) $12.90 and
$23.21 per share with a midpoint of $18.06 per share based on fiscal year 2004
EBITDA of $178.9 million, and (2) $9.59 and $20.49 per share with a midpoint of
$15.04 per share based on fiscal year 2004 FCF of $87.7 million.
Wasserstein Perella also performed a third DCF analysis for MotivePower
using the base case, but excluding certain benefits. This analysis indicated a
range of values for the MotivePower common stock of (1) $11.13 and $15.77 per
share with a midpoint of $13.45 per share based on fiscal year 2004 EBITDA of
$91.0 million, and (2) $10.81 and $16.40 per share with a midpoint of $13.61 per
share based on fiscal year 2004 FCF of $51.9 million.
Based on this range of implied share values, Wasserstein Perella noted that
the implied share price of MotivePower common stock derived from applying the
exchange ratio to the closing price of WABCO common stock on September 24, 1999,
was within the foregoing valuation range and that this fact supported a
determination that the exchange ratio was fair to the MotivePower shareholders,
other than WABCO and its affiliates.
Premiums Analysis
Wasserstein Perella reviewed 21 announced transactions from September 1,
1997 through September 26, 1999 involving mergers of publicly-held companies
(other than financial services firms) where transaction values were between $400
and $700 million to derive a range of premiums paid over the public trading
prices one day, one week and four weeks before the announcement of each
transaction. In connection with this analysis, Wasserstein Perella noted, among
other things, that (1) the reasons for, and circumstances surrounding, each of
the transactions analyzed were diverse, (2) the characteristics of the companies
involved were not necessarily comparable to those of MotivePower and WABCO and
(3) premiums fluctuate based on perceived growth, synergies, strategic value,
the type of consideration utilized in the transaction, information in the
securities markets and other factors.
Wasserstein Perella's premiums analyses indicated that the medians of
premiums paid in the transactions over the public per share trading prices one
day, one week and four weeks before the announcement were 24.4%, 30.7% and
29.5%, respectively. Based on this range of implied premiums, Wasserstein
Perella noted that the exchange ratio resulted in a premium on the September 24,
1999, closing price of MotivePower common stock that was within the foregoing
range of average premiums and that this fact supported a determination that the
exchange ratio was fair to the MotivePower shareholders, other than WABCO and
its affiliates.
Summary
The preceding summary is not a complete description of the analyses
performed by Wasserstein Perella or its presentations to the MotivePower Board.
Wasserstein Perella believes that its analyses must be considered as a whole and
that selecting portions of its analyses and the factors considered by it,
without considering all factors and analyses, could create a misleading view of
the process underlying its analyses set forth in its opinion. In performing its
analyses, Wasserstein Perella made numerous macroeconomic, operating and
financial assumptions with respect to industry performance, general business,
regulatory and economic conditions and other matters, many of which are beyond
the control of MotivePower and WABCO. Any estimates incorporated in the analyses
performed by Wasserstein Perella are not necessarily indicative of actual past
or future results or values, which may be significantly more or less favorable
than these estimates. Estimated values do not purport to be appraisals and do
not necessarily reflect the prices at which rail supply and services companies
may be sold. Since these estimates are inherently subject to uncertainty,
Wasserstein Perella does not assume any responsibility for their accuracy. No
company analyzed for comparative purposes is identical to MotivePower or WABCO.
Accordingly, an analysis of comparative companies and comparative
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business combinations is not simply mathematical, but rather involves complex
considerations and judgments concerning financial and operating characteristics
of the companies involved and other factors that affect value.
In addition to the analyses outlined above, Wasserstein Perella performed
other valuation analyses which it deemed appropriate in determining the fairness
of the exchange ratio from a financial point of view to the MotivePower
shareholders, other than WABCO and its affiliates. Wasserstein Perella concluded
that, in its judgment, including the full range of its analyses described above,
the exchange ratio is fair, from a financial point of view, to the MotivePower
shareholders, other than WABCO and its affiliates.
Wasserstein Perella is an investment banking firm engaged in, among other
things, the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. The MotivePower Board selected
Wasserstein Perella as its financial advisor because Wasserstein Perella is an
internationally recognized investment banking firm, and members of Wasserstein
Perella have substantial experience in transactions such as the merger and in
the valuation of companies.
MotivePower agreed to pay Wasserstein Perella (1) a monthly financial
advisory fee of $20,000 as of April 14, 1999 through the date of either the
termination or successful consummation of the merger and (2) a fee of $5.26
million contingent upon the successful consummation of the merger, against which
the monthly financial advisory fee will be credited. In addition, MotivePower
agreed to reimburse Wasserstein Perella for its reasonable out-of-pocket
expenses related to its engagement, including the reasonable fees and expenses
of counsel, whether or not the merger is consummated. MotivePower also has
agreed to indemnify Wasserstein Perella and certain related persons against
certain liabilities relating to or arising out of its engagement, including
certain liabilities under the federal securities laws. In the past, Wasserstein
Perella has provided financial advisory services to MotivePower and received
compensation for its services.
In the ordinary course of its business, Wasserstein Perella may actively
trade the securities of WABCO and, before completion of the merger, MotivePower
for the accounts of Wasserstein Perella and for the accounts of its customers
and, accordingly, may at any time hold a long or short position in such
securities.
OPINION OF WABCO FINANCIAL ADVISOR
CSFB has acted as financial advisor to WABCO in connection with the merger.
WABCO selected CSFB based on CSFB's experience, expertise and familiarity with
WABCO and its business. CSFB is an internationally recognized investment banking
firm and is regularly engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
At meetings of the WABCO Board on May 18, 1999 and June 1, 1999,
representatives of CSFB made presentations regarding the valuation analyses
performed by it in connection with the original merger agreement. CSFB rendered
its written opinion, dated June 2, 1999, with respect to the original merger
agreement, that the exchange ratio was fair from a financial point of view to
the WABCO shareholders. At a meeting of the WABCO Board on September 26, 1999,
representatives of CSFB made a presentation regarding the valuation analyses
performed by it in connection with the transaction contemplated by the revised
merger agreement, and orally delivered its opinion, subsequently delivered in
writing, that, as of September 26, 1999 and based upon and subject to the
matters set forth in that opinion, the exchange ratio was fair from a financial
point of view to WABCO. CSFB has consented to the inclusion of the CSFB opinion
as Annex G to this joint proxy statement/prospectus.
WE HAVE ATTACHED THE FULL TEXT OF THE SEPTEMBER 26, 1999 CSFB OPINION,
WHICH SETS FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITATIONS ON THE REVIEW UNDERTAKEN AS ANNEX G TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. THE CSFB OPINION IS DIRECTED TO THE WABCO BOARD AND
RELATES ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE EXCHANGE
RATIO TO WABCO,
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DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY WABCO SHAREHOLDER AS TO WHETHER SUCH WABCO SHAREHOLDER
SHOULD APPROVE THE MERGER. THIS SECTION INCLUDES ONLY A SUMMARY OF THE CSFB
OPINION AND, AS A SUMMARY, IT IS NOT A SUBSTITUTE FOR THE FULL TEXT OF THE
OPINION. WE URGE THE WABCO SHAREHOLDERS TO READ THE CSFB OPINION IN ITS
ENTIRETY.
In arriving at its opinion, CSFB reviewed certain publicly available
business and financial information relating to WABCO and MotivePower, as well as
the merger agreement. CSFB also reviewed certain other information, including
financial forecasts and estimates of the cost savings and other potential
synergies anticipated to result from the merger, provided to it by WABCO and
MotivePower, and met with the managements of WABCO and MotivePower to discuss
the business and prospects of WABCO and MotivePower. CSFB also relied upon the
views of WABCO's and MotivePower's managements concerning the business,
operational and strategic benefits and implications of the merger.
CSFB also considered certain financial and stock market data of WABCO and
MotivePower and compared that data with similar data for other publicly held
companies in businesses similar to that of WABCO and MotivePower. CSFB also
considered the financial terms of certain other business combinations and other
transactions that have recently been effected. CSFB also considered such other
information, financial studies, analyses, and investigations and financial,
economic and market criteria as CSFB deemed relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the foregoing information and relied on such
information being complete and accurate in all material respects. With respect
to the financial forecasts, CSFB assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
managements of WABCO and MotivePower as to the future financial performance of
their respective companies and as to the cost savings and other potential
synergies anticipated to result from the merger. In addition, CSFB was not
requested to make and did not make an independent evaluation or appraisal of the
assets or liabilities, contingent or otherwise, of WABCO or MotivePower, nor was
CSFB furnished with any such evaluation or appraisal. Furthermore, CSFB assumed
that the merger will qualify for pooling of interests accounting treatment and
as a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code.
CSFB was not requested to, and did not, solicit third party indications of
interest in acquiring all or any part of WABCO.
CSFB necessarily based its opinion upon financial, economic, market and
other conditions as they existed and could be evaluated on the date of the CSFB
opinion. CSFB did not express any opinion as to what the actual value of WABCO
common stock will be when issued to shareholders of MotivePower pursuant to the
merger or the prices at which such shares of WABCO common stock will trade
subsequent to the merger.
In preparing the CSFB opinion, CSFB performed a variety of financial and
comparative analyses. The preparation of a fairness opinion is a complex
analytical process involving various determinations as to the most appropriate
and relevant methods of financial analyses and the application of those methods
to the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. In arriving at its opinion, CSFB made
qualitative judgments as to the significance and relevance of each analysis and
factor considered by it. Accordingly, CSFB believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors,
without considering all analyses and factors, could create a misleading or
incomplete view of the processes underlying those analyses and the CSFB opinion.
In its analyses, CSFB made numerous assumptions with respect to WABCO,
MotivePower, industry performance, regulatory, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of WABCO and MotivePower.
The following is a summary of the material analyses and methodologies used
by CSFB to render its fairness opinion.
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Valuation Analyses Used to Derive Implied Exchange Ratios
CSFB prepared separate valuations of WABCO and MotivePower both excluding
and including the impact of synergies resulting from the merger. In determining
valuation, CSFB used the following methodologies: Discounted Cash Flow Analysis,
Comparable Companies Analysis, Comparable Acquisitions Analysis, Contribution
Analysis and Historical Exchange Ratio Analysis. Each of these methodologies was
used to generate an implied exchange ratio reference range. CSFB has also
analyzed the potential pro forma effect of the merger on earnings per share.
These various valuation analyses are summarized below.
The valuation methodologies noted above and the implied exchange ratio
ranges derived therefrom are described below. In applying the various valuation
methodologies to the particular businesses, operations and prospects of WABCO
and MotivePower, and the particular circumstances of the merger, CSFB made
qualitative judgments as to the significance and relevance of each analysis.
Moreover, no company, transaction or business used in the analyses as a
comparison is identical to WABCO or MotivePower or the merger, nor is an
evaluation of the results of the analyses entirely mathematical. Rather, those
analyses involve complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the companies, business segments, or
transactions being analyzed. The estimates contained in those analyses and the
ranges of valuations and implied exchange ratios resulting from any particular
analysis are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than those
suggested by the analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to reflect the
prices at which businesses or securities actually may be sold. Accordingly,
those analyses and estimates are inherently subject to substantial uncertainty.
CSFB's financial analyses were only one of many factors the WABCO Board
considered in its evaluation of the merger and should not be viewed as
determinative of the views of the WABCO Board or management with respect to the
exchange ratio or the merger. ACCORDINGLY, THE METHODOLOGIES AND THE IMPLIED
EXCHANGE RATIOS DERIVED THEREFROM DESCRIBED BELOW MUST BE CONSIDERED AS A WHOLE
AND IN THE CONTEXT OF THE NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES,
INCLUDING THE ASSUMPTIONS UNDERLYING THESE ANALYSES. CONSIDERING THE IMPLIED
EXCHANGE RATIOS SET FORTH BELOW WITHOUT CONSIDERING THE FULL NARRATIVE
DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING THE ASSUMPTIONS UNDERLYING
THESE ANALYSES, COULD CREATE A MISLEADING OR INCOMPLETE VIEW OF THE PROCESS
UNDERLYING, AND CONCLUSIONS REPRESENTED BY, CSFB'S OPINION.
Discounted Cash Flow Analysis
WABCO Discounted Cash Flow Analysis. CSFB performed discounted cash flow
("DCF") analyses of WABCO by calculating the present value of the sum of a
ten-year stream of unlevered free cash flows and a 2008 terminal value. CSFB's
analysis was based on two cases of WABCO management's projections for the years
1999 through 2001, the base case and a more conservative alternative case, and
an extension of those forecasts through 2008, developed on the basis of
projected growth rates. CSFB utilized a ten year forecast to perform the DCF
analysis in order to reflect the general business cycles. For both cases, CSFB
applied multiples which were based on companies and transactions in WABCO's
industry segments of EBITDA that ranged from 6.0 to 7.0 and discount rates,
based on the weighted average cost of capital for WABCO's industry segments, of
9.0% to 9.5%.
MotivePower Discounted Cash Flow Analysis. CSFB performed DCF analyses of
MotivePower by calculating the present value of the sum of a ten-year stream of
unlevered free cash flows and a 2008 terminal value. MotivePower's analysis was
based on two cases of MotivePower managements' projections for the year 1999,
the base case and a more conservative alternative case, and an extension of
those forecasts through 2008, developed by WABCO management on the basis of
projected growth rates. CSFB utilized a ten year forecast to perform the DCF
analysis in order to reflect the general business cycles. For both cases, CSFB
applied multiples which were based on companies and transactions in
MotivePower's industry segments of EBITDA that ranged from 6.0 to 7.0 and
discount rates of 9.0% to 9.5%, based on the weighted average cost of capital
for MotivePower's industry segments.
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<PAGE> 66
Based on the foregoing, the DCF analysis for WABCO and MotivePower
excluding the impact of synergies resulted in an implied exchange ratio
reference range of 0.46 to 0.63. Including the impact of synergies, the DCF
analysis resulted in an implied exchange ratio reference range of 0.67 to 0.85.
Comparable Companies Analysis
CSFB compared certain financial information for WABCO and MotivePower
businesses to that of selected public companies, all of which CSFB selected
because, among other reasons, each serves markets generally similar to markets
WABCO and MotivePower serve, each had a meaningful number of published earnings
estimates, and each is considered to be reasonably comparable to the respective
WABCO and MotivePower business segments. CSFB considered the companies set forth
in the table below.
SELECTED COMPANIES
<TABLE>
<CAPTION>
COMPONENTS CAR BUILDERS
<S> <C>
Westinghouse Air Brake Company Greenbrier Companies
ABC-NACO Transportation Technologies
Harmon Industries Trinity Industries
MotivePower Industries
</TABLE>
CSFB compared the enterprise values, for purposes of this analysis, the sum
of market equity value and net debt, of the selected companies as multiples of
estimated fiscal 1999 and 2000 EBITDA and EBIT. CSFB based estimated financial
data for the selected companies on estimates of equity research analysts. Based
on these analyses, CSFB derived a range of enterprise values as multiples of
1999 and 2000 estimated EBITDA of 6.0 to 7.0 and 5.5 to 6.5, respectively, and a
range of enterprise values as multiples of 1999 and 2000 estimated EBIT of 8.0
to 10.0 and 7.0 to 8.0, respectively. These ranges were derived from the
selected components companies, as CSFB determined that the business
characteristics of the selected car builders were less comparable to WABCO and
MotivePower.
CSFB then applied these multiples to the 1999 and 2000 management estimates
for EBITDA and EBIT for each of WABCO and MotivePower. CSFB's analysis resulted
in an implied exchange ratio reference range of 0.48 to 0.80.
Comparable Acquisitions Analysis
CSFB analyzed the purchase prices and implied transaction multiples paid or
proposed to be paid in selected merger and acquisition transactions in the rail,
automotive and other electronic control and instrumentation segments, all of
which CSFB considered to be reasonably comparable to the respective WABCO and
MotivePower business segments. CSFB selected the acquisition transactions, among
other reasons, because the target of each transaction served markets generally
similar to markets WABCO and MotivePower serve. CSFB considered rail, automotive
and other electronic control and instrumentation transactions, including those
transactions set forth in the table below.
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<PAGE> 67
<TABLE>
<CAPTION>
ACQUIROR COMPANY TARGET COMPANY
<S> <C> <C>
Rail Amsted Industries................. Varlen Corporation
ABC Rail Products Corp............ Naco Inc.
Varlen Corporation................ Brenco Inc.
Trinity Industries Inc............ Transcisco Industries, Inc.
Automotive Dura Automotive................... Adwest Automotive plc
(Mid-market) Dura Automotive................... Excel Industries
Borg-Warner Automotive............ Kuhlman Corporation
Stoneridge, Inc................... Hi-Stat Manufacturing
Meritor Automotive................ LucasVarity Heavy Duty Brakes
Hayes Lemmerz..................... CMI International
Other Electronic EG&G Inc.......................... Perkin-Elmer Instrumentation
Control and JF Lehman......................... Special Devices
Instrumentation Dura Automotive................... Trident Automotive
Breed Technologies................ AlliedSignal
</TABLE>
CSFB compared enterprise values for the selected acquisitions as multiples
of revenues, EBITDA and EBIT. CSFB based all multiples on historical financial
information available at the time of the announcement of the selected
acquisitions. The table below sets forth the median, mean, high and low
multiples for the selected acquisitions.
MULTIPLE RANGES
<TABLE>
<CAPTION>
LOW HIGH MEAN MEDIAN
--- ---- ---- ------
<S> <C> <C> <C> <C>
Revenues.................................................... 0.4 2.3 1.1 1.0
EBITDA...................................................... 5.8 11.5 8.0 7.6
EBIT........................................................ 8.1 14.9 11.2 10.9
</TABLE>
CSFB applied selected ranges of multiples based on these multiples to 1999
estimated revenues, EBITDA and EBIT for each of WABCO and MotivePower. CSFB's
analysis resulted in an implied exchange ratio range of 0.50 to 0.71.
Contribution Analysis
CSFB analyzed the relative contributions of WABCO and MotivePower to the
estimated revenues, EBITDA, EBIT and net income of the pro forma combined
company for fiscal years 1999 and 2000. This analysis indicated that based on
the WABCO base case and the MotivePower base case and without consideration of
potential synergies, WABCO's and MotivePower's contributions would be as set
forth in the following table:
<TABLE>
<CAPTION>
WABCO MPO
----- ---
<S> <C> <C> <C>
1999 estimated Revenues 64% 36%
1999 estimated EBITDA 67% 33%
1999 estimated EBIT 67% 33%
1999 estimated Net Income 61% 39%
2000 estimated Revenues 63% 37%
2000 estimated EBITDA 67% 33%
2000 estimated EBIT 67% 33%
2000 estimated Net Income 62% 38%
</TABLE>
In summary, CSFB's analysis resulted in an implied exchange ratio range of
0.60 to 0.70.
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<PAGE> 68
Historical Exchange Ratio Analysis
CSFB compared the historical stock prices of WABCO and MotivePower over
various periods and derived the implied exchange ratios from those prices. Based
on the average exchange ratios over periods ranging from 30 days to two years,
ending on September 24, 1999 as well as on that date, the implied exchange ratio
range was 0.55 to 0.82.
Pro Forma Transaction Analysis
CSFB analyzed the potential pro forma effect of the merger on earnings per
share with respect to the shareholders of WABCO for the fiscal years 1999
through 2001, using the WABCO base case and the MotivePower base case, assuming
qualification of the merger for pooling of interests accounting treatment and
the achievement of the per-year synergy levels estimated by WABCO and
MotivePower managements. This analysis suggested that, with respect to WABCO's
shareholders, the merger would be dilutive to earnings per share in fiscal years
1999 and 2000 and accretive to earnings per share in fiscal year 2001. The
actual results that the combined company achieves may, however, vary from
projected results and these variations may be material.
Miscellaneous
Pursuant to the terms of CSFB's engagement, WABCO has agreed to pay CSFB a
fee of $4,700,000, $150,000 of which was payable upon CSFB's engagement and the
remainder of which will be payable upon consummation of the merger. WABCO will
also reimburse CSFB for certain out-of-pocket expenses incurred by CSFB in
connection with its services to WABCO, including fees and expenses of legal
counsel. WABCO has agreed to indemnify CSFB, its affiliates, the respective
directors, officers, partners, agents and employees of CSFB and its affiliates,
and each person, if any, controlling CSFB or any of its affiliates, against
certain liabilities, including liabilities under the federal securities laws.
CSFB has in the past performed certain investment banking services for
WABCO, for which CSFB has received customary fees. In the ordinary course of its
business, CSFB and its affiliates may actively trade the debt and equity
securities of WABCO and MotivePower for their own accounts and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities. As of September 26, 1999, CSFB owned approximately 3,300,311
shares of MotivePower common stock.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the WABCO Board and the MotivePower
Board with respect to the revised merger agreement and the revised merger,
shareholders should be aware that certain members of the WABCO Board and the
MotivePower Board and certain members of the management of WABCO and MotivePower
have interests in the merger that may be different from, or in addition to, the
interests of the other shareholders of WABCO and MotivePower generally.
BOARD OF DIRECTORS
As of the closing, the board of directors of the combined company will
consist of the eight WABCO directors currently on WABCO's board of directors and
four directors currently on MotivePower's board, Gilbert E. Carmichael, Lee B.
Foster II, James P. Miscoll and Nicholas J. Stanley. See "The Merger
Agreement -- WABCO Board and Related Matters" on page I-71.
Those shareholders comprising the active original management owners of
WABCO are parties to an amended voting trust agreement which provides for, among
other matters, the WABCO common stock subject to the amended voting trust
agreement to be voted as one block and restrictions on the sale or transfer of
such stock subject to the voting trust.
A stockholders agreement exists among the voting trust, Vestar Equity
Partners, L.P. ("Vestar"), Harvard Private Capital Holdings, Inc. ("Harvard"),
American Industrial Partners Capital Fund II, L.P. ("AIP") and
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WABCO pursuant to which Vestar, Harvard, AIP and the voting trust have agreed,
among other matters, upon the composition of the board of directors of WABCO as
described below. Provisions of WABCO's by-laws reiterate the provisions of the
stockholders agreement.
As of October 8, 1999 (i) Vestar owned 2,400,000 shares (or approximately
7% of the outstanding shares) of WABCO common stock and Vestar Capital Partners,
Inc., an affiliate of Vestar, owned an additional 40,000 shares of WABCO common
stock, (ii) Harvard owned 2,401,000 shares (or approximately 7% of the
outstanding shares) of WABCO common stock, (iii) AIP owned 900,000 shares (or
approximately 3% of the outstanding shares) of WABCO common stock and (iv)
2,837,169 shares (or approximately 8% of the outstanding shares) of WABCO common
stock were subject to the voting trust.
Mr. James P. Kelley is affiliated with Vestar Capital Partners, Inc. and
Vestar Equity Partners, L.P. and serves as a director of WABCO and, subject to
the provisions of the stockholders agreement and WABCO's by-laws described
below, will continue to serve as a director of WABCO following the merger. Mr.
Kim G. Davis is a Managing Director and Co-founder of Charlesbank Capital
Partners, LLC (which serves as investment advisor to Harvard) and serves as a
director of WABCO and, subject to the provisions of the stockholders agreement
and WABCO's by-laws described below, will continue to serve as a director of
WABCO following the merger.
Subject to the limitations described below, WABCO's by-laws provide that
the board of directors of WABCO shall consist of such number of persons as is
determined from time to time by the affirmative vote of a majority of the
directors then in office. WABCO's by-laws and the stockholders agreement
effectively require the nominating committee of WABCO's Board to nominate the
following persons for election to the Board so that the Board shall be comprised
of the following: (i) the Chief Executive Officer of WABCO; (ii) another
executive officer of WABCO; (iii) at least three individuals who are not
employees of WABCO or any of its subsidiaries; (iv) one individual designated by
Vestar (so long as Vestar and its affiliates own at least 50% of the shares of
WABCO common stock beneficially owned by Vestar on March 31, 1997); (v) one
individual designated by Mr. Kassling (so long as Mr. Kassling and his
affiliates own at least 50% of the shares of WABCO common stock beneficially
owned by Mr. Kassling on March 31, 1997); (vi) one individual designated by
Harvard (so long as Harvard and its affiliates own at least 50% of the shares of
WABCO common stock beneficially owned by Harvard on March 31, 1997); and (vii)
Emilio A. Fernandez (so long as (x) Mr. Fernandez is able and willing to serve
and (y) Mr. Fernandez and his affiliates own at least 50% of the shares of WABCO
common stock delivered by WABCO pursuant to the asset purchase agreement
pursuant to which WABCO acquired Pulse Electronics, Incorporated).
Except with respect to Mr. Fernandez, in the event of a vacancy on the
WABCO Board caused by the death, resignation or removal of a director prior to
the fulfillment of his term, the party or other person or entity, if any,
originally designating such director shall, so long as its or his right to
designate such director is applicable, designate an individual to serve as a
successor director. The death, resignation or removal of Mr. Fernandez as a
director shall terminate his right to serve on the WABCO Board.
Each of the voting trust, Vestar, Harvard, AIP, Mr. Kassling and Mr.
Fernandez is required to vote all of the shares of WABCO common stock and any
other voting securities of WABCO from time to time held by it or him in favor
of, and each of the voting trust, Harvard, Vestar, AIP, Mr. Kassling and Mr.
Fernandez shall cause any shares of WABCO common stock or other voting
securities of WABCO as to which it or he from time to time has the right to
direct the vote to be voted in favor of, and to take any other appropriate steps
to cause, the election to the WABCO Board of individuals designated by Vestar,
Harvard, and/or Mr. Kassling and, in the case of Mr. Fernandez, the Chairman of
the Board, and nominated by the Nominating Committee. For this purpose, Mr.
Kassling shall not be deemed to control any shares of WABCO common stock held by
the WABCO ESOP.
ADVISORY AGREEMENTS
In connection with the merger, WABCO entered into agreements with Vestar
Capital Partners Inc. (an affiliate of Vestar) and Charlesbank Capital Partners,
LLC (which acts as the investment advisor to Harvard) providing for the payment
by WABCO to Vestar of a fee of $1,400,000 and to Charlesbank of a fee of
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<PAGE> 70
$250,000 for their respective assistance in the evaluation, negotiation and
consummation of the merger. Both agreements were approved by a disinterested
majority of the WABCO Board.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
WABCO has agreed to indemnify, to the extent provided under MotivePower's
charter and by-laws in effect on September 26, 1999, the individuals who on or
before the closing were officers or directors of MotivePower or its subsidiaries
with respect to all acts or omissions before the closing by these individuals in
these capacities. WABCO has also agreed to provide, for six years after the
closing, a directors' and officers' liability insurance and indemnification
policy that provides MotivePower's officers and directors in office immediately
prior to the closing coverage substantially equivalent to MotivePower's policy
in effect on September 26, 1999. See "The Merger Agreement -- Covenants --
Indemnification and Insurance of MotivePower Directors and Officers" on page
I-73.
STOCK OPTIONS, STOCK APPRECIATION RIGHTS, RESTRICTED STOCK AND STOCK ACCOUNT
UNDER DEFERRED COMPENSATION PLAN
MotivePower Stock Options and Stock Appreciation Rights. At the effective
time, each outstanding option and stock appreciation right granted by
MotivePower to purchase or acquire shares of MotivePower common stock will be
assumed by WABCO and will, after the effective time, constitute an option to
acquire, on the same terms and subject to the same conditions as applied to the
MotivePower stock option or stock appreciation right prior to the effective
time, the number, rounded down to the nearest whole number, of shares of WABCO
common stock determined by multiplying:
- the number of shares of MotivePower common stock subject to the option or
stock appreciation right immediately before the effective time by
- the exchange ratio.
The exercise price of each outstanding option will be a price per share of
WABCO common stock, rounded up to the nearest cent, equal to:
- the per share exercise price for MotivePower common stock that otherwise
could have been purchased under the MotivePower stock option divided by
- the exchange ratio.
In addition, the MotivePower common stock account under the MotivePower
Deferred Compensation Plan will be converted into an account representing the
number of shares of WABCO common stock, rounded down to the nearest whole
number, determined by multiplying the number of shares of MotivePower common
stock subject to such account immediately prior to the effective time by the
exchange ratio.
The merger has also affected and will also affect the stock options, shares
of restricted stock and stock appreciation rights granted to MotivePower
employees, including MotivePower executive officers, as follows:
- Options granted to MotivePower employees, including MotivePower executive
officers, that were not exercisable at the time that the MotivePower
shareholders approved the original merger agreement became exercisable at
that time.
- Restrictions on shares of restricted stock granted by MotivePower to
Messrs. Pope and Wolf that had not lapsed prior to the time that the
MotivePower shareholders approved the original merger agreement lapsed at
that time. The numbers of shares of restricted stock held by Messrs. Pope
and Wolf with respect to which restrictions lapsed as a result of the
MotivePower shareholders having approved the original merger agreement
were 37,500 and 75,000 respectively.
- Stock appreciation rights granted to Mr. Wolf that are not exercisable
prior to the effective time of the revised merger will become exercisable
for shares of MotivePower common stock immediately prior to the effective
time of the revised merger. The aggregate market value of the shares of
MotivePower common stock issuable upon the exercise of these stock
appreciation rights is $303,750.
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<PAGE> 71
Options granted to nonemployee directors of MotivePower that are not
exercisable prior to the effective time will become exercisable immediately
prior to the effective time if approval of the revised merger agreement and the
revised merger by the MotivePower shareholders is obtained. The nonemployee
directors of MotivePower will be entitled to exercise these options until the
effective time, and any options not exercised prior to that time will terminate.
The following table shows the options to purchase shares of MotivePower
common stock that became or will become exercisable as a result of shareholder
approval of the original merger and, if received, the revised merger held by
each of the executive officers and each of the non-employee directors of
MotivePower, assuming the revised merger is effective November 19, 1999. All
references in the table and elsewhere in this joint proxy statement/prospectus
to shares that may be purchased upon the exercise of MotivePower stock options
and their exercise price per share and to shares of restricted stock and stock
appreciation rights granted by MotivePower reflect the three-for-two split of
the shares of MotivePower common stock effective April 2, 1999.
OPTIONS BECOMING EXERCISABLE
AS A RESULT OF THE MERGER
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
DATE OF MOTIVEPOWER EXERCISE
NAME AND PRINCIPAL POSITION GRANT COMMON STOCK PRICE ($)
- --------------------------- ------- ------------ ---------
<S> <C> <C> <C>
Executive Officers
John C. Pope
Chairman of the Board -- -- --
- -------------------------------------------------------------------------------------------------
Michael A. Wolf
President, Chief Executive Officer and Director 5/13/96 180,000 $ 5.19
- -------------------------------------------------------------------------------------------------
Joseph S. Crawford, Jr. 4/10/96 18,750 $ 3.33
Executive Vice President and Chief Operating 2/10/97 37,500 $ 7.17
Officer 8/27/98 22,500 $ 15.94
- -------------------------------------------------------------------------------------------------
William F. Fabrizio 10/29/96 56,250 $ 5.17
Senior Vice President and Chief Financial 2/10/97 18,750 $ 7.17
Officer
- -------------------------------------------------------------------------------------------------
David L. Bonvenuto 11/6/97 5,625 $ 16.77
Vice President, Controller and Principal 9/8/98 11,250 $ 15.44
Accounting Officer
- -------------------------------------------------------------------------------------------------
Jeannette Fisher-Garber 10/29/96 18,750 $ 5.17
Vice President, General Counsel and Secretary 2/10/97 3,750 $ 7.17
- -------------------------------------------------------------------------------------------------
Thomas P. Lyons 4/10/96 937 $ 3.33
Vice President and Treasurer 2/10/97 7,500 $ 7.17
- -------------------------------------------------------------------------------------------------
Jeffrey A. Plut 2/10/97 3,750 $ 7.17
Vice President, Corporate Development 11/6/97 11,250 $ 16.77
8/27/98 5,625 $ 15.94
- -------------------------------------------------------------------------------------------------
Scott E. Wahlstrom 4/10/96 3,750 $ 3.33
Vice President, Human Resources and 2/10/97 7,500 $ 7.17
Administration
- -------------------------------------------------------------------------------------------------
Timothy R. Wesley 4/10/96 1,875 $ 3.33
Vice President, Investor and Public Relations 2/10/97 7,500 $ 7.17
- -------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 72
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
DATE OF MOTIVEPOWER EXERCISE
NAME AND PRINCIPAL POSITION GRANT COMMON STOCK PRICE ($)
- --------------------------- ------- ------------ ---------
<S> <C> <C> <C>
Nonemployee Directors
Gilbert E. Carmichael 4/1/97 6,000 $ 3.625
Director and Vice Chairman 1/2/98 2,000 $ 16.22
1/4/99 3,000 $20.875
- -------------------------------------------------------------------------------------------------
Ernesto Fernandez Hurtado 12/19/96 6,000 $2.4167
Director 1/2/97 750 $5.2917
1/2/98 2,000 $ 16.22
1/4/99 3,000 $20.875
- -------------------------------------------------------------------------------------------------
James P. Miscoll 1/2/97 750 $5.2917
Director 1/2/98 2,000 $ 16.22
1/4/99 3,000 $20.875
- -------------------------------------------------------------------------------------------------
Lee B. Foster II 1/2/97 750 $5.2917
Director 1/2/98 2,000 $ 16.22
1/4/99 3,000 $20.875
- -------------------------------------------------------------------------------------------------
Nicholas J. Stanley 1/2/97 750 $5.2917
Director 1/2/98 2,000 $ 16.22
1/4/99 3,000 $20.875
- -------------------------------------------------------------------------------------------------
</TABLE>
WABCO Stock Options, Restricted Stock and Stock Appreciation Rights. The
merger will not materially affect options granted to WABCO employees, including
executive officers, or non-employee directors of WABCO. Each outstanding option
granted by WABCO to purchase shares of WABCO common stock will, after the
effective time, continue to be an option to purchase the same number of shares
of WABCO common stock at the same exercise price per share.
WABCO also has performance-based options outstanding to some management
employees. The performance targets are based upon fully-diluted earnings per
share of WABCO. It is our present intention to continue to measure the vesting
of these performance options by the earnings per share of the WABCO businesses
as calculated prior to the merger. These arrangements will be administered in
accordance with the past practices and interpretations of the WABCO Board and
Compensation Committee. Any question regarding the past practices and
interpretations of the WABCO Board and the WABCO Compensation Committee and the
application of these past practices and interpretations to the facts and
circumstances in a given case after the merger will be referred to the
Compensation Committee of the combined company for a final decision. This
decision may not be inconsistent with the intention of the merger agreement and
the merger.
Other WABCO Stock Plans. The WABCO 1998 Employee Stock Purchase Plan was
suspended effective immediately following the purchase period under that plan
ending June 30, 1999. WABCO anticipates that it will reinstitute the plan after
the merger.
We anticipate that the WABCO 1997 Executive Retirement Plan will continue
in effect for eligible employees.
EMPLOYMENT AGREEMENTS
John C. Pope. John C. Pope serves as Chairman of the Board of MotivePower
pursuant to the terms of an employment agreement between Mr. Pope and
MotivePower. Mr. Pope will not be employed by WABCO following the merger. Under
the agreement, Mr. Pope is entitled to a base salary of $350,000 per year, which
may be increased from time to time and which currently is $372,000. The
agreement also provides for secretarial assistance for Mr. Pope for a maximum of
25 hours per week, the provision of office equipment
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<PAGE> 73
not to exceed $10,000 and medical and dental benefits. Mr. Pope is required to
devote not more than an average of three days per week to the business and
affairs of MotivePower. The agreement further provides for the grant of 450,000
stock appreciation rights. A maximum value was fixed for these rights at $4.60
per right in connection with the grant to Mr. Pope of options to purchase
450,000 shares of MotivePower common stock. These rights were exercised and the
resulting amount was deferred into the MotivePower common stock account under
MotivePower's Deferred Compensation Plan. In addition, the agreement provides
for the grant of 75,000 shares of restricted stock. The restrictions on one-half
of these shares of restricted stock lapsed prior to the time that the
MotivePower shareholders approved the original merger agreement and the
restrictions on the remaining shares of restricted stock lapsed pursuant to
MotivePower's Stock Incentive Plan at the time that the MotivePower shareholders
approved the original merger agreement. If the original merger agreement had not
been approved, these restrictions would have lapsed upon the earliest of (1)
January 1, 2007 so long as Mr. Pope is employed by MotivePower on that date, (2)
the occurrence of a change in control of MotivePower, (3) Mr. Pope's termination
of employment due to death or disability or (4) Mr. Pope's termination of
employment by MotivePower other than for cause.
The initial term of Mr. Pope's employment agreement was two years and is
subject to annual automatic one-year extensions, unless notice of the automatic
extension provision is terminated by MotivePower. Currently, the term of the
agreement ends on January 2, 2000. Upon consummation of the merger and
termination of his employment, Mr. Pope will be entitled, in lieu of any further
salary and bonus payments and in addition to the restricted stock and stock
options, which restrictions lapsed and which options became exercisable as
described above, to the following payments and benefits:
- a lump sum payment equal to two times the sum of the following amounts:
the amount of Mr. Pope's annual base salary, at the rate in effect
immediately preceding the effective time of the merger, and the amount of
Mr. Pope's annual bonus received for the year prior to the effective time
of the merger, or the amount of Mr. Pope's target bonus for such year,
whichever is greater;
- for a period of two years after the effective time of the merger, health
insurance substantially similar to that provided to Mr. Pope during his
employment, secretarial assistance for a maximum of 25 hours per week and
reimbursement for reasonable computer support, telephone, postage and
other out-of-pocket expenses incurred by Mr. Pope in connection with the
operation of his office; and
- if any payment or benefit received or to be received by Mr. Pope in
connection with the merger or the termination of his employment is
subject to the excise tax imposed under Section 4999 of the Internal
Revenue Code, MotivePower will reimburse Mr. Pope in an amount such that
Mr. Pope receives actual payments or benefits in an amount not less than
that which he would have received if no obligation for the excise tax, or
any additional tax on tax reimbursements received including income tax,
had arisen.
Michael A. Wolf. Michael A. Wolf serves as President and Chief Executive
Officer of MotivePower pursuant to the terms of an employment agreement between
Mr. Wolf and MotivePower. Mr. Wolf will not be employed by WABCO following the
merger. Under the agreement, Mr. Wolf is entitled to a base salary of $475,000
per year, which amount was $398,000 prior to an amendment to the employment
agreement dated May 13, 1999, and a bonus under MotivePower's Executive
Incentive Plan. The agreement also provides for participation in a deferred
compensation plan and participation in all perquisites and health and welfare
benefits consistent with MotivePower's policies for other executive personnel.
In addition, the agreement provides for a term life insurance policy on the life
of Mr. Wolf having a death benefit of up to $1,000,000.
In addition, MotivePower granted to Mr. Wolf 150,000 shares of restricted
stock pursuant to the agreement. The restrictions on 75,000 of these shares
lapsed on June 30, 1999. The restrictions on the remaining 75,000 shares lapsed
pursuant to MotivePower's Stock Incentive Plan at the time that the MotivePower
shareholders approved the original merger agreement. If the original merger
agreement had not been approved, these restrictions would have lapsed upon the
earliest of (1) June 30, 2000 so long as Mr. Wolf is employed by MotivePower on
that date, (2) the occurrence of a change in control of MotivePower, (3) Mr.
Wolf's termination of employment due to death or disability or (4) Mr. Wolf's
termination of employment by MotivePower other than for cause. Also pursuant to
the agreement,
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<PAGE> 74
MotivePower granted to Mr. Wolf 600,000 stock appreciation rights. A maximum
value was fixed for these rights at $1.69 per right in connection with the grant
to Mr. Wolf of options to purchase 600,000 shares of MotivePower common stock.
As of the date of this joint proxy statement/prospectus 420,000 of the rights
have been exercised and the resulting amounts were deferred into the MotivePower
common stock account under MotivePower's Deferred Compensation Plan, and 180,000
of the rights become exercisable for shares of MotivePower common stock
immediately prior to the effective time if the merger is consummated. If the
merger is not consummated, these rights become exercisable for shares of
MotivePower common stock on July 1, 2000, provided that Mr. Wolf has not
voluntarily terminated his employment before then, or if earlier, immediately
prior to a change in control of MotivePower, upon Mr. Wolf's termination of
employment due to death or disability or Mr. Wolf's termination of employment by
MotivePower other than for cause.
The initial term of Mr. Wolf's employment agreement was 24 months and was
subject to monthly automatic one-month extensions through June 30, 1999, so that
there remained a 24-month term at all times through June 30, 1999. Thereafter,
the term of the agreement expires on July 1, 2001. Upon consummation of the
merger and termination of Mr. Wolf's employment, or if MotivePower terminates
Mr. Wolf's employment in contemplation of or within 90 days prior to the
effective time of the merger, Mr. Wolf will be entitled, in lieu of any further
salary and bonus payments and in addition to the restricted stock and stock
options, which restrictions lapsed and which options became exercisable as
described above, to the following payments and benefits:
- a lump sum payment equal to three times, two times prior to the amendment
to the employment agreement dated May 13, 1999, the sum of the following
amounts: the amount of Mr. Wolf's annual base salary, at the rate in
effect immediately preceding his termination of employment and the amount
of Mr. Wolf's annual bonus received for the year prior to his termination
of employment or the amount of Mr. Wolf's maximum target bonus for such
year, whichever is greater;
- for a period of 12 months after Mr. Wolf's employment is terminated or
until Mr. Wolf finds new employment, whichever occurs first, perquisites,
health and welfare benefits and life insurance similar to that provided
to Mr. Wolf during his employment, which benefit was added by the
amendment to the employment agreement dated May 13, 1999;
- the restrictions on all stock appreciation rights shall become
exercisable, as described above; and
- if any payment or benefit received or to be received by Mr. Wolf in
connection with the merger or the termination of his employment is
subject to the excise tax imposed under Section 4999 of the Internal
Revenue Code, MotivePower will reimburse Mr. Wolf in an amount such that
Mr. Wolf receives actual payments or benefits in an amount not less than
that which he would have received if no obligation for the excise tax, or
any additional tax on tax reimbursements received including income tax,
had arisen.
The agreement also generally restricts Mr. Wolf from competing with
MotivePower for two years following the termination of his employment.
EMPLOYMENT CONTINUITY AGREEMENTS
MotivePower entered into Employment Continuity Agreements with 13 of its
executives and key employees, including Joseph S. Crawford, Jr., Executive Vice
President and Chief Operating Officer, William F. Fabrizio, Senior Vice
President and Chief Financial Officer, David L. Bonvenuto, Vice President,
Controller and Principal Accounting Officer, Jeannette Fisher-Garber, Vice
President, General Counsel and Secretary, Thomas P. Lyons, Vice President and
Treasurer, Jeffrey A. Plut, Vice President, Corporate Development, Scott E.
Wahlstrom, Vice President, Human Resources and Administration and Timothy R.
Wesley, Vice President, Investor and Public Relations, effective April 1, 1999.
In accordance with the intent of the MotivePower Board when adopting the
agreements, amendments to the agreements were approved by the MotivePower Board
on May 18, 1999 to confirm that the change in control covered by the agreements
included a transaction of the type contemplated by the merger. Pursuant to each
agreement, the employee agreed to continue the employee's employment by
MotivePower for the period which began on June 3, 1999 and continued until the
MotivePower shareholders approved the original merger agreement. MotivePower
paid
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a retention bonus to each employee following the end of that period. The
retention bonus was in the form of a lump sum cash amount equal to six months of
the employee's monthly base salary in effect on June 3, 1999 and is in addition
to all other compensation to which the employee may be entitled.
In addition, pursuant to each agreement, if within 24 months after the
MotivePower shareholders approved the original merger agreement, MotivePower
terminates the employee's employment other than for good cause or the employee
voluntarily terminates employment for good reason, as defined in the agreement,
the employee will be entitled to the following payments and benefits, in
addition to all other compensation to which the employee may be entitled:
- within 30 days following termination, a lump sum cash amount equal to 18
months of the employee's monthly base salary in effect upon the date of
termination in the case of William F. Fabrizio, Jeannette Fisher-Garber
and Joseph S. Crawford, 15 months of the employee's monthly base salary
in effect upon the date of termination in the case of seven employees,
including Timothy R. Wesley and Scott E. Wahlstrom, and 12 months of the
employee's monthly base salary in effect upon the date of termination in
the case of Jeffrey A. Plut, Thomas P. Lyons and David L. Bonvenuto;
- for the number of months following termination that is equal to the
number of months of base salary payable to the employee, the continuation
of the participation of the employee and the employee's dependents in
MotivePower's health, life, disability and other employee welfare benefit
plans, programs and arrangements or the provision of substantially
similar benefits; and
- if any payment or benefit received or to be received by the employee in
connection with the merger or the termination of the employee's
employment is subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code, MotivePower will reimburse the employee in an
amount such that the employee receives actual payments or benefits in an
amount not less than that which the employee would have received if no
obligation for the excise tax, or any additional tax on tax
reimbursements received including income tax, had arisen.
Each agreement also generally restricts the employee from competing with
MotivePower for the number of months following the termination of the employee's
employment that is equal to the number of months of base salary payable to the
employee.
EXECUTIVE INCENTIVE PLAN
MotivePower's Executive Incentive Plan provides annual cash awards to 45
key senior management employees, including all of the executive officers. Awards
are based on specific and measurable employee performance, as well as on the
performance and contribution to MotivePower's overall results of the business
unit, division or subsidiary of MotivePower for which the employee performs
services. Pursuant to an amendment to the plan adopted on June 2, 1999, the plan
was clarified to provide that if an employee's employment is terminated by
MotivePower without cause or by the employee for good reason following a change
in control of MotivePower during the award year of the change in control, or the
subsequent year and prior to making of awards for that award year, the employee
would be deemed to have remained employed at the time awards are made for the
award year of the change in control and be deemed to have achieved all
individual goals for that year. The amendment also added clarifying language
specifying that the award for the award year in which a change in control of
MotivePower occurs would be calculated based on the results of operations of
MotivePower's business units, divisions and subsidiaries without giving effect
to the transaction that gives rise to the change in control. In addition, the
amendment deleted language which prohibited the amendment or termination of the
plan following a change in control until the beginning of the third fiscal year
following the fiscal year of the change in control and replaced that language
with the requirement that any such amendment or termination not adversely affect
the award fund for the award year of the change in control, or the preceding
year if the awards for that year have not been paid, or any employee's rights
with respect thereto. The amendment is applicable to change in control
transactions of the type contemplated by the merger, and the approval of the
original merger agreement by the MotivePower shareholders constituted a change
in control for purposes of the plan.
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THE MERGER AGREEMENT
The following summary of the merger agreement is qualified by reference to
the complete text of the merger agreement, which is incorporated by reference
and attached as Annex A.
STRUCTURE OF THE MERGER
Under the merger agreement, MotivePower will merge into WABCO.
TIMING OF CLOSING
The closing will occur no later than two business days after the day on
which the last of the conditions set forth in the merger agreement has been
satisfied or waived, unless MotivePower and WABCO agree to a different date. We
expect that, immediately upon the closing of the merger, we will file a
certificate of merger with the Secretary of State of the State of Delaware and
file articles of merger with the Department of State of the Commonwealth of
Pennsylvania, at which time the merger will be effective.
MERGER CONSIDERATION
The merger agreement provides that each share of MotivePower common stock,
together with any associated right under MotivePower's existing shareholder
rights plan, outstanding immediately prior to the effective time will, at the
effective time, be converted into the right to receive 0.66 shares of WABCO
common stock. However, any shares of MotivePower common stock held by
MotivePower as treasury stock or by any wholly-owned subsidiary of MotivePower
or owned by WABCO or any wholly-owned subsidiary of WABCO will be canceled
without any payment for those shares.
TREATMENT OF MOTIVEPOWER STOCK OPTIONS, STOCK APPRECIATION RIGHTS AND STOCK
ACCOUNT UNDER DEFERRED COMPENSATION PLAN
At the effective time, each outstanding option and stock appreciation right
granted by MotivePower to employees to purchase shares of MotivePower common
stock will be converted into an option or stock appreciation right, as the case
may be, to acquire WABCO common stock having the same terms and conditions as
the MotivePower stock option or stock appreciation right had before the
effective time. The number of shares that the new WABCO option or stock
appreciation right will be exercisable for and the exercise price of the new
WABCO option will reflect the exchange ratio in the merger. At the effective
time, the MotivePower common stock account under the MotivePower Deferred
Compensation Plan will be converted into an account representing the number of
shares of WABCO common stock which will reflect the exchange ratio in the
merger. The options granted by MotivePower to non-employee directors, which are
not exercised prior to the effective time, will terminate at the effective time.
See "Interests of Certain Persons in the Merger -- Stock Options, Stock
Appreciation Rights, Restricted Stock and Stock Account under Deferred
Compensation Plan" on page I-64.
EXCHANGE OF SHARES
We will appoint an exchange agent to handle the exchange of MotivePower
common stock certificates in the merger for WABCO common stock and the payment
of cash for fractional shares of MotivePower common stock. Soon after the
closing, the exchange agent will send to each holder of MotivePower stock a
letter of transmittal for use in the exchange and instructions explaining how to
surrender MotivePower common stock certificates to the exchange agent. Holders
of MotivePower common stock that surrender their certificates to the exchange
agent, together with a properly completed letter of transmittal, will receive
the appropriate merger consideration. Holders of unexchanged shares of
MotivePower common stock will not be entitled to receive any dividends or other
distributions payable by WABCO after the closing until their certificates are
surrendered.
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WABCO will not issue any fractional shares in the merger. Holders of
MotivePower common stock will receive cash for any fractional shares of WABCO
common stock owed to them in an amount based on the market value of WABCO common
stock on the date on which the merger occurs.
WABCO BOARD AND RELATED MATTERS
The merger agreement provides that as of the effective time:
- The WABCO Board size will be increased from 8 to 12.
- The current directors of WABCO will retain their seats and the following
four directors of MotivePower will become directors of WABCO: Gilbert E.
Carmichael, Lee B. Foster II, James P. Miscoll and Nicholas J. Stanley.
WABCO's by-laws and the stockholders agreement among certain of WABCO's
existing shareholders set forth certain requirements regarding the ongoing
composition of WABCO's Board. See "Interests of Certain Persons in the Merger --
Board of Directors" on page I-62.
COVENANTS
Each of MotivePower and WABCO has undertaken covenants in the merger
agreement. The following summarizes the more significant of these covenants.
No Solicitation. Each of WABCO and MotivePower has agreed that it and its
subsidiaries and their respective officers, directors, employees and advisers,
as the case may be, will not (1) solicit, initiate or knowingly encourage an
offer for an alternative acquisition transaction involving WABCO or MotivePower,
as the case may be, of a nature defined in the merger agreement, (2) enter into
any agreement with respect to any alternative transaction, or (3) participate in
any discussions or negotiations regarding, or furnish any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to any alternative transaction. However, until the earlier of the date of the
applicable shareholders meeting or November 10, 1999, the foregoing actions are
permitted in response to an unsolicited bona fide offer so long as prior to
doing so: (1) a majority of the members of the WABCO Board or MotivePower Board,
as the case may be, in good faith determined, after consultation with outside
legal counsel, that it is necessary to do so to comply with the fiduciary
obligations of the WABCO Board or MotivePower Board, as the case may be, and (2)
WABCO or MotivePower, as the case may be, received an executed confidentiality
agreement from this offeror with terms no less favorable to WABCO or
MotivePower, as the case may be, than those contained in the existing
confidentiality agreement between MotivePower and WABCO.
WABCO and MotivePower must keep the other party informed of the identity of
any potential bidder and the terms and status of any offer.
WABCO Board's Covenant to Recommend. The WABCO Board has agreed to
recommend the approval and adoption of the merger agreement and the merger to
WABCO's shareholders. However, the WABCO Board is permitted to withdraw or to
modify in a manner adverse to MotivePower this recommendation, and to approve or
recommend an alternative acquisition transaction of a nature defined in the
merger agreement or withdraw or modify its approval or recommendation of the
merger agreement or the merger, if a majority of the members of the WABCO Board
determines in good faith, after consultation with its outside legal counsel,
that it is necessary to do so to comply with its fiduciary obligations.
MotivePower Board's Covenant to Recommend. The MotivePower Board has agreed
to recommend the approval and adoption of the merger agreement and the merger to
MotivePower's shareholders. However, the MotivePower Board is permitted to
withdraw or to modify in a manner adverse to WABCO this recommendation, and to
approve or recommend an alternative acquisition transaction of a nature defined
in the merger agreement or withdraw or modify its approval or recommendation of
the merger agreement or the merger, if a majority of the members of the
MotivePower Board determines in good faith, after consultation with its outside
legal counsel, that it is necessary to do so to comply with its fiduciary
obligations.
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Interim Operations of MotivePower and WABCO. Each of MotivePower and WABCO
has undertaken a separate covenant that places restrictions on it and its
subsidiaries until either the effective time or the merger agreement is
terminated. In general, MotivePower and its subsidiaries and WABCO and its
subsidiaries are required to conduct their business in the ordinary course
consistent with past practice and to use their reasonable best efforts to
preserve intact their business organizations, and relationships with third
parties and to keep available the services of their present officers and
employees. The companies have also agreed to some specific restrictions which
are subject to exceptions described in the merger agreement. The following are
summaries of the more significant of these restrictions undertaken by each
company:
- amending its organizational documents
- amending material terms of its outstanding securities
- entering into any merger or consolidation
- issuing, disposing of or encumbering any equity securities, options or
other securities convertible into or exercisable for equity securities,
except to a limited extent to employees or directors
- selling, disposing of or encumbering any property or assets outside the
ordinary course of business, except dispositions that in the aggregate do
not exceed $1,000,000
- creating or incurring any material lien on any material assets other than
in the ordinary course of business
- making any material loan, advance or capital contribution to or
investments in any person other than in the ordinary course of business
- declaring or paying any dividend or other distribution, except for the
payment to the WABCO shareholders of their regular cash quarterly
dividend of $.01 per share
- reclassifying, splitting or redeeming any of its capital stock
- acquiring any assets, other than acquisitions in the ordinary course of
business and acquisitions that do not in the aggregate exceed $25 million
- incurring any indebtedness for borrowed money or selling any debt
securities, except for indebtedness for borrowed money incurred in the
ordinary course of business or that has a term of less than one year and
does not exceed $5 million in the aggregate
- making capital expenditures in excess of $15,000,000 in the aggregate
during any calendar quarter commencing after September 30, 1999
- terminating, waiving any rights under or requesting any material change
in any material contract
- changing its accounting policies or making any material tax election
inconsistent with any prior election or position taken
- increasing officer or employee compensation or benefits except for
ordinary course increases in employee wages consistent with past practice
- taking any other action that would reasonably be expected to make any
representation or warranty by it inaccurate in any material respect
Reasonable Best Efforts Covenant. MotivePower and WABCO have agreed to use
their reasonable best efforts to (1) take all actions and do all things
necessary or advisable under applicable laws to complete the merger and the
other transactions contemplated by the merger agreement as promptly as
practicable, (2) obtain from any governmental entity any consents, approvals or
authorizations required to be obtained or made by MotivePower and WABCO in
connection with the execution of the merger agreement and the transactions
contemplated by the merger agreement and (3) make all necessary filings and all
other submissions required under the securities laws of the United States and
any other applicable law. In connection with seeking any approval of a
governmental entity, neither MotivePower nor WABCO shall be
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required to commit to any divestiture transaction, agree to sell or hold
separate any of MotivePower's or WABCO's businesses, or agree to any changes or
restrictions in the operation of those businesses, if the divestiture or these
restrictions would be reasonably expected to have a material adverse effect on
MotivePower, WABCO and their subsidiaries, taken as a whole. However,
MotivePower and WABCO have each agreed to dispose of businesses with a fair
market value of no more than $25 million or revenues for the most recently
completed 12 months of no more than $25 million in order to settle or resolve
some antitrust actions.
Employee Benefits Matters. The merger agreement provides that WABCO will
honor all WABCO and MotivePower employee benefit plans and employment
agreements.
The merger agreement provides that all individuals who are employees of
MotivePower or any of its subsidiaries at the effective time shall be given
credit for all service with MotivePower and its subsidiaries under all employee
benefit plans and arrangements currently maintained by WABCO in which they
become participants for purposes of eligibility, vesting and certain other
matters to the same extent as if rendered to WABCO.
Please see "Interests of Certain Persons in the Merger," beginning on page
I-62, for additional information on employee benefits matters covered in the
merger agreement.
Indemnification and Insurance of MotivePower Directors and Officers. WABCO
has agreed that:
- It will indemnify MotivePower directors and officers for liabilities from
their acts or omissions in those capacities occurring prior to closing to
the extent provided under MotivePower's charter and by-laws as in effect
on September 26, 1999.
- For six years after closing, it will provide to MotivePower's directors
and officers liability insurance protection substantially equivalent in
kind and scope as the coverage provided by MotivePower's current
officers' and directors' liability insurance policies, except that,
subject to limitations, WABCO will not be obligated to pay in any one
year an amount in excess of 150% of the annual premiums currently paid by
MotivePower.
Other Covenants. The merger agreement contains mutual covenants of the
parties, the most significant of which is that each party agrees to take all
actions reasonably necessary to obtain a favorable determination (if required)
from the SEC that the merger may be accounted for as a pooling of interests.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains substantially reciprocal representations and
warranties made by MotivePower and WABCO to each other. The representations and
warranties relate to:
- corporate organization - capitalization - corporate authorization to
enter into the contemplated transaction - absence of any breach of
organizational documents, law or specified material agreements as a result
of the contemplated transaction - governmental approvals required in
connection with the contemplated transaction - filings with the SEC -
information provided by it for inclusion in this joint proxy statement/
prospectus - absence of specified material changes since a specified
balance sheet date - compliance with laws - tax matters - litigation -
employee benefits matters - labor matters - intellectual property matters
- environmental and safety matters - insurance matters - the shareholder
votes required to approve the contemplated transaction - absence of
circumstances inconsistent with the intended accounting or tax treatment
of the merger - brokers' or advisors' fees - real property matters -
product warranty matters - foreign corrupt practices - material contracts
and - the receipt of accountant's letters regarding accounting treatment
of the merger.
In addition, WABCO represents and warrants to MotivePower as to certain
other matters, including the inapplicability of the Delaware anti-takeover
statute to the merger, the merger agreement, the WABCO stock option agreement
and the WABCO voting agreement. In addition, MotivePower represents and warrants
to WABCO as to some other matters, including the inapplicability of provisions
of MotivePower's articles of incorporation and MotivePower's shareholder rights
plan to the merger, the merger agreement and the
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MotivePower stock option agreement. For information about the anti-takeover
statute and the rights plan, see "Comparison of Shareholder Rights -- Summary of
Material Differences Between Current Rights of MotivePower Shareholders and
Rights Those Shareholders Will Have as WABCO Shareholders Following the Merger
- -- Business Combinations" on page II-9 and "-- Shareholder Rights Plan" on page
II-7.
The representations and warranties in the merger agreement do not survive
the closing or termination of the merger agreement.
CONDITIONS TO THE COMPLETION OF THE MERGER
Mutual Closing Conditions. The obligations of MotivePower and WABCO to
complete the merger are subject to the satisfaction or, to the extent legally
permissible, waiver of the following conditions:
- approval and adoption of the merger agreement and the merger by the
MotivePower and WABCO shareholders
- expiration or termination of the HSR Act waiting period and the receipt
of any other approvals required under applicable analogous foreign laws
shall have been obtained
- absence of legal prohibition on completion of the merger
- receipt of letters from the independent public accountants of MotivePower
and WABCO to the effect that the merger will qualify for "pooling of
interests" accounting treatment
- WABCO's registration statement on Form S-4, which includes this joint
proxy statement/prospectus, being effective and not subject to any stop
order by the SEC
- approval for the listing on the NYSE of the shares of WABCO common stock
to be issued in the merger
- accuracy as of closing of the representations and warranties made by the
other party to the extent specified in the merger agreement
- performance in all material respects by the other party of the
obligations required to be performed by it at or prior to closing
- receipt of opinions of MotivePower's and WABCO's counsel that, for
federal income tax purposes, the merger will qualify as a tax-free
reorganization
TERMINATION OF THE MERGER AGREEMENT
Right to Terminate. The merger agreement may be terminated at any time
prior to the closing in any of the following ways:
(a) The merger agreement may be terminated by mutual written consent of
MotivePower and WABCO.
(b) The merger agreement may be terminated by either MotivePower or WABCO
if:
(1) the merger has not been completed by January 31, 2000,
(2) there is a permanent legal prohibition to closing the merger,
(3) MotivePower or WABCO shareholders fail to adopt and approve the
merger agreement and the merger at a duly held meeting,
(4) - on or prior to the earlier of the MotivePower shareholders
meeting or November 10, 1999, the MotivePower Board has
determined to recommend an acquisition proposal to its
shareholders and to enter into an agreement concerning the
acquisition proposal after determining, subject to complying
with the merger agreement, that the acquisition proposal is more
favorable to MotivePower shareholders than the merger, and
MotivePower has delivered to WABCO a written notice of
MotivePower's intent to enter into an agreement, attaching the
most current version of the agreement to the notice,
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- five business days have elapsed following delivery to WABCO of
the written notice by MotivePower and during the five business
day-period MotivePower has fully cooperated with WABCO with the
intent of enabling WABCO to agree to a modification of the terms
of the merger agreement so that the transactions contemplated by
the merger agreement may be effected,
- at the end of the five business day-period the MotivePower Board
continues reasonably to believe that the acquisition proposal is
more favorable to MotivePower shareholders than the merger, and
- MotivePower has paid WABCO the cash termination fee described
under "-- Termination Fees Payable by MotivePower" on page I-76.
(5) - on or prior to the earlier of the WABCO shareholders meeting or
November 10, 1999, the WABCO Board has determined to recommend
an acquisition proposal to its shareholders and to enter into an
agreement concerning the acquisition proposal after determining,
subject to complying with the merger agreement, that the
acquisition proposal is more favorable to WABCO shareholders
than the merger, and WABCO has delivered to MotivePower written
notice of WABCO's intent to enter into an agreement, attaching
the most current version of the agreement to the notice,
- five business days have elapsed following delivery to
MotivePower of the written notice by WABCO and during the five
business day-period WABCO has fully cooperated with MotivePower
with the intent of enabling MotivePower to agree to a
modification of the terms of the merger agreement so that the
transactions contemplated by the merger agreement may be
effected,
- at the end of the five business day-period the WABCO Board
continues reasonably to believe that the acquisition proposal is
more favorable to WABCO shareholders than the merger, and
- WABCO has paid MotivePower the cash termination fee described
under "-- Termination Fees Payable by WABCO" on page I-76.
(c) The merger agreement may be terminated by WABCO if:
(1) the MotivePower Board has not recommended or has modified in a
manner materially adverse to WABCO its recommendation of the
merger agreement and the merger,
(2) MotivePower shall have materially and knowingly breached the
covenants described under " -- Covenants -- No Solicitation" on
page I-71 or " -- Covenants -- MotivePower Board's Covenant to
Recommend" on page I-71, or
(3) if a material breach of or failure to perform any representation,
warranty or covenant on the part of MotivePower set forth in the
merger agreement has occurred which would cause some of the
conditions under " -- Conditions to the Completion of the Merger"
on page I-74 not to be satisfied, and these conditions are
incapable of being satisfied by January 31, 2000.
(d) The merger agreement may be terminated by MotivePower if:
(1) the WABCO Board has not recommended or has modified in a manner
materially adverse to MotivePower its recommendation of the merger
agreement and the merger,
(2) WABCO has materially and knowingly breached the covenants
described under " -- Covenants -- No Solicitation" on page I-71 or
" -- Covenants -- WABCO Board's Covenant to Recommend" on page
I-71, or
(3) if a material breach of or failure to perform any representation,
warranty or covenant on the part of WABCO set forth in the merger
agreement has occurred which would cause some of the conditions
under " -- Conditions to the Completion of the Merger" on page
I-74 not to be satisfied, and these conditions are incapable of
being satisfied by January 31, 2000.
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Neither MotivePower nor WABCO can terminate the merger agreement for the
reasons described in paragraph (b)(1) above if its failure to fulfill its
obligations under the merger agreement has resulted in the failure to complete
the merger on or before January 31, 2000.
If the merger agreement is validly terminated, there will be no liability
or obligation on the part of MotivePower, WABCO or their respective officers,
directors, shareholders or affiliates unless this party is in willful breach
thereof. However, the provisions of the merger agreement relating to expenses
and termination fees, as well as the confidentiality agreement and the
MotivePower and WABCO stock option agreements entered into between MotivePower
and WABCO, will continue in effect notwithstanding termination of the merger
agreement.
Termination Fees Payable by WABCO. WABCO has agreed to pay MotivePower a
cash amount equal to $15 million plus reimburse MotivePower for up to $2 million
of its out-of-pocket fees and expenses incurred in connection with the merger
agreement and the transactions contemplated by the merger agreement in any of
the following circumstances:
- the merger agreement is terminated as described in paragraph (b)(5),
(d)(1) or (d)(2) under " -- Right to Terminate" on page I-74
- the merger agreement terminates in circumstances where the following two
conditions are met:
- WABCO's shareholders fail to adopt and approve the merger agreement
and the merger at a duly held meeting, and
- either (1) a third party has made a proposal for an alternative
transaction the earlier of the date of the WABCO shareholders
meeting and November 10, 1999 or (2) the WABCO Board has not
recommended or has modified in a manner materially adverse to
MotivePower its recommendation of the merger agreement and the
merger.
Termination Fees Payable by MotivePower. MotivePower has agreed to pay
WABCO a cash amount equal to $15 million plus reimburse WABCO for up to $2
million of its out-of-pocket fees and expenses incurred in connection with the
merger agreement and the transactions contemplated by the merger agreement in
any of the following circumstances:
- the merger agreement is terminated as described in paragraph (b)(4),
(c)(1) or (c)(2) under " -- Right to Terminate" on page I-74
- the merger agreement terminates in circumstances where the following two
conditions are met:
- MotivePower's shareholders fail to adopt and approve the merger
agreement and the merger at a duly held meeting, and
- either (1) a third party has made a proposal for an alternative
transaction after the earlier of the date of the MotivePower
shareholders meeting and November 10, 1999 or (2) the MotivePower
Board has not recommended or has modified in a manner materially
adverse to WABCO its recommendation of the merger agreement and the
merger.
EXPENSES
Except as described above and subject to an exception relating to the
payment of transfer taxes, all costs and expenses incurred in connection with
the merger agreement and related transactions will be paid by the party
incurring these costs or expenses. However, MotivePower and WABCO will share
equally all fees and expenses, other than attorneys' and accounting fees and
expenses, incurred in relation to the printing and filing of the joint proxy
statement/prospectus dated July 22, 1999, the registration statement of
MotivePower declared effective July 22, 1999 and this joint proxy
statement/prospectus and the registration statement of WABCO of which this joint
proxy statement/prospectus is a part. We estimate that merger-related fees and
expenses, consisting primarily of SEC filing fees, fees and expenses of
investment bankers, attorneys and accountants, and financial printing and other
related charges, will total approximately $20-25 million assuming the merger is
completed.
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AMENDMENTS
Any provision of the merger agreement may be amended prior to closing if
the amendment is in writing and signed by WABCO and MotivePower and authorized
by our boards of directors. MotivePower and WABCO amended the revised merger
agreement as of October 4, 1999, in order, among other things, to make certain
changes to the proposed by-laws of the combined company that were viewed by the
parties as helpful to assuring the intended accounting treatment of the merger.
The amendment also consisted of certain technical revisions to the merger
agreement. The amendment to the revised merger agreement was approved at a
special meeting of the MotivePower Board held on October 4, 1999 and was within
the parameters of the approval granted by the WABCO Board on September 26, 1999.
After the approval and adoption of the merger agreement and the merger by the
shareholders of WABCO or MotivePower, no amendment that by law requires further
approval by shareholders may be made without the further approval of the
shareholders.
MUTUAL RELEASE
WABCO and MotivePower have released and waived any claim that either may
have against the other in connection with the original merger agreement and the
original merger.
STOCK OPTION AGREEMENTS
The following summary of the WABCO stock option agreement and the
MotivePower stock option agreement is qualified by reference to the complete
text of the agreements, which are incorporated by reference and attached as
Annex B and Annex C.
General. At the same time that MotivePower and WABCO entered into the
merger agreement, they also entered into the WABCO stock option agreement and
the MotivePower stock option agreement. Under the WABCO stock option agreement,
WABCO granted MotivePower an irrevocable option to purchase up to 6,453,710
shares of WABCO common stock at a price per share of $19.875. Under the
MotivePower stock option agreement, MotivePower granted WABCO an irrevocable
option to purchase up to 5,133,655 shares of MotivePower common stock at a price
per share of $13.12. The options are exercisable in the circumstances described
below.
Exercise of the Stock Options. MotivePower can exercise the WABCO option in
whole or in part at any time after the occurrence of any event entitling
MotivePower to receive the cash termination fee payable by WABCO pursuant to the
merger agreement (see " -- Termination of the Merger Agreement -- Termination
Fees Payable by WABCO" on page I-76) and prior to termination of the option.
WABCO can exercise the MotivePower option in whole or in part at any time after
the occurrence of any event entitling WABCO to receive the cash termination fee
payable by MotivePower pursuant to the merger agreement (see "-- Termination of
the Merger Agreement -- Termination Fees Payable by MotivePower" on page I-76)
and prior to termination of the option.
The options terminate upon the earliest to occur of
- the effective time of the merger,
- subject to some limitations, 12 months after first becoming
exercisable, or
- 30 days after termination of the merger agreement if the option is
not exercisable.
The exercise price and number of option shares are also subject to the
anti-dilution and other adjustments specified in the stock option agreements.
Any purchase of option shares is subject to specified closing conditions,
including receipt of applicable regulatory approvals.
Cash Election. Each of the WABCO and MotivePower stock option agreements
further provides that, so long as the option is exercisable, the grantee of the
option may, instead of exercising the option, elect to require the grantor of
the option to pay to the grantee in exchange for the cancellation of the
relevant portion
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<PAGE> 84
of the option an amount in cash equal to the "spread", as defined below,
multiplied by the number of option shares as to which this cash election is
made.
"Spread" means the excess, if any, over the exercise price of the higher of
(1) the highest price per share of WABCO common stock or MotivePower common
stock, as the case may be, paid or proposed to be paid by any third party
pursuant to an alternative acquisition proposal and (2) the closing price of the
WABCO common stock or the MotivePower common stock, as the case may be, on the
NYSE on the last trading day immediately preceding the date on which MotivePower
or WABCO, as the case may be, notifies the other party of this cash election.
Repurchase of Option Shares. If by the date that is the first anniversary
of the date of a termination of the merger agreement, neither the grantee of the
option nor any other person has acquired more than fifty percent of the shares
of outstanding common stock of the grantor of the option, then the grantor of
the option has the right to purchase all of the option shares acquired upon
exercise of the option at the greater of (1) the purchase price for these option
shares or (2) the average of the last sales prices for these shares on the five
trading days ending five days prior to the date the grantor gives written notice
of the exercise of this repurchase right.
Sale of Shares. At any time prior to the first anniversary of a termination
of the merger agreement, the grantee of the option will have the right to sell
to the grantor all of the shares acquired upon exercise of the option at the
greater of (1) the purchase price for these option shares or (2) the average of
the last sales prices for these shares on the five trading days ending five days
prior to the date the grantee gives written notice of its intention to exercise
its sale right.
Listing and Registration Rights. Each of WABCO and MotivePower has agreed
to list the option shares on the NYSE and to grant customary rights to require
registration by the grantor of the option shares for sale by the grantee under
the securities laws.
Limitation on Total Profit. The stock option agreements provides that,
notwithstanding any other provision of that agreement or the merger agreement,
the total profit, as defined below, that the grantee may derive will not exceed
$22.5 million in the aggregate. If a grantee's total profit otherwise would
exceed this amount, the grantee shall repay the excess to the grantor in cash so
that the grantee's actually realized total profit does not exceed $22.5 million.
"Total profit" as used in the stock option agreements means the sum, before
taxes, of the following: (1) (x) the amount of the termination fee under the
merger agreement received by the grantee, not including out-of-pocket expenses
that the grantor pays to the grantee, and the aggregate amount that the grantee
receives from exercising its cash election right described under " -- Cash
Election" above, less (y) any amount that the grantee repays to the grantor;
plus (2)(x) the amount that the grantee receives from exercising the put or call
right described under " -- Repurchase of Option Shares" or " -- Sale of Shares"
above, less (y) the grantee's purchase price for these shares; plus (3)(x) the
net cash amounts that the grantee receives from the sale of option shares (or of
any other securities into or for which such option shares are converted or
exchanged), less (y) the grantee's purchase price for these option shares.
The stock option agreements also provide that the options may not be
exercised for a number of option shares that would, as of the date of exercise,
result in a notional total profit, as described below, exceeding $7.5 million.
As used in the stock option agreements, the "notional total profit" with respect
to the option shares for which the grantee of the option may propose to exercise
the option means the total profit determined as of the date the grantee notifies
the grantor of its intent to exercise the option and assuming that the
applicable option shares, together with all other option shares previously
acquired upon exercise of the option and held by the grantee or its affiliates
as of that date, were sold for cash at the closing market price on the preceding
trading day, less customary brokerage commissions.
Effect of Options. The options are intended to make it more likely that the
merger will be completed on the agreed terms and to compensate WABCO or
MotivePower, as the case may be, for its efforts and costs in case the merger is
not completed under circumstances generally involving a third party proposal for
a business combination with WABCO or MotivePower. Among other effects, the
option could prevent an
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<PAGE> 85
alternative business combination with WABCO or MotivePower from being accounted
for as a pooling of interests. The option may therefore discourage proposals for
alternative business combinations with WABCO or MotivePower, even if a third
party were prepared to offer shareholders of WABCO or MotivePower consideration
with a higher market value than the value of the WABCO stock to be exchanged for
MotivePower stock in the merger.
VOTING AGREEMENTS
William E. Kassling, Robert J. Brooks, Harvard Private Capital Holdings,
Inc. and Vestar Equity Partners L.P., each of whom is a WABCO shareholder, have
entered into a voting agreement dated as of September 26, 1999 with MotivePower.
The voting agreement provides that, with limited exceptions, those WABCO
shareholders will vote their shares in favor of the revised merger and further
will not take any action that would impede or prevent the revised merger. The
voting agreement also restricts those WABCO shareholders from soliciting other
competing takeover proposals. A copy of this voting agreement is attached as
Annex D to this joint proxy statement/prospectus.
John C. Pope has entered into a voting agreement dated as of September 26,
1999 with WABCO. The voting agreement provides that, with limited exceptions,
Mr. Pope will vote his shares in favor of the revised merger and further will
not take any action that would impede or prevent the revised merger. The voting
agreement also restricts Mr. Pope from soliciting other competing takeover
proposals. A copy of this voting agreement is attached as Annex E to this joint
proxy statement/prospectus.
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<PAGE> 86
CHAPTER TWO
LEGAL INFORMATION
COMPARISON OF SHAREHOLDER RIGHTS
The rights of MotivePower shareholders under Pennsylvania law, the
MotivePower charter and the MotivePower by-laws prior to the merger are similar
to the rights they will have following the merger as WABCO shareholders under
Delaware law, the WABCO charter and the WABCO by-laws, with the principal
exceptions summarized in the chart below. Copies of the WABCO charter, the WABCO
by-laws, the MotivePower charter and the MotivePower by-laws are incorporated by
reference and will be sent to holders of shares of MotivePower common stock upon
request. See "Where You Can Find More Information" on page III-1. The merger
agreement provides that at the effective time, the WABCO by-laws will be amended
and restated as described in Exhibit 1.4(b) of the merger agreement. The primary
amendment made to the WABCO by-laws relates to the establishment of advance
notice provisions for shareholders seeking to bring business before an annual
meeting of shareholders. The summaries contained in the following charts are not
intended to be complete and are qualified by reference to Delaware law,
Pennsylvania law, the WABCO charter, the WABCO by-laws, the MotivePower charter,
the MotivePower by-laws and the stockholders' agreement and the voting trust
agreement referenced herein.
SUMMARY OF MATERIAL DIFFERENCES BETWEEN CURRENT RIGHTS OF MOTIVEPOWER
SHAREHOLDERS AND RIGHTS THOSE SHAREHOLDERS WILL HAVE AS WABCO SHAREHOLDERS
FOLLOWING THE MERGER
<TABLE>
<CAPTION>
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WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Corporate Governance: The rights of WABCO shareholders The rights of MotivePower
are currently governed by shareholders are currently
Delaware law and the charter and governed by Pennsylvania law and
by-laws of WABCO. the charter and by-laws of
MotivePower.
Upon completion of the merger, Upon completion of the merger,
the rights of WABCO shareholders the rights of MotivePower
will be governed by Delaware shareholders who become WABCO
law, the WABCO charter and the shareholders in the merger will
WABCO by-laws. The charter and be governed by Delaware law, the
by-laws of WABCO after the WABCO charter and the WABCO
merger will be identical in all by-laws. The charter and by-laws
material respects to those in of WABCO after the merger will
effect prior to the merger with be identical in all material
the exception of the respects to those in effect
establishment of the advance prior to the merger with the
notice provisions in the exception of the establishment
by-laws. of advance notice provisions in
the by-laws.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Corporate Governance: Those shareholders comprising
(continued) the active original management
owners are parties to the
amended voting trust agreement.
The amended voting trust
agreement provides for, among
other matters, the WABCO common
stock subject to the amended
voting trust agreement to be
voted as one block and
restrictions on the sale or
transfer of such stock subject
to the voting trust. The amended
voting trust agreement expires
on January 1, 2000 and can be
terminated by an affirmative
vote of two-thirds of the shares
held by the trust.
As of September 30, 1999,
ownership of WABCO's common
stock was held in the following
approximate percentages: by the
voting trust (8%), Vestar Equity
Partners, L.P. (7%), Harvard
Private Capital Holdings, Inc.
(7%), American Industrial
Partners Capital Fund II, L.P.
(3%), and all others including
the WABCO ESOP and public
shareholders (75%). A
stockholders agreement exists
among the voting trust, Vestar,
Harvard, AIP and WABCO that
provides for, among other
things, the composition of the
WABCO Board as long as minimum
stock percentages are
maintained. Provisions of
WABCO's by-laws reiterate the
provisions of the stockholders
agreement.
For a discussion of the effect
of these provisions see
"Interests of Certain Persons in
the Merger -- Board of
Directors" on page I-62.
- ------------------------------------------------------------------------------------------------------------
Authorized Capital Stock: The authorized capital stock of The authorized capital stock of
WABCO consists of 100 million MotivePower consists of
shares of common stock and 1 55,000,000 shares of common
million shares of preferred stock and 10,000,000 shares of
stock. preferred stock.
- ------------------------------------------------------------------------------------------------------------
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<PAGE> 88
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Number of Directors: WABCO's by-laws provide that the MotivePower's charter provides,
number of directors will be as subject to the rights, if any,
determined by the WABCO Board of the holders of any series of
subject to the requirements MotivePower preferred stock
contained in the by-laws. The specified in a certificate of
WABCO Board currently consists designation, that the number of
of 8 directors. directors be not less than 3 and
After the merger, WABCO's not more than 15. The
by-laws will continue to provide MotivePower Board currently
that the number of directors consists of 7 directors.
will be as determined by the
WABCO Board, however, it is
anticipated that the number of
directors will be increased to
12.
For a discussion of the by-law
provisions regarding the
composition of WABCO's Board see
"Interest of Certain Persons in
the Merger-Board of Directors"
on page I-62.
- ------------------------------------------------------------------------------------------------------------
Classification of Board of WABCO's Board is divided into MotivePower's Board is divided
Directors: three classes, with each class into three classes, with each
serving a staggered three-year class serving a staggered
term. three-year term.
- ------------------------------------------------------------------------------------------------------------
Nomination of Directors: WABCO's by-laws provide that MotivePower's by-laws do not
directors are nominated provide for a nomination
exclusively by its Nominating procedure. MotivePower's Board
Committee. has appointed a Nominating and
For a discussion of the by-law Corporate Governance Committee
provisions regarding the that is among other things
composition of WABCO's Board see responsible for evaluating
"Interest of Certain Persons in candidates for its Board and
the Merger-Board of Directors" making recommendations to the
on page I-62. Board regarding nominations for
positions on the Board.
- ------------------------------------------------------------------------------------------------------------
Removal of Directors: Delaware law provides that a In general, unless otherwise
company with a classified board provided in the charter, the
may remove a director only for shareholders of a Pennsylvania
cause, unless its charter corporation that has a
provides otherwise, which the classified board may remove a
WABCO charter does not. director only for cause.
The MotivePower charter requires
that, subject to the rights, if
any, of the holders of any
series of MotivePower preferred
stock specified in a certificate
of designation, directors may be
removed only for cause and only
at annual or special meetings by
the affirmative vote of the
holders of at least 66 2/3% of
the shares entitled to vote,
voting as a single class. The
MotivePower by-laws contain a
substantially similar provision.
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</TABLE>
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<PAGE> 89
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Quorum at Shareholders The WABCO by-laws provide that, The MotivePower by-laws provide
Meeting: except as otherwise provided by that, except as otherwise
law or the WABCO charter, the provided by law or in a
presence in person or by proxy certificate of designation with
at a meeting of the holders of respect to any MotivePower
shares representing a majority preferred stock, the presence in
of WABCO capital stock entitled person or by proxy at a meeting
to vote at the meeting is a of the holders of shares
quorum. representing a majority of the
MotivePower stock entitled to
vote at the meeting is a quorum.
- ------------------------------------------------------------------------------------------------------------
Vote Required for Certain The WABCO by-laws provide that, The MotivePower by-laws provide
Shareholder Actions: except as otherwise required by that the affirmative vote of the
law, the WABCO charter, the holders of a majority of the
WABCO by-laws or any certificate stock represented at a
of designation with respect to shareholder meeting at which a
any WABCO preferred stock, the quorum is present and which is
affirmative vote of a majority actually voted shall be deemed
of the stock represented and the act of the shareholders,
entitled to vote on the matter except in the election of
shall be deemed the act of the directors or as otherwise
shareholders. provided in the MotivePower
by-laws, the MotivePower charter
Under Delaware law, the approval or a certificate of designation
of any merger or consolidation with respect to any MotivePower
or a sale of all or preferred stock or as required
substantially all of a by law.
corporation's assets requires Under Pennsylvania law, unless
the affirmative vote of a required by the by-laws of a
majority of the total votes constituent corporation,
represented by the outstanding shareholder approval is not
stock of the corporation required for a plan of merger or
entitled to vote on the matter. consolidation if: (1) (A) the
surviving or new corporation is
a domestic corporation whose
articles of incorporation as
defined under Pennsylvania law
are identical to the articles of
incorporation of the constituent
corporation; (B) each share of
the constituent corporation
outstanding immediately prior to
the merger or consolidation will
continue as or be converted
into, except as otherwise agreed
to by the holder of the share,
an identical share of the
surviving or new corporation;
and (C) such plan provides that
the shareholders of the
constituent corporation will
hold in the aggregate shares of
the surviving or new corporation
having a majority of the votes
entitled to be cast generally
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</TABLE>
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<PAGE> 90
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Vote Required for Certain in an election of directors; or
Shareholder Actions: (2) prior to the adoption of the
(continued) plan, another corporation that
is a party to the plan owns 80%
or more of the outstanding
shares of each class of the
constituent corporation. The
MotivePower by-laws do not
contain this requirement.
Under Pennsylvania law,
shareholder approval is required
for the sale, lease, exchange or
other disposition of all, or
substantially all, of the
property and assets of a
corporation when not made in the
usual or regular course of the
business of that corporation or
for the purpose of relocating
the business of that
corporation.
In cases where shareholder
approval is required, a merger,
consolidation, sale, lease,
exchange or other disposition
must be approved by a majority
of the votes cast by the holders
of the securities entitled to
vote on the matter.
- ------------------------------------------------------------------------------------------------------------
Shareholder Action by Under Delaware law, unless Under Pennsylvania law, unless
Written Consent: otherwise provided in a otherwise provided in a
corporation's charter, corporation's by-laws,
shareholders may act by written shareholders may act by
consent. The WABCO charter and unanimous written consent.
by-laws allow shareholder action Pennsylvania law provides that
by written consent. shareholders may act by less
than unanimous consent only if
expressly authorized in the
charter. The MotivePower charter
provides that, subject to the
rights of the holders of any
series of preferred stock, any
action required or permitted to
be taken by the shareholders
must be effected at a duly
called annual or special meeting
of shareholders and not by
written consent.
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</TABLE>
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<PAGE> 91
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
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<S> <C> <C>
Amendment of Charter Generally, the WABCO by-laws may MotivePower's by-laws provide
and By-laws: be amended or adopted by either that, except as otherwise
the holders of a majority of the provided by law or by the
capital stock entitled to vote MotivePower charter or by-laws,
thereon or by a majority of the the MotivePower by-laws may be
entire WABCO Board. amended by either the holders of
However, the WABCO charter a majority of the capital stock
provides that any adoption of entitled to vote thereon or by a
new by-laws by shareholders majority of the entire
cannot invalidate any prior act MotivePower Board, provided that
of the WABCO Board which would no amendment adopted by the
have been valid if such by-laws Board varies or conflicts with
had not been adopted. any amendment adopted by the
Under Delaware law, the WABCO shareholders.
charter may be amended by the However, the MotivePower charter
affirmative vote of a majority provides that the amendment of
of the outstanding stock specified by-law provisions by
entitled to vote thereon at the the shareholders requires the
shareholders meeting and a affirmative vote of at least
majority of the outstanding 66 2/3% of the voting power of
stock of each class entitled to MotivePower's outstanding voting
vote thereon as a class. stock voting as a single class.
These include by-law provisions
relating to shareholder
meetings, the number, election
and removal of directors,
indemnification of directors and
officers and procedures for
amending the by-laws.
- ------------------------------------------------------------------------------------------------------------
Voting Stock: The outstanding voting The outstanding voting
securities of WABCO are the securities of MotivePower are
shares of WABCO common stock. the shares of MotivePower common
stock.
- ------------------------------------------------------------------------------------------------------------
Repurchase of Shares: Under Delaware law, a Under Pennsylvania law, a
corporation may generally redeem corporation may acquire its own
or repurchase shares of its shares so long as payment of the
stock unless the capital of the purchase price does not render
corporation is impaired or the the corporation insolvent or
redemption or repurchase would cause the value of its assets,
impair the capital of the as determined by the Board using
corporation. On March 3, 1999, reasonable valuation methods, to
WABCO announced an open market be less than its total
stock repurchase program which liabilities and amounts payable
was terminated upon signing of to holders of preferred
the original merger agreement. securities.
No shares were repurchased
pursuant to the program.
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</TABLE>
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<PAGE> 92
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
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<S> <C> <C>
Exculpation of Directors The WABCO charter provides that The MotivePower charter provides
and Officers: no director shall be personally that, to the fullest extent
liable to the corporation or any permitted by Pennsylvania law,
of its shareholders for monetary no director will be personally
damages for breaches of liable to the corporation for or
fiduciary duty except as with respect to any acts or
follows: omissions in the performance of
A director would be liable under his or her duties.
Section 174 of the Delaware Pennsylvania law permits a
Corporation Law, which creates corporation to include in its
liability for unlawful payment by-laws a provision, adopted by
of dividends and unlawful stock a vote of its shareholders,
purchases or redemptions. which eliminates the personal
A director would also be liable liability of its directors for
by reason that the director monetary damages for any action
- breached the director's duty taken or failure to take any
of loyalty to the corporation or action unless:
its shareholders, - the directors have breached or
- acted or failed to act in a failed to perform their
manner that was not in good duties; and
faith or acted in a manner - the breach or failure to
that involved intentional perform constitutes
misconduct or a knowing self-dealing, willful
violation of law, or misconduct or recklessness.
- derived an improper personal However, a Pennsylvania
benefit. corporation is not empowered to
The WABCO charter and by-laws do eliminate personal liability
not contain a provision limiting where the responsibility or
the liability of officers in liability of a director is
this manner. pursuant to any criminal statute
or is for the payment of taxes
pursuant to any federal, state
or local law.
The MotivePower charter and by-
laws do not contain a provision
limiting the liability of
officers.
- ------------------------------------------------------------------------------------------------------------
Shareholder Rights Plan: WABCO does not have a MotivePower has entered into a
shareholder rights plan. While rights agreement, dated as of
WABCO has no present intention January 19, 1996, with
to adopt a shareholder rights ChaseMellon Shareholder
plan, the WABCO Board pursuant Services, L.L.C., as rights
to its authority to issue agent, as amended, pursuant to
preferred stock, could do so which MotivePower has issued
without shareholder approval at rights to purchase its Series C
any time. Preferred Stock. MotivePower has
taken all actions necessary to
render the rights issued
pursuant to the rights agreement
inapplicable to the merger and
the related agreements and
transactions. The rights
agreement will terminate upon
the effective date of the
merger.
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<TABLE>
<CAPTION>
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WABCO MOTIVEPOWER
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<S> <C> <C>
Appraisal Rights: Under Delaware law, the rights Under Pennsylvania law,
of dissenting shareholders to appraisal rights are available
obtain the fair value for their in connection with specified
shares--so-called "appraisal corporate actions including a
rights"--may be available in merger or consolidation, a share
connection with a statutory exchange or conversion, a sale
merger or consolidation in or transfer of all or
specific situations. Appraisal substantially all of a
rights are not available to a corporation's assets or a
corporation's shareholders under corporate action in which
Delaware law when the disparate treatment is accorded
corporation is to be the to the holders of shares of the
surviving corporation and no same class or series. However,
vote of its shareholders is appraisal rights are not
required to approve the merger. provided to the holders of
In addition, unless otherwise shares of any class that is
provided in the charter, no listed on a national securities
appraisal rights are available exchange in the case of sales or
under Delaware law to holders of transfers of all or
shares of any class of stock substantially all of the assets
which is either (1) listed on a of the corporation and are not
national securities exchange or provided in the case of other
designated as a national market such transactions to the holders
system security on an of shares of any class that is
interdealer quotation systems by either (1) listed on a national
the NASD or (2) held of record securities exchange or (2) held
by more than 2,000 shareholders, of record by more than 2,000
unless those shareholders are shareholders unless:
required by the terms of the - the shares are not converted
merger to accept anything other solely into shares of the
than: acquiring, surviving, new or
- shares of stock of the other corporation and cash in
surviving corporation; lieu of fractional shares;
- shares of stock of another - if the shares constitute a
corporation which, as of the preferred or special class of
effective date of the merger stock, the charter of the
or consolidation, are of the corporation, the corporate
kind described in clause (1) action under consideration or
or (2), above; the express terms of the
- cash instead of fractional transaction encompassed in the
shares; or corporate action do not
- any combination of the above entitle all holders of the
three bullets. shares of the class to vote on
Appraisal rights are not the matter and require for the
available under Delaware law in adoption of the matter the
the event of the sale of all or affirmative vote of a majority
substantially all of a of the votes cast by all
corporation's assets or the shareholders of the class; or
adoption of an amendment to its - if the shares constitute a
charter, unless the rights are group of a class or series which
granted in the corporation's are to receive the same
charter. The WABCO charter does special treatment in the
not grant such rights. corporate action under
consideration, the holders in
that group are not entitled to
vote as a special class in
respect of the corporate
action.
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<TABLE>
<CAPTION>
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WABCO MOTIVEPOWER
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<S> <C> <C>
Business Combinations: Section 203 of the Delaware Pennsylvania law restricts the
General Corporation Law provides ability of some persons to
that, if a person acquires 15% acquire control of a
or more of the stock of a Pennsylvania corporation.
Delaware corporation without the However, MotivePower has chosen
approval of the board of to opt out of these
directors of that corporation, anti-takeover provisions as
thereby becoming an "interested allowed under Pennsylvania law.
stockholder," that person may In lieu of these provisions,
not engage in specified MotivePower's charter
transactions with the incorporates the provisions of
corporation for a period of Section 203 of the Delaware
three years unless one of the General Corporation Law.
following three exceptions However, the MotivePower Board
applies: has taken the necessary action
- the board of directors to make the provisions of
approved the acquisition of Section 203 incorporated in its
stock or the transaction prior charter inapplicable to the
to the time that the person merger and the related
became an interested transactions. A summary of
stockholder; Section 203 is provided in the
- the person became an adjacent column.
interested shareholder and 85%
owner of the voting stock of
the corporation in the
transaction, excluding voting
stock owned by directors who
are also officers and some
employee stock plans, or
- after the person becomes an
interested stockholder, if the
transaction is approved by the
board of directors and
authorized by the affirmative
vote of two-thirds of the
outstanding voting stock which
is not owned by the interested
stockholder.
A Delaware corporation may elect
not to be governed by Section
203. WABCO has not so elected,
but the WABCO Board has taken
the necessary action to make
Section 203 inapplicable to the
merger and the related
transactions.
- ------------------------------------------------------------------------------------------------------------
Annual Meeting Notices: The WABCO by-laws and Delaware The MotivePower by-laws require
law require that the written that the written notice of an
notice of an annual meeting of annual meeting of shareholders
shareholders specify the place, specify the place, date and hour
date and hour of the meeting. of the meeting. Notices of
Notices of special meetings must special meetings must also state
also state the purpose or the purpose or purposes of the
purposes of the meeting. meeting.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fiduciary Duties of Directors: Directors of a Delaware Directors of a Pennsylvania
corporation owe fiduciary duties corporation owe fiduciary duties
of care and loyalty to the of care and loyalty to the
corporation's shareholders. corporation. Pennsylvania law
Delaware law does not expressly expressly permits the board and
permit a director of a Delaware its committees and members, when
corporation to consider the discharging their duties, in
interest of any constituencies considering what is in the best
other than the corporation or interests of the corporation, to
its shareholders. consider, among other things,
the interests of the
shareholders, employees,
suppliers, customers or
creditors of the corporation or
the interests of the communities
served by the corporation.
Consequently, boards of
Pennsylvania corporations may
have broader discretion, and
increased protections from
liability, than directors of
Delaware corporations,
particularly in the context of a
threatened change in control.
- ------------------------------------------------------------------------------------------------------------
Advance Notice Provisions: The WABCO by-laws do not require The MotivePower by-laws require
shareholders to provide advance that its shareholders provide
notice of the business to be advance notice of proposals and
brought before an annual or nominations to its Board. In
special meeting of the general, the advance notice must
shareholders. be provided to the Secretary of
Upon the effective date of the MotivePower at least 60 days
merger, the WABCO by-laws will before the date of an annual
be amended to provide for meeting and must contain
advance notice by the specified information.
shareholders of certain Shareholders are not permitted
proposals. Specifically, the to propose business at special
by-laws will require that any meetings unless otherwise
shareholder of WABCO intending determined by the presiding
to present a proposal for action officer at the meeting or
by the shareholders at an annual directed by a majority of the
meeting must give written notice Board.
of the proposal, containing
specified information, to the
secretary of the corporation not
later than the notice deadline.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 96
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The notice deadline will
generally be no later than 60
days nor earlier than 120 days
prior to the anniversary of the
preceding year's proxy statement
for the annual meeting.
Compliance with the notice
requirements of the new section
of the by-laws will be required
in order for a shareholder
proposal to be presented for a
shareholder vote at an annual
meeting.
The new section of the by-laws
will not affect any rights of a
shareholder to request inclusion
of a proposal in WABCO's proxy
statement pursuant to Securities
and Exchange Commission Rule
14a-8 or to present for action
at an annual meeting any
proposal so included. Rule 14a-8
requires that notice of
shareholder proposals requested
to be included in WABCO's proxy
materials pursuant to that rule
must generally be furnished to
the company not later than 120
days prior to the anniversary
date of the company's proxy
statement for the previous
year's annual meeting.
- ------------------------------------------------------------------------------------------------------------
Committees: The WABCO by-laws provide for The MotivePower by-laws provide
the establishment of a for the establishment of an
Nominating Committee. Pursuant Executive and Finance Committee.
to the by-laws, the Board of Pursuant to the by-laws, the
Directors may by resolution Board of Directors may by
passed by a majority of the resolution passed by a majority
Board of Directors, designate of the Board of Directors,
one or more additional designate one or more additional
committees, each committee to committees, each committee to
consist of one or more of the consist of one or more of the
directors of the corporation. In directors of the corporation. In
accordance with these accordance with these
provisions, the Board of provisions, the Board of
Directors has established a Directors has established a
Compensation Committee, a Nominating and Corporate
Nominating Committee and an Governance Committee, a
Audit Committee. No changes will Compensation and Management
be made to the committee Development Committee and an
provisions contained in the Audit and Corporate
WABCO by-laws in connection with Responsibility Committee.
the merger. Each committee of
the Board of Directors must
include either the director
nominated by Vestar or the
director nominated by Harvard as
one of its members.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 97
DESCRIPTION OF WABCO CAPITAL STOCK
The following summary of the current terms of the capital stock of WABCO
and the terms of the capital stock of WABCO to be in effect after completion of
the merger is not meant to be complete and is qualified by reference to the
WABCO charter and WABCO by-laws. The WABCO charter is incorporated by reference
and a copy will be sent to holders of shares of WABCO common stock and
MotivePower common stock upon request. See "Where You Can Find More Information"
on page III-1. The WABCO by-laws are incorporated by reference and included as
an exhibit to the merger agreement attached as Annex A.
AUTHORIZED CAPITAL STOCK
Under the WABCO charter, WABCO's authorized capital stock consists of
100,000,000 shares of WABCO common stock, par value $0.01 per share, and
1,000,000 shares of preferred stock, par value $0.01 per share.
COMMON STOCK
As of October 8, 1999, there were 25,698,794 WABCO shares issued and
outstanding (excluding ESOP shares that are not allocated to WABCO employees),
8,615,050 shares issued and held in WABCO's treasury, 8,412,756 shares reserved
for issuance under WABCO's ESOP and 4,700,000 shares 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 WABCO shares. Subject to Delaware law,
the rights of the holders of any shares of preferred stock that may be issued in
the future and limitations in certain debt instruments, holders of shares of
common stock are entitled to receive dividends as may be declared by the board
of directors out of legally available funds. Upon dissolution of WABCO, which
does not include the merger, the holders of WABCO common stock will be entitled
to a ratable portion of any assets remaining after payment of all priority
claims.
PREFERRED STOCK
The WABCO board of directors is authorized to issue shares of preferred
stock in one or more classes or series and to fix the designations, powers,
preferences and rights of the shares of each such class or series, including
dividend rates, conversion rights, voting rights, terms of redemption and
liquidation preferences and the number of shares constituting each such class or
series. This action may be taken by the board at anytime and without shareholder
approval. While WABCO has no preferred stock outstanding and has no current
understandings, plans or agreements for the issuance of preferred stock, shares
of preferred stock may be used in connection with the raising of additional
capital, future acquisitions, and for other corporate purposes.
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. is the transfer agent and
registrar for the WABCO common stock.
CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL
WABCO's certificate of incorporation and by-laws, as well as Delaware law,
contain several provisions that may make the acquisition of control of WABCO by
means of tender offer, open market purchases, a proxy contest or otherwise more
difficult if not approved by the board of directors. A summary of those
provisions is set forth below. In addition, certain events relating to a change
of control of WABCO will constitute an event of default under its credit
facilities, which may indirectly make more difficult the acquisition of control
of WABCO.
Section 203 of the Delaware General Corporation Law. Section 203 of the
Delaware General Corporation Law provides that, subject to certain exceptions
specified therein, an "interested stockholder" (as defined below) of a Delaware
corporation shall not engage in any business combination, including mergers or
II-12
<PAGE> 98
consolidations or acquisitions of additional shares of the corporation, with the
corporation for a three-year period following the date that such stockholder
becomes an interested stockholder unless (1) prior to such time, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder, (2) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding certain shares) or (3) at or subsequent to such
time, the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 66 2/3% of the outstanding voting stock which
is not owned by the interested stockholder. Except as otherwise specified by
Section 203, an "interested stockholder" is defined to include any person that
is the owner of 15% or more of the outstanding voting stock of the corporation,
or is an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within three
years immediately prior to the relevant date and the affiliates and associates
of any such person. For purposes of Section 203, the board of directors approved
the acquisition of 15% or more of the outstanding voting stock of WABCO by
WABCO's ESOP and, accordingly, WABCO believes that WABCO's ESOP will not be
subject to the restrictions of Section 203 with respect to its ownership of
shares of common stock if its percentage ownership of WABCO's voting stock is
not reduced below 15%.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. The stockholders of a
corporation may elect to exclude the corporation from the restrictions imposed
under Section 203, by amending the corporation's certificate of incorporation or
by-laws. Neither WABCO's certification of incorporation nor its by-laws exclude
WABCO from the restrictions imposed under Section 203. These restrictions may
have the effect of preventing changes in the management of WABCO. It is possible
that these provisions could make it more difficult to accomplish transactions
which shareholders may otherwise deem to be in their best interests.
Potential Effect of WABCO's ESOP. Approximately 8,412,756 shares of the
WABCO ESOP's total of 9,282,256 shares of common stock are currently not
allocated to participants' accounts. Nevertheless, these unallocated shares of
common stock have voting and other ownership rights. A potential acquiror
seeking 100% control of WABCO would be required to purchase these shares. The
additional cost of acquiring WABCO's ESOP shares could have a deterrent effect
on potential acquirors.
STOCK EXCHANGE LISTING; DELISTING AND DEREGISTRATION OF MOTIVEPOWER COMMON STOCK
It is a condition to the merger that the shares of WABCO common stock
issuable in the merger be approved for listing on the NYSE at or prior to the
closing, subject to official notice of issuance. If the merger is completed,
MotivePower common stock will cease to be listed.
LEGAL MATTERS
The validity of the WABCO common stock to be issued to MotivePower
shareholders pursuant to the merger will be passed upon by Reed Smith Shaw &
McClay LLP. It is a condition to the completion of the merger that MotivePower
and WABCO receive opinions from Sidley & Austin and Kirkland & Ellis with
respect to the tax treatment of the merger. See "The Merger Transaction --
Material United States Federal Income Tax Consequences of the Merger" on page
I-39 and "The Merger Agreement -- Conditions to the Completion of the Merger" on
page I-74.
EXPERTS
The consolidated financial statements of MotivePower Industries, Inc. and
subsidiaries and the related financial statement schedule incorporated in this
joint proxy statement/prospectus by reference from MotivePower's Annual Report
on Form 10-K for the year ended December 31, 1998 have been audited by
II-13
<PAGE> 99
Deloitte & Touche LLP independent auditors, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The WABCO consolidated financial statements and schedules as of December
31, 1998 and 1997 and for the years ended December 31, 1998, 1997 and 1996
incorporated in this joint proxy statement/prospectus which is part of this
registration statement have been audited by Arthur Andersen LLP independent
public accountants, as indicated in their reports with respect thereto, and have
been so incorporated in reliance upon the authority of said firm as experts in
giving said reports.
II-14
<PAGE> 100
CHAPTER THREE
ADDITIONAL INFORMATION FOR SHAREHOLDERS
FUTURE SHAREHOLDER PROPOSALS
MOTIVEPOWER
MotivePower will hold an annual meeting in 2000 only if the merger has not
already been completed. Any shareholder proposal for MotivePower's annual
meeting in 2000, if held, must be sent to the Secretary at the address of
MotivePower's principal executive office given under "The Companies" on page
I-3. The deadline for receipt of a proposal to be considered for inclusion in
MotivePower's proxy statement is November 20, 1999. In connection with the 2000
Annual Meeting of Shareholders, if MotivePower does not receive notice of a
matter or proposal to be considered, whether or not the proponent thereof
intends to include the matter or proposal in the proxy statement of MotivePower,
on or before January 20, 2000 then the persons appointed by the MotivePower
Board to act as the proxies for the annual meeting will be allowed to use their
discretionary voting authority with respect to any such matter or proposal at
the annual meeting, if the matter or proposal is raised at the annual meeting.
On request, the Secretary will provide detailed instructions for submitting
proposals.
WABCO
Any shareholder proposal for WABCO's annual meeting in 2000 must be sent to
the Secretary at the following address: 1001 Air Brake Avenue, Wilmerding,
Pennsylvania 15148. The deadline for receipt of a proposal to be considered for
inclusion in WABCO's proxy statement is December 3, 1999. In connection with the
2000 Annual Meeting of Stockholders, if WABCO does not receive notice of a
matter or proposal to be considered, whether or not the proponent thereof
intends to include the matter or proposal in the proxy statement of WABCO, on or
before January 31, 2000 then the persons appointed by the WABCO Board to act as
the proxies for the annual meeting will be allowed to use their discretionary
voting authority with respect to any such matter or proposal at the annual
meeting, if the matter or proposal is raised at the annual meeting. On request,
the Secretary will provide detailed instructions for submitting proposals.
SEC rules set forth standards for the exclusion of some shareholder
proposals from a proxy statement for an annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
MotivePower and WABCO file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Our SEC filings are also available to the public from commercial document
retrieval services and at the web site maintained by the SEC at
http://www.sec.gov.
WABCO filed a registration statement on Form S-4 to register with the SEC
the WABCO common stock to be issued to MotivePower shareholders in the merger.
This joint proxy statement/prospectus is a part of that registration statement
and constitutes a prospectus of WABCO in addition to being a proxy statement of
MotivePower and WABCO for the meetings. As allowed by SEC rules, this joint
proxy statement/prospectus does not contain all the information you can find in
the registration statement or the exhibits to the registration statement.
The SEC allows us to "incorporate by reference" information into this joint
proxy statement/prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
joint proxy statement/prospectus, except for any information superseded by
information in, or incorporated by reference in, this joint proxy
statement/prospectus. This joint proxy statement/prospectus incorporates by
reference the
III-1
<PAGE> 101
documents set forth below that we have previously filed with the SEC. These
documents contain important information about our companies and their finances.
<TABLE>
<CAPTION>
MOTIVEPOWER SEC FILINGS (FILE NO. 001-13225) PERIOD
- --------------------------------------------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal Year ended December 31, 1998
Quarterly Report Form 10-Q Filed on May 14, 1999
Current Report on Form 8-K Filed on May 14, 1999
Current Report on Form 8-K Filed on June 3, 1999
Current Report on Form 8-K Filed on August 18, 1999
Current Report on Form 8-K Filed on September 28, 1999
Current Report on Form 8-K Filed on October 15, 1999
</TABLE>
<TABLE>
<CAPTION>
WABCO SEC FILINGS (FILE NO. 001-13782) PERIOD
- --------------------------------------------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal Year ended December 31, 1998
Quarterly Report on Form 10-Q Filed on May 5, 1999
Current Report on Form 8-K Filed on June 3, 1999
Current Report on Form 8-K Filed on August 18, 1999
Current Report on Form 8-K Filed on August 23, 1999
Current Report on Form 8-K Filed on October 13, 1999
Current Report on Form 8-K Filed on October 14, 1999
The description of WABCO common stock
set forth in the Registration Statement
on Form 8-A as filed on May 14, 1995
</TABLE>
We are also incorporating by reference additional documents that we file
with the SEC between the date of this joint proxy statement/prospectus and the
date of the meetings.
MotivePower has supplied all information contained or incorporated by
reference in this joint proxy statement/prospectus relating to MotivePower, and
WABCO has supplied all such information relating to WABCO.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this joint proxy statement/prospectus. Shareholders may obtain
documents incorporated by reference in this joint proxy statement/prospectus by
requesting them in writing or by telephone from the appropriate party at the
following address:
<TABLE>
<CAPTION>
MOTIVEPOWER WABCO
<S> <C>
Two Gateway Center 1001 Air Brake Avenue
14th Floor Wilmerding, PA 15148
Pittsburgh, PA 15222 Tel: (412) 825-1000
Tel: (412) 201-1101
</TABLE>
If you would like to request documents from us, please do so by November
12, 1999 to receive them before the meetings.
You can also get more information by visiting MotivePower's web site at
www.motivepower.com and WABCO's web site at www.wabco-rail.com. Web site
materials are not part of this joint proxy statement/prospectus.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MOTIVEPOWER
PROPOSALS AND THE WABCO PROPOSALS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED OCTOBER 20,
1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND
NEITHER THE MAILING OF THIS JOINT PROXY STATEMENT/PROSPECTUS TO SHAREHOLDERS NOR
THE ISSUANCE OF WABCO COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO
THE CONTRARY.
III-2
<PAGE> 102
ANNEX A
CONFORMED COPY
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BETWEEN
MOTIVEPOWER INDUSTRIES, INC.
AND
WESTINGHOUSE AIR BRAKE COMPANY
DATED AS OF SEPTEMBER 26, 1999
AS AMENDED AS OF OCTOBER 4 , 1999
<PAGE> 103
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I
THE MERGER
Section 1.1. The Merger.................................................. 2
Section 1.2. Effective Time.............................................. 2
Section 1.3. Effects of the Merger....................................... 2
Section 1.4. Charter and By-Laws; Board of Directors; Management
Succession.................................................. 2
Section 1.5. Conversion of Securities.................................... 2
Section 1.6. WABCO to Make Certificates Available........................ 3
Section 1.7. Dividends; Transfer Taxes; Withholding...................... 3
Section 1.8. No Fractional Securities.................................... 4
Section 1.9. Return of Exchange Fund..................................... 4
Section 1.10. No Further Ownership Rights in MotivePower Common Stock..... 4
Section 1.11. Closing of MotivePower Transfer Books....................... 4
Section 1.12. Lost Certificates........................................... 4
Section 1.13. Further Assurances.......................................... 5
Section 1.14. Closing..................................................... 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF WABCO
Section 2.1. Corporate Organization...................................... 5
Section 2.2. Capitalization.............................................. 6
Section 2.3. Authority; No Violation..................................... 7
Section 2.4. Consents and Approvals...................................... 7
Section 2.5. SEC Documents and Other Reports............................. 8
Section 2.6. Registration Statement and Joint Proxy Statement............ 8
Section 2.7. Absence of Certain Changes or Events........................ 8
Section 2.8. Permits and Compliance...................................... 9
Section 2.9. Tax Matters................................................. 9
Section 2.10. Actions and Proceedings..................................... 10
Section 2.11. Certain Agreements.......................................... 10
Section 2.12. ERISA....................................................... 10
Section 2.13. Labor Matters............................................... 12
Section 2.14. Intellectual Property; Year 2000 Compliance................. 12
Section 2.15. Environmental and Safety Matters............................ 12
Section 2.16. Insurance................................................... 13
Section 2.17. Parachute Payments to Disqualified Individuals.............. 13
Section 2.18. Required Vote of WABCO Stockholders......................... 13
Section 2.19. State Takeover Laws......................................... 13
Section 2.20. Pooling of Interests; Reorganization........................ 14
Section 2.21. Opinion of Financial Advisor................................ 14
Section 2.22. Broker's Fees............................................... 14
Section 2.23. Unlawful Payments and Contributions......................... 14
Section 2.24. Real Property............................................... 14
Section 2.25. Material Contracts.......................................... 15
Section 2.26. Warranties.................................................. 15
Section 2.27. Pooling Letter.............................................. 15
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MOTIVEPOWER
Section 3.1. Corporate Organization...................................... 16
Section 3.2. Capitalization.............................................. 16
Section 3.3. Authority; No Violation..................................... 17
Section 3.4. Consents and Approvals...................................... 17
Section 3.5. SEC Documents and Other Reports............................. 18
Section 3.6. Registration Statement and Joint Proxy Statement............ 18
Section 3.7. Absence of Certain Changes or Events........................ 18
Section 3.8. Permits and Compliance...................................... 19
Section 3.9. Tax Matters................................................. 19
Section 3.10. Actions and Proceedings..................................... 20
Section 3.11. Certain Agreements.......................................... 20
Section 3.12. ERISA....................................................... 20
Section 3.13. Labor Matters............................................... 21
Section 3.14. Intellectual Property; Year 2000 Compliance................. 22
Section 3.15. Environmental and Safety Matters............................ 22
Section 3.16. Insurance................................................... 23
Section 3.17. Parachute Payments to Disqualified Individuals.............. 23
Section 3.18. Required Vote of MotivePower Stockholders................... 23
Section 3.19. State Takeover Laws: Certain Charter Provisions............. 23
Section 3.20. Pooling of Interests; Reorganization........................ 23
Section 3.21. Opinion of Financial Advisor................................ 23
Section 3.22. Broker's Fees............................................... 24
Section 3.23. MotivePower Rights Agreement; Other Matters................. 24
Section 3.24. Unlawful Payments and Contributions......................... 24
Section 3.25. Real Property............................................... 24
Section 3.26. Material Contracts.......................................... 24
Section 3.27. Warranties.................................................. 25
Section 3.28. Pooling Letter.............................................. 25
ARTICLE IV
CONDUCT OF BUSINESS
Section 4.1. Conduct of WABCO............................................ 25
Section 4.2. Conduct of MotivePower...................................... 27
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1. No Solicitation............................................. 29
Section 5.2. Joint Proxy Statement; Registration Statement............... 30
Section 5.3. Shareholders Meetings....................................... 31
Section 5.4. Access to Information....................................... 31
Section 5.5. Notices of Certain Events................................... 32
Section 5.6. Appropriate Action; Consents; Filings....................... 32
Section 5.7. Public Disclosure........................................... 34
Section 5.8. Reorganization; Pooling of Interest......................... 34
Section 5.9. Comfort Letters............................................. 34
Section 5.10. Compliance with the Securities Act and Pooling of Interests
Restrictions; Termination of Voting Trust and Stockholders
Agreement................................................... 34
Section 5.11. Listing or Quotation of Stock............................... 35
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 5.12. Indemnification of Directors and Officers................... 35
Section 5.13. MotivePower Stock Options; MotivePower SAR: MotivePower
Stock Account............................................... 35
Section 5.14. Benefit Plans to be Honored................................. 36
Section 5.15. State Takeover Laws......................................... 37
Section 5.17. Transfer Taxes.............................................. 37
ARTICLE VI
CONDITIONS TO MERGER
Section 6.1. Conditions to Each Party's Obligations...................... 37
Section 6.2. Additional Conditions to Obligations of MotivePower......... 37
Section 6.3. Additional Conditions to Obligations of WABCO............... 38
ARTICLE VII
TERMINATION
Section 7.1. Termination................................................. 39
Section 7.2. Effect of Termination....................................... 41
Section 7.3. Fees and Expenses........................................... 41
Section 7.4. Amendment................................................... 42
Section 7.5. Extension; Waiver........................................... 42
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations, Warranties and Agreements... 42
Section 8.2. Notices..................................................... 42
Section 8.3. Interpretation.............................................. 43
Section 8.4. Counterparts................................................ 43
Section 8.5. Entire Agreement; No Third Party Beneficiaries.............. 43
Section 8.6. Governing Law............................................... 44
Section 8.7. Assignment.................................................. 44
</TABLE>
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TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION
- ---- -------
<S> <C>
Affected Employees 5.14(b)
Agreement Preamble
Antitrust Laws 5.6(b)
Articles of Merger 1.2
Business Unit 5.6(b)
Certificate of Merger 1.2
Certificates 1.6(b)
Closing 1.14
Code Recitals
Computer Systems 2.14(b)
Confidentiality Agreement 5.4
Constituent Corporations Preamble
DGCL 1.1
Draft Letter 3.28
Effective Time 1.2
End Date 7.1(b)
Environmental Laws 2.15(a)
ERISA 2.12(a)
ERISA Affiliate 2.12(d)(iii)
ESPP 2.2(a)
Exchange Act 2.5
Exchange Agent 1.6(a)
Exchange Fund 1.6(a)
Exchange Ratio 1.5(b)
GAAP 2.5
Governmental Entity 2.4
HSR Act 2.4
Indemnified Parties 5.12(a)
Intellectual Property Rights 2.14(a)
IRS 2.9
Joint Proxy Statement 2.4
Knowledge of MotivePower 3.8
Knowledge of WABCO 2.8
Liens 2.2(b)
Material Adverse Effect 2.1(a)
Material Agreement 2.3(b)
MotivePower Preamble
MotivePower Articles of Incorporation 3.1(a)
MotivePower Common Stock Recitals
MotivePower Director Option Plan 3.2(a)
MotivePower Disclosure Letter Article III
MotivePower Ex-U.S. Pension Plan 3.12(e)
MotivePower Fees and Expenses 7.3(b)
MotivePower Leased Property 3.25(b)
MotivePower Leases 3.25(b)
MotivePower Material Contracts 3.26
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION
- ---- -------
<S> <C>
MotivePower Multiemployer Plan 3.12(d)(ii)
MotivePower Option Agreement Recitals
MotivePower Option Plan 3.2(a)
MotivePower Owned Real Property 3.25(a)
MotivePower Permits 3.8
MotivePower Plan 3.12(d)(i)
MotivePower Preferred Stock 3.2(a)
MotivePower Real Property 3.25(b)
MotivePower Rights 3.2(a)
MotivePower Rights Agreement 3.2(a)
MotivePower SAK 3.2
MotivePower Shareholders Meeting 5.3
MotivePower SEC Documents 3.5
MotivePower Series C Preferred Stock 3.2(a)
MotivePower Stock Account 5.13
MotivePower Stock Plans 3.2(a)
MotivePower Tax Certificate 5.8
Merger Recitals
NYSE 1.8
1995 Director Option Plan 2.2(a)
1995 Option Plan 2.2(a)
PBCL 1.1
Permits 2.8
Person 4.1(c)
Registration Statement 2.4
SEC 2.4
Securities Act 2.1(a)
Shareholders Meetings 5.3
Significant Proposal 5.1(a)
State and Foreign Approvals 2.4
Subsidiary 2.1(a)
Substitute Option 5.13
Substitute SAR 5.13
Substitute Stock Account 5.13
Superior Proposal 5.1(a)
Surviving Corporation 1.1
Takeover Proposal 5.1(a)
Tax Return 2.9
Taxes 2.9
Vestar 5.10(c)
Voting Trust 5.10(c)
wholly-owned Subsidiary 2.1(a)
WABCO Preamble
WABCO Certificate of Incorporation 2.1(a)
WABCO Common Stock Recitals
WABCO Disclosure Letter Article II
WABCO Employee Stock Ownership Trust 3.23
WABCO Ex-U.S. Pension Plan 2.12(e)
</TABLE>
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<PAGE> 108
<TABLE>
<CAPTION>
TERM SECTION
- ---- -------
<S> <C>
WABCO Leased Property 2.24(b)
WABCO Leases 2.24(b)
WABCO Material Contracts 2.25
WABCO Multiemployer Plan 2.12(d)(ii)
WABCO Option Agreement Recitals
WABCO Owned Property 2.24(a)
WABCO Permits 2.8
WABCO Plan 2.12(d)(i)
WABCO Preferred Stock 2.2(a)
WABCO Real Property 2.24(b)
WABCO SEC Documents 2.5
WABCO Stock Options 2.2(a)
WABCO Stock Plans 2.2(a)
WABCO Stockholders Meeting 5.3
WABCO Tax Certificate 5.8
Worker Safety Laws 2.15(a)
Year 2000 Compliant 2.14(b)
</TABLE>
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<PAGE> 109
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of September
26, 1999 (this "Agreement") as amended, between MotivePower Industries, Inc., a
Pennsylvania corporation ("MotivePower"), and Westinghouse Air Brake Company, a
Delaware corporation ("WABCO") (MotivePower and WABCO being hereinafter
collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, MotivePower and WABCO are parties to that certain Agreement and
Plan of Merger dated June 2, 1999, as amended as of July 19, 1999 (as so
amended, the "Original Merger Agreement");
WHEREAS, MotivePower and WABCO wish to amend the Original Merger Agreement
to provide for the merger of MotivePower with and into WABCO (the "Merger"),
upon the terms and subject to the conditions set forth herein, whereby each
issued and outstanding share of Common Stock, par value $.01 per share, of
MotivePower ("MotivePower Common Stock"), together with any associated
MotivePower Right (as defined in Section 3.2(a)), not owned directly or
indirectly by MotivePower or WABCO will be converted into shares of Common
Stock, par value $.01 per share, of WABCO ("WABCO Common Stock");
WHEREAS, the respective Boards of Directors of MotivePower and WABCO have
approved and declared advisable the Merger, upon the terms and subject to the
conditions set forth herein;
WHEREAS, the respective Boards of Directors of MotivePower and WABCO have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is in the best interest of their
respective stockholders;
WHEREAS, as a condition and inducement to WABCO entering into this
Agreement and incurring the obligations set forth herein, concurrently with the
execution and delivery of this Agreement, WABCO and MotivePower are entering
into the Amended and Restated MotivePower Stock Option Agreement (the
"MotivePower Option Agreement") pursuant to which MotivePower has granted WABCO
an option, exercisable under the circumstances specified therein, to purchase
shares of MotivePower Common Stock;
WHEREAS, as a condition and inducement to MotivePower entering into this
Agreement and incurring the obligations set forth herein, concurrently with the
execution and delivery of this Agreement, WABCO and MotivePower are entering
into the Amended and Restated WABCO Stock Option Agreement (the "WABCO Option
Agreement") pursuant to which WABCO has granted MotivePower an option,
exercisable under the circumstances specified therein, to purchase shares of
WABCO Common Stock;
WHEREAS, concurrently with the execution hereof, in order to induce
MotivePower to enter into this Agreement, MotivePower is entering into a Voting
Agreement (the "Voting Agreement") with William E. Kassling, Robert J. Brooks,
Harvard Private Capital Holdings, Inc., a Massachusetts corporation, and Vestar
Equity Partners, L.P., a Delaware limited partnership (collectively, the
"Principal Shareholders") providing for certain voting and other restrictions
with respect to the shares of WABCO Common Stock beneficially owned by the
Principal Shareholders upon the terms and conditions specified therein;
WHEREAS, concurrently with the execution hereof, in order to induce WABCO
to enter into this Agreement, WABCO is entering into a Voting Agreement with
John C. Pope providing for certain voting and other restrictions with respect to
the shares of MotivePower Common Stock beneficially owned by John C. Pope upon
the terms and conditions specified therein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests.
<PAGE> 110
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the Pennsylvania Business Corporation Law (the
"PBCL") and the Delaware General Corporation Law (the "DGCL"), MotivePower shall
be merged with and into WABCO at the Effective Time (as defined in Section 1.2).
Following the Merger, the separate corporate existence of MotivePower shall
cease and WABCO shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
MotivePower in accordance with the PBCL and the DGCL.
SECTION 1.2. EFFECTIVE TIME. As soon as practicable following the Closing
(as defined in Section 1.14), MotivePower and WABCO will cause Articles of
Merger (the "Articles of Merger"), executed in accordance with the relevant
provisions of the PBCL, to be filed with the Department of State of the
Commonwealth Pennsylvania and a Certificate of Merger (the "Certificate of
Merger"), executed in accordance with the relevant provisions of the DGCL, to be
filed with the Secretary of State of Delaware. The Merger shall become effective
on the date and at the time when the last of the following actions shall have
been completed: (i) the Articles of Merger have been duly filed with the
Department of State of the Commonwealth of Pennsylvania and (ii) the Certificate
of Merger has been duly filed with the Secretary of State of Delaware (the
"Effective Time").
SECTION 1.3. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 1929 of the PBCL and Section 259 of the DGCL.
SECTION 1.4. CHARTER AND BY-LAWS; BOARD OF DIRECTORS; MANAGEMENT
SUCCESSION. (a) At the Effective Time, the Certificate of Incorporation of
WABCO, as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law. At the Effective
Time, the By-Laws of WABCO shall be amended and restated in their entirety as
set forth in Exhibit 1.4(b) and such By-Laws, as so amended and restated, shall
be the By-Laws of the Surviving Corporation until thereafter changed or amended
as provided therein or by the Certificate of Incorporation.
(b) From and after the Effective Time, until duly changed in compliance
with applicable law and the Certificate of Incorporation and By-Laws of the
Surviving Corporation, the Board of Directors of the Surviving Corporation shall
consist of the persons listed on Exhibit 1.4(c).
(c) At the Effective Time, Mr. William E. Kassling shall be the Chairman
and Chief Executive Officer of the Surviving Corporation. The other officers of
the Surviving Corporation shall include those persons listed on Exhibit 1.4(d)
who shall hold the office set forth opposite their respective name.
SECTION 1.5. CONVERSION OF SECURITIES. As of the Effective Time, by virtue
of the Merger and without any action on the part of WABCO, MotivePower or the
holders of any securities of the Constituent Corporations:
(a) All shares of MotivePower Common Stock, together with any associated
MotivePower Rights, that are held in the treasury of MotivePower or by any
wholly-owned Subsidiary of MotivePower and any shares of MotivePower Common
Stock, together with any associated MotivePower Rights, owned by WABCO or by any
wholly-owned Subsidiary of WABCO shall be cancelled and no capital stock of
WABCO or other consideration shall be delivered in exchange therefor.
(b) Subject to the provisions of Sections 1.8 and 1.10 hereof, each share
of MotivePower Common Stock, together with any MotivePower Right, issued and
outstanding immediately prior to the Effective Time (other than shares and any
associated Rights to be cancelled in accordance with Section 1.5(a)) shall be
converted into .66 (such number being the "Exchange Ratio") validly issued,
fully paid and nonassessable
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shares of WABCO Common Stock. All such shares and any associated Rights of
MotivePower Common Stock, when so converted, shall no longer be outstanding and
shall automatically be cancelled and retired and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive any dividends and other distributions in
accordance with Section 1.7, certificates representing the shares of WABCO
Common Stock into which such shares are converted and any cash, without
interest, in lieu of fractional shares to be issued or paid in consideration
therefor upon the surrender of such certificate in accordance with Section 1.6.
(c) All MotivePower Stock Options (as defined in Section 2.2(a))
outstanding at the Effective Time shall become options to purchase WABCO Common
Stock pursuant to Section 5.13.
SECTION 1.6. WABCO TO MAKE CERTIFICATES AVAILABLE. (a) Exchange of
Certificates. WABCO shall authorize ChaseMellon Shareholder Services, L.L.C. (or
such other person or persons as shall be reasonably acceptable to WABCO and
MotivePower) to act as Exchange Agent hereunder (the "Exchange Agent"). As soon
as practicable after the Effective Time, WABCO shall deposit with the Exchange
Agent, in trust for the holders of shares of MotivePower Common Stock converted
in the Merger, certificates representing the shares of WABCO Common Stock
issuable pursuant to Section 1.5(b) in exchange for outstanding shares of
MotivePower Common Stock and cash, as required to make payments in lieu of any
fractional shares pursuant to Section 1.8 (such cash and shares of WABCO Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall
deliver the WABCO Common Stock contemplated to be issued pursuant to Section
1.5(b) out of the Exchange Fund.
(b) Exchange Procedures. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each record holder of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of MotivePower Common Stock converted in the Merger (the
"Certificates") a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon actual delivery of the Certificates to the Exchange Agent, and shall
contain instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of WABCO Common Stock and cash in
lieu of fractional shares). Upon surrender for cancellation to the Exchange
Agent of all Certificates held by any record holder of a Certificate, together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of WABCO Common Stock into which the shares
represented by the surrendered Certificate shall have been converted at the
Effective Time pursuant to this Article I, cash in lieu of any fractional share
in accordance with Section 1.8 and certain dividends and other distributions in
accordance with Section 1.7, and any Certificate so surrendered shall forthwith
be cancelled.
SECTION 1.7. DIVIDENDS; TRANSFER TAXES; WITHHOLDING. No dividends or other
distributions that are declared on or after the Effective Time on WABCO Common
Stock, or are payable to the holders of record thereof on or after the Effective
Time, will be paid to any person entitled by reason of the Merger to receive a
certificate representing WABCO Common Stock until such person surrenders the
related Certificate or Certificates, as provided in Section 1.6, and no cash
payment in lieu of fractional shares will be paid to any such person pursuant to
Section 1.8 until such person shall so surrender the related Certificate or
Certificates. Subject to the effect of applicable law, there shall be paid to
each record holder of a new certificate representing such WABCO Common Stock:
(i) at the time of such surrender or as promptly as practicable thereafter, the
amount of any dividends or other distributions theretofore paid with respect to
the shares of WABCO Common Stock represented by such new certificate and having
a record date on or after the Effective Time and a payment date prior to such
surrender; (ii) at the appropriate payment date or as promptly as practicable
thereafter, the amount of any dividends or other distributions payable with
respect to such shares of WABCO Common Stock and having a record date on or
after the Effective Time but prior to such surrender and a payment date on or
subsequent to such surrender; and (iii) at the time of such surrender or as
promptly as practicable thereafter, the amount of any cash payable with respect
to a fractional share of WABCO Common Stock to which such holder is entitled
pursuant to Section 1.8. In no event shall the person entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other distributions. If any cash or certificate representing shares
of WABCO Common Stock is to
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be paid to or issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such shares of WABCO Common Stock in
a name other than that of the registered holder of the Certificate surrendered,
or shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not applicable. WABCO or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement such amounts as WABCO or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by WABCO or the Exchange Agent and paid to the appropriate authority,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the person in respect of which such deduction and
withholding was made by WABCO or the Exchange Agent.
SECTION 1.8. NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional shares of WABCO Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this Article I, and no WABCO
dividend or other distribution or stock split shall relate to any fractional
share, and no fractional share shall entitle the owner thereof to vote or to any
other rights of a security holder of WABCO. In lieu of any such fractional
share, each holder of MotivePower Common Stock who would otherwise have been
entitled to a fraction of a share of WABCO Common Stock upon surrender of
Certificates for exchange pursuant to this Article I will be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(i) the per share closing price on the New York Stock Exchange (the "NYSE") of
WABCO Common Stock (as reported in the NYSE Composite Transactions) on the date
of the Effective Time (or, if the shares of WABCO Common Stock do not trade on
the NYSE on such date, the first date of trading of shares of WABCO Common Stock
on the NYSE after the Effective Time) by (ii) the fractional interest to which
such holder would otherwise be entitled. As promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders of fractional
share interests, the Exchange Agent shall so notify WABCO, and WABCO shall
deposit such amount with the Exchange Agent and shall cause the Exchange Agent
to forward payments to such holders of fractional share interests subject to and
in accordance with the terms of Section 1.7 and this Section 1.8.
SECTION 1.9. RETURN OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the former stockholders of MotivePower for six
months after the Effective Time shall be delivered to WABCO, upon demand of
WABCO, and any such former stockholders who have not theretofore complied with
this Article I shall thereafter look only to WABCO for payment of their claim
for WABCO Common Stock, any cash in lieu of fractional shares of WABCO Common
Stock and any dividends or distributions with respect to WABCO Common Stock.
WABCO shall not be liable to any former holder of MotivePower Common Stock for
any such shares of WABCO Common Stock, cash and dividends and distributions held
in the Exchange Fund which is delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
SECTION 1.10. NO FURTHER OWNERSHIP RIGHTS IN MOTIVEPOWER COMMON STOCK. All
shares of WABCO Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of MotivePower Common Stock
represented by such Certificates.
SECTION 1.11. CLOSING OF MOTIVEPOWER TRANSFER BOOKS. At the Effective Time,
the stock transfer books of MotivePower shall be closed and no transfer of
shares of MotivePower Common Stock shall thereafter be made on the records of
MotivePower. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, the Exchange Agent or WABCO, such Certificates shall be
cancelled and exchanged as provided in this Article I.
SECTION 1.12. LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and,
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<PAGE> 113
if required by WABCO or the Exchange Agent, the posting by such person of a
bond, in such reasonable amount as WABCO or the Exchange Agent may direct as
indemnity against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of WABCO Common Stock, any cash in lieu of
fractional shares of WABCO Common Stock to which the holders thereof are
entitled pursuant to Section 1.8 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 1.7.
SECTION 1.13. FURTHER ASSURANCES. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties, permits, licenses or
assets of either of the Constituent Corporations, or (b) otherwise to carry out
the purposes of this Agreement, the Surviving Corporation and its proper
officers and directors or their designees shall be authorized to execute and
deliver, in the name and on behalf of either of the Constituent Corporations,
all such deeds, bills of sale, assignments and assurances and to do, in the name
and on behalf of either Constituent Corporation, all such other acts and things
as may be necessary, desirable or proper to vest, perfect or confirm the
Surviving Corporation's right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
SECTION 1.14. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") and all actions specified in this Agreement to occur
at the Closing shall take place at the offices of Doepken Keevican & Weiss, 58th
Floor, USX Tower, 600 Grant Street, Pittsburgh, Pennsylvania, at 10:00 a.m.,
local time, no later than the second business day following the day on which the
last of the conditions set forth in Article VI shall have been fulfilled or
waived (if permissible) or at such other time and place as WABCO and MotivePower
shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF WABCO
Except as disclosed in the letter delivered to MotivePower concurrently
herewith and designated therein as the WABCO Disclosure Letter (the "WABCO
Disclosure Letter"), in each case with specific reference to the Section to
which exception is taken, WABCO hereby represents and warrants to MotivePower as
follows:
SECTION 2.1. CORPORATE ORGANIZATION. (a) WABCO is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. WABCO has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect on WABCO. As used in this Agreement,
the term "Material Adverse Effect" means, with respect to MotivePower or WABCO,
as the case may be, a material adverse effect on (i) the business, operations,
results of operations or financial condition of such party and its Subsidiaries
taken as a whole or (ii) the ability of such party to consummate the
transactions contemplated hereby, except to the extent (w) resulting from any
changes in general United States or global economic conditions, (x) resulting
from any changes affecting the railroad equipment and parts industry in general,
(y) resulting from matters disclosed in Section 3.1 of the MotivePower
Disclosure Letter (as hereinafter defined), or (z) as contemplated by the joint
press release issued by WABCO and MotivePower on August 18, 1999. As used in
this Agreement, the word "Subsidiary" means any corporation, partnership,
limited liability company, joint venture or other legal entity of which
MotivePower or WABCO, as the case may be (either alone or through or together
with any other Subsidiary), (i) owns, directly or indirectly, 50% or more of the
stock or other equity interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation, partnership, limited liability company, joint venture or other
legal entity, (ii) is a general partner, trustee or other entity or person
performing similar functions or (iii) has
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control (as defined in Rule 405 under the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "Securities
Act")). For all purposes of this Agreement, a "wholly-owned Subsidiary" shall be
deemed to include those entities which, for regulatory or other local law
purposes, have issued nominal ownership interests to persons other than WABCO or
MotivePower or their respective Subsidiaries. True and complete copies of the
Restated Certificate of Incorporation (the "WABCO Certificate of Incorporation")
and Amended and Restated By-Laws of WABCO, as in effect as of the date of this
Agreement, have previously been made available by WABCO to MotivePower.
(b) Each WABCO Subsidiary (i) is duly organized and validly existing under
the laws of its jurisdiction of organization, (ii) is duly qualified to do
business and in good standing in all jurisdictions (whether federal, state,
local or foreign) where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and in which the failure to be so
qualified would have a Material Adverse Effect on WABCO and (iii) has all
requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
(c) The minute books of WABCO accurately reflect in all material respects
all material corporate actions held or taken since January 1, 1997 of its
stockholders and Board of Directors (including committees of the Board of
Directors of WABCO).
SECTION 2.2. CAPITALIZATION. (a) The authorized capital stock of WABCO
consists of (i) 100,000,000 shares of WABCO Common Stock, of which, as of May
27, 1999, 33,966,897 shares were issued and outstanding and 13,459,703 shares
were held in treasury, and (ii) 1,000,000 shares of Preferred Stock, par value
$.01 per share, of WABCO (the "WABCO Preferred Stock"), none of which, as of the
date hereof, were designated, issued and outstanding. All of the issued and
outstanding shares of WABCO Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date of this
Agreement, except pursuant to the terms of options issued pursuant to the WABCO
1995 Stock Incentive Plan, as amended (the "1995 Option Plan"), or the 1995
Non-Employee Directors' Fee and Stock Option Plan (the "1995 Director Option
Plan" and, together with the 1995 Option Plan, the "WABCO Stock Plans") and
except as contemplated hereby, WABCO does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of WABCO
Common Stock or any other equity securities of WABCO or any securities
representing the right to purchase or otherwise receive any shares of WABCO
Common Stock or WABCO Preferred Stock. As of the date of this Agreement, no
shares of WABCO Common Stock or WABCO Preferred Stock are reserved for issuance,
except for 4,800,000 shares of WABCO Common Stock reserved for issuance upon
exercise of stock options granted pursuant to the WABCO Stock Plans (the "WABCO
Stock Options") and 500,000 shares of WABCO Common Stock reserved for issuance
in connection with the WABCO 1998 Employee Stock Purchase Plan (the "ESPP").
Since December 31, 1998, WABCO has not issued any shares of its capital stock or
any securities convertible into or exercisable for any shares of its capital
stock, other than pursuant to the ESPP and the exercise of WABCO Stock Options
granted prior to such date. WABCO has previously provided MotivePower with a
list of the option holders, the date of each option to purchase WABCO Common
Stock granted, the number of shares subject to each such option, the expiration
date of each such option, and the price at which each such option may be
exercised under an applicable WABCO Stock Plan. In no event will the aggregate
number of shares of WABCO Common Stock outstanding at the Effective Time exceed
the number specified in Section 2.2(a) of the WABCO Disclosure Letter.
(b) WABCO owns, directly or indirectly, all of the issued and outstanding
shares of capital stock or other equity ownership interests of each of the WABCO
Subsidiaries as set forth in Section 2.2(b) of the WABCO Disclosure Letter, free
and clear of any liens, pledges, charges, encumbrances and security interests
whatsoever ("Liens") other than as set forth in Section 2.2(b) of the WABCO
Disclosure Letter, and all of such shares or equity ownership interests are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. No WABCO Subsidiary has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of capital stock or any other
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equity security of such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other equity
security of such Subsidiary.
SECTION 2.3. AUTHORITY; NO VIOLATION. (a) WABCO has full corporate power
and authority to execute and deliver this Agreement and the WABCO Option
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the WABCO Option Agreement and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly approved and declared advisable by the Board of Directors of
WABCO. The Board of Directors of WABCO has directed that this Agreement and the
transactions contemplated hereby be submitted to WABCO's stockholders for
adoption at the WABCO Stockholders Meeting (as defined in Section 5.3) and,
except for the adoption of this Agreement by the affirmative vote of the holders
of a majority of the outstanding shares of WABCO Common Stock, no other
corporate proceedings on the part of WABCO are necessary to approve and adopt
this Agreement and the WABCO Option Agreement and to consummate the transactions
contemplated hereby and thereby. Each of this Agreement and the WABCO Option
Agreement has been duly and validly executed and delivered by WABCO and
(assuming due authorization, execution and delivery by MotivePower of this
Agreement and the WABCO Option Agreement) constitutes a valid and binding
obligation of WABCO, enforceable against WABCO in accordance with its terms.
(b) Neither the execution and delivery of this Agreement or the WABCO
Option Agreement by WABCO nor the consummation by WABCO of the transactions
contemplated hereby or thereby, nor compliance by WABCO with any of the terms or
provisions hereof or thereof, will (i) violate any provision of the WABCO
Certificate of Incorporation or the WABCO By-Laws or (ii) assuming that the
consents and approvals referred to in Section 2.4 are duly obtained, (x) violate
any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to WABCO or any of its Subsidiaries or any of their
respective properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of WABCO or any of its Subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture or other agreement,
instrument for borrowed money, any guarantee of any agreement or instrument for
borrowed money or any license, lease or any other agreement or instrument
("Material Agreement") to which WABCO or any of its Subsidiaries is a party, or
by which they or any of their respective properties or assets may be bound or
affected, except (in the case of clause (y) above) for such violations,
conflicts, breaches or defaults which, either individually or in the aggregate,
will not have a Material Adverse Effect on WABCO.
SECTION 2.4. CONSENTS AND APPROVALS. Except (i) in connection, or in
compliance, with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (ii) for the filing of any required
applications or notices with any state or foreign agencies and approval of such
applications and notices (the "State and Foreign Approvals"), (iii) for the
filing with the Securities and Exchange Commission (the "SEC") of a joint proxy
statement in definitive form relating to the meetings of MotivePower's
shareholders and WABCO's stockholders to be held in connection with this
Agreement and the transactions contemplated hereby (the "Joint Proxy Statement")
and the registration statement on Form S-4 (the "Registration Statement") in
which the Joint Proxy Statement will be included as a prospectus, (iv) for the
filing of the Articles of Merger with the Department of State of the
Commonwealth of Pennsylvania and the filing of the Certificate of Merger with
the Secretary of State of Delaware, (v) for such filings and approvals as are
required to be made or obtained under the securities or "Blue Sky" laws of
various states or the NYSE in connection with the issuance or listing of the
shares of WABCO Common Stock pursuant to this Agreement, (vi) for the approval
of this Agreement by the requisite vote of the shareholders of MotivePower and
stockholders of WABCO and (vii) those consents listed in Section 2.4 of the
WABCO Disclosure Letter, no material consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") or with
any third party are necessary in connection with (A) the execution and delivery
by WABCO of this Agreement and the WABCO Option Agreement and (B) the
consummation by
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WABCO of the Merger and the other transactions contemplated by this Agreement
and the WABCO Option Agreement.
SECTION 2.5. SEC DOCUMENTS AND OTHER REPORTS. WABCO has filed all required
documents with the SEC since January 1, 1997 (the "WABCO SEC Documents"). As of
their respective dates, the WABCO SEC Documents complied in all material
respects with the requirements of the Securities Act or the Securities Exchange
Act of 1934, as amended (together with the rules and regulations promulgated
thereunder, the "Exchange Act"), as the case may be, and, at the respective
times they were filed, none of the WABCO SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of WABCO
included in the WABCO SEC Documents complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto as of their respective dates of filing, were
prepared in accordance with generally accepted accounting principles ("GAAP")
(except, in the case of the unaudited statements, as permitted by Regulation S-X
of the SEC) applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto) and fairly presented in all
material respects the consolidated financial position of WABCO and its
consolidated Subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the WABCO SEC Documents or as required by GAAP, WABCO has
not, since December 31, 1998, made any change in the accounting practices or
policies applied in the preparation of its financial statements.
SECTION 2.6. REGISTRATION STATEMENT AND JOINT PROXY STATEMENT. None of the
information to be supplied by WABCO for inclusion or incorporation by reference
in the Registration Statement or the Joint Proxy Statement will (i) in the case
of the Registration Statement, at the time it becomes effective, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading or (ii) in the case of the Joint Proxy Statement, at the time of the
mailing of the Joint Proxy Statement and at the respective times of the
Shareholders Meetings (as defined in Section 5.3), contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior to
the Effective Time any event with respect to WABCO, its officers and directors
or any of its Subsidiaries shall occur that is required to be described in the
Joint Proxy Statement or the Registration Statement, such event shall be so
described, and an appropriate amendment or supplement shall be promptly filed
with the SEC and, as required by law, disseminated to the stockholders of WABCO.
The Registration Statement will comply (with respect to WABCO) as to form in all
material respects with the provisions of the Securities Act, and the Joint Proxy
Statement will comply (with respect to WABCO) as to form in all material
respects with the provisions of the Exchange Act.
SECTION 2.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the WABCO SEC Documents filed prior to the date of this Agreement, since
December 31, 1998, (A) WABCO and its Subsidiaries have not incurred any material
liability or obligation (indirect, direct or contingent), or entered into any
material oral or written agreement or other transaction, that is not in the
ordinary course of business or that would have a Material Adverse Effect on
WABCO, (B) WABCO and its Subsidiaries have not sustained any loss or
interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that has had or
that would have a Material Adverse Effect on WABCO, (C) there has been no change
in the capital stock of WABCO and no dividend or distribution of any kind
declared, paid or made by WABCO on any class of its stock, except for the
regular quarterly dividend of not more than $.01 per share of WABCO Common
Stock, (D) there has not been (y) any granting by WABCO or any of its
Subsidiaries to any executive officer or material modification of any severance
or termination benefits or (z) any entry by WABCO or any of its Subsidiaries
into or material modification of any employment, severance or termination
agreement with any such executive officer,
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(E) WABCO and its Subsidiaries have not prepared or filed any Tax Return (as
defined in Section 2.9) inconsistent in any material respect with past practice
or, on any such Tax Return, taken any position, made any election, or adopted
any method that is inconsistent with positions taken, elections made or methods
used in preparing or filing similar Tax Returns in prior periods, and (F) there
has been no other event causing a Material Adverse Effect on WABCO, nor any
development that would, individually or in the aggregate, have a Material
Adverse Effect on WABCO. Set forth in Section 2.7 of the WABCO Disclosure Letter
is a description of any material changes, between December 31, 1998 and the date
of this Agreement (excluding any intervening fluctuations between such dates),
to the amount and terms of the indebtedness of WABCO and its Subsidiaries as
described in WABCO's Annual Report on Form 10-K for the year ended December 31,
1998, as filed with the SEC (other than any changes in, or the incurrence of,
indebtedness of WABCO or any of its Subsidiaries with a principal amount not in
excess of $1,000,000).
SECTION 2.8. PERMITS AND COMPLIANCE. Each of WABCO and its Subsidiaries is
in possession of all franchises, grants, authorizations, licenses, permits,
charters, easements, variances, exceptions, consents, certificates, approvals
and orders of any Governmental Entity (collectively, "Permits") necessary for
WABCO or any of its Subsidiaries to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "WABCO Permits"), except
where the failure to have any of the WABCO Permits would not, individually or in
the aggregate, have a Material Adverse Effect on WABCO, and, as of the date of
this Agreement, no suspension or cancellation of any of the WABCO Permits is
pending or, to the Knowledge of WABCO, threatened, except where the suspension
or cancellation of any of the WABCO Permits, individually or in the aggregate,
would not have a Material Adverse Effect on WABCO. Neither WABCO nor any of its
Subsidiaries is in violation of (i) its charter, by-laws or equivalent
documents, (ii) any applicable law, ordinance, administrative or governmental
rule or regulation or (iii) any order, decree or judgment of any Governmental
Entity having jurisdiction over WABCO or any of its Subsidiaries, except, in the
case of clauses (i), (ii) and (iii), for any violations that, individually or in
the aggregate, would not have a Material Adverse Effect on WABCO. "Knowledge of
WABCO" means the actual knowledge, after reasonable investigation, of the
individuals identified in Section 2.8 of the WABCO Disclosure Letter.
SECTION 2.9. TAX MATTERS. Except as otherwise set forth in Section 2.9 of
the WABCO Disclosure Letter, (i) WABCO and each of its Subsidiaries have filed
all federal, and all material state, local, foreign and provincial, Tax Returns
required to have been filed or appropriate extensions therefor have been
properly obtained, and such Tax Returns are correct and complete, except to the
extent that any failure to so file or any failure to be correct and complete,
individually or in the aggregate, would not have a Material Adverse Effect on
WABCO; (ii) all Taxes shown to be due on such Tax Returns have been timely paid
or extensions for payment have been properly obtained, or such Taxes are being
timely and properly contested, (iii) WABCO and each of its Subsidiaries have
complied in all material respects with all rules and regulations relating to the
withholding of Taxes except to the extent that any failure to comply with such
rules and regulations, individually or in the aggregate, would not have a
Material Adverse Effect on WABCO; (iv) neither WABCO nor any of its Subsidiaries
has waived any statute of limitations in respect of its Taxes which waiver is
currently in effect; (v) any Tax Returns referred to in clause (i) relating to
federal and state income Taxes have been examined by the Internal Revenue
Service (the "IRS") or the appropriate state taxing authority or the period for
assessment of the Taxes in respect of which such Tax Returns were required to be
filed has expired; (vi) no issues that have been raised in writing by the
relevant taxing authority in connection with the examination of the Tax Returns
referred to in clause (i) are currently pending; and (vii) all deficiencies
asserted or assessments made as a result of any examination of such Tax Returns
by any taxing authority have been paid in full. To the Knowledge of WABCO, the
representations set forth in the WABCO Tax Certificate (as defined in Section
5.8), if made on the date hereof (assuming the Merger were consummated on the
date hereof), would be true and correct. For purposes of this Agreement: (i)
"Taxes" means (A) any federal, state, local, foreign or provincial income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value-added, transfer or
excise tax, or other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or
penalty imposed by any Governmental Entity, and (B) any liability for the
payment of amounts with respect to payments of a type described in clause (A) as
a result of being a member of an affiliated, consolidated, combined or unitary
group, and (ii) "Tax Return" means any
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return, report or similar statement (including the attached schedules) required
to be filed with respect to any Tax, including any information return, claim for
refund, amended return or declaration of estimated Tax.
SECTION 2.10. ACTIONS AND PROCEEDINGS. Except as set forth in the WABCO SEC
Documents filed prior to the date of this Agreement, there are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against or involving WABCO or any of its Subsidiaries, or against or involving
any of the directors, officers or employees of WABCO or any of its Subsidiaries,
as such, any of its or their properties, assets or business or any WABCO Plan
that, individually or in the aggregate, would have a Material Adverse Effect on
WABCO. Except as set forth in Section 2.10 of the WABCO Disclosure Letter, as of
the date of this Agreement, there are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations pending or, to the
Knowledge of WABCO, threatened against or involving WABCO or any of its
Subsidiaries or any of its or their directors, officers or employees as such, or
any of its or their properties, assets or business or any WABCO Plan that,
individually or in the aggregate, would have a Material Adverse Effect on WABCO.
There are no actions, suits, labor disputes or other litigation, legal or
administrative proceedings or governmental investigations pending or, to the
Knowledge of WABCO, threatened against or affecting WABCO or any of its
Subsidiaries or any of its or their officers, directors or employees, as such,
or any of its or their properties, assets or business relating to the
transactions contemplated by this Agreement or the WABCO Option Agreement.
SECTION 2.11. CERTAIN AGREEMENTS. Except as set forth in Section 2.11 of
the WABCO Disclosure Letter, neither WABCO nor any of its Subsidiaries is a
party to any oral or written agreement or plan, including any employment
agreement, severance agreement, retention agreement, stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, the vesting of the benefits of which
will be accelerated, or which will become payable or which at the participant's
or holder's option may become payable, due to or by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will, or may at the option of the holder or participant, be calculated
on the basis of any of the transactions contemplated by this Agreement. No
holder of any option to purchase shares of WABCO Common Stock, or shares of
WABCO Common Stock granted in connection with the performance of services for
WABCO or its Subsidiaries, is or will be entitled to receive cash from WABCO or
any Subsidiary in lieu of or in exchange for such option or shares as a result
of the transactions contemplated by this Agreement or the WABCO Option
Agreement.
SECTION 2.12. ERISA. (a) Section 2.12(a)(X) of the WABCO Disclosure Letter
contains a list of each WABCO Plan. With respect to each WABCO Plan, WABCO has
made available to MotivePower a true and correct copy of (i) the most recent
annual report (Form 5500) filed with the IRS, (ii) such WABCO Plan and all
amendments thereto, (iii) each trust agreement, insurance contract or
administration agreement relating to such WABCO Plan, (iv) the most recent
summary plan description for each WABCO Plan for which a summary plan
description is required, (v) the most recent actuarial report or valuation
relating to a WABCO Plan subject to Title IV of the Employee Retirement Income
Security Act of 1974 and the regulations promulgated thereunder ("ERISA"), (vi)
the most recent determination letter, if any, issued by the IRS with respect to
any WABCO Plan intended to be qualified under section 401(a) of the Code, (vii)
any request for a determination currently pending before the IRS and (viii) all
correspondence with the IRS, the Department of Labor or the Pension Benefit
Guaranty Corporation relating to any outstanding controversy. Each WABCO Plan
complies with ERISA, the Code and all other applicable statutes and governmental
rules and regulations, except any failure to comply as would not have,
individually or in the aggregate, a Material Adverse Effect on WABCO. Except as
set forth in Section 2.12(a)(Y) of the WABCO Disclosure Letter, (i) no
"reportable event" (within the meaning of Section 4043 of ERISA) has occurred
within the past three years with respect to any WABCO Plan which could result in
liability to WABCO, (ii) neither WABCO nor any of its ERISA Affiliates (as
hereinafter defined) has withdrawn from any WABCO Multiemployer Plan (as
hereinafter defined) at any time or instituted, or is currently considering
taking, any action to do so, and (iii) no action has been taken, or is currently
being considered, to terminate any WABCO Plan subject to Title IV of ERISA.
(b) There has been no failure to make any contribution or pay any amount
due to any WABCO Plan as required by Section 412 of the Code, Section 302 of
ERISA, or the terms of any such Plan, and no WABCO
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Plan, nor any trust created thereunder, has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived.
(c) With respect to WABCO Plans, no event has occurred and, to the
Knowledge of WABCO, there exists no condition or set of circumstances in
connection with which WABCO or any of its ERISA Affiliates would be subject to
any liability under the terms of such WABCO Plans, ERISA, the Code or any other
applicable law which has had, or would have, individually or in the aggregate, a
Material Adverse Effect on WABCO. Except as listed on Section 2.12(c) of the
WABCO Disclosure Letter, all WABCO Plans that are intended to be qualified under
Section 401(a) of the Code have been determined by the IRS to be so qualified,
or a timely application for such determination is now pending or will be filed
on a timely basis and, except as listed on Section 2.12(c) of the WABCO
Disclosure Letter, to the Knowledge of WABCO there is no reason why any WABCO
Plan is not so qualified in operation. Neither WABCO nor any of its ERISA
Affiliates has been notified by any WABCO Multiemployer Plan that such WABCO
Multiemployer Plan is currently in reorganization or insolvency under and within
the meaning of Section 4241 or 4245 of ERISA or that such WABCO Multiemployer
Plan intends to terminate or has been terminated under Section 4041A of ERISA.
To the Knowledge of WABCO, neither the termination of any WABCO Multiemployer
Plan nor the complete or partial withdrawal by WABCO or any of its ERISA
Affiliates from any WABCO Multiemployer Plan would result in any liability of
WABCO or any of its ERISA Affiliates that would have, individually or in the
aggregate, a Material Adverse Effect on WABCO. Except as set forth in Section
2.12(c) of the WABCO Disclosure Letter, neither WABCO nor any of its ERISA
Affiliates has any liability or obligation under any welfare plan to provide
life insurance or medical benefits after termination of employment to any
employee or dependent other than as required by (i) Part 6 of Title 1 of ERISA
or (ii) the laws of a jurisdiction outside the United States.
(d) As used in this Agreement, (i) "WABCO Plan" means a "pension plan" (as
defined in Section 3(2) of ERISA (other than a WABCO Multiemployer Plan (as
hereinafter defined))), a "welfare plan" (as defined in Section 3(1) of ERISA),
or any material bonus, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, severance, death benefit, insurance or other plan, arrangement or
understanding, in each case established or maintained or contributed to by WABCO
or any of its ERISA Affiliates or as to which WABCO or any of its ERISA
Affiliates or otherwise may have any liability, whether or not covered by ERISA
(other than a WABCO Ex-U.S. Pension Plan (as hereinafter defined)), (ii) "WABCO
Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which WABCO or any of its ERISA Affiliates is or has
been obligated to contribute or otherwise may have any liability, and (iii) with
respect to any person, "ERISA Affiliate" means any corporation or trade or
business (whether or not incorporated) which is under common control, or
otherwise would be considered a single employer with such person pursuant to
Section 414(b), (c), (m) or (o) of the Code and the regulations promulgated
thereunder or pursuant to Section 4001(b) of ERISA and the regulations
promulgated thereunder.
(e) Section 2.12(e) of the WABCO Disclosure Letter contains a list of each
WABCO Ex-U.S. Pension Plan (as hereinafter defined) and WABCO has provided to
MotivePower a copy of any written plan document. Except as would not have,
individually or in the aggregate, a Material Adverse Effect on WABCO, each such
plan has been maintained in compliance with all applicable laws, orders and
regulations, and the fair market value of the assets of each such plan which is
intended to be a funded WABCO Ex-U.S. Pension Plan or arrangement equals or
exceeds the value of the accrued benefits. As used in this Agreement, the term
"WABCO Ex-U.S. Pension Plan" shall mean any arrangement (other than a WABCO
Plan) providing retirement pension benefits that is established or maintained by
WABCO or any Subsidiary for the benefit of employees who are or were employed
outside the United States.
(f) Section 2.12(f) of the WABCO Disclosure Letter contains a list, as of
the date of this Agreement, of all (i) severance and employment agreements with
officers of WABCO and each ERISA Affiliate, (ii) severance programs and policies
of WABCO with or relating to its employees and (iii) plans, programs, agreements
and other arrangements of WABCO with or relating to its employees which contain
change of control or similar provisions, in each case involving a severance or
employment agreement or arrangement with an individual officer or employee, only
to the extent such agreement or arrangement provides for
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minimum annual payments in excess of $100,000. WABCO has provided to MotivePower
a true and complete copy of each of the foregoing.
SECTION 2.13. LABOR MATTERS. Except as disclosed in Section 2.13 of the
WABCO Disclosure Letter, neither WABCO nor any of its Subsidiaries is party to
any collective bargaining agreement or other labor agreement with any union or
labor organization and no union or labor organization has been recognized by
WABCO or any of its Subsidiaries as an exclusive bargaining representative for
employees of WABCO or any of its Subsidiaries. Neither WABCO nor any of its
Subsidiaries is the subject of any material proceeding asserting that it or any
of its Subsidiaries has committed an unfair labor practice or is seeking to
compel it to bargain with any labor union or labor organization nor is there
pending or, to the Knowledge of WABCO, threatened, nor has there been for the
past three years, any labor strike, dispute, walkout, work stoppage, slow-down
or lockout involving it or any of its Subsidiaries, except in each case as would
not, individually or in the aggregate, have a Material Adverse Effect on WABCO.
SECTION 2.14. INTELLECTUAL PROPERTY; YEAR 2000 COMPLIANCE. (a) WABCO and
its Subsidiaries own or have a valid, enforceable right to use free from any
encumbrances, other than those that would not have a Material Adverse Effect on
WABCO, all patents, patent rights, trademarks, trade names, service marks, trade
secrets, copyrights, inventions, know-how, processes, procedures, customer and
supplier lists, computer data, documentation and software, domain names,
applications for registration of any of the foregoing and other proprietary
intellectual property rights (collectively, "Intellectual Property Rights") as
are necessary in connection with the business of WABCO and its Subsidiaries,
taken as a whole, except where the failure to have such Intellectual Property
Rights, individually or in the aggregate, would not have a Material Adverse
Effect on WABCO. Except as set forth in Section 2.14 of the WABCO Disclosure
Letter, neither WABCO nor any of its Subsidiaries has infringed any Intellectual
Property Rights of any third party other than any infringements that,
individually or in the aggregate, would not have a Material Adverse Effect on
WABCO. Neither WABCO nor its Subsidiaries are aware of any infringement or
misappropriation by any person with respect to the Intellectual Property Rights
owned or used by WABCO or its Subsidiaries other than any such infringement or
misappropriation that would not have a Material Adverse Effect on WABCO. All
Intellectual Property Rights owned or used by WABCO or its Subsidiaries as of
the date hereof will be owned or available for use by WABCO and its Subsidiaries
on terms and conditions immediately following the Effective Date that are not
materially different from those existing prior to the Effective Date.
(b) WABCO and each of its Subsidiaries have conducted a commercially
reasonable inventory and assessment of the hardware, software and embedded
microcontrollers in non-computer equipment (the "Computer Systems") used by
WABCO and its Subsidiaries in its business, in order to determine which parts of
the Computer System are not yet Year 2000 Compliant (as defined below) and to
estimate the cost of rendering such Computer Systems Year 2000 Compliant prior
to January 1, 2000 or such earlier date on which the Computer Systems may shut
down or produce incorrect calculations or otherwise malfunction without becoming
totally inoperable. Based on the above inventory and assessment, the estimated
cost of rendering the Computer Systems Year 2000 Compliant is $10 million, a
portion of which has already been expended and the rest of which has been
included in the current budget adopted by WABCO. For purposes of this Agreement,
"Year 2000 Compliant" means that all of the Computer Systems will correctly
recognize, manipulate and process (including calculating, comparing and
sequencing) date information relating to dates before, on or after January 1,
2000 including leap year calculations, and that the operation and functionality
of such Computer Systems will not be materially adversely affected by the advent
of the year 2000 or any manipulation of data featuring date information relating
to dates before, on or after January 1, 2000.
SECTION 2.15. ENVIRONMENTAL AND SAFETY MATTERS. (a) Except as set forth in
Section 2.15 of the WABCO Disclosure Letter, the properties, assets and
operations of WABCO and its predecessors and Subsidiaries have complied and are
in compliance with all applicable federal, state, local, regional and foreign
laws, rules and regulations, orders, decrees, common law, judgments, permits and
licenses relating to public and worker health and safety (collectively, "Worker
Safety Laws") and relating to the protection, regulation and clean-up of the
indoor and outdoor environment and activities or conditions related thereto,
including, without limitation, those relating to the generation, handling,
disposal, transportation or release of hazardous or toxic materials, substances,
wastes, pollutants and contaminants including, without limitation, asbestos,
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petroleum, radon and polychlorinated biphenyls (collectively, "Environmental
Laws"), except for any violations that, individually or in the aggregate, have
not had, and would not have, a Material Adverse Effect on WABCO. With respect to
such properties, assets and operations, including any previously owned, leased
or operated properties, assets or operations, there are no past, present or
reasonably anticipated future events, conditions, circumstances, activities,
practices, incidents, actions or plans of WABCO or any of its predecessors or
Subsidiaries that would interfere with or prevent compliance or continued
compliance with or give rise to any liabilities or investigatory, corrective or
remedial obligations under applicable Worker Safety Laws and Environmental Laws,
other than any such interference, prevention, liability or obligation that,
individually or in the aggregate, has not had, and would not have, a Material
Adverse Effect on WABCO.
(b) WABCO and its predecessors and Subsidiaries have not caused or
permitted any property, asset, operation, including any previously owned
property, asset or operation, to use, generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer or process hazardous or toxic materials,
substances, wastes, pollutants or contaminants, except in material compliance
with all Environmental Laws and Worker Safety Laws, other than any such activity
that, individually or in the aggregate, has not had, and would not have, a
Material Adverse Effect on WABCO. WABCO and its Subsidiaries have not reported
to any Governmental Entity, or been notified by any Governmental Entity of the
existence of, any material violation of an Environmental Law or any release,
discharge or emission of any hazardous or toxic materials, substances, wastes,
pollutants or contaminants, other than any such violation, release, discharge or
emission that, individually or in the aggregate, has not had, and would not
have, a Material Adverse Effect on WABCO.
(c) With respect to WABCO, neither this Agreement nor the consummation of
the transactions that are the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to or consent of
any Governmental Entity or third party, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental Laws,
other than any such obligations that, individually or in the aggregate, would
not have a Material Adverse Effect on WABCO.
(d) This Section sets forth the sole representations and warranties of
WABCO with respect to environmental, health or safety matters, including without
limitation all matters arising under Environmental Laws and Worker Safety Laws.
SECTION 2.16. INSURANCE. WABCO and its Subsidiaries have in effect
insurance coverage with reputable insurers, which in respect of amounts,
premiums, types and risks insured, constitutes reasonably adequate coverage
against all risks customarily insured against by companies of comparable size
and with similar operations.
SECTION 2.17. PARACHUTE PAYMENTS TO DISQUALIFIED INDIVIDUALS. Except as set
forth in Section 2.17 of the WABCO Disclosure Letter, no payment or other
benefit, and no acceleration of the vesting of any options, payments or other
benefits, will, as a direct or indirect result of the transactions contemplated
by this Agreement, be (or under Section 280G of the Code and the Treasury
Regulations thereunder be presumed to be) a "parachute payment" to a
"disqualified individual" (as those terms are defined in Section 280G of the
Code and the Treasury Regulations thereunder) with respect to WABCO or any of
its Subsidiaries, without regard to whether such payment or acceleration is
reasonable compensation for personal services performed or to be performed in
the future. The approximate aggregate amount of "parachute payments" related to
the matters set forth in such Section 2.17 of the WABCO Disclosure Letter,
assuming the Closing occurs on November 1, 1999 and termination of all listed
individuals without cause on such date is set forth in such Section 2.17 of the
WABCO Disclosure Letter.
SECTION 2.18. REQUIRED VOTE OF WABCO STOCKHOLDERS. The affirmative vote of
the holders of a majority of the outstanding shares of WABCO Common Stock is
required to adopt this Agreement. No other vote of the stockholders of WABCO is
required by law, the WABCO Certificate of Incorporation or the WABCO By-Laws or
otherwise in order for WABCO to consummate the Merger and the transactions
contemplated by this Agreement and the WABCO Stock Option Agreement.
SECTION 2.19. STATE TAKEOVER LAWS. The Board of Directors of WABCO has, to
the extent such statute is applicable, taken all action (including appropriate
approvals of the Board of Directors of WABCO)
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necessary to exempt MotivePower, its Subsidiaries and affiliates, the Merger,
this Agreement, the WABCO Option Agreement, the Voting Agreement and the
transactions contemplated hereby and thereby from Section 203 of the DGCL. To
the Knowledge of WABCO, no other state takeover statutes are applicable to the
Merger, this Agreement, the WABCO Option Agreement or the transactions
contemplated hereby or thereby.
SECTION 2.20. POOLING OF INTERESTS; REORGANIZATION. To the Knowledge of
WABCO, neither it nor any of its Subsidiaries has (i) taken any action or failed
to take any action which action or failure would jeopardize the treatment of the
Merger as a pooling of interests for accounting purposes or (ii) taken any
action or failed to take any action which action or failure would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
SECTION 2.21. OPINION OF FINANCIAL ADVISOR. WABCO has received the written
opinion of Credit Suisse First Boston Corporation, dated the date hereof, to the
effect that, as of the date hereof, the Exchange Ratio is fair to WABCO from a
financial point of view, a copy of which opinion has been delivered to
MotivePower.
SECTION 2.22. BROKER'S FEES. Except as set forth in the WABCO Disclosure
Letter and the engagement letter agreement between WABCO and Credit Suisse First
Boston Corporation, a true and complete copy of which has previously been
provided to MotivePower, neither WABCO nor any WABCO Subsidiary nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with the Merger or related transactions contemplated by this Agreement or the
WABCO Option Agreement.
SECTION 2.23. UNLAWFUL PAYMENTS AND CONTRIBUTIONS. To the Knowledge of
WABCO, neither WABCO, any Subsidiary nor any of their respective directors,
officers or any of their respective employees or agents has (i) used any WABCO
funds for any unlawful contribution, endorsement, gift, entertainment or other
unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any person.
SECTION 2.24. REAL PROPERTY. (a) Section 2.24(a) of the WABCO Disclosure
Letter lists each material parcel of real property owned by WABCO or any of its
Subsidiaries (the "WABCO Owned Property"). WABCO or its applicable Subsidiary
has good and marketable title in and to all of the WABCO Owned Property, subject
to no Liens that would have a Material Adverse Effect on WABCO or materially
impair WABCO's rights to or ability to use any such property, except as
described on Section 2.24(a) of the WABCO Disclosure Letter.
(b) Section 2.24(b) of the WABCO Disclosure Letter sets forth a list of all
material leases, subleases and other occupancy agreements, including all
amendments, extensions and other modifications (the "WABCO Leases") for real
property (the "WABCO Leased Property"; the WABCO Owned Property and the WABCO
Leased Property collectively the "WABCO Real Property") to which WABCO or any of
its Subsidiaries is a party. WABCO or its applicable Subsidiary has a good and
valid leasehold interest in and to all of the WABCO Leased Property, subject to
no Liens except as described in Section 2.24(b) of the WABCO Disclosure Letter.
Each WABCO Lease is in full force and effect and is enforceable in accordance
with its terms. There exists no default or condition which, with the giving of
notice, the passage of time or both, could become a default under any WABCO
Lease in any case, that would have a Material Adverse Effect on WABCO or
materially impair WABCO's rights to or ability to use any such property. WABCO
has previously delivered to MotivePower true and complete copies of all the
WABCO Leases. Except as described on Section 2.24(b) of the WABCO Disclosure
Letter, no consent, waiver, approval or authorization is required from the
landlord under any WABCO Lease as a result of the execution of this Agreement or
the consummation of the transactions contemplated hereby the failure to obtain
would have a Material Adverse Effect on WABCO or materially impair WABCO's
rights to or ability to use any such property.
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SECTION 2.25. MATERIAL CONTRACTS. There have been made available to
MotivePower, its affiliates and their representatives true and complete copies
of all of the following contracts to which WABCO or any of its Subsidiaries is a
party or by which any of them is bound (collectively, the "WABCO Material
Contracts"): (i) contracts with any current officer or director of WABCO or any
of its Subsidiaries; (ii) contracts for the sale of any of the assets of WABCO
or any of its Subsidiaries other than in the ordinary course of business or for
the grant to any person of any preferential rights to purchase any of its assets
other than inventory in the ordinary course of business; (iii) contracts
containing covenants of WABCO or any of its Subsidiaries not to compete in any
line of business or with any person in any geographical area or covenants of any
other person not to compete with WABCO or any of its Subsidiaries in any line of
business or in any geographical area; (iv) material indentures, credit
agreements, mortgages, promissory notes, and all contracts relating to the
borrowing of money; and (v) all other agreements contracts or instruments which,
in the reasonable opinion of WABCO, are material to WABCO or any of its
Subsidiaries. Except as set forth in Section 2.25 of the WABCO Disclosure Letter
or as would not have a Material Adverse Effect on WABCO, all of the WABCO
Material Contracts are in full force and effect and are the legal, valid and
binding obligation of WABCO or its Subsidiaries, enforceable against them in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Except as set forth in Section 2.25 of the
WABCO Disclosure Letter, neither WABCO nor any Subsidiary is in default in any
material respect under any WABCO Material Contract nor, to the Knowledge of
WABCO, is any other party to any WABCO Material Contract in default thereunder
in any material respect except, in each case, for those defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
WABCO.
SECTION 2.26. WARRANTIES. To WABCO's Knowledge, the accrual for warranty
related expenses as of December 31, 1998 reported in WABCO's audited financial
statement contained in WABCO's Form 10-K for the year ended December 31, 1998,
adequately reflects an amount required for satisfaction of warranty claims due
in respect of goods sold or services provided by WABCO or any of its
Subsidiaries prior to such date. Such provision has been established in
accordance with GAAP. Neither WABCO nor its Subsidiaries have agreed to provide
any express product or service warranties other than (a) standard warranties,
the terms of which have been provided to MotivePower and identified as WABCO's
standard warranties, (b) warranties that (i) parts and components are free from
defects in workmanship or comply with standard or agreed specifications that are
extended for terms of no more than two (2) years each and that expressly provide
that cure is to be effected by repair or replacement of the defective or
noncomplying products and (ii) original equipment is free from defects in
workmanship or complies with standard or agreed specifications that are extended
for terms of no more than seven (7) years each and that expressly provide that
cure is to be effected by repair or replacement of the defective or noncomplying
products and (c) other warranties that, individually or in the aggregate, will
not, if material claims are made thereunder, have a Material Adverse Effect on
WABCO.
SECTION 2.27. POOLING LETTER. WABCO has received a letter from Arthur
Andersen LLP dated on or about September 26, 1999 and addressed to WABCO, a copy
of which has been delivered to MotivePower, in which Arthur Andersen LLP concurs
with the WABCO management's conclusions that, as of September 26, 1999, no
conditions exist related to WABCO that would preclude MotivePower from
accounting for the Merger as a pooling of interests.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MOTIVEPOWER
Except as disclosed in the letter delivered to WABCO concurrently herewith
and designated therein as the MotivePower Disclosure Letter (the "MotivePower
Disclosure Letter"), in each case with specific
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reference to the Section to which exception is taken, MotivePower hereby
represents and warrants to WABCO as follows:
SECTION 3.1. CORPORATE ORGANIZATION. (a) MotivePower is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. MotivePower has the corporate power and authority
to own or lease all of its properties and assets and to carry on its business as
it is now being conducted, and is duly licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on MotivePower.
True and complete copies of the Articles of Incorporation (the "MotivePower
Articles of Incorporation") and By-Laws of MotivePower, as in effect as of the
date of this Agreement, have previously been made available by MotivePower to
WABCO.
(b) Each MotivePower Subsidiary (i) is duly organized and validly existing
under the laws of its jurisdiction of organization, (ii) is duly qualified to do
business and in good standing in all jurisdictions (whether federal, state,
local or foreign) where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and in which the failure to be so
qualified would have a Material Adverse Effect on MotivePower and (iii) has all
requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
(c) The minute books of MotivePower accurately reflect in all material
respects all material corporate actions held or taken since January 1, 1997 of
its shareholders and Board of Directors (including committees of the Board of
Directors of MotivePower).
SECTION 3.2. CAPITALIZATION. (a) The authorized capital stock of
MotivePower consists of (i) 55,000,000 shares of MotivePower Common Stock, of
which, as of May 27, 1999, 27,019,235 shares were issued and outstanding and no
shares were held in treasury, and (ii) 10,000,000 shares of Preferred Stock, par
value $.01 per share, of MotivePower (the "MotivePower Preferred Stock"),
1,600,000 shares of which, as of the date hereof, have been designated Series C
Junior Participating Preferred Stock (the "MotivePower Series C Preferred
Stock") and none of which, as of the date hereof, were, issued and outstanding.
All of the issued and outstanding shares of MotivePower Common Stock have been
duly authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except as contemplated hereby and
except pursuant to (i) the terms of options granted pursuant to MotivePower
Stock Incentive Plan (the "MotivePower Option Plan") or MotivePower Stock Option
Plan for Non-Employee Directors (the "MotivePower Director Option Plan" and,
together with MotivePower Option Plan, the "MotivePower Stock Plans"), (ii) the
rights to purchase MotivePower Series C Preferred Stock (the "MotivePower
Rights"), issued pursuant to the Rights Agreement, dated as of January 19, 1996,
as amended (the "MotivePower Rights Agreement"), between MotivePower and
Chemical Mellon Shareholder Services, L.L.C., (iii) the Stock Appreciation Right
Agreement, dated as of July 1, 1996, between MotivePower and Michael A. Wolf, as
amended by a First Amendment to Employment Agreement dated as of February 9,
1998 and an Amendment to Stock Appreciation Right Agreement dated as of June 2,
1999 (the "MotivePower SAR"); and (iv) the MotivePower Industries, Inc. Deferred
Compensation Plan, effective April 23, 1994, as amended and restated as of
February 10, 1997 and further amended effective October 1, 1998 (the
"MotivePower Deferred Compensation Plan"), MotivePower does not have and is not
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of MotivePower Common Stock or any other equity securities of MotivePower or any
securities representing the right to purchase or otherwise receive any shares of
MotivePower Common Stock or MotivePower Preferred Stock.
As of the date of this Agreement, no shares of MotivePower Common Stock or
MotivePower Preferred Stock are reserved for issuance, except for 3,205,000
shares of MotivePower Common Stock reserved for issuance upon exercise of stock
options issued pursuant to the MotivePower Stock Plans. Since December 31, 1998,
MotivePower has not issued any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock, other than
pursuant to the exercise of employee stock options
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granted prior to such date. MotivePower has previously provided WABCO with a
list of the option holders, the date of each option to purchase MotivePower
Common Stock granted, the number of shares subject to each such option, the
expiration date of each such option, and the price at which each such option may
be exercised under an applicable MotivePower Stock Plan. In no event will the
aggregate number of shares of MotivePower Common Stock outstanding immediately
prior to the Effective Time exceed the number specified in Section 3.2(a) of the
MotivePower Disclosure Letter.
(b) MotivePower owns, directly or indirectly, all of the issued and
outstanding shares of capital stock or other equity ownership interests of each
of the MotivePower Subsidiaries as set forth in Section 3.2(b) of the
MotivePower Disclosure Letter, free and clear of any Liens other than as set
forth in Section 3.2(b) of the MotivePower Disclosure Letter, and all of such
shares or equity ownership interests are duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof.
No MotivePower Subsidiary has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to purchase
or otherwise receive any shares of capital stock or any other equity security of
such Subsidiary.
SECTION 3.3. AUTHORITY; NO VIOLATION. (a) MotivePower has full corporate
power and authority to execute and deliver this Agreement and the MotivePower
Option Agreement and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the MotivePower Option
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly and validly approved by the Board of Directors of
MotivePower. The Board of Directors of MotivePower has directed that this
Agreement and the transactions contemplated hereby be submitted to MotivePower's
shareholders for adoption at the MotivePower Shareholders Meeting (as defined in
Section 5.3) and, except for the adoption of this Agreement by the affirmative
vote of a majority of the votes cast by the holders of MotivePower Common Stock
at the MotivePower Shareholders Meeting, no other corporate proceedings on the
part of MotivePower are necessary to approve and adopt this Agreement and the
MotivePower Option Agreement and to consummate the transactions contemplated
hereby and thereby. Each of this Agreement and the MotivePower Option Agreement
has been duly and validly executed and delivered by MotivePower and (assuming
due authorization, execution and delivery by MotivePower of this Agreement and
the MotivePower Option Agreement) constitutes a valid and binding obligation of
MotivePower, enforceable against MotivePower in accordance with its terms.
(b) Neither the execution and delivery of this Agreement or the MotivePower
Option Agreement by MotivePower nor the consummation by MotivePower of the
transactions contemplated hereby or thereby, nor compliance by MotivePower with
any of the terms or provisions hereof or thereof, will (i) violate any provision
of the MotivePower Articles of Incorporation or the MotivePower By-Laws or (ii)
assuming that the consents and approvals referred to in Section 3.4 are duly
obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to MotivePower or any of its
Subsidiaries or any of their respective properties or assets, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of MotivePower or any of its Subsidiaries under, any of the terms,
conditions or provisions of any Material Agreement to which MotivePower or any
of its Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected, except (in the case of clause (y)
above) for such violations, conflicts, breaches or defaults which, either
individually or in the aggregate, will not have a Material Adverse Effect on
MotivePower.
SECTION 3.4. CONSENTS AND APPROVALS. Except (i) in connection, or in
compliance, with the provisions of the HSR Act, (ii) for the filing of any
required State and Foreign Approvals, (iii) for the filing with the SEC of the
Joint Proxy Statement and the Registration Statement, (iv) for the filing of the
Articles of Merger with the Department of State of the Commonwealth of
Pennsylvania and the filing of the
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Certificate of Merger with the Secretary of State of Delaware, (v) for such
filings and approvals as are required to be made or obtained under the
securities or "Blue Sky" laws of various states or the NYSE in connection with
the issuance or listing of the shares of WABCO Common Stock pursuant to this
Agreement, (vi) for the approval of this Agreement by the requisite vote of the
shareholders of MotivePower and stockholders of WABCO and (vii) those consents
listed in Section 3.4 of the MotivePower Disclosure Letter, no material consents
or approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary in connection with (A) the execution and delivery
by MotivePower of this Agreement and the MotivePower Option Agreement and (B)
the consummation by MotivePower of the Merger and the other transactions
contemplated by this Agreement and the MotivePower Option Agreement.
SECTION 3.5. SEC DOCUMENTS AND OTHER REPORTS. MotivePower has filed all
required documents with the SEC since January 1, 1997 (the "MotivePower SEC
Documents"). As of their respective dates, the MotivePower SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and, at the respective times they were
filed, none of the MotivePower SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of MotivePower included in the
MotivePower SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto as of their respective dates of filing, were
prepared in accordance with GAAP (except, in the case of the unaudited
statements, as permitted by Regulation S-X of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated therein or in the
notes thereto) and fairly presented in all material respects the consolidated
financial position of MotivePower and its consolidated Subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the MotivePower SEC
Documents or as required by GAAP, MotivePower has not, since December 31, 1998,
made any change in the accounting practices or policies applied in the
preparation of its financial statements.
SECTION 3.6. REGISTRATION STATEMENT AND JOINT PROXY STATEMENT. None of the
information to be supplied by MotivePower for inclusion or incorporation by
reference in the Registration Statement or the Joint Proxy Statement will (i) in
the case of the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or (ii) in the case of the Joint Proxy Statement, at the
time of the mailing of the Joint Proxy Statement and at the respective times of
the Shareholders Meetings, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the Effective Time any
event with respect to MotivePower, its officers and directors or any of its
Subsidiaries shall occur that is required to be described in the Joint Proxy
Statement or the Registration Statement, such event shall be so described, and
an appropriate amendment or supplement shall be promptly filed with the SEC and,
as required by law, disseminated to the stockholders of MotivePower. The
Registration Statement will comply (with respect to MotivePower) as to form in
all material respects with the provisions of the Securities Act, and the Joint
Proxy Statement will comply (with respect to MotivePower) as to form in all
material respects with the provisions of the Exchange Act.
SECTION 3.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the MotivePower SEC Documents filed prior to the date of this Agreement, since
December 31, 1998, (A) MotivePower and its Subsidiaries have not incurred any
material liability or obligation (indirect, direct or contingent), or entered
into any material oral or written agreement or other transaction, that is not in
the ordinary course of business or that would have a Material Adverse Effect on
MotivePower, (B) MotivePower and its Subsidiaries have not sustained any loss or
interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that has had or
that would have a Material Adverse Effect on MotivePower, (C) there has been no
change in the capital stock of MotivePower and no dividend or
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distribution of any kind declared, paid or made by MotivePower on any class of
its stock, (D) there has not been (y) any granting by MotivePower or any of its
Subsidiaries to any executive officer or material modification of any severance
or termination benefits or (z) any entry by MotivePower or any of its
Subsidiaries into or material modification of any employment, severance or
termination agreement with any such executive officer, (E) MotivePower and its
Subsidiaries have not prepared or filed any Tax Return inconsistent in any
material respect with past practice or, on any such Tax Return, taken any
position, made any election, or adopted any method that is inconsistent with
positions taken, elections made or methods used in preparing or filing similar
Tax Returns in prior periods, and (F) there has been no other event causing a
Material Adverse Effect on MotivePower, nor any development that would,
individually or in the aggregate, have a Material Adverse Effect on MotivePower.
Set forth in Section 3.7 of MotivePower Disclosure Letter is a description of
any material changes, between December 31, 1998 and the date of this Agreement
(excluding any intervening fluctuations between such dates), to the amount and
terms of the indebtedness of MotivePower and its Subsidiaries as described in
MotivePower's Annual Report on Form 10-K for the year ended December 31, 1998,
as filed with the SEC (other than any changes in, or the incurrence of,
indebtedness of MotivePower or any of its Subsidiaries with a principal amount
not in excess of $1,000,000).
SECTION 3.8. PERMITS AND COMPLIANCE. Except as set forth in Section 3.8 of
the MotivePower Disclosure Letter, each of MotivePower and its Subsidiaries is
in possession of all Permits necessary for MotivePower or any of its
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "MotivePower Permits"), except where
the failure to have any of the MotivePower Permits would not, individually or in
the aggregate, have a Material Adverse Effect on MotivePower, and, as of the
date of this Agreement, no suspension or cancellation of any of the MotivePower
Permits is pending or, to the Knowledge of MotivePower, threatened, except where
the suspension or cancellation of any of the MotivePower Permits, individually
or in the aggregate, would not have a Material Adverse Effect on MotivePower.
Neither MotivePower nor any of its Subsidiaries is in violation of (i) its
charter, by-laws or equivalent documents, (ii) any applicable law, ordinance,
administrative or governmental rule or regulation or (iii) any order, decree or
judgment of any Governmental Entity having jurisdiction over MotivePower or any
of its Subsidiaries, except, in the case of clauses (i), (ii) and (iii), for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on MotivePower. "Knowledge of MotivePower" means the actual
knowledge, after reasonable investigation, of the individuals identified in
Section 3.8 of the MotivePower Disclosure Letter.
SECTION 3.9. TAX MATTERS. Except as otherwise set forth in Section 3.9 of
the MotivePower Disclosure Letter, (i) MotivePower and each of its Subsidiaries
have filed all federal, and all material state, local, foreign and provincial,
Tax Returns required to have been filed or appropriate extensions therefor have
been properly obtained, and such Tax Returns are correct and complete, except to
the extent that any failure to so file or any failure to be correct and
complete, individually or in the aggregate, would not have a Material Adverse
Effect on MotivePower; (ii) all Taxes shown to be due on such Tax Returns have
been timely paid or extensions for payment have been properly obtained, or such
Taxes are being timely and properly contested, (iii) MotivePower and each of its
Subsidiaries have complied in all material respects with all rules and
regulations relating to the withholding of Taxes except to the extent that any
failure to comply with such rules and regulations, individually or in the
aggregate, would not have a Material Adverse Effect on MotivePower; (iv) neither
MotivePower nor any of its Subsidiaries has waived any statute of limitations in
respect of its Taxes which waiver is currently in effect; (v) any Tax Returns
referred to in clause (i) relating to federal and state income Taxes have been
examined by the IRS or the appropriate state taxing authority or the period for
assessment of the Taxes in respect of which such Tax Returns were required to be
filed has expired; (vi) no issues that have been raised in writing by the
relevant taxing authority in connection with the examination of the Tax Returns
referred to in clause (i) are currently pending; and (vii) all deficiencies
asserted or assessments made as a result of any examination of such Tax Returns
by any taxing authority have been paid in full. MotivePower has not been a
United States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period (relative to the Effective Time)
specified in Code Section 897(c)(1)(A)(ii). To the Knowledge of MotivePower, the
representations set forth in the MotivePower Tax Certificate (as defined in
Section 5.8), if made on the date hereof (assuming the Merger were consummated
on the date hereof), would be true and correct.
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SECTION 3.10. ACTIONS AND PROCEEDINGS. Except as set forth in Section 3.10
of the MotivePower Disclosure Letter and in the MotivePower SEC Documents filed
prior to the date of this Agreement, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or involving
MotivePower or any of its Subsidiaries, or against or involving any of the
directors, officers or employees of MotivePower or any of its Subsidiaries, as
such, any of its or their properties, assets or business or any MotivePower Plan
that, individually or in the aggregate, would have a Material Adverse Effect on
MotivePower. As of the date of this Agreement, there are no actions, suits or
claims or legal, administrative or arbitrative proceedings or investigations
pending or, to the Knowledge of MotivePower, threatened against or involving
MotivePower or any of its Subsidiaries or any of its or their directors,
officers or employees as such, or any of its or their properties, assets or
business or any MotivePower Plan that, individually or in the aggregate, would
have a Material Adverse Effect on MotivePower. There are no actions, suits,
labor disputes or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the Knowledge of MotivePower,
threatened against or affecting MotivePower or any of its Subsidiaries or any of
its or their officers, directors or employees, as such, or any of its or their
properties, assets or business relating to the transactions contemplated by this
Agreement or the MotivePower Option Agreement.
SECTION 3.11. CERTAIN AGREEMENTS. Except as set forth in Section 3.11 of
the MotivePower Disclosure Letter, neither MotivePower nor any of its
Subsidiaries is a party to any oral or written agreement or plan, including any
employment agreement, severance agreement, retention agreement, stock option
plan, stock appreciation rights plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, the vesting of the
benefits of which will be accelerated, or which will become payable or which at
the participant's or holder's option may become payable, due to or by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will, or may at the option of the holder
or participant, be calculated on the basis of any of the transactions
contemplated by this Agreement. No holder of any option to purchase shares of
MotivePower Common Stock, or shares of MotivePower Common Stock granted in
connection with the performance of services for MotivePower or its Subsidiaries,
is or will be entitled to receive cash from MotivePower or any Subsidiary in
lieu of or in exchange for such option or shares as a result of the transactions
contemplated by this Agreement or the MotivePower Option Agreement.
SECTION 3.12. ERISA. (a) Section 3.12 (a) of the MotivePower Disclosure
Letter contains a list of each MotivePower Plan. With respect to each
MotivePower Plan, MotivePower has made available to WABCO a true and correct
copy of (i) the most recent annual report (Form 5500) filed with the IRS, (ii)
such MotivePower Plan and all amendments thereto, (iii) each trust agreement,
insurance contract or administration agreement relating to such MotivePower
Plan, (iv) the most recent summary plan description for each MotivePower Plan
for which a summary plan description is required, (v) the most recent actuarial
report or valuation relating to a MotivePower Plan subject to Title IV of ERISA,
(vi) the most recent determination letter, if any, issued by the IRS with
respect to any MotivePower Plan intended to be qualified under section 401(a) of
the Code, (vii) any request for a determination currently pending before the IRS
and (viii) all correspondence with the IRS, the Department of Labor or the
Pension Benefit Guaranty Corporation relating to any outstanding controversy.
Each MotivePower Plan complies with ERISA, the Code and all other applicable
statutes and governmental rules and regulations, except any failure to comply as
would not have, individually or in the aggregate, a Material Adverse Effect on
MotivePower. Except as set forth in Section 3.12 of the MotivePower Disclosure
Letter, (i) no "reportable event" (within the meaning of Section 4043 of ERISA)
has occurred within the past three years with respect to any MotivePower Plan
which could result in liability to MotivePower, (ii) neither MotivePower nor any
of its ERISA Affiliates has withdrawn from any MotivePower Multiemployer Plan
(as hereinafter defined) at any time or instituted, or is currently considering
taking, any action to do so, and (iii) no action has been taken, or is currently
being considered, to terminate any MotivePower Plan subject to Title IV of
ERISA.
(b) There has been no failure to make any contribution or pay any amount
due to any MotivePower Plan as required by Section 412 of the Code, Section 302
of ERISA, or the terms of any such Plan, and no MotivePower Plan, nor any trust
created thereunder, has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived.
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(c) With respect to MotivePower Plans, no event has occurred and, to the
Knowledge of MotivePower, there exists no condition or set of circumstances in
connection with which MotivePower or any of its ERISA Affiliates would be
subject to any liability under the terms of such MotivePower Plans, ERISA, the
Code or any other applicable law which has had, or would have, individually or
in the aggregate, a Material Adverse Effect on MotivePower. Except as listed on
Section 3.12(c) of the MotivePower Disclosure Letter, all MotivePower Plans that
are intended to be qualified under Section 401(a) of the Code have been
determined by the IRS to be so qualified, or a timely application for such
determination is now pending or will be filed on a timely basis and, except as
listed on Section 3.12(c) of the MotivePower Disclosure Letter, to the Knowledge
of MotivePower there is no reason why any MotivePower Plan is not so qualified
in operation. Neither MotivePower nor any of its ERISA Affiliates has been
notified by any MotivePower Multiemployer Plan that such MotivePower
Multiemployer Plan is currently in reorganization or insolvency under and within
the meaning of Section 4241 or 4245 of ERISA or that such MotivePower
Multiemployer Plan intends to terminate or has been terminated under Section
4041A of ERISA. To the Knowledge of MotivePower, neither the termination of any
MotivePower Multiemployer Plan nor the complete or partial withdrawal by
MotivePower or any of its ERISA Affiliates from any MotivePower Multiemployer
Plan would result in any liability of MotivePower or any of its ERISA Affiliates
that would have, individually or in the aggregate, a Material Adverse Effect on
MotivePower. Except as disclosed in Section 3.12(c) of the MotivePower
Disclosure Letter, neither MotivePower nor any of its ERISA Affiliates has any
liability or obligation under any welfare plan to provide life insurance or
medical benefits after termination of employment to any employee or dependent
other than as required by (i) Part 6 of Title 1 of ERISA or (ii) the laws of a
jurisdiction outside the United States.
(d) As used in this Agreement, (i) "MotivePower Plan" means a "pension
plan" (as defined in Section 3(2) of ERISA (other than a MotivePower
Multiemployer Plan (as hereinafter defined))), a "welfare plan" (as defined in
Section 3(1) of ERISA), or any material bonus, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, vacation, severance, death benefit, insurance or other
plan, arrangement or understanding, in each case established or maintained or
contributed to by MotivePower or any of its ERISA Affiliates or as to which
MotivePower or any of its ERISA Affiliates or otherwise may have any liability,
whether or not covered by ERISA (other than a MotivePower Ex-U.S. Pension Plan
(as hereinafter defined)), and (ii) "MotivePower Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which
MotivePower or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability.
(e) Section 3.12(e) of the MotivePower Disclosure Letter contains a list of
each MotivePower Ex-U.S. Pension Plan and MotivePower has provided to WABCO a
copy of any written plan document. Except as would not have, individually or in
the aggregate, a Material Adverse Effect on MotivePower, each such plan has been
maintained in compliance with all applicable laws, orders and regulations, and
the fair market value of the assets of each such plan which is intended to be a
funded MotivePower Ex-U.S. Pension Plan or arrangement equals or exceeds the
value of the accrued benefits. As used in this Agreement, the term "MotivePower
Ex-U.S. Pension Plan" shall mean any arrangement (other than a MotivePower Plan)
providing retirement pension benefits that is established or maintained by
MotivePower or any Subsidiary for the benefit of employees who are or were
employed outside the United States.
(f) Section 3.12(f) of the MotivePower Disclosure Letter contains a list,
as of the date of this Agreement, of all (i) severance and employment agreements
with officers of MotivePower and each ERISA Affiliate, (ii) severance programs
and policies of MotivePower with or relating to its employees and (iii) plans,
programs, agreements and other arrangements of MotivePower with or relating to
its employees which contain change of control or similar provisions, in each
case involving a severance or employment agreement or arrangement with an
individual officer or employee, only to the extent such agreement or arrangement
provides for minimum annual payments in excess of $100,000. MotivePower has
provided to WABCO a true and complete copy of each of the foregoing.
SECTION 3.13. LABOR MATTERS. Except as disclosed in Section 3.13 of the
MotivePower Disclosure Letter, neither MotivePower nor any of its Subsidiaries
is party to any collective bargaining agreement or other labor agreement with
any union or labor organization and no union or labor organization has been
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recognized by MotivePower or any of its Subsidiaries as an exclusive bargaining
representative for employees of MotivePower or any of its Subsidiaries. Other
than as described in Section 3.13 of the MotivePower Disclosure Letter, neither
MotivePower nor any of its Subsidiaries is the subject of any material
proceeding asserting that it or any of its Subsidiaries has committed an unfair
labor practice or is seeking to compel it to bargain with any labor union or
labor organization nor is there pending or, to the Knowledge of MotivePower,
threatened, nor has there been for the past three years, any labor strike,
dispute, walkout, work stoppage, slow-down or lockout involving it or any of its
Subsidiaries, except in each case as would not, individually or in the
aggregate, have a Material Adverse Effect on MotivePower.
SECTION 3.14. INTELLECTUAL PROPERTY; YEAR 2000 COMPLIANCE. Except as set
forth in Section 3.14 of the MotivePower Disclosure Letter, (a) MotivePower and
its Subsidiaries own or have a valid, enforceable right to use free from any
encumbrances, other than those that would not have a Material Adverse Effect on
MotivePower, Intellectual Property Rights as are necessary in connection with
the business of MotivePower and its Subsidiaries, taken as a whole, except where
the failure to have such Intellectual Property Rights, individually or in the
aggregate, would not have a Material Adverse Effect on MotivePower. Neither
MotivePower nor any of its Subsidiaries has infringed any Intellectual Property
Rights of any third party other than any infringements that, individually or in
the aggregate, would not have a Material Adverse Effect on MotivePower. Neither
MotivePower nor its Subsidiaries are aware of any infringement or
misappropriation by any person with respect to the Intellectual Property Rights
owned or used by MotivePower or its Subsidiaries other than any such
infringement or misappropriation that would not have a Material Adverse Effect
on MotivePower. All Intellectual Property Rights owned or used by MotivePower or
its Subsidiaries as of the date hereof will be owned or available for use by
MotivePower and its Subsidiaries on terms and conditions immediately following
the Effective Date that are not materially different from those existing prior
to the Effective Date.
(b) MotivePower and each of its Subsidiaries have conducted a commercially
reasonable inventory and assessment of the Computer Systems used by MotivePower
and its Subsidiaries in its business, in order to determine which parts of the
Computer System are not yet Year 2000 Compliant and to estimate the cost of
rendering such Computer Systems Year 2000 Compliant prior to January 1, 2000 or
such earlier date on which the Computer Systems may shut down or produce
incorrect calculations or otherwise malfunction without becoming totally
inoperable. Based on the above inventory and assessment, the estimated cost to
be incurred after the date of this Agreement of rendering the Computer Systems
Year 2000 Compliant is $300,000, which has been included in the current budget
adopted by MotivePower.
SECTION 3.15. ENVIRONMENTAL AND SAFETY MATTERS. (a) Except as set forth in
Section 3.15 of the MotivePower Disclosure Letter, the properties, assets and
operations of MotivePower and its predecessors and Subsidiaries have complied
and are in compliance with all Worker Safety Laws and Environmental Laws, except
for any violations that, individually or in the aggregate, have not had, and
would not have, a Material Adverse Effect on MotivePower. With respect to such
properties, assets and operations, including any previously owned, leased or
operated properties, assets or operations, except as set forth in Section 3.15
of the MotivePower Disclosure Letter, there are no past, present or reasonably
anticipated future events, conditions, circumstances, activities, practices,
incidents, actions or plans of MotivePower or any of its predecessors or
Subsidiaries that would interfere with or prevent compliance or continued
compliance with or give rise to any liabilities or investigatory, corrective or
remedial obligations under applicable Worker Safety Laws and Environmental Laws,
other than any such interference, prevention, liability or obligation that,
individually or in the aggregate, has not had, and would not have, a Material
Adverse Effect on MotivePower.
(b) Except as set forth in Section 3.15 of the MotivePower Disclosure
Letter, MotivePower and its predecessors and Subsidiaries have not caused or
permitted any property, asset, operation, including any previously owned
property, asset or operation, to use, generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer or process hazardous or toxic materials,
substances, wastes, pollutants or contaminants, except in material compliance
with all Environmental Laws and Worker Safety Laws, other than any such activity
that, individually or in the aggregate, has not had, and would not have, a
Material Adverse Effect on MotivePower. Except as set forth in Section 3.15 of
the MotivePower Disclosure Letter, MotivePower and its Subsidiaries have not
reported to any Governmental Entity, or been notified by any
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Governmental Entity of the existence of, any material violation of an
Environmental Law or any release, discharge or emission of any hazardous or
toxic materials, substances, wastes, pollutants or contaminants, other than any
such violation, release, discharge or emission that, individually or in the
aggregate, has not had, and would not have, a Material Adverse Effect on
MotivePower.
(c) With respect to MotivePower, neither this Agreement nor the
consummation of the transactions that are the subject of this Agreement will
result in any obligations for site investigation or cleanup, or notification to
or consent of any Governmental Entity or third party, pursuant to any of the
so-called "transaction-triggered" or "responsible property transfer"
Environmental Laws, other than any such obligations that, individually or in the
aggregate, would not have, a Material Adverse Effect on MotivePower.
(d) This Section sets forth the sole representations and warranties of
MotivePower with respect to environmental, health or safety matters, including
without limitation all matters arising under Environmental Laws and Worker
Safety Laws.
SECTION 3.16. INSURANCE. MotivePower and its Subsidiaries have in effect
insurance coverage with reputable insurers, which in respect of amounts,
premiums, types and risks insured, constitutes reasonably adequate coverage
against all risks customarily insured against by companies of comparable size
and with similar operations.
SECTION 3.17. PARACHUTE PAYMENTS TO DISQUALIFIED INDIVIDUALS. Except as set
forth in Section 3.17 of the MotivePower Disclosure Letter, no payment or other
benefit, and no acceleration of the vesting of any options, payments or other
benefits, will, as a direct or indirect result of the transactions contemplated
by this Agreement, be (or under Section 280G of the Code and the Treasury
Regulations thereunder be presumed to be) a "parachute payment" to a
"disqualified individual" (as those terms are defined in Section 280G of the
Code and the Treasury Regulations thereunder) with respect to MotivePower or any
of its Subsidiaries, without regard to whether such payment or acceleration is
reasonable compensation for personal services performed or to be performed in
the future. The approximate aggregate amount of "parachute payments" related to
the matters set forth in such Section 3.17 of the MotivePower Disclosure Letter,
assuming the Closing occurs on November 1, 1999 and termination of all listed
individuals without cause on such date is set forth in such Section 3.17 of the
MotivePower Disclosure Letter.
SECTION 3.18. REQUIRED VOTE OF MOTIVEPOWER STOCKHOLDERS. The affirmative
vote of a majority of the votes cast by holders of MotivePower Common Stock at
the MotivePower Shareholders Meeting is required to adopt this Agreement. No
other vote of the shareholders of MotivePower is required by law, the
MotivePower Articles of Incorporation or the MotivePower By-Laws or otherwise in
order for MotivePower to consummate the Merger and the transactions contemplated
by this Agreement and the MotivePower Option Agreement.
SECTION 3.19. STATE TAKEOVER LAWS: CERTAIN CHARTER PROVISIONS. The Board of
Directors of MotivePower has, to the extent such provision is applicable, taken
all action (including appropriate approvals of the Board of Directors of
MotivePower) necessary to exempt WABCO, its Subsidiaries and affiliates, the
Merger, this Agreement, the MotivePower Option Agreement and the transactions
contemplated hereby and thereby from Article 12 of the MotivePower Articles of
Incorporation. To the Knowledge of MotivePower, no state takeover statutes are
applicable to the Merger, this Agreement, the MotivePower Option Agreement or
the transactions contemplated hereby or thereby.
SECTION 3.20. POOLING OF INTERESTS; REORGANIZATION. To the Knowledge of
MotivePower, neither it nor any of its Subsidiaries has (i) taken any action or
failed to take any action which action or failure would jeopardize the treatment
of the Merger as a pooling of interests for accounting purposes or (ii) taken
any action or failed to take any action which action or failure would jeopardize
the qualification of the Merger as a reorganization within the meaning of
Section 368(a) of the Code.
SECTION 3.21. OPINION OF FINANCIAL ADVISOR. MotivePower has received the
written opinion of Wasserstein Perella & Co., Inc., dated the date hereof, to
the effect that, as of the date hereof, the Exchange Ratio is fair to
MotivePower's shareholders from a financial point of view, a copy of which
opinion has been delivered to WABCO.
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SECTION 3.22. BROKER'S FEES. Except as set forth in the engagement letter
agreement between MotivePower and Wasserstein Perella & Co., Inc., a true and
complete copy of which has previously been provided to WABCO, neither
MotivePower nor any MotivePower Subsidiary nor any of their respective officers
or directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with the Merger or
related transactions contemplated by this Agreement or the MotivePower Option
Agreement.
SECTION 3.23. MOTIVEPOWER RIGHTS AGREEMENT; OTHER MATTERS. (a) MotivePower
has amended the MotivePower Rights Agreement to render the MotivePower Rights
Agreement inapplicable to the Merger and the other transactions contemplated by
this Agreement and the MotivePower Option Agreement and to provide that the
Distribution Date (as defined in the MotivePower Rights Agreement) shall not be
deemed to occur and the rights issuable pursuant to the MotivePower Rights
Agreement will not separate from the shares of MotivePower Common Stock, as a
result of entering into this Agreement and the MotivePower Option Agreement, or
consummating the Merger and the other transactions contemplated hereby and
thereby.
(b) On or prior to the date hereof, MotivePower has delivered to WABCO true
and correct copies of certain waivers executed by each of the individuals who
hold options with related limited stock appreciation rights ("LSAR") under the
MotivePower Stock Incentive Plan, pursuant to which each such individual has
waived his or her LSAR rights.
SECTION 3.24. UNLAWFUL PAYMENTS AND CONTRIBUTIONS. To the Knowledge of
MotivePower, neither MotivePower, any Subsidiary nor any of their respective
directors, officers or any of their respective employees or agents has (i) used
any MotivePower funds for any unlawful contribution, endorsement, gift,
entertainment or other unlawful expense relating to political activity; (ii)
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any person.
SECTION 3.25. REAL PROPERTY. (a) Section 3.25(a) of the MotivePower
Disclosure Letter lists each parcel of real property owned by MotivePower or any
of its Subsidiaries (the "MotivePower Owned Property"). MotivePower or its
applicable Subsidiary has good and marketable title in and to all of the
MotivePower Owned Property, subject to no Liens that would have a Material
Adverse Effect on MotivePower or materially impair MotivePower's rights to or
ability to use any such property, except as described on Section 3.25(a) of the
MotivePower Disclosure Letter.
(b) Section 3.25(b) of the MotivePower Disclosure Letter sets forth a list
of all material leases, subleases and other occupancy agreements, including all
amendments, extensions and other modifications (the "MotivePower Leases") for
real property (the "MotivePower Leased Property"; the MotivePower Owned Property
and the MotivePower Leased Property collectively the "MotivePower Real
Property") to which MotivePower or any of its Subsidiaries is a party.
MotivePower or its applicable Subsidiary has a good and valid leasehold interest
in and to all of the MotivePower Leased Property, subject to no Liens except as
described in Section 3.25(b) of the MotivePower Disclosure Letter. Each
MotivePower Lease is in full force and effect and is enforceable in accordance
with its terms. There exists no default or condition which, with the giving of
notice, the passage of time or both, could become a default under any
MotivePower Lease in any case, that would have a Material Adverse Effect on
MotivePower or materially impair MotivePower's rights to or ability to use any
such property. MotivePower has previously delivered to WABCO true and complete
copies of all the MotivePower Leases. Except as described on Section 3.25(b) of
the MotivePower Disclosure Letter, no consent, waiver, approval or authorization
is required from the landlord under any MotivePower Lease as a result of the
execution of this Agreement or the consummation of the transactions contemplated
hereby the failure to obtain would have a Material Adverse Effect on MotivePower
or materially impair MotivePower's rights to or ability to use any such
property.
SECTION 3.26. MATERIAL CONTRACTS. Except as set forth in Section 3.26 of
the MotivePower Disclosure Letter, there have been made available to WABCO, its
affiliates and their representatives true and complete copies of all of the
following contracts to which MotivePower or any of its Subsidiaries is a party
or by which any of them is bound (collectively, the "MotivePower Material
Contracts"): (i) contracts with
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any current officer or director of MotivePower or any of its Subsidiaries; (ii)
contracts for the sale of any of the assets of MotivePower or any of its
Subsidiaries other than in the ordinary course of business or for the grant to
any person of any preferential rights to purchase any of its assets other than
inventory in the ordinary course of business; (iii) contracts containing
covenants of MotivePower or any of its Subsidiaries not to compete in any line
of business or with any person in any geographical area or covenants of any
other person not to compete with MotivePower or any of its Subsidiaries in any
line of business or in any geographical area; (iv) material indentures, credit
agreements, mortgages, promissory notes, and all contracts relating to the
borrowing of money; and (v) all other agreements contracts or instruments which,
in the reasonable opinion of MotivePower, are material to MotivePower or any of
its Subsidiaries. Except as set forth or as would not have a Material Adverse
Effect on MotivePower, all of the MotivePower Material Contracts are in full
force and effect and are the legal, valid and binding obligation of MotivePower
or its Subsidiaries, enforceable against them in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity). Except as
set forth in Section 3.26 of the MotivePower Disclosure Letter, neither
MotivePower nor any Subsidiary is in default in any material respect under any
MotivePower Material Contract nor, to the Knowledge of MotivePower, is any other
party to any MotivePower Material Contract in default thereunder in any material
respect except, in each case, for those defaults that, individually or in the
aggregate, would not have a Material Adverse Effect on MotivePower.
SECTION 3.27. WARRANTIES. To MotivePower's Knowledge, the accrual for
warranty related expenses as of December 31, 1998 reported in MotivePower's
audited financial statement contained in MotivePower's Form 10-K for the year
ended December 31, 1998, adequately reflects an amount required for satisfaction
of warranty claims due in respect of goods sold or services provided by
MotivePower or any of its Subsidiaries prior to such date. Such provision has
been established in accordance with GAAP. Except as set forth in Section 3.27 of
the MotivePower Disclosure Letter, neither MotivePower nor its Subsidiaries have
agreed to provide any express product or service warranties other than (a)
standard warranties, the terms of which have been provided to MotivePower and
identified as MotivePower's standard warranties, (b) warranties that products
are free from defects in workmanship or comply with standard or agreed
specifications that are extended for terms of no more than two (2) years each
and that expressly provide that cure is to be effected by repair or replacement
of the defective or noncomplying products and (c) other warranties that,
individually or in the aggregate, will not, if material claims are made
thereunder, have a Material Adverse Effect on MotivePower.
SECTION 3.28. POOLING LETTER. MotivePower has received a draft of a letter
(the "Draft Letter") from Deloitte & Touche LLP and addressed to MotivePower, a
copy of which has been delivered to WABCO, in which Deloitte & Touche LLP
concurs with the MotivePower management's conclusions that no conditions exist
related to MotivePower that would preclude MotivePower from accounting for the
Merger as a pooling of interests. MotivePower has also received a letter from
Deloitte & Touche LLP dated on or about September 26, 1999 and addressed to
MotivePower, a copy of which has been delivered to WABCO, whereby Deloitte &
Touche LLP states, subject to certain conditions precedent, that it expects to
able to issue the Draft Letter at the Closing.
ARTICLE IV
CONDUCT OF BUSINESS
SECTION 4.1. CONDUCT OF WABCO. WABCO agrees that from the date hereof until
the Effective Time, except as set forth in Section 4.1 of the WABCO Disclosure
Letter or as otherwise expressly contemplated by this Agreement or with the
prior written consent of MotivePower, WABCO and its Subsidiaries shall conduct
their business in the ordinary course consistent with past practice and shall
use their reasonable best efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing, from the date hereof until the Effective Time,
except as set forth in the WABCO Disclosure
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Letter or as expressly contemplated by this Agreement, without the prior written
consent of MotivePower, WABCO will not, and will not permit any of its
Subsidiaries to:
(a) adopt or propose any change in its charter, bylaws or equivalent
documents;
(b) amend any material term of any outstanding security of WABCO or any of
its Subsidiaries;
(c) merge or consolidate with any corporation, limited liability company,
partnership, trust, association, individual or any other entity or organization
("Person");
(d) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee, encumber, or authorize the issuance, sale, pledge, disposition,
grant, transfer, lease, license, guarantee or encumbrance of, (i) any shares of
capital stock of WABCO or any of its Subsidiaries (other than the issuance of
shares by a wholly-owned Subsidiary of WABCO to WABCO or another wholly-owned
Subsidiary of WABCO), or securities convertible or exchangeable or exercisable
for any shares of such capital stock, or any options, warrants or other rights
of any kind to acquire any shares of such capital stock or such convertible or
exchangeable securities, or any stock appreciation rights or limited stock
appreciation rights, or any other ownership interest of WABCO or any of its
Subsidiaries or (ii) except in the ordinary course of business and in a manner
consistent with past practice, any property or assets (tangible or intangible)
(including, without limitation, by merger, consolidation, spinoff or other
dispositions of stock or assets) of WABCO or any of its Subsidiaries, except in
the case of either clause (i) or (ii) (A) the issuance of WABCO Common Stock
upon the exercise of stock options issued pursuant to the WABCO Stock Plans
prior to the date hereof, (B) the award of options in connection with new
employee hires in the ordinary course of business and consistent with past
practice; provided, however, that no such new employee shall receive options to
purchase more than 5,000 shares of WABCO Common Stock, (C) pursuant to existing
obligations under contracts or agreements in force at the date of this Agreement
and (D) sales or other dispositions of property and assets of WABCO and its
Subsidiaries in an aggregate amount that does not exceed $1,000,000;
(e) create or incur any material Lien on any material asset (tangible or
intangible) other than in the ordinary course of business and consistent with
past practice;
(f) make any material loan, advance or capital contributions to or
investments in any Person other than loans, advances or capital contributions to
or investments in wholly-owned Subsidiaries of WABCO made in the ordinary course
and consistent with past practices;
(g) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock (except for dividends paid by any direct or indirect wholly-owned
Subsidiary of WABCO to WABCO or to any other direct or indirect wholly-owned
Subsidiary of WABCO and except for the regular quarterly cash dividend of $.01
per share of WABCO Common Stock with a record date consistent with prior record
dates) or enter into any agreement with respect to the voting of its capital
stock;
(h) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(i) (i) acquire (including, without limitation, by merger, consolidation or
acquisition of stock or assets) any interest in any Person or any division
thereof (other than a wholly-owned Subsidiary) or any assets, other than
acquisitions of assets in the ordinary course of business and consistent with
past practice and any other acquisitions for consideration that is not, in the
aggregate, in excess of $25,000,000, (ii) incur any indebtedness for borrowed
money or guarantee such indebtedness of another Person, or issue or sell any
debt securities or warrants or other rights to acquire any debt security of
WABCO or any of its Subsidiaries, except for (A) indebtedness for borrowed money
incurred in the ordinary course of business and consistent with past practice or
in connection with transactions otherwise permitted under this Section 4.1, (B)
other indebtedness for borrowed money with a maturity of not more than one year
in a principal amount not, in the aggregate, in excess of $5,000,000, and (C)
other indebtedness for borrowed money incurred under WABCO's credit agreement
for working capital purposes only, (iii) terminate, cancel, waive any rights
under or request any material change in, or agree to any material change in, any
material contract or agreement of WABCO
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or, except in connection with transactions permitted under this Section 4.1(i),
enter into any contract or agreement material to the business, results of
operations or financial condition of WABCO and its Subsidiaries, taken as a
whole, in either case other than in the ordinary course of business and
consistent with past practice, (iv) make or authorize any capital expenditure,
other than capital expenditures that are not, in the aggregate, in excess of
$5,000,000 from the date of this Agreement through September 30, 1999 and
$15,000,000 during any calendar quarter thereafter, for WABCO and its
Subsidiaries, taken as a whole (provided that any capital expenditure allowance
unused during any period may be carried forward to increase the capital
expenditure allowance for the succeeding period), or (v) enter into or amend any
contract, agreement, commitment or arrangement that, if fully performed, would
not be permitted under this Section 4.1(i);
(j) take any action with respect to accounting policies or procedures,
other than actions in the ordinary course of business and consistent with past
practice or except as required by changes in GAAP;
(k) make any material Tax election or take any position on any Tax Return
filed on or after the date of this Agreement or adopt any method therefor that
is inconsistent with elections made, positions taken or methods used in
preparing or filing similar Tax Returns in prior periods;
(l) except as may be required by contractual commitments or corporate
policies with respect to severance or termination pay in existence on the date
hereof, (i) increase the compensation payable or to become payable to its
officers or employees (except for increases in the ordinary course of business
and consistent with past practice in salaries or wages of employees of WABCO or
any of its Subsidiaries), (ii) establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, except as
contemplated by this Agreement or to the extent required by applicable law or
the terms of a collective bargaining agreement, (iii) increase the benefits
payable under any existing severance or termination pay policies or employment
or other agreements or (iv) take any affirmative action to accelerate the
vesting of any stock-based compensation;
(m) take any action that would, individually or in the aggregate,
reasonably be expected to make any representation and warranty of WABCO
hereunder untrue in any material respect at, or as of any time prior to, the
Effective Time; or
(n) agree or commit to do any of the foregoing.
SECTION 4.2. CONDUCT OF MOTIVEPOWER. MotivePower agrees that from the date
hereof until the Effective Time, except as set forth in Section 4.2 of the
MotivePower Disclosure Letter or as otherwise expressly contemplated by this
Agreement or with the prior written consent of WABCO, MotivePower and its
Subsidiaries shall conduct their business in the ordinary course consistent with
past practice and shall use their reasonable best efforts to preserve intact
their business organizations and relationships with third parties and to keep
available the services of their present officers and employees. Without limiting
the generality of the foregoing, from the date hereof until the Effective Time,
except as set forth in the MotivePower Disclosure Letter or as expressly
contemplated by this Agreement, without the prior written consent of WABCO,
MotivePower will not, and will not permit any of its Subsidiaries to:
(a) adopt or propose any change in its charter, bylaws or equivalent
documents;
(b) amend any material term of any outstanding security of MotivePower or
any of its Subsidiaries;
(c) merge or consolidate with any Person;
(d) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee, encumber, or authorize the issuance, sale, pledge, disposition,
grant, transfer, lease, license, guarantee or encumbrance of, (i) any shares of
capital stock of MotivePower or any of its Subsidiaries (other than the issuance
of shares by a wholly-owned Subsidiary of MotivePower to MotivePower or another
wholly-owned Subsidiary of MotivePower), or securities convertible or
exchangeable or exercisable for any shares of such capital stock, or any
options, warrants or other rights of any kind to acquire any shares of such
capital stock or such convertible or exchangeable securities, or any stock
appreciation rights or limited stock appreciation rights, or any other
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ownership interest of MotivePower or any of its Subsidiaries or (ii) except in
the ordinary course of business and in a manner consistent with past practice,
any property or assets (tangible or intangible) (including, without limitation,
by merger, consolidation, spinoff or other dispositions of stock or assets) of
MotivePower or any of its Subsidiaries, except in the case of either clause (i)
or (ii) (A) the issuance of MotivePower Common Stock upon the exercise of stock
options issued pursuant to the MotivePower Stock Plans prior to the date hereof,
(B) the award of options in connection with new employee hires in the ordinary
course of business and consistent with past practice; provided, however, that no
such new employee shall receive options to purchase more than 5,000 shares of
MotivePower Common Stock, (C) pursuant to existing obligations under contracts
or agreements in force at the date of this Agreement and (D) sales or other
dispositions of property and assets of MotivePower and its Subsidiaries in an
aggregate amount that does not exceed $1,000,000;
(e) create or incur any material Lien on any material asset (tangible or
intangible) other than in the ordinary course of business and consistent with
past practice;
(f) make any material loan, advance or capital contributions to or
investments in any Person other than loans, advances or capital contributions to
or investments in wholly-owned Subsidiaries of MotivePower made in the ordinary
course and consistent with past practices;
(g) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock (except for dividends paid by any direct or indirect wholly-owned
Subsidiary of MotivePower to MotivePower or to any other direct or indirect
wholly-owned Subsidiary of MotivePower) or enter into any agreement with respect
to the voting of its capital stock;
(h) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(i) (i) acquire (including, without limitation, by merger, consolidation or
acquisition of stock or assets) any interest in any Person or any division
thereof (other than a wholly-owned Subsidiary) or any assets, other than
acquisitions of assets in the ordinary course of business and consistent with
past practice and any other acquisitions for consideration that is not, in the
aggregate, in excess of $25,000,000, (ii) incur any indebtedness for borrowed
money or guarantee such indebtedness of another Person, or issue or sell any
debt securities or warrants or other rights to acquire any debt security of
MotivePower or any of its Subsidiaries, except for (A) indebtedness for borrowed
money incurred in the ordinary course of business and consistent with past
practice or in connection with transactions otherwise permitted under this
Section 4.2, (B) other indebtedness for borrowed money with a maturity of not
more than one year in a principal amount not, in the aggregate, in excess of
$5,000,000, and (C) other indebtedness for borrowed money incurred under
MotivePower's credit agreement for working capital purposes only, (iii)
terminate, cancel, waive any rights under or request any material change in, or
agree to any material change in, any material contract or agreement of
MotivePower or, except in connection with transactions permitted under this
Section 4.2(i), enter into any contract or agreement material to the business,
results of operations or financial condition of MotivePower and its
Subsidiaries, taken as a whole, in either case other than in the ordinary course
of business and consistent with past practice, (iv) make or authorize any
capital expenditure, other than capital expenditures that are not, in the
aggregate, in excess of $5,000,000 from the date of this Agreement through
September 30, 1999 and $15,000,000 during any calendar quarter thereafter, for
MotivePower and its Subsidiaries, taken as a whole (provided that any capital
expenditure allowance unused during any period may be carried forward to
increase the capital expenditure allowance for the succeeding period), or (v)
enter into or amend any contract, agreement, commitment or arrangement that, if
fully performed, would not be permitted under this Section 4.2(i);
(j) take any action with respect to accounting policies or procedures,
other than actions in the ordinary course of business and consistent with past
practice or except as required by changes in GAAP;
(k) make any material Tax election or take any position on any Tax Return
filed on or after the date of this Agreement or adopt any method therefor that
is inconsistent with elections made, positions taken or methods used in
preparing or filing similar Tax Returns in prior periods;
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(l) except as may be required by contractual commitments or corporate
policies with respect to severance or termination pay in existence on the date
hereof, (i) increase the compensation payable or to become payable to its
officers or employees (except for increases in the ordinary course of business
and consistent with past practice in salaries or wages of employees of
MotivePower or any of its Subsidiaries), (ii) establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift, compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any director, officer or employee, except as
contemplated by this Agreement or to the extent required by applicable law or
the terms of a collective bargaining agreement, (iii) increase the benefits
payable under any existing severance or termination pay policies or employment
or other agreements or (iv) take any affirmative action to accelerate the
vesting of any stock-based compensation;
(m) take any action that would, individually or in the aggregate,
reasonably be expected to make any representation and warranty of MotivePower
hereunder untrue in any material respect at, or as of any time prior to, the
Effective Time; or
(n) agree or commit to do any of the foregoing.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. NO SOLICITATION. (a) WABCO and MotivePower each agree that it
shall not, nor shall it permit any of its Subsidiaries to, nor shall it
authorize or permit any officer, director or employee or any investment banker,
attorney, accountant, agent or other advisor or representative of WABCO or
MotivePower, as the case may be, or any of their respective Subsidiaries to, (i)
solicit, initiate or knowingly encourage the submission of any Takeover
Proposal, (ii) enter into any agreement with respect to a Takeover Proposal or
(iii) participate in any discussions or negotiations regarding, or furnish to
any Person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal; provided, however,
that on or prior to 5:00 p.m., eastern time on the 45th calendar day after the
date hereof or if earlier, the date of the applicable Shareholders Meeting, to
the extent required by the fiduciary obligations of the Board of Directors of
WABCO or MotivePower, as the case may be, as determined in good faith by a
majority of the members thereof (after consultation with outside legal counsel),
such party may, in response to unsolicited requests therefor, participate in
discussions or negotiations with, or furnish information pursuant to a
confidentiality agreement no less favorable to such party than the
Confidentiality Agreement (as defined in Section 5.4) to, any Person who
indicates a willingness to make a Superior Proposal. Each of WABCO and
MotivePower immediately shall cease and cause to be terminated all existing
discussions or negotiations with any Persons conducted heretofore with respect
to, or that could reasonably be expected to lead to, any Takeover Proposal. For
all purposes of this Agreement, (i) "Takeover Proposal" means any proposal for a
merger, consolidation, share exchange, business combination or other similar
transaction involving WABCO or MotivePower, as the case may be, or any of their
respective Significant Subsidiaries (as hereinafter defined) or any proposal or
offer to acquire, directly or indirectly, an equity interest in, any voting
securities of, or a substantial portion of the assets of, WABCO or MotivePower,
as the case may be, or any of their respective Significant Subsidiaries, other
than the transactions contemplated by this Agreement, (ii) "Superior Proposal"
means a bona fide written proposal made by a third party to acquire all of the
outstanding equity interests in or substantially all of the assets of WABCO or
MotivePower, as the case may be, pursuant to a tender or exchange offer, a
merger, a share exchange, a sale of all or substantially all its assets or
otherwise on terms which a majority of the members of the Board of Directors of
WABCO or MotivePower, as the case may be, determines in good faith (taking into
account the advice of independent financial advisors) to be more favorable to
WABCO or MotivePower, as the case may be, and their respective stockholders than
the Merger (and any revised proposal made by the other party to this Agreement)
and for which financing, to the extent required, is then fully committed, and
(iii) a "Significant Subsidiary" means any Subsidiary that would constitute a
"significant subsidiary" within the meaning of Rule 1-02 of Regulation S-X of
the SEC.
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(b) Except as otherwise provided in this Section 5.1(b), neither the Board
of Directors of WABCO nor any committee thereof shall (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to MotivePower, the approval
or recommendation by the Board of Directors of WABCO or any such committee of
this Agreement or the Merger or (ii) approve or recommend, or propose to approve
or recommend, any Takeover Proposal. Except as otherwise provided in this
Section 5.1(b), neither the Board of Directors of MotivePower nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to WABCO, the approval or recommendation by the Board of
Directors of MotivePower or any such committee of this Agreement or the Merger
or (ii) approve or recommend, or propose to approve or recommend, any Takeover
Proposal. Notwithstanding the foregoing, (i) the Board of Directors of WABCO or
MotivePower, to the extent required by its fiduciary obligations, as determined
in good faith by a majority of the members thereof (after consultation with
outside legal counsel), may approve or recommend a Superior Proposal or withdraw
or modify its approval or recommendation of this Agreement or the Merger and
(ii) nothing contained in this Agreement shall prevent the Board of Directors of
WABCO or MotivePower from complying with Rule 14d-9 and Rule 14e-2 promulgated
under the Exchange Act with regard to a Takeover Proposal.
(c) WABCO and MotivePower shall each notify the other party promptly (but
in no event later than 24 hours) after receipt by WABCO or MotivePower (or its
advisors), respectively, of any Takeover Proposal or any request for nonpublic
information in connection with a Takeover Proposal or for access to the
properties, books or records of such party by any Person or entity that informs
such party that it is considering making, or has made, a Takeover Proposal. Such
notice to the other party shall be made orally and in writing and shall indicate
the identity of the offeror and the terms and conditions of such proposal,
inquiry or contact. Such party shall keep the other party informed, on a current
basis, of the status and details (including amendments or proposed amendments)
of any such Takeover Proposal or request and the status of any negotiations or
discussions.
(d) During the period from the date of this Agreement through the Effective
Time, neither WABCO nor MotivePower shall terminate, amend, modify or waive any
provision of any confidentiality, standstill or similar agreement to which
WABCO, MotivePower or any of their respective Subsidiaries is a party and which
relates to any transaction that could constitute a Takeover Proposal or that has
as a counterparty any Person making a Takeover Proposal. During such period,
each of WABCO and MotivePower agrees to enforce, to the fullest extent permitted
under applicable law, the provisions of any such agreements, including using its
best efforts to obtain injunctions to prevent any threatened or actual breach of
such agreements and to enforce specifically the terms and any provision thereof
in any court of the United States or any state thereof having jurisdiction.
SECTION 5.2. JOINT PROXY STATEMENT; REGISTRATION STATEMENT. (a) As promptly
as practicable after the execution of this Agreement, MotivePower and WABCO
shall prepare and file with the SEC the Joint Proxy Statement, and WABCO shall
prepare and file with the SEC the Registration Statement (in which the Joint
Proxy Statement will be included). MotivePower will be given the opportunity to
review and comment upon the Registration Statement. MotivePower and WABCO shall
use their reasonable best efforts to cause the Registration Statement to become
effective under the Securities Act as soon after such filing as practicable. The
Joint Proxy Statement shall include the recommendation of the Board of Directors
of WABCO in favor of approval and adoption of this Agreement and the Merger,
except to the extent the Board of Directors of WABCO, in accordance with the
terms of Section 5.1(b), shall have withdrawn or modified its approval or
recommendation of this Agreement or the Merger, and the recommendation of the
Board of Directors of MotivePower in favor of approval and adoption of this
Agreement and the Merger, except to the extent the Board of Directors of
MotivePower, in accordance with the terms of Section 5.1(b), shall have
withdrawn or modified its approval or recommendation of this Agreement and of
the Merger. MotivePower shall use its reasonable best efforts to cause the Joint
Proxy Statement to be mailed to its shareholders, and WABCO shall use its
reasonable best efforts to cause the Joint Proxy Statement to be mailed to its
stockholders, in each case as promptly as practicable after the Registration
Statement becomes effective.
(b) MotivePower and WABCO shall make all necessary filings with respect to
the Merger and the transactions contemplated thereby under the Securities Act
and the Exchange Act and applicable "Blue Sky"
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laws and the rules and regulations thereunder. No filing of, or amendment or
supplement to, the Registration Statement or the Joint Proxy Statement will be
made by MotivePower or WABCO without providing the other party the opportunity
to review and comment thereon. WABCO will advise MotivePower, promptly after it
receives notice thereof and in any event within 24 hours thereof, of the time
when the Registration Statement has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of the WABCO Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Registration Statement or comments thereon and responses
thereto or requests by the SEC for additional information. If at any time prior
to the Effective Time any information relating to MotivePower or WABCO, or any
of their respective affiliates, officers or directors, should be discovered by
MotivePower or WABCO which should be set forth in an amendment or supplement to
any of the Registration Statement or the Joint Proxy Statement, so that any of
such documents would not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the shareholders of MotivePower and WABCO.
SECTION 5.3. SHAREHOLDERS MEETINGS. WABCO shall duly call, give notice of,
convene and hold a meeting of its stockholders (the "WABCO Stockholders
Meeting") for the purpose of voting on the adoption and approval of this
Agreement and the Merger and, through its Board of Directors, will recommend to
its stockholders adoption and approval of this Agreement and the Merger, except
to the extent that the Board of Directors of WABCO shall have withdrawn or
modified its approval or recommendation of this Agreement and the Merger as
permitted by Section 5.1(b). MotivePower shall duly call, give notice of,
convene and hold a meeting of its shareholders (the "MotivePower Shareholders
Meeting" and, together with the WABCO Stockholders Meeting, the "Shareholders
Meetings") for the purpose of voting on the adoption and approval of this
Agreement and the Merger and, through its Board of Directors, will recommend to
its shareholders adoption and approval of this Agreement and the Merger, except
to the extent that the Board of Directors of MotivePower shall have withdrawn or
modified its approval or recommendation of this Agreement and the Merger as
permitted by Section 5.1(b). In a manner consistent with their fiduciary duties
to their respective stockholders and as they may reasonably determine to be
consistent with the objective of consummating the Merger, MotivePower and WABCO
will use their reasonable best efforts to hold the MotivePower Shareholders
Meeting and the WABCO Stockholders Meeting on the same date and as soon as
practicable after the date hereof. Except to the extent that the Board of
Directors of WABCO shall have withdrawn or modified its approval or
recommendation as aforesaid, WABCO will use its reasonable best efforts to
solicit from its stockholders proxies in favor of adoption and approval of this
Agreement and the Merger. Except to the extent that the Board of Directors of
MotivePower shall have withdrawn or modified its approval or recommendation as
aforesaid, MotivePower will use its reasonable best efforts to solicit from its
shareholders proxies in favor of adoption and approval of this Agreement and the
Merger. Notwithstanding anything to the contrary in this Agreement, this
Agreement shall be submitted to WABCO's stockholders at the WABCO Stockholders
Meeting whether or not the Board of Directors of WABCO determines at any time
that this Agreement is no longer advisable and recommends that the stockholders
reject it. Notwithstanding anything to the contrary in this Agreement, this
Agreement shall be submitted to MotivePower's shareholders at the MotivePower
Shareholders Meeting whether or not the Board of Directors of MotivePower
determines at any time that this Agreement is no longer advisable and recommends
that shareholders reject it.
SECTION 5.4. ACCESS TO INFORMATION. Upon reasonable notice and subject to
applicable law and other legal obligations, each of WABCO and MotivePower shall,
and shall cause each of its Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of the other, access, during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, each of WABCO and MotivePower
shall, and shall cause each of its Subsidiaries to, furnish promptly to the
other (a) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements
of federal securities laws and (b) all other information concerning its
business, properties and personnel as such other party may reasonably request.
Unless otherwise required by law, the parties will hold any such information
which is nonpublic in
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confidence in accordance with the Mutual Confidentiality Agreement dated as of
March 15, 1999 between MotivePower and WABCO (the "Confidentiality Agreement").
No information or knowledge obtained in any investigation pursuant to this
Section 5.4 shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
SECTION 5.5. NOTICES OF CERTAIN EVENTS. (a) MotivePower and WABCO shall
promptly notify each other of:
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement, the WABCO Option Agreement or
the MotivePower Option Agreement; and
(ii) any notice or other communication from any Governmental Entity in
connection with the transactions contemplated by this Agreement, the WABCO
Option Agreement or the MotivePower Option Agreement.
(b) WABCO shall promptly notify MotivePower of any actions, suits, claims,
investigations or proceedings commenced or, to the Knowledge of WABCO,
threatened against, relating to or involving or otherwise affecting WABCO or any
of its Subsidiaries which, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Section 2.10 or which relate to
the consummation of the transactions contemplated by this Agreement, the WABCO
Option Agreement or the MotivePower Option Agreement. In addition, WABCO shall
promptly notify MotivePower of (a) (i) it becoming aware of any fact or event
which would be reasonably likely to demonstrate that any representation or
warranty of any party hereto contained in this Agreement was or is untrue or
inaccurate in any material respect as of the date of this Agreement or (ii) the
occurrence or non-occurrence of any fact or event which would be reasonably
likely to cause any material covenant, condition or agreement of any party
hereto under this Agreement not to be complied with or satisfied in all material
respects and (b) any failure of any party hereto to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder in any material respect; provided, however, that no such notification
shall affect the representations or warranties of any party or the conditions to
the obligations of any party hereunder.
(c) MotivePower shall promptly notify WABCO of any actions, suits, claims,
investigations or proceedings commenced or, to the Knowledge of MotivePower,
threatened against, relating to or involving or otherwise affecting MotivePower
or any of its Subsidiaries which, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 3.10 or
which relate to the consummation of the transactions contemplated by this
Agreement, the WABCO Option Agreement or the MotivePower Option Agreement. In
addition, MotivePower shall promptly notify WABCO of (a) (i) it becoming aware
of any fact or event which would be reasonably likely to demonstrate that any
representation or warranty of any party hereto contained in this Agreement was
or is untrue or inaccurate in any material respect as of the date of this
Agreement or (ii) the occurrence or non-occurrence of any fact or event which
would be reasonably likely to cause any material covenant, condition or
agreement of any party hereto under this Agreement not to be complied with or
satisfied in all material respects and (b) any failure of any party hereto to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder in any material respect; provided, however, that no
such notification shall affect the representations or warranties of any party or
the conditions to the obligations of any party hereunder.
SECTION 5.6. APPROPRIATE ACTION; CONSENTS; FILINGS. (a) (i) Subject to the
terms and conditions of this Agreement and except to the extent that (x) the
Board of Directors of WABCO shall have withdrawn or modified its approval or
recommendation of this Agreement or the Merger or (y) the Board of Directors of
MotivePower shall have withdrawn or modified its approval or recommendation of
this Agreement or the Merger, in each case as permitted by Section 5.1(b),
MotivePower and WABCO shall use their reasonable best efforts to (A) take, or
cause to be taken, all actions, and do, or cause to be done, all things,
necessary, proper or advisable under applicable laws to consummate the Merger
and the other transactions contemplated by this Agreement as promptly as
practicable, (B) obtain from any Governmental Entity any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be obtained or
made by MotivePower and WABCO or any of their Subsidiaries, or to avoid any
action or proceeding by any
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Governmental Entity (including, without limitation, those in connection with the
HSR Act), in connection with the authorization, execution and delivery of this
Agreement and the consummation of the transactions contemplated herein, and (C)
make all necessary filings, and thereafter make any other required submissions,
with respect to this Agreement and the Merger required under the Securities Act,
the Exchange Act and any other applicable law; provided, however, that
MotivePower and WABCO shall cooperate with each other in connection with the
making of all such filings, including providing copies of all such documents to
the non-filing party and its advisors prior to filing and, if requested,
accepting all reasonable additions, deletions or changes suggested in connection
therewith. MotivePower and WABCO shall furnish to each other all information
required for any application or other filing to be made pursuant to the rules
and regulations of any applicable law in connection with the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement and except to the extent that (x) the Board of Directors of WABCO
shall have withdrawn or modified its approval or recommendation of this
Agreement or the Merger or (y) the Board of Directors of MotivePower shall have
withdrawn or modified its approval or recommendation of this Agreement or the
Merger, in each case as permitted by Section 5.1(b), MotivePower and WABCO shall
not take any action, or refrain from taking any action, the effect of which
would be to delay or impede the ability of MotivePower and WABCO to consummate
the transactions contemplated by this Agreement, unless in such party's
reasonable judgment, taking such action is consistent with achieving the
ultimate objective of consummating the Merger.
(ii) Notwithstanding any other provision of this Agreement and except as
provided in Section 5.6(b), in connection with seeking any approval of a
Governmental Entity relating to this Agreement or the consummation of the
transactions contemplated hereby, without the other party's prior written
consent, neither party shall, and neither party shall be required to, commit to
any divestiture transaction, agree to sell or hold separate, before or after the
Effective Time, any of MotivePower's or WABCO's businesses, product lines,
properties or assets, or agree to any changes or restrictions in the operation
of such businesses, product lines, properties or assets, in any such case if
such divestiture or such restrictions would, individually or in the aggregate,
be reasonably expected to have a material adverse effect on the financial
condition or results of operations of MotivePower and its Subsidiaries, taken as
a whole, after giving effect to the Merger.
(b) In furtherance and not in limitation of the foregoing, the parties
shall use reasonable best efforts to resolve such objections, if any, as may be
asserted with respect to the transactions contemplated by this Agreement under
any antitrust, competition or trade regulatory laws, rules or regulations of any
domestic or foreign government or governmental authority or any multinational
authority ("Antitrust Laws"). If any suit is instituted challenging any of the
transactions contemplated by this Agreement as violative of any Antitrust Law,
the parties shall take such action (including without limitation, agreeing to
hold separate or to divest any of the businesses, product lines or assets of
WABCO or its Subsidiaries or of MotivePower or its Subsidiaries (a "Business
Unit") (but only if the Business Units required to be held separate or divested
do not in the aggregate have a fair market value of more than $25,000,000 or
revenues for the most recently completed 12 months of more than $25,000,000) as
may be required (a) by the applicable government or governmental or
multinational authority (including, without limitation, the Antitrust Division
of the United States Department of Justice or the Federal Trade Commission) in
order to resolve such objections as such government or authority may have to
such transactions under such Antitrust Law, or (b) by any domestic or foreign
court or similar tribunal, in any suit brought by a private party or
governmental or multinational authority challenging the transactions
contemplated by this Agreement as violative of any Antitrust Law, in order to
avoid the entry of, or to effect the dissolution of, any injunction, temporary
restraining order or other order that has the effect of preventing the
consummation of any of such transactions. The entry by a court, in any suit
brought by a private party or governmental or multinational authority
challenging the transactions contemplated by this Agreement as violative of any
Antitrust Law, of an order or decree permitting the transactions contemplated by
this Agreement, but requiring that any Business Unit of WABCO or its
Subsidiaries or MotivePower or its Subsidiaries be divested or held separate
(but only if such Business Units required to be held separate or divested do not
in the aggregate have a fair market value of more than $25,000,000 or revenues
for the most recently completed 12 months of more than $25,000,000), or that
would otherwise limit the Surviving Corporation's freedom of action with respect
to, or its ability to retain,
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the Subsidiaries, other assets or businesses of the Constituent Corporations,
shall not be deemed a failure to satisfy the conditions specified in Section
6.1(b) or Section 6.1(c) hereof.
(c) (i) MotivePower and WABCO shall give, or shall cause their respective
Subsidiaries to give, any notices to third parties, and use, and cause their
respective Subsidiaries to use, their reasonable best efforts to obtain any
third party consents (A) necessary, proper or advisable in order to consummate
the transactions contemplated by this Agreement or (B) required to prevent a
Material Adverse Effect on MotivePower or a Material Adverse Effect on WABCO
from occurring prior to or after the Effective Time.
(ii) In the event that either party shall fail to obtain any third party
consent described in Section 5.6(b)(i) above, such party shall use its
reasonable best efforts, and shall take any such actions reasonably requested by
the other party hereto, to minimize any adverse effect upon MotivePower and
WABCO, their respective Subsidiaries, and their respective businesses resulting,
or which could reasonably be expected to result after the Effective Time, from
the failure to obtain such consent.
SECTION 5.7. PUBLIC DISCLOSURE. MotivePower and WABCO shall consult with
each other before issuing any press release or otherwise making any public
statement with respect to the Merger or this Agreement or the transactions
contemplated hereby or press releases containing any forward-looking statements
and shall not issue any such press release or make any such public statement
prior to such consultation and the receipt of approval therefor by the other
party, which consent shall not be unreasonably withheld, except as may be
required by law, court process or by stock exchange rules.
SECTION 5.8. REORGANIZATION; POOLING OF INTERESTS. MotivePower shall make
(to the extent it can truthfully do so) the representations of MotivePower
contained in a certificate of MotivePower (the "MotivePower Tax Certificate")
substantially to the effect of the MotivePower Tax Certificate contained in the
MotivePower Disclosure Letter, and WABCO shall make (to the extent it can
truthfully do so) the representations of WABCO contained in a certificate of
WABCO (the "WABCO Tax Certificate") substantially to the effect of the WABCO Tax
Certificate contained in the WABCO Disclosure Letter.
(b) Each of WABCO and MotivePower agrees to take, together with their
respective accountants, all actions reasonably necessary in order to obtain a
favorable determination (if required) from the SEC that the Merger may be
accounted for as a pooling of interests in accordance with generally accepted
accounting principles.
SECTION 5.9. COMFORT LETTERS. (a) WABCO shall use its reasonable best
efforts to cause to be delivered to MotivePower "comfort" letters of Arthur
Andersen LLP, WABCO's independent public accountants, dated the date on which
the Registration Statement shall become effective and as of the Effective Time,
and addressed to WABCO and MotivePower, in form and substance reasonably
satisfactory to MotivePower and reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
(b) MotivePower shall use its reasonable best efforts to cause to be
delivered to WABCO "comfort" letters of Deloitte & Touche LLP, MotivePower's
independent public accountants, dated the date on which the Registration
Statement shall become effective and as of the Effective Time, and addressed to
WABCO and MotivePower, in form and substance reasonably satisfactory to WABCO
and reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement.
SECTION 5.10. COMPLIANCE WITH THE SECURITIES ACT AND POOLING OF INTERESTS
RESTRICTIONS; TERMINATION OF VOTING TRUST AND STOCKHOLDERS AGREEMENT. (a) Within
10 business days after the date hereof, MotivePower shall cause to be prepared
and delivered to WABCO a list (reasonably satisfactory to counsel for WABCO)
identifying all persons who may be, at the time of the MotivePower Shareholders
Meeting, deemed to be "affiliates" of MotivePower as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145
Affiliates"). MotivePower shall use its reasonable best efforts to cause each
person who is identified as a Rule 145 Affiliate in such list to deliver to
WABCO within 30 days of the date hereof a written agreement in substantially the
form of Exhibit 5.10(a) hereto, executed by each of such persons identified in
the foregoing list (which agreements shall supersede any agreements
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entered into pursuant to Section 5.10(a) of the Original Merger Agreement).
WABCO shall publish, in a manner that satisfies the "publication" requirements
under applicable SEC rules or accounting releases, financial results (including
combined sales and net income) covering at least 30 days of post-Merger
operations no later than 15 days following the first month-end that is more than
30 days after the Effective Date.
(b) Within 10 business days after the date hereof, WABCO shall deliver to
MotivePower a list (reasonably satisfactory to counsel for MotivePower)
identifying those persons who may be, at the time of the WABCO Stockholders
Meeting, affiliates of WABCO under applicable SEC accounting releases with
respect to pooling of interests accounting treatment. WABCO shall use its
reasonable best efforts to enter into a written agreement in substantially the
form of Exhibit 5.10(b) hereto within 30 days of the date hereof with each of
such persons identified in the foregoing list (which agreements shall supersede
any agreements entered into pursuant to Section 5.10(b) of the Original Merger
Agreement).
(c) Prior to the Effective Time, WABCO shall cause the Voting Trust created
under the Second Amended WABCO Voting Trust/Disposition Agreement, dated as of
December 13, 1995 (the "Voting Trust") and the Amended and Restated Stockholders
Agreement, dated as of March 5, 1997, among the Voting Trust, Harvard Private
Capital Holdings, Inc., American Industrial Partners Capital Fund II, L.P.,
Vestar Equity Partners, L.P. and WABCO to be terminated, unless the accountants
for MotivePower and WABCO mutually agree that such action is not necessary to
preserve the treatment of the Merger as "pooling of interests" for accounting
purposes.
SECTION 5.11. LISTING OR QUOTATION OF STOCK. WABCO shall use its reasonable
best efforts to cause the shares of WABCO Common Stock to be issued in the
Merger to be approved for listing on the NYSE on or prior to the Closing Date,
subject to official notice of issuance.
SECTION 5.12. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) After the
Effective Time, the Surviving Corporation shall, to the same extent and on the
same terms and conditions provided for in the MotivePower Articles of
Incorporation and the MotivePower By-Laws, in each case as of the date of this
Agreement, to the extent consistent with applicable law, indemnify and hold
harmless, each present and former director or officer of MotivePower and each
Subsidiary of MotivePower (collectively, the "Indemnified Parties") against all
costs and expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and settlement amounts paid in connection
with any claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), whether civil, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as an officer or director, in each case occurring before the Effective
Time (including the transactions contemplated by this Agreement).
(b) For a period of six years from the Effective Time, the Surviving
Corporation shall provide to MotivePower's current directors and officers
liability insurance protection substantially equivalent in kind and scope as
that provided by MotivePower's current directors' and officers' liability
insurance policies (copies of which have been made available to WABCO);
provided, however, that in no event shall the Surviving Corporation be required
to expend in any one year an amount in excess of 150% of the annual premiums
currently paid by MotivePower for such insurance; provided, further, that if
during such period the annual premiums for such comparable insurance coverage
exceed such amount, the Surviving Corporation shall be obligated to provide a
policy which, in the reasonable judgment of the Surviving Corporation, provides
the best coverage available for a cost not exceeding such amount.
SECTION 5.13. MOTIVEPOWER STOCK OPTIONS; MOTIVEPOWER SAR: MOTIVEPOWER STOCK
ACCOUNT. At the Effective Time, each MotivePower Stock Option, vested or
unvested, which is outstanding immediately prior to the Effective Time pursuant
to the MotivePower Stock Plans in effect on the date hereof shall become and
represent an option to purchase the number of shares of WABCO Common Stock (a
"Substitute Option") (decreased to the nearest full share) determined by
multiplying (i) the number of shares of MotivePower Common Stock subject to such
MotivePower Stock Option immediately prior to the Effective Time by (ii) the
Exchange Ratio, at an exercise price per share of WABCO Common Stock (rounded up
to the nearest cent), equal to the exercise price per share of MotivePower
Common Stock immediately prior to the Effective Time divided by the Exchange
Ratio. It is the intention of the parties that the above formula
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shall be applied in a manner consistent with Section 424(a) of the Code. At the
Effective Time, the MotivePower SAR, if outstanding immediately prior to the
Effective Time, shall become and represent an SAR exercisable for the number of
shares of WABCO Common Stock (the "Substitute SAR") (decreased to the nearest
full share) determined by multiplying (i) the number of shares of MotivePower
Common Stock for which such MotivePower SAR is exercisable immediately prior to
the Effective Time by (ii) the Exchange Ratio. At the Effective Time, the
Company stock account under the MotivePower Deferred Compensation Plan (the
"MotivePower Stock Account") immediately prior to the Effective Time shall
become and represent an account representing the number of shares of WABCO
Common Stock (the "Substitute Stock Account") (decreased to the nearest full
share) determined by multiplying (i) the number of shares of MotivePower Common
Stock, subject to such MotivePower Stock Account immediately prior to the
Effective Time by (ii) the Exchange Ratio. WABCO shall pay cash to holders of
MotivePower Stock Options and the MotivePower SAR in lieu of issuing fractional
shares of WABCO Common Stock upon the exercise of Substitute Options and the
Substitute SAR for shares of WABCO Common Stock and the payment of amounts in
the Substitute Stock Account, unless in the judgment of WABCO such payment would
adversely affect the ability to account for the Merger under the pooling of
interests method. After the Effective Time, except as provided above in this
Section 5.13, each Substitute Option and the Substitute SAR shall be exercisable
upon the same terms and conditions as were applicable under the related
MotivePower Stock Option or the MotivePower SAR, as the case may be, at the
Effective Time. WABCO shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of WABCO Common Stock for delivery upon
exercise of MotivePower Stock Options and the MotivePower SAR and distribution
of the Substitute Stock Account. Promptly following the Effective Time of the
Merger, WABCO shall file a registration statement on Form S-8 or another
appropriate form with respect to the shares of WABCO Common Stock subject to
such Substitute Options, Substitute SAR and Substitute Stock Account and shall
use its reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
Substitute Options, Substitute SAR and Substitute Stock Account remain
outstanding. The Board of Directors of WABCO shall prior to the Effective Time
adopt resolutions specifically approving the issuance of shares of WABCO Common
Stock and the grant of Substitute Options to each person who will become a
director or officer of WABCO at the Effective Time, such specific approvals to
be given for the purpose of exempting such issuances of WABCO Common Stock and
such grants of Substitute Options under Rule 16b-3 promulgated under the
Exchange Act. With respect to those individuals who subsequent to the Merger
will be subject to the reporting requirements under Section 16(a) of the
Exchange Act, where applicable, WABCO shall administer MotivePower Option Plans
in a manner that complies with Rule 16b-3 promulgated under the Exchange Act to
the extent MotivePower Option Plans complied with such rule prior to the Merger.
MotivePower and WABCO shall take all necessary action to implement or to provide
for the implementation of the provisions of this Section 5.13.
SECTION 5.14. BENEFIT PLANS TO BE HONORED. (a) From and after the Effective
Time, WABCO shall honor and shall cause the MotivePower Subsidiaries to honor
all WABCO Plans, all MotivePower Plans and all employment agreements entered
into by WABCO or MotivePower (or their Subsidiaries) prior to the date hereof;
provided, however, that nothing in this Agreement shall be interpreted as
limiting the power of WABCO or the MotivePower Subsidiaries to amend or
terminate any MotivePower Plan or any other individual employee benefit plan,
program, agreement or policy or as requiring WABCO to offer to continue (other
than as required by its terms) any written employment contract.
(b) All individuals who are employees of MotivePower or a MotivePower
Subsidiary at the Effective Time (the "Affected Employees") shall be given
credit for all service with MotivePower and its Subsidiaries (or service
credited by MotivePower or such Subsidiaries) under all employee benefit plans
and arrangements currently maintained by WABCO or any of its Subsidiaries in
which they become participants for purposes of eligibility, vesting, level of
participant contribution and benefit accruals (except benefit accruals under
defined benefit pension plans) to the same extent as if rendered to WABCO or any
of its Subsidiaries. WABCO shall cause to be waived any pre-existing condition
limitation under its welfare plans that might otherwise apply to an Affected
Employee who may become covered by such plans. WABCO agrees to recognize (or
cause to be recognized) the dollar amount of all expenses incurred by Affected
Employees during the calendar year in
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which the Effective Time occurs for purposes of satisfying the calendar year
deductions and co-payment limitations for such year under the relevant benefit
plans of WABCO and its Subsidiaries that may cover such employees.
SECTION 5.15. STATE TAKEOVER LAWS. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby, the
MotivePower Option Agreement or the WABCO Option Agreement, MotivePower and
WABCO and their respective Boards of Directors shall use their reasonable best
efforts to grant such approvals and take such actions as are necessary so that
the transactions contemplated hereby and thereby may be consummated as promptly
as practicable on the terms contemplated hereby and thereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby and thereby.
SECTION 5.17. TRANSFER TAXES. MotivePower or, after the Effective Time, the
Surviving Corporation on behalf of MotivePower, shall pay or cause to be paid
any real property transfer, gains or similar taxes imposed as a result of the
Merger.
ARTICLE VI
CONDITIONS TO MERGER
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to this Agreement to consummate the Merger and the
transactions contemplated hereby shall be subject to the satisfaction of the
following conditions:
(a) Shareholder Approvals. (i) This Agreement and the Merger shall have
been approved and adopted by the stockholders of WABCO, and (ii) this Agreement
and the Merger shall have been approved and adopted by the shareholders of
MotivePower.
(b) Waiting Periods; Approvals. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and any other approvals required under applicable analogous foreign
laws shall have been obtained, except where the failure to obtain such approval
would not, individually or in the aggregate, have a Material Adverse Effect on
MotivePower and its Subsidiaries, taken as a whole, after giving effect to the
Merger.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint shall prohibit the
consummation of the Merger.
(d) Pooling of Interests. WABCO and MotivePower shall each have received a
letter from their respective independent accountants addressed to WABCO or
MotivePower, as the case may be, to the effect that the Merger will qualify for
"pooling of interests" accounting treatment.
(e) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
(f) Listing of Stock. The shares of WABCO Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE, subject to official
notice of issuance.
SECTION 6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF MOTIVEPOWER. The
obligations of MotivePower to consummate the Merger and the transactions
contemplated hereby shall be subject to the satisfaction of the following
additional conditions, any of which may be waived in writing exclusively by
MotivePower:
(a) Representations and Warranties. The representations and warranties of
WABCO set forth in this Agreement that are qualified as to materiality shall be
true and correct as of the Closing Date and the representations and warranties
that are not so qualified, taken together, shall be true and correct in all
material respects, in each case as though made on and as of the Closing Date
(except to the extent any such
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representation or warranty expressly speaks as of an earlier date); and
MotivePower shall have received a certificate signed on behalf of WABCO by an
executive officer of WABCO to such effect.
(b) Performance of Obligations. WABCO shall have performed in all material
respects each obligation and agreement and shall have complied in all material
respects with each covenant required to be performed and complied with by it
under this Agreement at or prior to the Effective Time; and MotivePower shall
have received a certificate signed on behalf of WABCO by an executive officer of
WABCO to such effect.
(c) Tax Opinion. MotivePower shall have received an opinion of Sidley &
Austin, in form and substance reasonably satisfactory to MotivePower, dated the
Effective Time, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing as of the Effective Time, for federal income
tax purposes:
(i) the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and WABCO and MotivePower will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by MotivePower or WABCO as a
result of the Merger;
(iii) no gain or loss will be recognized by the shareholders of
MotivePower upon the conversion of their shares of MotivePower Common Stock
into shares of WABCO Common Stock pursuant to the Merger, except with
respect to cash, if any, received in lieu of fractional shares of WABCO
Common Stock;
(iv) the aggregate tax basis of the shares of WABCO Common Stock
received in exchange for shares of MotivePower Common Stock pursuant to the
Merger (including a fractional share of WABCO Common Stock for which cash
is paid) will be the same as the aggregate tax basis of such shares of
MotivePower Common Stock;
(v) the holding period for shares of WABCO Common Stock received in
exchange for shares of MotivePower Common Stock pursuant to the Merger will
include the holder's holding period for such shares of MotivePower Common
Stock, provided such shares of MotivePower Common Stock were held as
capital assets by the holder at the Effective Time; and
(vi) a stockholder of MotivePower who receives cash in lieu of a
fractional share of WABCO Common Stock will recognize gain or loss equal to
the difference, if any, between such stockholder's basis in the fractional
share (determined under clause (iv) above) and the amount of cash received.
In rendering such opinion, Sidley & Austin may rely as to matters of fact upon
the representations contained herein and may receive and rely upon
representations from MotivePower, WABCO, and others, including representations
from MotivePower to the effect of the representations in the MotivePower Tax
Certificate and representations from WABCO to the effect of the representations
in the WABCO Tax Certificate.
SECTION 6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF WABCO. The obligation
of WABCO to effect the Merger is subject to the satisfaction of each of the
following additional conditions, any of which may be waived in writing
exclusively by WABCO:
(a) Representations and Warranties. The representations and warranties of
MotivePower set forth in this Agreement that are qualified as to materiality
shall be true and correct as of the Closing Date and the representations and
warranties that are not so qualified, taken together, shall be true and correct
in all material respects, in each case as though made on and as of the Closing
Date (except to the extent any such representation or warranty expressly speaks
as of an earlier date); and WABCO shall have received a certificate signed on
behalf of MotivePower by an executive officer of MotivePower to such effect.
(b) Performance of Obligations. MotivePower shall have performed in all
material respects each obligation and agreement and shall have complied in all
material respects with each covenant required to be performed or complied with
by it under this Agreement at or prior to the Effective Time; and WABCO shall
have received a certificate signed on behalf of MotivePower by an executive
officer of MotivePower to such effect.
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(c) Tax Opinion. WABCO shall have received an opinion of Kirkland & Ellis,
in form and substance reasonably satisfactory to WABCO, dated the Effective
Time, substantially to the effect that on the basis of facts, representations
and assumptions set forth in such opinion which are consistent with the state of
facts existing as of the Effective Time, for federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and WABCO and MotivePower will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by MotivePower or WABCO as a
result of the Merger;
(iii) no gain or loss will be recognized by the shareholders of
MotivePower upon the conversion of their shares of MotivePower Common Stock
into shares of WABCO Common Stock pursuant to the Merger, except with
respect to cash, if any, received in lieu of fractional shares of WABCO
Common Stock;
(iv) the aggregate tax basis of the shares of WABCO Common Stock
received in exchange for shares of MotivePower Common Stock pursuant to the
Merger (including a fractional share of WABCO Common Stock for which cash
is paid) will be the same as the aggregate tax basis of such shares of
MotivePower Common Stock;
(v) the holding period for shares of WABCO Common Stock received in
exchange for shares of MotivePower Common Stock pursuant to the Merger will
include the holder's holding period for such shares of MotivePower Common
Stock, provided such shares of MotivePower Common Stock were held as
capital assets by the holder at the Effective Time; and
(vi) a stockholder of MotivePower who receives cash in lieu of a
fractional share of WABCO Common Stock will recognize gain or loss equal to
the difference, if any, between such stockholder's basis in the fractional
share (determined under clause (iv) above) and the amount of cash received.
In rendering such opinion, Kirkland & Ellis may rely as to matters of fact upon
the representations contained herein and may receive and rely upon
representations from MotivePower, WABCO, and others, including representations
from MotivePower to the effect of the representations in the MotivePower Tax
Certificate and representations from WABCO to the effect of the representations
in the WABCO Tax Certificate.
ARTICLE VII
TERMINATION
SECTION 7.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(m), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with the Merger by the
shareholders of MotivePower or the stockholders of WABCO:
(a) by mutual written consent of MotivePower and WABCO; or
(b) by either MotivePower or WABCO, if the Merger shall not have been
consummated by January 31, 2000 (the "End Date"); provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before the End Date; or
(c) by either MotivePower or WABCO, if a court of competent jurisdiction or
other Governmental Entity shall have issued a final, non-appealable order,
decree or ruling, or taken any other action, having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger; or
(d) by either MotivePower or WABCO (i) if, at the WABCO Stockholders
Meeting (including any adjournment or postponement thereof), the requisite vote
of the stockholders of WABCO in favor of adoption of this Agreement shall not
have been obtained or (ii) if, at the MotivePower Shareholders Meeting
(including
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any adjournment or postponement thereof), the requisite vote of the shareholders
of MotivePower in favor of adoption of this Agreement shall not have been
obtained; or
(e) by WABCO, if the Board of Directors of MotivePower shall not have
recommended or shall have modified in a manner materially adverse to WABCO its
recommendation of this Agreement and the Merger; or
(f) by WABCO, if MotivePower or any of its Affiliates shall have materially
and knowingly breached the covenant contained in Section 5.1; or
(g) by WABCO or MotivePower at any time on or prior to 5:00 p.m., eastern
time on the 45th day after the date hereof, or if earlier, the date of the
MotivePower Shareholders Meeting, if the Board of Directors of MotivePower shall
have determined to recommend a Takeover Proposal to its shareholders and to
enter into a binding written agreement concerning such Takeover Proposal after
determining, pursuant to Section 5.1, that such Takeover Proposal constitutes a
Superior Proposal; provided, however, that MotivePower may not terminate this
Agreement pursuant to this Section 7.1(g) unless (i) MotivePower has delivered
to WABCO a written notice of MotivePower's intent to enter into such an
agreement to effect the Superior Proposal, attaching the most current version of
such agreement to such notice (which version shall be updated on a current
basis), (ii) five business days have elapsed following delivery to WABCO of such
written notice by MotivePower and (iii) during such five business day-period
MotivePower has fully cooperated with WABCO, including informing WABCO (to the
extent not otherwise done so pursuant to clause (i) or Section 5.1(b)) of the
terms and conditions of the Takeover Proposal, with the intent of enabling WABCO
to agree to a modification of the terms and conditions of this Agreement so that
the transactions contemplated hereby may be effected; provided, further, that
MotivePower may not terminate this Agreement pursuant to this Section 7.1(g)
unless at the end of such five business day-period the Board of Directors of
MotivePower continues reasonably to believe that the Takeover Proposal
constitutes a Superior Proposal and prior to such termination MotivePower pays
to WABCO the amounts specified under Section 7.3(d); or
(h) by MotivePower, if a material breach of or failure to perform any
representation, warranty, covenant or agreement on the part of WABCO set forth
in this Agreement shall have occurred which would cause the conditions set forth
in Sections 6.2(a) or 6.2(b) not to be satisfied, and such conditions are
incapable of being satisfied by the End Date; or
(i) by MotivePower, if the Board of Directors of WABCO shall not have
recommended or shall have modified in a manner materially adverse to MotivePower
its recommendation of this Agreement and the Merger; or
(j) by MotivePower, if WABCO or any of its Affiliates shall have materially
and knowingly breached the covenant contained in Section 5.1; or
(k) by MotivePower or WABCO at any time on or prior to 5:00 p.m., eastern
time on the 45th day after the date hereof, or if earlier, the date of the WABCO
Stockholders Meeting, if the Board of Directors of WABCO shall have determined
to recommend a Takeover Proposal to its stockholders and to enter into a binding
written agreement concerning such Takeover Proposal after determining, pursuant
to Section 5.1, that such Takeover Proposal constitutes a Superior Proposal;
provided, however, that WABCO may not terminate this Agreement pursuant to this
Section 7.1(k) unless (i) WABCO has delivered to MotivePower a written notice of
WABCO's intent to enter into such an agreement to effect the Superior Proposal,
attaching the most current version of such agreement to such notice (which
version shall be updated on a current basis), (ii) five business days have
elapsed following delivery to MotivePower of such written notice by WABCO and
(iii) during such five business day-period WABCO has fully cooperated with
MotivePower, including informing MotivePower (to the extent not otherwise done
so pursuant to clause (i) or Section 5.1(b)) of the terms and conditions of the
Takeover Proposal and the identity of the Person making the Takeover Proposal,
with the intent of enabling MotivePower to agree to a modification of the terms
and conditions of this Agreement so that the transactions contemplated hereby
may be effected; provided, further, that WABCO may not terminate this Agreement
pursuant to this Section 7.1(k) unless at the end of such five business day-
period the Board of Directors of WABCO continues reasonably to believe that the
Takeover Proposal
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constitutes a Superior Proposal and prior to such termination WABCO pays to
MotivePower the amounts specified under Section 7.3(b); or
(l) by WABCO, if a material breach of or failure to perform any
representation, warranty, covenant or agreement on the part of MotivePower set
forth in this Agreement shall have occurred which would cause the conditions set
forth in Sections 6.3(a) or 6.3(b) not to be satisfied, and such conditions are
incapable of being satisfied by the End Date.
SECTION 7.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Section 7.1, there shall be no liability or obligation on
the part of MotivePower, WABCO or their respective officers, directors,
stockholders or Affiliates, except as set forth in Section 7.3 and except to the
extent that such termination results from the willful breach by a party of any
of its representations, warranties, covenants or agreements contained in this
Agreement; provided, however, that the provisions of Sections 7.3, 8.2 and 8.7
of this Agreement and the Confidentiality Agreement, the WABCO Option Agreement
and the MotivePower Option Agreement shall remain in full force and effect and
survive any termination of this Agreement.
SECTION 7.3. FEES AND EXPENSES. (a) Except as set forth in this Section 7.3
or elsewhere in this Agreement, the WABCO Option Agreement or the MotivePower
Option Agreement, all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not the Merger is consummated; provided,
however, that MotivePower and WABCO shall share equally all fees and expenses,
other than attorneys' and accounting fees and expenses, incurred in relation to
the printing and filing of the Joint Proxy Statement (including any related
preliminary materials), the Registration Statement (including financial
statements and exhibits) and any pre- or post-effective amendments or
supplements thereto, the joint proxy statement dated July 22, 1999 of
MotivePower and WABCO (including any related preliminary materials) and the
registration statement on S-4 of MotivePower declared effective on July 22, 1999
(including financial statements and exhibits) and any pre-or post-effective
amendments thereto.
(b) If this Agreement is terminated pursuant to Section 7.1(i), 7.1(j) or
7.1(k), WABCO shall (i) reimburse MotivePower upon demand for all out-of-pocket
fees and expenses ("MotivePower Fees and Expenses") incurred or paid by or on
behalf of MotivePower or any Subsidiary of MotivePower in connection with this
Agreement and the transactions contemplated herein, including all fees and
expenses of counsel, investment banking firms, accountants and consultants;
provided, however, that WABCO shall not be required to reimburse MotivePower for
any MotivePower Fees and Expenses in excess of $2,000,000 in the aggregate, and
(ii) pay to MotivePower a termination fee of $15 million in cash within one
business day after such termination.
(c) If this Agreement is terminated pursuant to Section 7.1(d)(i) and
either (I) a Takeover Proposal with respect to WABCO shall have been made after
the date of this Agreement and prior to the WABCO Stockholders Meeting or (II)
the Board of Directors of WABCO shall not have recommended or shall have
modified in a manner materially adverse to MotivePower its recommendation of
this Agreement and the Merger, WABCO shall (i) reimburse MotivePower upon demand
for all MotivePower Fees and Expenses; provided, however, that WABCO shall not
be obligated to reimburse MotivePower for any MotivePower Fees and Expenses in
excess of $2,000,000 in the aggregate, and (ii) pay to MotivePower a termination
fee of $15 million in cash within one business day after such termination.
(d) If this Agreement is terminated pursuant to Section 7.1(e), 7.1(f) or
7.1(g), MotivePower shall (i) reimburse WABCO upon demand for all out-of-pocket
fees and expenses ("WABCO Fees and Expenses") incurred or paid by or on behalf
of WABCO or any Subsidiary of WABCO in connection with this Agreement and the
transactions contemplated herein, including all fees and expenses of counsel,
investment banking firms, accountants and consultants; provided, however, that
MotivePower shall not be obligated to reimburse WABCO for any WABCO Fees and
Expenses in excess of $2,000,000 in the aggregate, and (ii) pay to WABCO a
termination fee of $15 million in cash within one business day after such
termination.
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(e) If this Agreement is terminated pursuant to Section 7.1(d)(ii) and
either (I) a Takeover Proposal with respect to MotivePower shall have been made
after the date of this Agreement and prior to the MotivePower Shareholders
Meeting or (II) the Board of Directors of MotivePower shall not have recommended
or shall have modified in a manner materially adverse to WABCO its
recommendation of this Agreement and the Merger, MotivePower shall (i) reimburse
WABCO upon demand for all WABCO Fees and Expenses; provided, however, that
MotivePower shall not be obligated to reimburse WABCO for any WABCO Fees and
Expenses in excess of $2,000,000 in the aggregate, and (ii) pay to WABCO a
termination fee of $15 million in cash within one business day after such
termination.
(f) If one party fails to promptly pay to the other any fee or expense due
hereunder, the defaulting party shall pay the costs and expenses (including
legal fees and expenses) in connection with any action, including the filing of
any lawsuit or other legal action, taken to collect payment, together with
interest on the amount of any unpaid fee at the publicly announced prime rate of
Citibank, N.A. from the date such fee was required to be paid.
SECTION 7.4. AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of WABCO or the shareholders of MotivePower, but,
after any such approval, no amendment shall be made which by law requires
further approval by such stockholders or shareholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
SECTION 7.5. EXTENSION; WAIVER. The parties hereto mutually release and
waive any claims that either party may have against the other pursuant to or in
connection with the Original Merger Agreement and the transactions contemplated
thereby. At any time prior to the Effective Time, the parties hereto may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto contained herein, (ii)
waive any inaccuracies in the representations and warranties of the other
parties hereto contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions of the other
parties hereto contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations, warranties, covenants and agreements in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for covenants and agreements which, by their
terms, are to be performed after the Effective Time and except for the
MotivePower Tax Certificate and WABCO Tax Certificate. The Confidentiality
Agreement shall survive the execution and delivery of this Agreement but shall
terminate and be of no further force and effect as of the Effective Time.
SECTION 8.2. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered personally, one day after
being delivered to a nationally recognized overnight courier or when telecopied
(with a confirmatory copy sent by such overnight courier) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to MotivePower, to
Two Gateway Center
14th Floor
Pittsburgh, PA 15222
Attention: Chief Executive Officer
Facsimile No.: (412) 201-1116
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with copies to:
Doepken Keevican & Weiss
58th Floor, USX Tower
600 Grant Street
Pittsburgh, PA 15219-2703
Attention: Leo A. Keevican, Jr.
Facsimile No.: (412) 355-2609
and
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, IL 60603
Attention: Frederick C. Lowinger
Facsimile No.: (312) 853-7036
(b) if to WABCO, to:
1001 Air Brake Avenue
Wilmerding, PA 15148
Attention: Chief Executive Officer
Facsimile No.: (412) 825-1156
with copies to:
Reed Smith Shaw McClay
435 Sixth Avenue
Pittsburgh, PA 15219
Attention: David DeNinno
Facsimile No.: (412) 288-3218
and
Kirkland & Ellis
655 15th Street, N.W.
Washington, D.C. 20005
Attention: Jack Feder
Facsimile No.: (202) 879-5200
SECTION 8.3. INTERPRETATION. When a reference is made in this Agreement to
a section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available.
SECTION 8.4. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 8.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(including the documents and the instruments referred to herein), the WABCO
Option Agreement and the MotivePower Option Agreement (a) constitute the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, including
without limitation the Original Merger Agreement, and (b) except as provided in
Section 5.12 of this Agreement and this
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Section 8.5, are not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder or thereunder.
SECTION 8.6. GOVERNING LAW. Except to the extent that the laws of the State
of Delaware are mandatorily applicable to the Merger, this Agreement shall be
governed by, and construed in accordance with, the laws of the Commonwealth of
Pennsylvania, regardless of the laws that might otherwise govern under the
applicable principles of conflicts of laws thereof.
SECTION 8.7. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, and any attempted assignment thereof without such
consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
IN WITNESS WHEREOF, MotivePower and WABCO have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
MOTIVEPOWER INDUSTRIES, INC.
By: /s/ JOHN C. POPE
------------------------------------
Name: John C. Pope
Title: Chairman of the Board
WESTINGHOUSE AIR BRAKE COMPANY
By: /s/ WILLIAM E. KASSLING
------------------------------------
Name: William E. Kassling
Title: Chief Executive Officer
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EXHIBIT 1.4(b)
AMENDED AND RESTATED BY-LAWS
OF
WESTINGHOUSE AIR BRAKE COMPANY
(hereinafter called the "Corporation")
(Adopted effective , 1999)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for the election
of directors or for any other purpose shall be held at such time and place,
either within or without the State of Delaware, as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting or in
a duly executed waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders (the "Annual
Meeting of Stockholders") shall be held on such date and at such time as shall
be designated from time to time by the Board of Directors and stated in the
notice of the meeting, at which meeting Directors shall be elected in accordance
with the provisions of that certain Amended and Restated Stockholders Agreement
dated as of March 4, 1997 (the "Amended and Restated Stockholders Agreement")
among the Corporation, Vestar Equity Partners, L.P., a Delaware limited
partnership ("Vestar"), Harvard Private Capital Holdings, Inc., a Massachusetts
Corporation ("Harvard") and American Industrial Partners Capital Fund II, L.P.,
a Delaware limited partnership ("AIP") (for as long as the Stockholders
Agreement shall be in effect), these By-Laws and applicable law and such other
business as may properly be brought before the meeting shall be transacted.
Written notice of the Annual Meeting of Stockholders stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than ten nor more than sixty days before the date of the
meeting.
SECTION 3. SPECIAL MEETINGS. Unless otherwise prescribed by law, special
meetings of stockholders ("Special Meetings of Stockholders"), for any purpose
or purposes, may be called by (i) the Chairman, if there be one, (ii) the Chief
Executive Officer (iii) Directors constituting not less than half of the members
of the Board of Directors then in office or (iv) stockholders owning a majority
of the capital stock of the Corporation issued and outstanding and entitled to
vote, in each case by delivering a written request to the Secretary. Such
request shall state the purpose or purposes of the proposed meeting. At any
time, upon the written request of any person or persons who have duly called a
Special Meeting of Stockholders, it shall be the duty of the Secretary to fix
the date of the Meeting, to be held not more than 75 days after the receipt of
the request, and to give due notice thereof. Special Meetings of Stockholders
shall be held at such place, either within or without the State of Delaware, and
at such time and date as the Board of Directors shall determine and as set forth
in the notice of the Meeting. Written notice of a Special Meeting of
Stockholders stating the place, date and hour of the Meeting and the purpose or
purposes for which the Meeting is called shall be given not less than ten nor
more than sixty days before the date of the Meeting to each stockholder entitled
to vote at such Meeting.
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SECTION 4. QUORUM. Except as otherwise provided by law or by the Restated
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), the holders of a majority of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.
SECTION 5. VOTING. Unless otherwise required by law, the Certificate of
Incorporation, these By-Laws or any Certificate of Designation with respect to
any preferred stock of the Corporation ("Preferred Stock"), any question brought
before any meeting of stockholders shall be decided by the vote of the holders
of a majority of the stock represented and entitled to vote thereat. Each
stockholder represented at a meeting of stockholders shall be entitled to cast
one vote for each share of the capital stock entitled to vote thereat held by
such stockholder. Such votes may be cast in person or by proxy but no proxy
shall be voted on or after three years from its date, unless such proxy provides
for a longer period. The Board of Directors, in its discretion, or the officer
of the Corporation presiding at a meeting of stockholders, in his discretion,
may require that any votes cast at such meeting shall be cast by written ballot.
SECTION 6. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken at any Annual or Special Meeting of Stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, and such written consent is
delivered to the Corporation by delivery to its registered office in Delaware,
its principal place of business or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
SECTION 7. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
SECTION 8. STOCK LEDGER. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
SECTION 9. NOTICE OF STOCKHOLDER BUSINESS.
(a) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders at
an annual meeting of stockholders must be (a) specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors
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(including by a Committee appointed by the Board of Directors), or (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors (including by a Committee appointed by the Board of Directors).
Nominations of persons for election to the Board of Directors of the corporation
shall exclusively be made pursuant to Sections 1(b) and 8 of Article III hereof.
(2) For business to be properly brought before an annual meeting by a
stockholder pursuant to paragraph (a)(1) of this Section 9, the stockholder must
have given timely notice thereof in writing to the Secretary of the Corporation
and such business must be a proper matter for stockholder action. To be timely,
a stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
60th day nor earlier than the close of business on the 120th day prior to the
first anniversary of the date of the preceding year's proxy statement for the
annual meeting; provided, however, that in the event that the date of the annual
meeting is more than 30 days before or more than 60 days after the first
anniversary of the preceding year's annual meeting, notice by the stockholder to
be timely must be so delivered not earlier than the close of business on the
120th day prior to such annual meeting and not later than the close of business
on the later of the 90th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of such meeting is
first made. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set forth (a) as to
any business that the stockholder properly proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and the beneficial owner, if any,
on whose behalf the proposal is made; (b) a representation that the stockholder
intends to appear in person or by proxy at the meeting to raise the proposal
specified in the notice; and (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(b) Special Meetings of Stockholders. Only such business shall be conducted
at a special meeting of stockholders as shall have been brought before the
meeting pursuant to the notice of meeting.
(c) General.
(1) Only such business shall be conducted at a meeting of stockholders as
shall have been brought before the meeting in accordance with the procedures set
forth in this Section 9. Except as otherwise provided by law, the Chairman of
the meeting shall have the power and duty to determine whether any business
proposed to be brought before the meeting was proposed in accordance with the
procedures set forth in this Section 9 and, if any proposed business is not in
compliance with this Section 9, to declare that such defective proposal shall be
disregarded.
(2) For purposes of this Section 9, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act").
(3) Notwithstanding the foregoing provisions of this Section 9, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 9. Nothing in this Section 9 shall be deemed to affect any
rights of (i) stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) the holders of any series of Preferred Stock to elect directors under
specified circumstances.
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ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND ELECTION OF DIRECTORS.
(a) Subject to paragraphs (b) through (h) of this Section 1 of Article III,
the Board of Directors of the Corporation (the "Board") shall consist of such
number of persons as is determined from time to time by the affirmative vote of
a majority of the Directors then in office.
(b) The Board shall maintain a Nominating Committee, which Nominating
Committee shall nominate persons to be elected to the Board as set forth in this
Agreement. Subject to paragraph (h) of this Section 1 of Article III, the
Chairman of the Board shall have exclusive authority to select the members of
the Board who will serve on the Nominating Committee. At any time that a new
Director is elected pursuant to the terms of this Agreement, the remaining
Directors then in office shall have an obligation to ratify and approve such
elections.
(c) The Nominating Committee shall nominate persons for election to the
Board so that the Board shall be comprised of the following: (i) the Chief
Executive Officer of WABCO; (ii) another executive officer of WABCO; (iii) at
least three individuals who are not employees of WABCO or any of its
subsidiaries; (iv) one individual designated by Vestar Equity Partners, L.P.
("Vestar") (the "Vestar Director") (so long as Vestar and its partners, and
Vestar Capital Partners, Inc. ("Vestar Capital") and its stockholders and
officers, and their respective Affiliates (defined below) collectively and
beneficially own at least 50% of the shares of common stock, par value $.01 per
share, of the Corporation (the "Common Stock") beneficially owned by Vestar and
Vestar Capital immediately after the closing of the purchase by Vestar, Harvard,
AIP and certain members of the Corporation's management of 6 million shares of
Common Stock owned by Scandinavian Incentive Holdings, B.V. ("SIH") and the
concurrent redemption by the Corporation of 4 million shares of Common Stock
owned by SIH (such purchase and redemption being together referred to as the
"SIH Purchase"); (v) one individual designated by William E. Kassling (so long
as Mr. Kassling and members of his immediate family and their Affiliates
collectively and beneficially own at least 50% of the shares of Common Stock
beneficially owned by Mr. Kassling immediately after the closing of the SIH
Repurchase); (vi) one individual designated by Harvard ("Harvard") (the "Harvard
Director") (so long as Harvard and its stockholders and officers and their
respective Affiliates collectively and beneficially own at least 50% of the
shares of Common Stock beneficially owned by Harvard immediately after the
closing of the SIH Repurchase); and (vii) Emilio A. Fernandez (so long as (x)
Mr. Fernandez is able and willing to serve and (y) Mr. Fernandez and his
immediate family and their Affiliates (the "Fernandez Group") collectively and
beneficially own at least 50% of the shares of Common Stock delivered by the
Corporation pursuant to that certain Asset Purchase Agreement dated as of
January 23, 1995 by and among the Corporation, Pulse Acquisition Corporation,
Pulse Electronics, Incorporated and Pulse Embedded Computer Systems, Inc. (the
"Pulse Shares"). So long as Mr. Fernandez meets the qualifications set forth in
the foregoing clause (vii), the Chairman of the Board shall direct the
Nominating Committee to nominate Mr. Fernandez as a member of the Board of
Directors.
(d) If requested by the Corporation in order to comply with paragraph (c)
above, Vestar, Mr. Kassling and/or Harvard shall cause its designee for Director
to resign effective at such time as Vestar, Mr. Kassling or Harvard, as the case
may be, no longer has the ability to designate a Director pursuant to paragraph
(c) above, and Mr. Fernandez shall resign effective at such time as the
Fernandez Group no longer beneficially owns at least 50% of the Pulse Shares.
(e) Vestar, Harvard and Mr. Kassling may, at any time during which their
respective rights to designate Directors are applicable, cause the removal of
any Director designated by it or him and designate a new individual or
individuals to serve as Director or Directors by prior written notice to the
Nominating Committee, which shall promptly nominate such individual(s) for
election to the Board. Except with respect to Mr. Fernandez, in the event of a
vacancy on the Board of Directors caused by the death, resignation or removal of
a Director prior to the fulfillment of his term, the party or other person or
entity originally designating such Director shall, so long as its right to
designate such Director is applicable, designate an
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individual to serve as a successor Director and shall promptly notify the
Nominating Committee of such action in writing, and the Nominating Committee
shall promptly nominate such individual for election to the Board. The death,
resignation or removal of Mr. Fernandez as a director shall terminate his right
to serve on the Board of Directors, and the Fernandez Group shall have no right
to designate a successor to fill any vacancy caused by such death, resignation
or removal.
(f) Any person designated by Vestar, Harvard, Mr. Kassling or, in the case
of Mr. Fernandez, the Chairman of the Board, as provided for herein shall be
nominated by the Nominating Committee to be elected to the Board at the
stockholders' meeting, or by the Directors already elected to the Board, as the
case may be, voting in conformity with such nomination. In furtherance thereof,
each of the Voting Trust (the "Voting Trust") created under the Second Amended
WABCO Voting Trust/Disposition Agreement, dated as of December 13, 1995, Vestar,
Harvard, Vestar Capital, AIP, Mr. Kassling and Mr. Fernandez shall vote all of
the shares of Common Stock and any other voting securities of the Corporation
from time to time held by it or him in favor of, and each of the Voting Trust,
Harvard, Vestar Capital, AIP, Mr. Kassling and Mr. Fernandez shall cause any
shares of Common Stock or other voting securities of the Corporation as to which
it or he from time to time has the right to direct the vote to be voted in favor
of, and to take any other appropriate steps to cause, the election to the Board
of individuals designated by Vestar, Harvard, and/or Mr. Kassling and, in the
case of Mr. Fernandez, the Chairman of the Board, and nominated by the
Nominating Committee; provided, that Mr. Kassling shall not be deemed to control
any shares of Common Stock held by the Westinghouse Air Brake Company Employee
Stock Ownership Plan or Westinghouse Air Brake Company Employee Stock Ownership
Trust for purposes of this Section 1 of Article III.
(g) Each director elected in accordance with the foregoing paragraphs (b)
through (f) shall be elected to one of three classes. The term of office of
those directors of the first class shall expire at the annual meeting next
ensuing; of the second class one year thereafter; and of the third class two
years thereafter. Beginning at the annual meeting next ensuing, directors shall
be elected for three-year terms of office. In all such cases, a director's term
of office shall continue until his successor is duly elected and qualified or
until his earlier resignation or removal.
(h) Each committee of the Board shall include either the Vestar Director or
the Harvard Director (as determined by Harvard and Vestar) as one of its
members.
(i) As used in this Section 1, "Affiliate" means any entity which is now,
or hereinafter becomes controlled by, or in control of, or in common control
with, another entity. "Control" means more than 50% of the ownership interest or
voting rights of any entity, directly or indirectly.
(j) So long as the Amended and Restated Stockholders Agreement dated as of
March 4, 1997 by and among the Voting Trust, Vestar, Harvard, AIP and the
Corporation remains in effect, the provision of this Section 1 of this Article
III and of Sections 1 and 2 of Article IV shall not be amended, supplemented or
repealed unless the corresponding provisions of the Stockholders Agreement are
similarly amended, supplemented or repealed in accordance with the procedures
set forth in the Stockholders Agreement.
SECTION 2. DUTIES AND POWERS.
(a) The Board of Directors shall have full power to control, manage and
direct the business of WABCO and to take such actions as may be necessary to
further the purposes of WABCO.
(b) The management of the business of the Corporation shall be the
responsibility of a Chief Executive Officer, to be appointed by the Board of
Directors. William E. Kassling shall continue to be the Chief Executive Officer
of the Corporation and he shall continue to serve as Chief Executive Officer
until replaced by the Board of Directors in accordance with the provisions of
any employment agreement then in force between the Corporation and Mr. Kassling.
The Chief Executive Officer of the Corporation, shall, subject to
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subsection (a) above, be entitled to make all decisions regarding the ordinary
course of business operation of the Corporation according to good business
practice.
(c) All of the Directors shall have one vote each.
SECTION 3. MEETINGS.
(a) Regular meetings of the Board of Directors shall be held in Wilmerding,
Pennsylvania, or at such other place as may be determined from time to time by
the Board of Directors. Regular meetings of the Board of Directors shall be held
no less frequently than quarterly and at such times as may be determined by the
Board of Directors. Any business that properly may be transacted by the Board of
Directors may be transacted at any regular meeting thereof.
(b) Special meetings of the Board of Directors may be called any time by
the Chairman of the Board, the Chief Executive Officer or by a majority of the
Directors then in office. Any such person or persons desiring to call a special
meeting or to have a matter placed on the agenda for a special meeting shall so
notify the other members of the Board of Directors and the Chief Executive
Officer in writing at least three (3) days before the date such meeting is
called for. Such notifications shall be accompanied by such supplemental and
explanatory information as may be necessary or appropriate in the circumstances.
Notice of a special meeting stating the date, time, place and purpose thereof
shall be furnished by the Chief Executive Officer or the Secretary in writing to
each member of the Board of Directors not later than twenty-four (24) hours
before the date of such meeting. Notice of a special meeting need not be given
to any Director who signs a waiver of notice or a consent to holding the meeting
or an approval of the minutes thereof, whether before or after the meeting, or
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice. Only matters placed on the agenda pursuant to
this subsection (b) may be considered at a special meeting unless the members of
the Board of Directors unanimously agree otherwise.
SECTION 4. QUORUM. Except as may be otherwise specifically provided by law,
the Certificate of Incorporation, these By-Laws or any Certificate of
Designation with respect to Preferred Stock, at all meetings of the Board of
Directors, a majority of the Board of Directors shall constitute a quorum for
the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the Board of
Directors.
SECTION 5. ACTIONS OF BOARD. Unless otherwise provided by the Certificate
of Incorporation or these By-Laws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 6. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 6 shall constitute
presence in person at such meeting. The Chief Executive Officer or the Secretary
shall provide to the Directors, within a reasonable time, written minutes of
each meeting.
SECTION 7. COMMITTEES. The Board of Directors may, by resolution passed by
a majority of the Board of Directors, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of any such committee. In the absence or disqualification of a member of a
committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any absent or
disqualified member. Any committee, to the extent allowed by law and provided in
the resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board
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of Directors in the management of the business and affairs of the Corporation.
Each committee shall keep regular minutes and report to the Board of Directors
when required.
SECTION 8. NOMINATING COMMITTEE. In addition to any other committees of the
Board established pursuant to Section 7 of this Article III, the Board shall at
all times have a Nominating Committee consisting of such number of directors as
shall be designated by the Chairman of the Board from time to time. The Chairman
of the Board shall have exclusive authority to select the members of the Board
who will serve on the Nominating Committee. The Nominating Committee shall have
exclusive authority to nominate persons to be elected to the Board. Subject to
the provisions of Section 1 of Article III of these By-Laws, the Nominating
Committee shall review the size and composition of the Board and make
nominations with respect to the persons to be elected as directors.
SECTION 9. COMPENSATION. The directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director or such other compensation (including without limitation the grant
of stock options) as the Board of Directors may from time to time determine. No
such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings.
SECTION 10. INTERESTED DIRECTORS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason. or solely because the director or officer is present at or participates
in the meeting of the Board of Directors or committee thereof which authorizes
the contract or transaction, or solely because his or their votes are counted
for such purpose if (i) the material facts as to his or their relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee; or (ii) the material facts as to his or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders ; or (iii) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by the Board
of Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorized the contract or
transaction.
ARTICLE IV
OFFICERS
SECTION 1. GENERAL. (a) The officers of the Corporation shall be the Chief
Executive Officer, the President, a Secretary and a Treasurer, and may include a
Chairman of the Board and one or more Vice-Chairmen of the Board or Vice
Presidents as the Board of Directors may from time to time determine. Any number
of offices may be held by the same person, unless otherwise prohibited by law,
the Certificate of Incorporation or these By-Laws. The officers of the
Corporation need not be stockholders of the Corporation or, except in the case
of the Chairman or Vice Chairman of the Board of Directors, need such officers
be directors of the Corporation.
SECTION 2. ELECTION. The Board of Directors shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any vacancy occurring in any office of the Corporation shall be filled
by the Board of Directors. The salaries of all officers of the Corporation shall
be fixed by the Board of Directors.
SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be
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executed in the name of and on behalf of the Corporation by the Chief Executive
Officer, the President or any Vice President and any such officer may, in the
name of and on behalf of the Corporation, take all such action as any such
officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like powers upon
any other person or persons.
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of
Directors, if there be one, shall preside at all meetings of the stockholders
and of the Board of Directors. During the absence or disability of the Chief
Executive Officer, the Chairman of the Board of Directors shall exercise all the
powers and discharge all the duties of the Chief Executive Officer. The Chairman
and any Vice Chairman of the Board of Directors shall also perform such other
duties and may exercise such other powers as from time to time may be assigned
to them by these By-Laws or by the Board of Directors.
SECTION 5. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall,
subject to the control of the Board of Directors and, if there be one, the
Chairman of the Board of Directors, have general supervision of the business of
the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall execute all bonds, mortgages,
contracts and other instruments of the Corporation requiring a seal, under the
seal of the Corporation, except that the other officers of the Corporation may
sign and execute documents when so authorized by these By-Laws, the Board of
Directors or the Chief Executive Officer. In the absence or disability of the
Chairman of the Board of Directors and each Vice Chairman, or if there be none,
the Chief Executive Officer shall preside at all meetings of the stockholders
and the Board of Directors. The Chief Executive Officer shall also perform such
other duties and may exercise such other powers as from time to time may be
assigned to him by these By-Laws or by the Board of Directors.
SECTION 6. PRESIDENT. The President shall, subject to the control of the
Board of Directors, be the chief operating officer of the Corporation and, in
such capacity shall be responsible for the day-to-day business operations of the
Corporation. The President shall also perform such other duties and may exercise
such other powers as from time to time may be assigned to him by the Chief
Executive Officer or by the Board of Directors.
SECTION 7. VICE PRESIDENTS. At the request of the President or Chief
Executive Officer or in their absence or in the event of their inability or
refusal to act, the Vice President or the Vice Presidents if there is more than
one (in the order designated by the Board of Directors) shall perform the duties
of the President or Chief Executive Officer, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President or Chief
Executive Officer. Each Vice President shall perform such other duties and have
such other powers as the Board of Directors, the Chief Executive Officer or the
President may from time to time may prescribe. If there be no Vice President,
the Board of Directors shall designate the officer of the Corporation who, in
the absence of the President or Chief Executive Officer or in the event of the
inability or refusal of the President or Chief Executive Officer to act, shall
perform the duties of the President or Chief Executive Officer, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President or Chief Executive Officer.
SECTION 8. SECRETARY. The Secretary shall attend all meetings of the Board
of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or the Chief Executive Officer,
under whose supervision he shall be. If the Secretary shall be unable or shall
refuse to cause to be given notice of all meetings of the stockholders and
special meeting of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors or the Chief Executive Officer may
choose another officer to cause such notice to be given. The Secretary shall
have custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the
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Secretary or by the signature of any such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his signature. The Secretary shall
see that all books, reports, statements, certificates and other documents and
records required by law to be kept or filed are properly kept or filed as the
case may be.
SECTION 9. TREASURER. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Chief Executive Officer, the President and the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of all
his transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the Corporation
a bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his office
and for the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
SECTION 10. ASSISTANT SECRETARIES. Except as may be otherwise provided in
these By-Laws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the Chief Executive Officer, the President, any Vice President, if
there be one or the Secretary, and in the absence of the Secretary or in the
event of his disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
SECTION 11. ASSISTANT TREASURERS. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chief Executive Officer, the
President, any Vice President, if there be one, or the Treasurer, and in the
absence of the Treasurer or in the event of his disability or refusal to act,
shall perform the duties of the Treasurer, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the Treasurer. If
required by the Board of Directors, an Assistant Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
SECTION 12. OTHER OFFICERS. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board of Directors, the Chief Executive Officer, the
President or a Vice President and (ii) by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation.
SECTION 2. SIGNATURES. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or
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registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent or registrar at
the date of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable in the
manner prescribed by law and in these By-Laws. Transfers of stock shall be made
on the books of the Corporation only by the person named in the certificate or
by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be canceled before a new certificate shall be
issued.
SECTION 5. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
such action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 6. BENEFICIAL OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
SECTION 1. NOTICES. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex or cable.
SECTION 2. WAIVERS OF NOTICE. Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, and may be
paid in cash, in property, or in shares of the capital stock. Before payment of
any
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dividend, there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors from time to time, in
its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be January
1 to December 31.
SECTION 4. CORPORATE SEAL. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN
THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees), payments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was lawful. The termination of any
action, suit or proceeding by payment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE
RIGHT OF THE CORPORATION. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director or officer of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under this
Article VIII (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the director or officer is proper in the circumstances because he has met
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the applicable standard of conduct set forth in Section 1 or Section 2 of this
Article VIII, as the case may be. Such determination shall be made (i) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (ii) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (iii) by the stockholders. To the extent, however, that a
director or officer of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding described above, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
SECTION 4. GOOD FAITH DEFINED. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise of which such person is or was serving at the request
of the Corporation as a director or officer. The provisions of this Section 4
shall not be deemed to be exclusive or to limit in any way the circumstances in
which a person may be deemed to have met the applicable standard of conduct set
forth in Sections 1 or 2 of this Article VIII, as the case may be.
SECTION 5. INDEMNIFICATION BY A COURT. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the presence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 or 2 of this Article VIII. The basis of such indemnification by a court shall
be a determination by such court that indemnification of the director or officer
is proper in the circumstances because he has met the applicable standards of
conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses incurred by a director or
officer in defending or investigating a threatened or pending action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it can ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VIII.
SECTION 7. NON-EXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided by or granted
pursuant to this Article VIII shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it
being the policy of the Corporation that indemnification of the persons
specified in Sections 1 and 2 of this Article VIII shall be made to the fullest
extent permitted by law. The provisions of this Article VIII shall not be deemed
to preclude the indemnification of any person who is not entitled in Sections 1
and 2 of this Article VIII but whom the Corporation has the power or obligation
to indemnify under the provisions of the General Corporation Law of the State of
Delaware, or otherwise.
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SECTION 8. INSURANCE. The Corporation may purchase or maintain insurance on
behalf of any person who is or was a director or officer of the Corporation, or
is or was a director or officer of the Corporation serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the right or
obligation to indemnify him against such liability under the provisions of this
Article VIII.
SECTION 9. CERTAIN DEFINITIONS. For purposes of this Article VIII,
references to "the Corporation" shall include, in connection to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed by consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director or officer of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, shall stand in the same
position under the provisions of this Article VIII with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued. For purposes of this
Article VIII, references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the Corporation" shall include any service as a director or
officer of the Corporation which imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VIII.
SECTION 10. SURVIVAL OF INDEMNIFICATION AN ADVANCEMENT OF EXPENSES. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VIII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators or such a
person.
SECTION 11. LIMITATION ON INDEMNIFICATION. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 hereof),
the Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may,
to the extent authorized from time to time by the Board of Directors, provide
rights to indemnification and to the advancement of expenses to employees and
agents of the Corporation similar to those conferred in this Article VIII to
directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or repealed, in whole or
in part, or new By-Laws may be adopted by the stockholders at any annual or
special meeting or by the Board of Directors, provided, however, that notice of
such alteration, amendment, repeal or adoption of new By-Laws be contained in
the notice of such meeting of stockholders or Board of Directors as the case may
be. All such amendments must be approved by either the holders of a majority of
the outstanding capital stock entitled to vote thereon or by a majority of the
Board of Directors then in office. Notwithstanding the foregoing, Article VIII
hereof shall not be altered, amended or repealed in whole or in part, unless
such alteration, amendment or repeal is approved by the stockholders of the
Corporation pursuant to a vote which would be sufficient to adopt an amendment
to the Certificate of Incorporation of the Corporation.
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<PAGE> 166
EXHIBIT 1.4(c)
Class I with terms expiring in 2000
Robert J. Brooks
Gregory T.H. Davies
Kim G. Davis
Nicholas J. Stanley
Class II with terms expiring in 2001
Gilbert E. Carmichael
James C. Huntington, Jr.
James P. Kelley
James P. Miscoll
Class III with terms expiring in 2002
Emilio A. Fernandez
Lee B. Foster II
William E. Kassling
James V. Napier
-1-
<PAGE> 167
EXHIBIT 1.4(d)
<TABLE>
<CAPTION>
POSITION NAME
-------- ----
<S> <C>
Chairman of the Board and Chief Executive Officer William E. Kassling
President and Chief Operating Officer Gregory T.H. Davies
Executive Vice President, Friction Products Howard J. Bromberg
Executive Vice President, Railroad Joseph S. Crawford, Jr.
Executive Vice President, Transit John M. Meister
Vice Chairman Gilbert E. Carmichael
Vice Chairman Emilio A. Fernandez
Senior Vice President, Chief Financial Officer and Robert J. Brooks
Secretary
Vice President, Investor Relations and Corporate Timothy R. Wesley
Communications
Vice President, Human Resources Kevin P. Conner
Vice President and Treasurer Thomas P. Lyons
Vice President and Controller David L. Bonvenuto
Vice President, Internal Audit George A. Socher
Vice President, Business Development Jeffrey A. Plut
</TABLE>
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<PAGE> 168
EXHIBIT 5.10(a)
FORM OF AFFILIATE LETTER FOR AFFILIATES OF MOTIVEPOWER
Westinghouse Air Brake Company
1002 Air Brake Avenue
Wilmerding, PA 15148
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of MotivePower Industries, Inc., a Pennsylvania corporation
("MotivePower"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), and/or (ii) used in and for
purposes of Accounting Series Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Amended and Restated Agreement and Plan
of Merger dated as of September 26, 1999 (the "Merger Agreement") between
MotivePower and Westinghouse Air Brake Company, a Delaware corporation
("WABCO"), MotivePower will be merged with and into WABCO (the "Merger").
Capitalized terms used in this letter without definition shall have the meanings
assigned to them in the Merger Agreement.
As a result of the Merger, I may receive shares of Common Stock, par value
$.01 per share, of WABCO (the "WABCO Shares") in exchange for shares of Common
Stock, par value $.01 per share, of MotivePower, together with any associated
preferred stock purchase rights (the "MotivePower Shares") owned by me or
purchasable upon exercise of stock options.
1. I represent, warrant and covenant to MotivePower that in the event I
receive any WABCO Shares as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
WABCO Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
WABCO Shares, to the extent I felt necessary, with my counsel or counsel
for MotivePower.
C. I have been advised that the issuance of the WABCO Shares to me
pursuant to the Merger will be registered with the Commission under the Act
on a Registration Statement on Form S-4. However, I have also been advised
that, because at the time the Merger is submitted for a vote of the
stockholders of MotivePower, (a) I may be deemed to be an affiliate of
MotivePower and (b) the distribution by me of the WABCO Shares has not been
registered under the Act, I may not sell, transfer or otherwise dispose of
the WABCO Shares issued to me in the Merger unless (i) in the opinion of
counsel reasonably satisfactory to WABCO, such sale, transfer or other
disposition is made in conformity with the volume and other limitations of
Rule 145 promulgated by the Commission under the Act, (ii) such sale,
transfer or other disposition has been registered under the Act or (iii) in
the opinion of counsel reasonably acceptable to WABCO, such sale, transfer
or other disposition is otherwise exempt from registration under the Act.
D. I understand that WABCO is under no obligation to register the
sale, transfer or other disposition of the WABCO Shares by me or on my
behalf under the Act or, except as provided in paragraph 2(A) below, to
take any other action necessary in order to make compliance with an
exemption from such registration available.
E. I also understand that there will be placed on the certificates for
the WABCO Shares issued to me, or any substitutions therefor, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
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<PAGE> 169
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
[ ] [ ], 1999 BETWEEN THE REGISTERED HOLDER HEREOF AND
WESTINGHOUSE AIR BRAKE COMPANY, A COPY OF WHICH AGREEMENT IS ON FILE AT
THE PRINCIPAL OFFICES OF WESTINGHOUSE AIR BRAKE COMPANY."
F. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement, WABCO reserves the right to put the following legend on the
certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
G. I further represent to, and covenant with, WABCO that I will not,
during the 30 days prior to the Effective Time (as defined in the Merger
Agreement), sell, transfer or otherwise dispose of or reduce my risk (as
contemplated by SEC Accounting Series Release No. 135) with respect to
MotivePower Shares or shares of the capital stock of WABCO that I may hold
and, furthermore, that I will not sell, transfer or otherwise dispose of or
reduce my risk (as contemplated by SEC Accounting Series Release No. 135)
with respect to the WABCO Shares received by me in the Merger or any other
shares of the capital stock of WABCO until after such time as results
covering at least 30 days of combined operations of WABCO and MotivePower
have been published by WABCO, in the form of a quarterly earnings report,
an effective registration statement filed with the Commission, a report to
the Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes the combined results of operations.
H. Execution of this letter should not be considered an admission on
my part that I am an "affiliate" of MotivePower as described in the first
paragraph of this letter, nor as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of
this letter.
2. By WABCO's acceptance of this letter, WABCO hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
WABCO Shares pursuant to Rule 145 and, to the extent applicable, Rule 144
under the Act, WABCO shall use its reasonable best efforts to (i) file, on
a timely basis, all reports and data required to be filed with the
Commission by it pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and (ii) furnish to me upon request a
written statement as to whether WABCO has complied with such reporting
requirements during the 12 months preceding any proposed sale of the WABCO
Shares by me under Rule 145. WABCO has filed all reports required to be
filed with the Commission under Section 13 of the 1934 Act during the
preceding 12 months.
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<PAGE> 170
B. It is understood and agreed that the certificates with the legends
set forth in paragraphs E and F above will be replaced with certificates
without such legend if (i) one year shall have elapsed from the date the
undersigned acquired the WABCO Shares received in the Merger and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii)
two years shall have elapsed from the date the undersigned acquired the
WABCO Shares received in the Merger and the provisions of Rule 145(d)(3)
are then applicable to the undersigned, or (iii) WABCO has received either
an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to WABCO, or a "no action" letter obtained by the undersigned
from the staff of the Commission, to the effect that the restrictions
imposed by Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
--------------------------------------
Name:
Agreed and accepted this day
of [ ], 1999, by
WESTINGHOUSE AIR BRAKE COMPANY
By
- --------------------------------------
Name:
Title:
-3-
<PAGE> 171
EXHIBIT 5.10(b)
FORM OF AFFILIATE LETTER FOR AFFILIATES OF WABCO
Westinghouse Air Brake Company
1001 Air Brake Avenue
Wilmerding, PA 15148
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Westinghouse Air Brake Company, a Delaware corporation
("WABCO"), as the term "affiliate" is defined for purposes of Accounting Series
Releases 130 and 135, as amended, of the Securities and Exchange Commission
("Commission"). Pursuant to the terms of the Amended and Restated Agreement and
Plan of Merger dated as of September 26, 1999 (the "Merger Agreement") between
WABCO and MotivePower Industries, Inc., a Pennsylvania corporation
("MotivePower"), MotivePower will be merged with and into WABCO (the "Merger").
I represent to, and covenant with, WABCO that I will not, during the period
beginning 30 days prior to the Effective Time (as defined in the Merger
Agreement) until after such time as results covering at least 30 days of
combined operations of WABCO and MotivePower have been published by WABCO, in
the form of a quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form 10-K, 10-Q, or
8-K, or any other public filing or announcement which includes the combined
results of operations, sell, transfer or otherwise dispose of or reduce my risk
with respect to any shares of the capital stock of WABCO or MotivePower that I
may hold.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of WABCO as described in the first paragraph of this
letter, nor as a waiver of any rights I may have to object to any claim that I
am such an affiliate on or after the date of this letter.
Very truly yours,
--------------------------------------
Name:
Accepted this day of
[ ], 1999, by
WESTINGHOUSE AIR BRAKE COMPANY
By
- --------------------------------------
Name:
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<PAGE> 172
ANNEX B
AMENDED AND RESTATED
WABCO STOCK OPTION AGREEMENT
BETWEEN
WESTINGHOUSE AIR BRAKE COMPANY,
A DELAWARE CORPORATION,
AND
MOTIVEPOWER INDUSTRIES, INC.,
A PENNSYLVANIA CORPORATION
DATED AS OF SEPTEMBER 26, 1999
<PAGE> 173
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. The Option; Exercise; Payment of Spread................. 1
2. Adjustments............................................. 2
3. Conditions to Delivery of Shares........................ 2
4. The Closing............................................. 2
5. Listing of Shares; Filings; Governmental Consents....... 3
6. Repurchase of Shares.................................... 3
7. Sale of Shares.......................................... 3
8. Registration Rights..................................... 3
9. Expenses................................................ 4
10. Specific Performance.................................... 4
11. Notice.................................................. 4
12. Interpretation.......................................... 5
13. Entire Agreement........................................ 5
14. Amendment............................................... 6
15. Severability............................................ 6
16. Governing Law........................................... 6
17. Counterparts............................................ 6
18. Parties in Interest..................................... 6
19. Corporate Authorization................................. 6
20. Assignment.............................................. 6
21. Termination............................................. 6
22. Profit Limitation....................................... 6
23. Public Announcement..................................... 7
</TABLE>
<PAGE> 174
AMENDED AND RESTATED WABCO STOCK OPTION AGREEMENT
AMENDED AND RESTATED STOCK OPTION AGREEMENT dated as of September 26, 1999
(the "Agreement") between Westinghouse Air Brake Company, a Delaware corporation
(the "Grantor"), and MotivePower Industries, Inc., a Pennsylvania corporation
(the "Grantee").
WHEREAS, the Grantor and the Grantee are parties to that certain Agreement
and Plan of Merger dated June 2, 1999, as amended as of July 19, 1999 (as so
amended, the "Original Merger Agreement") and that certain WABCO Stock Option
Agreement dated June 2, 1999 (the "Original WABCO Option Agreement");
WHEREAS, the Grantor and the Grantee are amending the Original Merger
Agreement as of the date hereof (as so amended, the "Merger Agreement") to
provide for the merger of Grantee with and into Grantor (the "Merger"); and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor has agreed to amend and restate the Original WABCO Option Agreement
as set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Payment of Spread. (a) Contemporaneously herewith
the Grantee and the Grantor are entering into the Merger Agreement. Subject to
the other terms and conditions set forth herein, the Grantor hereby grants to
the Grantee an irrevocable option (the "Option") to purchase up to 6,453,710
shares of Common Stock (the "Shares") at a cash purchase price equal to $19.875
per share (the "Purchase Price"). The Option may be exercised by the Grantee, in
whole or in part, at any time, or from time to time, following (but not prior
to) the occurrence of one of the events set forth in Section 3(c) hereof, and
prior to the termination of the Option in accordance with the terms of this
Agreement.
(b) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying a date (subject to the HSR Act (as defined below) and any other
applicable regulatory approvals) not later than 10 business days and not earlier
than three business days following the date such notice is given for the closing
of such purchase.
(c) If at any time the Option is then exercisable pursuant to the terms of
Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option to
purchase Shares provided in Section 1(a) hereof, to send a written notice to the
Grantor (the "Cash Exercise Notice") specifying a date not later than 20
business days and not earlier than 10 business days following the date such
notice is given on which date the Grantor shall pay to the Grantee an amount in
cash equal to the Spread (as hereinafter defined) multiplied by all or such
portion of the Shares subject to the Option as Grantee shall specify. As used
herein, "Spread" shall mean the excess, if any, over the Purchase Price of the
higher (x) if applicable, the highest price per share of Common Stock (including
any brokerage commissions, transfer taxes and soliciting dealers' fees) paid or
proposed to be paid by any person pursuant to any Takeover Proposal (as defined
in the Merger Agreement) (the "Alternative Purchase Price") or (y) the closing
price of the shares of Common Stock on the New York Stock Exchange (the "NYSE")
Composite Tape, the American Stock Exchange (the "AMEX") or The Nasdaq National
Market (the "Nasdaq"), as the case may be, on the last trading day immediately
prior to the date of the Cash Exercise Notice (the "Closing Price"). If the
Alternative Purchase Price includes any property other than cash, the
Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if
any, included in the Alternative Purchase Price plus (ii) the fair market value
of such other property. If such other property consists of securities with an
existing public trading market, the average of the closing prices (or the
average of the closing bid and asked prices if closing prices are unavailable)
for such securities in their principal public trading market on the five trading
days ending five days prior to the date of the Cash Exercise Notice shall be
deemed to equal the fair market value of such property. If such other property
consists of something other than cash or securities with an existing public
trading market and, as of the payment date for the Spread, agreement on the
value of such other property has not been reached, the Alternative Purchase
Price shall be deemed to equal the Closing Price. Upon exercise of its right to
receive cash pursuant to this Section 1(c), the obligations of the Grantor to
deliver Shares pursuant to Section 4 shall
<PAGE> 175
be terminated with respect to such number of Shares for which the Grantee shall
have elected to be paid the Spread.
2. Adjustments. (a) In the event of any change in the number of issued and
outstanding shares of Common Stock by reason of any stock dividend, stock split,
split-up, recapitalization, merger or other change in the corporate or capital
structure of the Grantor, the number of Shares subject to this Option and the
purchase price per Share shall be appropriately adjusted to restore the Grantee
to its rights hereunder, including its right to purchase Shares representing 19%
of the capital stock of the Grantor entitled to vote generally for the election
of the directors of Grantor which is issued and outstanding immediately prior to
the exercise of the Option.
(b) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that Grantor enters into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Grantor will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any person, other than Grantee or
one of its subsidiaries, to merge into Grantor, and Grantor will be the
continuing or surviving corporation, but in connection with such merger, the
shares of Common Stock outstanding immediately prior to the consummation of such
merger will be changed into or exchanged for stock or other securities of
Grantor or any other person or cash or any other property, or the shares of
Common Stock outstanding immediately prior to the consummation of such merger
will, after such merger, represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction will make proper provision so that the Option will, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect to Common
Stock if the Option had been exercised immediately prior to such consolidation,
merger, sale, or transfer, or the record date therefor, as applicable and make
any other necessary adjustments.
3. Conditions to Delivery of Shares. The Grantor's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated;
and
(c) (i) the Merger Agreement is terminated pursuant to Section 7.1(d)(i)
and either (I) a Takeover Proposal with respect to Grantor shall have been made
after the date of the Merger Agreement and prior to the Grantor Stockholders
Meeting (as defined in the Merger Agreement) or (II) the Board of Directors of
Grantor shall not have recommended or shall have modified in a manner materially
adverse to Grantee its recommendation of the Merger Agreement and Merger; or
(ii) the Merger Agreement is terminated pursuant to Section 7.1(i), 7.1(j) or
7.1(k) of the Merger Agreement.
4. The Closing. (a) Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice or Cash Exercise Notice,
as the case may be, at 9:00 A.M., local time, at the offices of Doepken Keevican
& Weiss, 58th Floor, USX Tower, 600 Grant Street, Pittsburgh, Pennsylvania, or,
if the conditions set forth in Section 3(a), (b) or (c) have not then been
satisfied, on the second business day following the satisfaction of such
conditions, or at such other time and place as the parties hereto may agree (the
"Closing Date"). On the Closing Date, (i) in the event of a closing pursuant to
Section 1(b) hereof, the Grantor will deliver to the Grantee a certificate or
certificates representing the Shares in the denominations designated by the
Grantee in its Stock Exercise Notice and the Grantee will purchase such Shares
from the Grantor at the price per Share equal to the Purchase Price or (ii) in
the event of a closing pursuant to Section 1(c) hereof, the Grantor will deliver
to the Grantee cash in an amount determined pursuant to
-2-
<PAGE> 176
Section 1(c) hereof. Any payment made pursuant to this Agreement shall be made
by certified or official bank check or by wire transfer of federal funds to a
bank designated by the party receiving such funds.
(b) The certificates representing the Shares shall bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
5. Listing of Shares; Filings; Governmental Consents. Subject to applicable
law and the rules and regulations of the NYSE, the AMEX or the Nasdaq, as the
case may be, after the Option becomes exercisable hereunder, the Grantor will
promptly file an application to list the Shares on the NYSE or the AMEX or quote
the Shares on Nasdaq, as the case may be, and will use its reasonable best
efforts to obtain approval of such listing and to effect all necessary filings
by the Grantor under the HSR Act and the applicable laws of each state and
foreign jurisdiction; provided, however, that if the Grantor is unable to effect
such listing by the Closing Date, the Grantor will nevertheless be obligated to
deliver the Shares upon the Closing Date. Each of the parties hereto will use
its reasonable best efforts to obtain consents of all third parties and
governmental authorities, if any, necessary to the consummation of the
transactions contemplated.
6. Repurchase of Shares. If by the date that is the first anniversary of
the date the Merger Agreement was terminated pursuant to the terms thereof (the
"Merger Termination Date"), neither the Grantee nor any other Person has
acquired more than fifty percent (excluding the Shares) of the shares of
outstanding Common Stock, then the Grantor has the right to purchase (the
"Repurchase Right") all, but not less than all, of the Shares acquired upon
exercise of this Option at the greater of (i) the Purchase Price or (ii) the
average of the last sales prices for shares of Common Stock on the five trading
days ending five days prior to the date the Grantor gives written notice of its
intention to exercise the Repurchase Right. If the Grantor does not exercise the
Repurchase Right within thirty days following the end of the one-year period
after the Merger Termination Date, the Repurchase Right lapses. In the event the
Grantor wishes to exercise the Repurchase Right, the Grantor shall send a
written notice to the Grantee specifying a date (not later than 20 business days
and not earlier than 10 business days following the date such notice is given)
for the closing of such purchase.
7. Sale of Shares. At any time prior to the first anniversary of the Merger
Termination Date, the Grantee shall have the right to sell (the "Sale Right") to
the Grantor all, but not less than all, of the Shares acquired upon exercise of
this Option at the greater of (i) the Purchase Price or (ii) the average of the
last sales prices for shares of Common Stock on the five trading days ending
five days prior to the date the Grantee gives written notice of its intention to
exercise the Sale Right. If the Grantee does not exercise the Sale Right prior
to the first anniversary of the Merger Termination Date, the Sale Right
terminates. In the event the Grantee wishes to exercise the Sale Right, the
Grantee shall send a written notice to the Grantor specifying a date not later
than 20 business days and not earlier than 10 business days following the date
such notice is given for the closing of such sale.
8. Registration Rights. (a) In the event that the Grantee shall desire to
sell any of the Shares within three years after the purchase of such Shares
pursuant hereto, and such sale requires, in the opinion of counsel to the
Grantee, which opinion shall be reasonably satisfactory to the Grantor and its
counsel, registration of such Shares under the Securities Act, the Grantor will
cooperate with the Grantee and any underwriters in registering such Shares for
resale, including, without limitation, promptly filing a registration statement,
including if requested by Grantee a "shelf" registration statement under Rule
145 under the Securities Act or any successor provision, which complies with the
requirements of applicable federal and state securities laws, and entering into
an underwriting agreement with such underwriters upon such terms and conditions
as are customarily contained in underwriting agreements with respect to
secondary distributions; provided, however, that the Grantor shall not be
required to have declared effective more than one registration statement
hereunder and shall be entitled to delay the filing or effectiveness of any
registration statement for up to 180 days if the offering would, in the judgment
of the Board of Directors of the Grantor, require premature disclosure of any
material corporate development or material transaction involving the Grantor or
interfere with any previously planned securities offering by the Grantor.
(b) If the Common Stock is registered pursuant to the provisions of this
Section 8, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in
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such numbers as the Grantee may from time to time reasonably request and (ii) if
any event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least 120 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish
the Grantee such numbers of copies of the registration statement and prospectus
as amended or supplemented as may reasonably be requested. The Grantor shall
bear the cost of the registration, including, but not limited to, all
registration and filing fees, printing expenses, and fees and disbursements of
counsel and accountants for the Grantor, except that the Grantee shall pay the
fees and disbursements of its counsel, and the underwriting fees and selling
commissions applicable to the shares of Common Stock sold by the Grantee. The
Grantor shall indemnify and hold harmless (i) Grantee, its affiliates and its
officers and directors and (ii) each underwriter and each person who controls
any underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (collectively, the "Underwriters") ((i) and
(ii) being referred to as "Indemnified Parties") against any losses, claims,
damages, liabilities or expenses, to which the Indemnified Parties may become
subject, insofar as such losses, claims, damages, liabilities (or actions in
respect thereof) and expenses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained or
incorporated by reference in any registration statement filed pursuant to this
paragraph, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Grantor will
not be liable in any such case to the extent that any such loss, liability,
claim, damage or expense arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any such
documents in reliance upon and in conformity with written information furnished
to Grantor by the Indemnified Parties expressly for use or incorporation by
reference therein.
(c) The Grantee shall indemnify and hold harmless the Grantor, its
affiliates and its officers and directors against any losses, claims, damages,
liabilities or expenses to which the Grantor, its affiliates and its officers
and directors may become subject, insofar as such losses, claims, damages,
liabilities (or actions in respect thereof) and expenses arise out of or are
based upon any untrue statement of any material fact contained or incorporated
by reference in any registration statement filed pursuant to this paragraph, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Grantor by the Grantee specifically for use or
incorporation by reference therein.
9. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
10. Specific Performance. The Grantor acknowledges that if the Grantor
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
11. Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally, one day after being
delivered to a nationally recognized overnight courier or when telecopied (with
a confirmatory copy sent by such overnight courier) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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<PAGE> 178
(a) if to the Grantee, to:
Two Gateway Center
14th Floor
Pittsburgh, PA 15222
Attention: Chief Executive Officer
Facsimile No.: (412) 201-1116
with copies to:
Doepken Keevican & Weiss
58th Floor, USX Tower
600 Grant Street
Pittsburgh, PA 15219-2703
Attention: Leo A. Keevican, Jr.
Facsimile No.: (412) 355-2609
and
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, IL 60603
Attention: Frederick C. Lowinger
Facsimile No.: (312) 853-7036
(b) if to the Grantor, to:
1001 Air Brake Avenue
Wilmerding, PA 15148
Attention: Chief Executive Officer
Facsimile No.: (412) 825-1156
with copies to:
Reed Smith Shaw McClay
435 Sixth Avenue
Pittsburgh, PA 15219
Attention: David DeNinno
Facsimile No.: (412) 288-3218
and
Kirkland & Ellis
655 15th Street, N.W.
Washington, D.C. 20005
Attention: Jack Feder
Facsimile No.: (202) 879-5200
12. Interpretation. When a reference is made in this Agreement to a
section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation."
13. Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, including without limitation
the Original WABCO Option Agreement, it being understood that the Option (as
defined in the Original WABCO Option Agreement) is hereby terminated and that as
of the date hereof the Option referred to in Section 1 hereof is granted to the
Grantee pursuant to this Agreement.
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<PAGE> 179
14. Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
15. Severability. The invalidity or unenforceability of any provision of
this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provision of this Agreement in such jurisdiction, or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction.
16. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Pennsylvania, regardless of the laws
that might otherwise govern under the applicable principles of conflicts of laws
thereof.
17. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
18. Parties in Interest. This Agreement shall inure to the benefit of and
be binding upon the parties named herein and their respective successors and
assigns; provided, however, that such successor in interest or assigns shall
agree to be bound by the provisions of this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any person other than
the Grantor or the Grantee, or their successors or assigns, any rights or
remedies under or by reason of this Agreement.
19. Corporate Authorization. The Grantor agrees to take all necessary
corporate action to authorize and reserve the Shares issuable upon exercise of
the Option and to insure that, when issued and delivered by the Grantor upon
exercise of the Option and paid for by Grantee as contemplated hereby, the
Shares will be duly authorized, validly issued, fully paid and nonassessable and
free of preemptive rights.
20. Assignment. No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
party hereto, except that the Grantee may assign its rights and obligations
hereunder to any of its direct or indirect wholly owned subsidiaries, but no
such transfer shall relieve the Grantee of its obligations hereunder if such
transferee does not perform such obligations.
21. Termination. The right to exercise the Option granted pursuant to this
Agreement shall terminate at the earliest of (i) the Effective Time (as defined
in the Merger Agreement), (ii) if the Option is not exercised within 12 months
after first becoming exercisable and (iii) if not then exercisable, thirty days
after termination of the Merger Agreement in accordance with its terms (the
dates referred to in clause (ii) and (iii) being hereinafter referred to as the
"Termination Date"); provided, however, that if the Option cannot be exercised
or the Shares cannot be delivered to Grantee upon such exercise because the
conditions set forth in Section 3(a), (b) or (c) hereof have not yet been
satisfied, the Termination Date shall be extended until thirty days after such
impediment to exercise or delivery has been removed.
22. Profit Limitation. (a) Notwithstanding any other provision of this
Agreement or the Merger Agreement, in no event shall the Grantee's Total Profit
(as hereinafter defined) exceed $22.5 million and, if it otherwise would exceed
such amount, the Grantee shall repay such excess amount to Grantor in cash (or
the purchase price for purposes of Section 6 or 7, as applicable, shall be
reduced) so that Grantee's Total Profit shall not exceed $22.5 million after
taking into account the foregoing actions.
Notwithstanding any other provision of this Agreement, this Option may not
be exercised for a number of Shares as would, as of the date of the Stock
Exercise Notice, result in a Notional Total Profit (as defined below) of more
than $7.5 million and, if exercise of the Option otherwise would exceed such
amount, the Grantee, at its discretion, may increase the Purchase Price for that
number of Shares set forth in the Stock Exercise Notice so that the Notional
Total Profit shall not exceed $7.5 million; provided, however, that nothing in
this sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date at the Purchase Price set forth in Section 1(a) hereof.
As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i)(x) the amount of cash received by Grantee
pursuant to Sections 7.3(b)(ii) and (c) (ii) of the Merger
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<PAGE> 180
Agreement and Section 1(c) hereof, less (y) any repayment of such cash to
Grantor, (ii)(x) the amount received by Grantee pursuant to the Grantor's
repurchase of Shares pursuant to Sections 6 or 7 hereof, less (y) the Grantee's
purchase price for such Shares, and (iii)(x) the net cash amounts received by
Grantee pursuant to the sale of Shares (or any other securities into or for
which such Shares are converted or exchanged) to any unaffiliated party, less
(y) the Grantee's purchase price for such Shares.
As used herein, the term "Notional Total Profit" with respect to any number
of Shares as to which Grantee may propose to exercise this Option shall be the
Total Profit determined as of the date of the Stock Exercise Notice assuming
that this Option was exercised on such date for such number of Shares and
assuming that such Shares, together with all Shares acquired upon exercise of
the Option and held by Grantee and its affiliates as of such date, were sold for
cash at the closing market price for the Common Stock as of the close of
business on the preceding trading day (less customary brokerage commissions).
23. Public Announcement. Grantee and Grantor shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to this Option and shall not issue any such press release or make any
such public statement prior to such consultation and the receipt of approval
therefor by the other party, which consent shall not be unreasonably withheld,
except as may be required by law, court process or by stock exchange rules.
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the day and year first above written.
MOTIVEPOWER INDUSTRIES, INC.
By: /s/ JOHN C. POPE
------------------------------------
Name: John C. Pope
Title: Chairman of the Board
WESTINGHOUSE AIR BRAKE COMPANY
By: /s/ WILLIAM E. KASSLING
------------------------------------
Name: William E. Kassling
Title: Chief Executive Officer
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<PAGE> 181
ANNEX C
AMENDED AND RESTATED
MOTIVEPOWER STOCK OPTION AGREEMENT
BETWEEN
WESTINGHOUSE AIR BRAKE COMPANY,
A DELAWARE CORPORATION,
AND
MOTIVEPOWER INDUSTRIES, INC.,
A PENNSYLVANIA CORPORATION
DATED AS OF SEPTEMBER 26, 1999
<PAGE> 182
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. The Option; Exercise; Payment of Spread................. 1
2. Adjustments............................................. 2
3. Conditions to Delivery of Shares........................ 2
4. The Closing............................................. 2
5. Listing of Shares; Filings; Governmental Consents....... 3
6. Repurchase of Shares.................................... 3
7. Sale of Shares.......................................... 3
8. Registration Rights..................................... 3
9. Expenses................................................ 4
10. Specific Performance.................................... 4
11. Notice.................................................. 4
12. Interpretation.......................................... 5
13. Entire Agreement........................................ 5
14. Amendment............................................... 6
15. Severability............................................ 6
16. Governing Law........................................... 6
17. Counterparts............................................ 6
18. Parties in Interest..................................... 6
19. Corporate Authorization................................. 6
20. Assignment.............................................. 6
21. Termination............................................. 6
22. Profit Limitation....................................... 6
23. Public Announcement..................................... 7
</TABLE>
<PAGE> 183
AMENDED AND RESTATED MOTIVEPOWER STOCK OPTION AGREEMENT
AMENDED AND RESTATED STOCK OPTION AGREEMENT dated as of September 26,1999
(the "Agreement") between MotivePower Industries, Inc., a Pennsylvania
corporation (the "Grantor") and Westinghouse Air Brake Company, a Delaware
corporation (the "Grantee").
WHEREAS, the Grantor and the Grantee are parties to that certain Agreement
and Plan of Merger dated June 2, 1999, as amended as of July 19, 1999 (as so
amended, the "Original Merger Agreement") and that certain MotivePower Stock
Option Agreement dated June 2, 1999 (the "Original MotivePower Option
Agreement");
WHEREAS, the Grantor and the Grantee are amending the Original Merger
Agreement as of the date hereof (as so amended, the "Merger Agreement") to
provide for the merger of Grantor with and into Grantee (the "Merger"); and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor has agreed to amend and restate the Original MotivePower Option
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Payment of Spread. (a) Contemporaneously herewith
the Grantee and the Grantor are entering into the Merger Agreement. Subject to
the other terms and conditions set forth herein, the Grantor hereby grants to
the Grantee an irrevocable option (the "Option") to purchase up to 5,133,655
shares of Common Stock (the "Shares") at a cash purchase price equal to $13.12
per share (the "Purchase Price"). The Option may be exercised by the Grantee, in
whole or in part, at any time, or from time to time, following (but not prior
to) the occurrence of one of the events set forth in Section 3(c) hereof, and
prior to the termination of the Option in accordance with the terms of this
Agreement.
(b) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying a date (subject to the HSR Act (as defined below) and any other
applicable regulatory approvals) not later than 10 business days and not earlier
than three business days following the date such notice is given for the closing
of such purchase.
(c) If at any time the Option is then exercisable pursuant to the terms of
Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option to
purchase Shares provided in Section 1(a) hereof, to send a written notice to the
Grantor (the "Cash Exercise Notice") specifying a date not later than 20
business days and not earlier than 10 business days following the date such
notice is given on which date the Grantor shall pay to the Grantee an amount in
cash equal to the Spread (as hereinafter defined) multiplied by all or such
portion of the Shares subject to the Option as Grantee shall specify. As used
herein, "Spread" shall mean the excess, if any, over the Purchase Price of the
higher (x) if applicable, the highest price per share of Common Stock (including
any brokerage commissions, transfer taxes and soliciting dealers' fees) paid or
proposed to be paid by any person pursuant to any Takeover Proposal (as defined
in the Merger Agreement) (the "Alternative Purchase Price") or (y) the closing
price of the shares of Common Stock on the New York Stock Exchange (the "NYSE")
Composite Tape, the American Stock Exchange (the "AMEX") or The Nasdaq National
Market (the "Nasdaq"), as the case may be, on the last trading day immediately
prior to the date of the Cash Exercise Notice (the "Closing Price"). If the
Alternative Purchase Price includes any property other than cash, the
Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if
any, included in the Alternative Purchase Price plus (ii) the fair market value
of such other property. If such other property consists of securities with an
existing public trading market, the average of the closing prices (or the
average of the closing bid and asked prices if closing prices are unavailable)
for such securities in their principal public trading market on the five trading
days ending five days prior to the date of the Cash Exercise Notice shall be
deemed to equal the fair market value of such property. If such other property
consists of something other than cash or securities with an existing public
trading market and, as of the payment date for the Spread, agreement on the
value of such other property has not been reached, the Alternative Purchase
Price shall be deemed to equal the Closing Price. Upon exercise of its right to
receive cash pursuant to this Section 1(c), the obligations of the Grantor to
deliver Shares pursuant to Section 4 shall
<PAGE> 184
be terminated with respect to such number of Shares for which the Grantee shall
have elected to be paid the Spread.
2. Adjustments. (a) In the event of any change in the number of issued and
outstanding shares of Common Stock by reason of any stock dividend, stock split,
split-up, recapitalization, merger or other change in the corporate or capital
structure of the Grantor, the number of Shares subject to this Option and the
purchase price per Share shall be appropriately adjusted to restore the Grantee
to its rights hereunder, including its right to purchase Shares representing 19%
of the capital stock of the Grantor entitled to vote generally for the election
of the directors of Grantor which is issued and outstanding immediately prior to
the exercise of the Option.
(b) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that Grantor enters into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Grantor will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any person, other than Grantee or
one of its subsidiaries, to merge into Grantor, and Grantor will be the
continuing or surviving corporation, but in connection with such merger, the
shares of Common Stock outstanding immediately prior to the consummation of such
merger will be changed into or exchanged for stock or other securities of
Grantor or any other person or cash or any other property, or the shares of
Common Stock outstanding immediately prior to the consummation of such merger
will, after such merger, represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction will make proper provision so that the Option will, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect to Common
Stock if the Option had been exercised immediately prior to such consolidation,
merger, sale, or transfer, or the record date therefor, as applicable and make
any other necessary adjustments.
3. Conditions to Delivery of Shares. The Grantor's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated;
and
(c) (i) the Merger Agreement is terminated pursuant to Section 7.1(d)(ii)
and either (I) a Takeover Proposal with respect to Grantor shall have been made
after the date of the Merger Agreement and prior to the Grantor Stockholders
Meeting (as defined in the Merger Agreement) or (II) the Board of Directors of
Grantor shall not have recommended or shall have modified in a manner materially
adverse to Grantee its recommendation of the Merger Agreement and the Merger; or
(ii) the Merger Agreement is terminated pursuant to Section 7.1(e), 7.1(f) or
7.1(g) of the Merger Agreement.
4. The Closing. (a) Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice or Cash Exercise Notice,
as the case may be, at 9:00 A.M., local time, at the offices of Doepken Keevican
& Weiss, 58th Floor, USX Tower, 600 Grant Street, Pittsburgh, Pennsylvania, or,
if the conditions set forth in Section 3(a), (b) or (c) have not then been
satisfied, on the second business day following the satisfaction of such
conditions, or at such other time and place as the parties hereto may agree (the
"Closing Date"). On the Closing Date, (i) in the event of a closing pursuant to
Section 1(b) hereof, the Grantor will deliver to the Grantee a certificate or
certificates representing the Shares in the denominations designated by the
Grantee in its Stock Exercise Notice and the Grantee will purchase such Shares
from the Grantor at the price per Share equal to the Purchase Price or (ii) in
the event of a closing pursuant to Section 1(c) hereof, the Grantor will deliver
to the Grantee cash in an amount determined pursuant to
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<PAGE> 185
Section 1(c) hereof. Any payment made pursuant to this Agreement shall be made
by certified or official bank check or by wire transfer of federal funds to a
bank designated by the party receiving such funds.
(b) The certificates representing the Shares shall bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
5. Listing of Shares; Filings; Governmental Consents. Subject to applicable
law and the rules and regulations of the NYSE, the AMEX or the Nasdaq, as the
case may be, after the Option becomes exercisable hereunder, the Grantor will
promptly file an application to list the Shares on the NYSE or the AMEX or quote
the Shares on Nasdaq, as the case may be, and will use its reasonable best
efforts to obtain approval of such listing and to effect all necessary filings
by the Grantor under the HSR Act and the applicable laws of each state and
foreign jurisdiction; provided, however, that if the Grantor is unable to effect
such listing by the Closing Date, the Grantor will nevertheless be obligated to
deliver the Shares upon the Closing Date. Each of the parties hereto will use
its reasonable best efforts to obtain consents of all third parties and
governmental authorities, if any, necessary to the consummation of the
transactions contemplated.
6. Repurchase of Shares. If by the date that is the first anniversary of
the date the Merger Agreement was terminated pursuant to the terms thereof (the
"Merger Termination Date"), neither the Grantee nor any other Person has
acquired more than fifty percent (excluding the Shares) of the shares of
outstanding Common Stock, then the Grantor has the right to purchase (the
"Repurchase Right") all, but not less than all, of the Shares acquired upon
exercise of this Option at the greater of (i) the Purchase Price or (ii) the
average of the last sales prices for shares of Common Stock on the five trading
days ending five days prior to the date the Grantor gives written notice of its
intention to exercise the Repurchase Right. If the Grantor does not exercise the
Repurchase Right within thirty days following the end of the one-year period
after the Merger Termination Date, the Repurchase Right lapses. In the event the
Grantor wishes to exercise the Repurchase Right, the Grantor shall send a
written notice to the Grantee specifying a date (not later than 20 business days
and not earlier than 10 business days following the date such notice is given)
for the closing of such purchase.
7. Sale of Shares. At any time prior to the first anniversary of the Merger
Termination Date, the Grantee shall have the right to sell (the "Sale Right") to
the Grantor all, but not less than all, of the Shares acquired upon exercise of
this Option at the greater of (i) the Purchase Price or (ii) the average of the
last sales prices for shares of Common Stock on the five trading days ending
five days prior to the date the Grantee gives written notice of its intention to
exercise the Sale Right. If the Grantee does not exercise the Sale Right prior
to the first anniversary of the Merger Termination Date, the Sale Right
terminates. In the event the Grantee wishes to exercise the Sale Right, the
Grantee shall send a written notice to the Grantor specifying a date not later
than 20 business days and not earlier than 10 business days following the date
such notice is given for the closing of such sale.
8. Registration Rights. (a) In the event that the Grantee shall desire to
sell any of the Shares within three years after the purchase of such Shares
pursuant hereto, and such sale requires, in the opinion of counsel to the
Grantee, which opinion shall be reasonably satisfactory to the Grantor and its
counsel, registration of such Shares under the Securities Act, the Grantor will
cooperate with the Grantee and any underwriters in registering such Shares for
resale, including, without limitation, promptly filing a registration statement,
including if requested by Grantee a "shelf" registration statement under Rule
145 under the Securities Act or any successor provision, which complies with the
requirements of applicable federal and state securities laws, and entering into
an underwriting agreement with such underwriters upon such terms and conditions
as are customarily contained in underwriting agreements with respect to
secondary distributions; provided, however, that the Grantor shall not be
required to have declared effective more than one registration statement
hereunder and shall be entitled to delay the filing or effectiveness of any
registration statement for up to 180 days if the offering would, in the judgment
of the Board of Directors of the Grantor, require premature disclosure of any
material corporate development or material transaction involving the Grantor or
interfere with any previously planned securities offering by the Grantor.
(b) If the Common Stock is registered pursuant to the provisions of this
Section 8, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in
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<PAGE> 186
such numbers as the Grantee may from time to time reasonably request and (ii) if
any event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least 120 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish
the Grantee such numbers of copies of the registration statement and prospectus
as amended or supplemented as may reasonably be requested. The Grantor shall
bear the cost of the registration, including, but not limited to, all
registration and filing fees, printing expenses, and fees and disbursements of
counsel and accountants for the Grantor, except that the Grantee shall pay the
fees and disbursements of its counsel, and the underwriting fees and selling
commissions applicable to the shares of Common Stock sold by the Grantee. The
Grantor shall indemnify and hold harmless (i) Grantee, its affiliates and its
officers and directors and (ii) each underwriter and each person who controls
any underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (collectively, the "Underwriters") ((i) and
(ii) being referred to as "Indemnified Parties") against any losses, claims,
damages, liabilities or expenses, to which the Indemnified Parties may become
subject, insofar as such losses, claims, damages, liabilities (or actions in
respect thereof) and expenses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained or
incorporated by reference in any registration statement filed pursuant to this
paragraph, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Grantor will
not be liable in any such case to the extent that any such loss, liability,
claim, damage or expense arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any such
documents in reliance upon and in conformity with written information furnished
to Grantor by the Indemnified Parties expressly for use or incorporation by
reference therein.
(c) The Grantee shall indemnify and hold harmless the Grantor, its
affiliates and its officers and directors against any losses, claims, damages,
liabilities or expenses to which the Grantor, its affiliates and its officers
and directors may become subject, insofar as such losses, claims, damages,
liabilities (or actions in respect thereof) and expenses arise out of or are
based upon any untrue statement of any material fact contained or incorporated
by reference in any registration statement filed pursuant to this paragraph, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Grantor by the Grantee specifically for use or
incorporation by reference therein.
9. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
10. Specific Performance. The Grantor acknowledges that if the Grantor
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
11. Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally, one day after being
delivered to a nationally recognized overnight courier or when telecopied (with
a confirmatory copy sent by such overnight courier) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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<PAGE> 187
(a) if to the Grantor, to:
Two Gateway Center
14th Floor
Pittsburgh, PA 15222
Attention: Chief Executive Officer
Facsimile No.: (412) 201-1116
with copies to:
Doepken Keevican & Weiss
58th Floor, USX Tower
600 Grant Street
Pittsburgh, PA 15219-2703
Attention: Leo A. Keevican, Jr.
Facsimile No.: (412) 355-2609
and
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, IL 60603
Attention: Frederick C. Lowinger
Facsimile No.: (312) 853-7036
(b) if to the Grantee, to:
1001 Air Brake Avenue
Wilmerding, PA 15148
Attention: Chief Executive Officer
Facsimile No.: (412) 825-1156
with copies to:
Reed Smith Shaw McClay
435 Sixth Avenue
Pittsburgh, PA 15219
Attention: David DeNinno
Facsimile No.: (412) 288-3218
and
Kirkland & Ellis
655 15th Street, N.W.
Washington, D.C. 20005
Attention: Jack Feder
Facsimile No.: (202) 879-5200
12. Interpretation. When a reference is made in this Agreement to a
section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation."
13. Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, including without limitation
the Original MotivePower Option Agreement, it being understood that the Option
(as defined in the Original MotivePower
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<PAGE> 188
Option Agreement) is hereby terminated and that as of the date hereof the Option
referred to in Section 1 hereof is granted to the Grantee pursuant to this
Agreement.
14. Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
15. Severability. The invalidity or unenforceability of any provision of
this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provision of this Agreement in such jurisdiction, or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction.
16. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Pennsylvania, regardless of the laws
that might otherwise govern under the applicable principles of conflicts of laws
thereof.
17. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
18. Parties in Interest. This Agreement shall inure to the benefit of and
be binding upon the parties named herein and their respective successors and
assigns; provided, however, that such successor in interest or assigns shall
agree to be bound by the provisions of this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any person other than
the Grantor or the Grantee, or their successors or assigns, any rights or
remedies under or by reason of this Agreement.
19. Corporate Authorization. The Grantor agrees to take all necessary
corporate action to authorize and reserve the Shares issuable upon exercise of
the Option and to insure that, when issued and delivered by the Grantor upon
exercise of the Option and paid for by Grantee as contemplated hereby, the
Shares will be duly authorized, validly issued, fully paid and nonassessable and
free of preemptive rights.
20. Assignment. No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
party hereto, except that the Grantee may assign its rights and obligations
hereunder to any of its direct or indirect wholly owned subsidiaries, but no
such transfer shall relieve the Grantee of its obligations hereunder if such
transferee does not perform such obligations.
21. Termination. The right to exercise the Option granted pursuant to this
Agreement shall terminate at the earliest of (i) the Effective Time (as defined
in the Merger Agreement), (ii) if the Option is not exercised within 12 months
after first becoming exercisable and (iii) if not then exercisable, thirty days
after termination of the Merger Agreement in accordance with its terms (the
dates referred to in clause (ii) and (iii) being hereinafter referred to as the
"Termination Date"); provided, however, that if the Option cannot be exercised
or the Shares cannot be delivered to Grantee upon such exercise because the
conditions set forth in Section 3(a), (b) or (c) hereof have not yet been
satisfied, the Termination Date shall be extended until thirty days after such
impediment to exercise or delivery has been removed.
22. Profit Limitation. (a) Notwithstanding any other provision of this
Agreement or the Merger Agreement, in no event shall the Grantee's Total Profit
(as hereinafter defined) exceed $22.5 million and, if it otherwise would exceed
such amount, the Grantee shall repay such excess amount to Grantor in cash (or
the purchase price for purposes of Section 6 or 7, as applicable, shall be
reduced) so that Grantee's Total Profit shall not exceed $22.5 million after
taking into account the foregoing actions.
Notwithstanding any other provision of this Agreement, this Option may not
be exercised for a number of Shares as would, as of the date of the Stock
Exercise Notice, result in a Notional Total Profit (as defined below) of more
than $7.5 million and, if exercise of the Option otherwise would exceed such
amount, the Grantee, at its discretion, may increase the Purchase Price for that
number of Shares set forth in the Stock Exercise Notice so that the Notional
Total Profit shall not exceed $7.5 million; provided, however, that nothing in
this sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date at the Purchase Price set forth in Section 1(a) hereof.
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<PAGE> 189
As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i)(x) the amount of cash received by Grantee
pursuant to Sections 7.3(d)(ii) and (e) (ii) of the Merger Agreement and Section
1(c) hereof, less (y) any repayment of such cash to Grantor, (ii)(x) the amount
received by Grantee pursuant to the Grantor's repurchase of Shares pursuant to
Sections 6 or 7 hereof, less (y) the Grantee's purchase price for such Shares,
and (iii)(x) the net cash amounts received by Grantee pursuant to the sale of
Shares (or any other securities into or for which such Shares are converted or
exchanged) to any unaffiliated party, less (y) the Grantee's purchase price for
such Shares.
As used herein, the term "Notional Total Profit" with respect to any number
of Shares as to which Grantee may propose to exercise this Option shall be the
Total Profit determined as of the date of the Stock Exercise Notice assuming
that this Option was exercised on such date for such number of Shares and
assuming that such Shares, together with all Shares acquired upon exercise of
the Option and held by Grantee and its affiliates as of such date, were sold for
cash at the closing market price for the Common Stock as of the close of
business on the preceding trading day (less customary brokerage commissions).
23. Public Announcement. Grantor and Grantee shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to this Option and shall not issue any such press release or make any
such public statement prior to such consultation and the receipt of approval
therefor by the other party, which consent shall not be unreasonably withheld,
except as may be required by law, court process or by stock exchange rules.
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the day and year first above written.
MOTIVEPOWER INDUSTRIES, INC.
By: /s/ JOHN C. POPE
------------------------------------
Name: John C. Pope
Title: Chairman of the Board
WESTINGHOUSE AIR BRAKE COMPANY
By: /s/ WILLIAM E. KASSLING
------------------------------------
Name: William E. Kassling
Title: Chief Executive Officer
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<PAGE> 190
ANNEX D
VOTING AGREEMENT
VOTING AGREEMENT, dated as of September 26, 1999 (this "Agreement"), among
MotivePower Industries, Inc., a Pennsylvania corporation ("MotivePower"), and
the undersigned stockholders (collectively, the "Stockholders" and individually,
a "Stockholder") of Westinghouse Air Brake Company, a Delaware corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, MotivePower and the Company are entering into the Amended and
Restated Agreement and Plan of Merger, dated as of even date herewith (as the
same may be amended and supplemented, the "Merger Agreement"), whereby, upon the
terms and subject to the conditions set forth in the Merger Agreement, each
issued and outstanding share of Common Stock, par value $.01 per share, of
MotivePower ("MotivePower Common Stock"), not owned directly or indirectly by
MotivePower, the Company or their respective wholly-owned subsidiaries, will be
converted into the Exchange Ratio of shares of Common Stock, par value $.01 per
share, of the Company ("Company Common Stock");
WHEREAS, the Stockholders independently own or have voting control with
respect to certain shares of Company Common Stock (together with any shares of
Company Common Stock acquired by the Stockholders after the date hereof and
during the term of this Agreement, being collectively referred to herein as the
"Subject Shares");
WHEREAS, certain of the Stockholders are parties to the Second Amended
WABCO Voting Trust/ Disposition Agreement, dated as of December 13, 1995 (the
"Voting Trust Agreement"), by and among the management investors named therein,
the Company and the trustees named therein;
WHEREAS, certain of the Stockholders are parties to the Amended and
Restated Stockholders Agreement, dated as of March 5, 1997 and amended on March
28, 1997 (the "Stockholders Agreement"), by and among the voting trust created
under the Voting Trust Agreement, Vestar Equity Partners, L.P., a Delaware
limited partnership, Harvard Private Capital Holdings, Inc., a Massachusetts
corporation, American Industrial Partners Capital Fund II, L.P., a Delaware
limited partnership, and the Company; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, MotivePower has required that the Stockholders agree, and in order to
induce MotivePower to enter into the Merger Agreement, each of the Stockholders
has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, each of the Stockholders agrees as follows:
SECTION 1. COVENANTS OF STOCKHOLDERS. Until the termination of this
Agreement in accordance with Section 4, each of the Stockholders independently
agrees as follows:
(a) At any meeting of the stockholders of the Company called to vote
upon the Merger or the Merger Agreement or at any adjournment thereof or in
any other circumstances upon which a vote, consent or other approval with
respect to the Merger or the Merger Agreement is sought, the Stockholders
shall vote (or cause to be voted) the Subject Shares, with respect to which
such Stockholder has voting authority, in favor of the Merger, the adoption
of the Merger Agreement and the approval of the terms thereof and each of
the other transactions contemplated by the Merger Agreement.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholders' vote, consent or other approval is sought, the Stockholders
shall vote (or cause to be voted) the Subject Shares, with respect to which
such Stockholder has voting authority, against (i) any merger agreement or
merger (other than the Merger Agreement and the Merger), consolidation,
combination, sale of substantial assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by the Company or any other
Takeover Proposal (as defined in the
<PAGE> 191
Merger Agreement), (ii) any amendment of the Company's Certificate of
Incorporation, or By-Laws, which amendment would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of
the other transactions contemplated by the Merger Agreement or change in
any manner the voting rights of any class of capital stock of the Company,
or (iii) any action or agreement which would result in a breach of any
representation, warranty, covenant or agreement of the Company set forth in
the Merger Agreement. Each Stockholder further agrees not to commit or
agree to take any action inconsistent with the foregoing.
(c) Each Stockholder agrees not to (i) sell, transfer, exchange,
redeem, pledge, encumber, assign or otherwise dispose of (including by
gift) (collectively, "Transfer"), or enter into any contract, option or
other arrangement (including any profit-sharing arrangement) with respect
to the Transfer of any of its Subject Shares to any person or (ii) enter
into any voting arrangement (other than this Agreement), whether by proxy,
voting agreement or otherwise, in relation to the Subject Shares, with
respect to which such Stockholder has voting authority, and agrees not to
commit or agree to take any of the foregoing actions.
(d) The Stockholders, as stockholders of the Company, shall not, nor
shall the Stockholders, as stockholders of the Company, permit any officer,
director or employee or any investment banker, attorney, accountant, agent
or other advisor or representative of any of the Stockholders to, (i)
solicit, initiate or knowingly encourage the submission of any Takeover
Proposal, (ii) enter into any agreement with respect to a Takeover Proposal
or (iii) participate in any discussions or negotiations regarding, or
furnish to any Person (as defined in the Merger Agreement) any information
with respect to, or take any other action to facilitate any inquiries or
the making of any proposal that constitutes any Takeover Proposal.
(e) Each Stockholder shall notify MotivePower promptly (but in no
event later than 24 hours) after receipt by such Stockholder, as a
stockholder of the Company, or such Stockholder, as a stockholder of the
Company, becoming aware, of any Takeover Proposal or any request for
nonpublic information in connection with a Takeover Proposal or for access
to the properties, books or records of such party by any Person or entity
that informs such party that it is considering making, or has made, a
Takeover Proposal.
(f) The Stockholders agree to take all action necessary to suspend all
covenants, agreements and arrangements of the Stockholders contained in the
Voting Trust Agreement and the Stockholders Agreement and to terminate the
Voting Trust Agreement and Stockholders Agreement immediately prior to the
Effective time (as defined in the Merger Agreement), unless the accountants
for MotivePower and the Company mutually agree that such action is not
necessary to preserve the treatment of the Merger as "pooling of interests"
for accounting purposes.
SECTION 2. REPRESENTATIONS AND WARRANTIES. Each of the Stockholders hereby
severally and not jointly represents and warrants to MotivePower as follows:
(a) Such Stockholder has good and marketable title to the Subject
Shares held by such Stockholder, free and clear of any claims, liens,
encumbrances, pledges and security interests whatsoever. Such Stockholder
owns no shares of capital stock of the Company other than the Subject
Shares. Such Stockholder has the sole right to vote, and the sole power of
disposition with respect to, the Subject Shares held by such Stockholder.
No proxies or powers of attorney have been granted with respect to such
Subject Shares that will remain in effect after the execution of this
Agreement. Except for this Agreement and as contemplated by Section 1(f),
no voting arrangement (including voting agreements or voting trusts)
affecting such Subject Shares shall remain in effect after the execution of
this Agreement.
(b) Such Stockholder has all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by such Stockholder, and the
consummation of the transactions contemplated hereby, has been duly
authorized by all necessary action on the part of such Stockholder. This
Agreement has been duly executed and delivered by such Stockholder and
constitutes a valid and binding obligation of such Stockholder
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<PAGE> 192
enforceable in accordance with its terms. The execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of or default (with or without notice or
lapse of time or both) under any provision of any trust agreement,
partnership agreement, loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, notice, decree, statute, law,
ordinance, rule or regulation applicable to such Stockholder or to any of
the property or assets of any of such Stockholder. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority
or instrumentality, domestic, foreign or supranational, is required by or
with respect to such Stockholder in connection with the execution and
delivery of this Agreement or the consummation by such Stockholder of the
transactions contemplated hereby.
SECTION 3. AFFILIATE LETTER. Each Stockholder agrees to execute and deliver
on a timely basis an Affiliate Letter in the form of Exhibit 5.10(a) to the
Merger Agreement, when and if requested by MotivePower.
SECTION 4. TERMINATION. This Agreement shall terminate, without further
liability or obligation of the parties hereto, including liability for damages,
upon the earlier of (i) the termination of the Merger Agreement in accordance
with its terms, (ii) consummation of the Merger and (iii) MotivePower becoming
entitled to terminate the Merger Agreement pursuant to Section 7.1(i) of the
Merger Agreement. Notwithstanding the foregoing, no termination pursuant to this
Section 4 shall relieve the undersigned from liability for breach of this
Agreement.
SECTION 5. FURTHER ASSURANCES. The Stockholders will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as MotivePower may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
SECTION 6. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, and any attempted assignment thereof without such
consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
SECTION 7. SPECIFIC PERFORMANCE. Each Stockholder acknowledges that money
damages would be both incalculable and an insufficient remedy for any breach of
this Agreement by it, and that any such breach would cause MotivePower
irreparable harm. Accordingly, each Stockholder agrees that in the event of any
breach or threatened breach of this Agreement by such Stockholder, in addition
to any other remedies at law or in equity it may have, shall be entitled,
without the requirement of posting a bond or other security, to equitable
relief, including injunctive relief and specific performance.
SECTION 8. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally, one day after
being delivered to a nationally recognized overnight courier or when telecopied
(with a confirmatory copy sent by such overnight courier) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to MotivePower, to:
Two Gateway Center
14th Floor
Pittsburgh, PA 15222
Attention: Chief Executive Officer
Facsimile: (412) 201-1116
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<PAGE> 193
with copies to:
Doepken Keevican & Weiss
58th Floor, USX Tower
600 Grant Street
Pittsburgh, PA 15219-2703
Attention: Leo A. Keevican, Jr.
Facsimile: (412) 355-2609
and
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, IL 60603
Attention: Frederick C. Lowinger
Facsimile: (312) 853-7036
(b) if to Harvard Private Capital Holding, Inc., to:
CharlesBank Capital Partners, L.L.C.
1330 Avenue of the Americas, 31st Floor
New York, NY 10019
Attention: Kim David
Facsimile: (212) 582-1250
(c) if to Vestar Equity Partners, L.P., to:
Vestar Capital Partners, Inc.
Seventeenth Street Plaza
1225 17th Street, Suite 1600
Denver, CO 80202
Attention: James P. Kelley
Facsimile: (303) 292-6639
with a copy to:
Vestar Capital Partners, Inc.
245 Park Avenue, 41st Floor
New York, NY 10067
Attention: Todd N. Khoury
Facsimile: (212) 808-4922
(d) if to William E. Kassling, to:
Westinghouse Air Brake Company
1001 Air Brake Avenue
Wilmerding, PA 15148
Attention: William E. Kassling
Facsimile: (412) 825-1156
(e) if to Robert J. Brooks, to:
Westinghouse Air Brake Company
1001 Air Brake Avenue
Wilmerding, PA 15148
Attention: Robert J. Brooks
Facsimile: (412) 825-1156
SECTION 9. INTERPRETATION. When a reference is made in this Agreement to a
section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
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<PAGE> 194
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation."
SECTION 10. CAPITALIZED TERMS. Capitalized terms used in this Agreement
that are not defined herein shall have such meanings as set forth in the Merger
Agreement.
SECTION 11. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(including the documents and the instruments referred to herein) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and is not intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
SECTION 12. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
SECTION 13. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto
contained herein, (ii) waive any inaccuracies in the representations and
warranties of the other parties hereto contained herein or in any document
delivered pursuant hereto and (iii) waive compliance with any of the agreements
or conditions of the other parties hereto contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
SECTION 14. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provision of this Agreement in such jurisdiction, or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction. If in the opinion of MotivePower's independent accountants, any
provision hereof would cause the Merger to be ineligible for "pooling of
interest" accounting treatment, it shall be deemed to be ineffective and
inapplicable.
SECTION 15. EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense.
SECTION 16. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under the applicable principles of
conflicts of laws thereof.
SECTION 17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 18. NO LIMITATION ON ACTIONS OF ANY STOCKHOLDER AS DIRECTOR OR
OFFICER. In the event the Stockholder or an officer, employee, advisor,
consultant or representative thereof or thereto is a director or officer of the
Company, notwithstanding anything to the contrary in this Agreement, nothing in
this Agreement is intended or shall be construed to require the Stockholder or
such officer, employee, advisor, consultant or representative to take or in any
way limit any action that the Stockholder or such officer,
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<PAGE> 195
employee, advisor, consultant or representative may take to discharge the
fiduciary duties of the Stockholder or such officer, employee, advisor,
consultant or representative as a director or officer of the Company.
* * * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
MOTIVEPOWER INDUSTRIES, INC.
By: /s/ JOHN C. POPE
------------------------------------
Name: John C. Pope
Title: Chairmen of the Board
/s/ WILLIAM E. KASSLING
--------------------------------------
William E. Kassling
/s/ ROBERT J. BROOKS
--------------------------------------
Robert J. Brooks
HARVARD PRIVATE CAPITAL HOLDINGS, INC.
By: /s/ KIM DAVIS
------------------------------------
Name: Kim Davis
Title: Managing Director
VESTAR EQUITY PARTNERS, L.P.
By: /s/ JAMES P. KELLEY
------------------------------------
Name: James P. Kelley
Title: Managing Director
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<PAGE> 196
ANNEX E
VOTING AGREEMENT
VOTING AGREEMENT, dated as of September 26, 1999 (this "Agreement"),
between Westinghouse Air Brake Company, a Delaware corporation ("WABCO"), and
the undersigned stockholder (the "Stockholder") of MotivePower Industries, Inc.,
a Pennsylvania corporation (the "Company").
W I T N E S S E T H:
WHEREAS, WABCO and the Company are entering into the Amended and Restated
Agreement and Plan of Merger, dated as of even date herewith (as the same may be
amended and supplemented, the "Merger Agreement"), whereby, upon the terms and
subject to the conditions set forth in the Merger Agreement, each issued and
outstanding share of Common Stock, par value $.01 per share, of the Company
("Company Common Stock"), not owned directly or indirectly by WABCO, the Company
or their respective wholly-owned subsidiaries, will be converted into the
Exchange Ratio of shares of Common Stock, par value $.01 per share, of WABCO
("WABCO Common Stock");
WHEREAS, the Stockholder owns or has voting control with respect to certain
shares of Company Common Stock (together with any shares of Company Common Stock
acquired by the Stockholder after the date hereof and during the term of this
Agreement, being collectively referred to herein as the "Subject Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, WABCO has required that the Stockholder agrees, and in order to
induce WABCO to enter into the Merger Agreement, the Stockholder has agreed to
enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the Stockholder agrees as follows:
SECTION 1. COVENANTS OF STOCKHOLDER. Until the termination of this
Agreement in accordance with Section 4, the Stockholder agrees as follows:
(a) At any meeting of the stockholders of the Company called to vote
upon the Merger or the Merger Agreement or at any adjournment thereof or in
any other circumstances upon which a vote, consent or other approval with
respect to the Merger or the Merger Agreement is sought, the Stockholder
shall vote (or cause to be voted) the Subject Shares in favor of the
Merger, the adoption of the Merger Agreement and the approval of the terms
thereof and each of the other transactions contemplated by the Merger
Agreement.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, the Stockholder
shall vote (or cause to be voted) the Subject Shares against (i) any merger
agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the
Company or any other Takeover Proposal (as defined in the Merger
Agreement), (ii) any amendment of the Company's Articles of Incorporation,
or By-Laws, which amendment would in any manner impede, frustrate, prevent
or nullify the Merger, the Merger Agreement or any of the other
transactions contemplated by the Merger Agreement or change in any manner
the voting rights of any class of capital stock of the Company, or (iii)
any action or agreement which would result in a breach of any
representation, warranty, covenant or agreement of the Company set forth in
the Merger Agreement. The Stockholder further agrees not to commit or agree
to take any action inconsistent with the foregoing.
(c) The Stockholder agrees not to (i) sell, transfer, exchange,
redeem, pledge, encumber, assign or otherwise dispose of (including by
gift) (collectively, "Transfer"), or enter into any contract, option or
other arrangement (including any profit-sharing arrangement) with respect
to the Transfer of the Subject
<PAGE> 197
Shares to any person or (ii) enter into any voting arrangement (other than
this Agreement), whether by proxy, voting agreement or otherwise, in
relation to the Subject Shares, and agrees not to commit or agree to take
any of the foregoing actions.
(d) The Stockholder, as stockholder of the Company, shall not, nor
shall the Stockholder, as stockholder of the Company, permit any officer,
director or employee or any investment banker, attorney, accountant, agent
or other advisor or representative of the Stockholder to, (i) solicit,
initiate or knowingly encourage the submission of any Takeover Proposal,
(ii) enter into any agreement with respect to a Takeover Proposal or (iii)
participate in any discussions or negotiations regarding, or furnish to any
Person (as defined in the Merger Agreement) any information with respect
to, or take any other action to facilitate any inquiries or the making of
any proposal that constitutes any Takeover Proposal.
(e) The Stockholder shall notify WABCO promptly (but in no event later
than 24 hours) after receipt by the Stockholder, as stockholder of the
Company, or the Stockholder, as stockholder of the Company, becoming aware,
of any Takeover Proposal or any request for nonpublic information in
connection with a Takeover Proposal or for access to the properties, books
or records of such party by any Person or entity that informs such party
that it is considering making, or has made, a Takeover Proposal.
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Stockholder hereby
represents and warrants to WABCO as follows:
(a) The Stockholder has good and marketable title to the Subject
Shares, free and clear of any claims, liens, encumbrances, pledges and
security interests whatsoever. The Stockholder owns no shares of capital
stock of the Company other than the Subject Shares. The Stockholder has the
sole right to vote, and the sole power of disposition with respect to, the
Subject Shares. No proxies or powers of attorney have been granted with
respect to the Subject Shares that will remain in effect after the
execution of this Agreement. Except for this Agreement and as contemplated
by Section 1(f), no voting arrangement (including voting agreements or
voting trusts) affecting the Subject Shares shall remain in effect after
the execution of this Agreement.
(b) The Stockholder has all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Stockholder, and the
consummation of the transactions contemplated hereby, has been duly
authorized by all necessary action on the part of the Stockholder. This
Agreement has been duly executed and delivered by the Stockholder and
constitutes a valid and binding obligation of the Stockholder enforceable
in accordance with its terms. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the terms hereof will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time or both)
under any provision of any trust agreement, partnership agreement, loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license, judgment,
order, notice, decree, statute, law, ordinance, rule or regulation
applicable to the Stockholder or to any of the property or assets of the
Stockholder. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency
or commission or other governmental authority or instrumentality, domestic,
foreign or supranational, is required by or with respect to the Stockholder
in connection with the execution and delivery of this Agreement or the
consummation by the Stockholder of the transactions contemplated hereby.
SECTION 3. AFFILIATE LETTER. The Stockholder agrees to execute and deliver
on a timely basis an Affiliate Letter in the form of Exhibit 5.10(b) to the
Merger Agreement, when and if requested by WABCO.
SECTION 4. TERMINATION. This Agreement shall terminate, without further
liability or obligation of the parties hereto, including liability for damages,
upon the earlier of (i) the termination of the Merger Agreement in accordance
with its terms, (ii) consummation of the Merger and (iii) WABCO becoming
entitled to terminate the Merger Agreement pursuant to Section 7.1(e) of the
Merger Agreement.
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<PAGE> 198
Notwithstanding the foregoing, no termination pursuant to this Section 4 shall
relieve the undersigned from liability for breach of this Agreement.
SECTION 5. FURTHER ASSURANCES. The Stockholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as WABCO may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
SECTION 6. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, and any attempted assignment thereof without such
consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
SECTION 7. SPECIFIC PERFORMANCE. The Stockholder acknowledges that money
damages would be both incalculable and an insufficient remedy for any breach of
this Agreement by it, and that any such breach would cause WABCO irreparable
harm. Accordingly, the Stockholder agrees that in the event of any breach or
threatened breach of this Agreement by the Stockholder, in addition to any other
remedies at law or in equity it may have, shall be entitled, without the
requirement of posting a bond or other security, to equitable relief, including
injunctive relief and specific performance.
SECTION 8. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally, one day after
being delivered to a nationally recognized overnight courier or when telecopied
(with a confirmatory copy sent by such overnight courier) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to WABCO, to:
1001 Air Brake Avenue
Wilmerding, PA 15148
Attention: Chief Executive Officer
Facsimile No.: (412) 825-1156
with copies to:
Reed Smith Shaw McClay
435 Sixth Avenue
Pittsburgh, PA 15219
Attention: David DeNinno
Facsimile No.: (412) 288-3218
and
Kirkland & Ellis
655 15th Street, N.W.
Washington, D.C. 20005
Attention: Jack Feder
Facsimile No.: (202) 879-5200
(b) if to the Stockholder, to:
810 South Ridge Road
Lake Forest, IL 60045
Attention: John C. Pope
Facsimile: (847) 735-0114
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<PAGE> 199
with copies to:
Doepken Keevican & Weiss
58th Floor, USX Tower
600 Grant Street
Pittsburgh, PA 15219-2703
Attention: Leo A. Keevican, Jr.
Facsimile: (412) 355-2609
and
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, IL 60603
Attention: Frederick C. Lowinger
Facsimile: (312) 853-7036
SECTION 9. INTERPRETATION. When a reference is made in this Agreement to a
section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation."
SECTION 10. CAPITALIZED TERMS. Capitalized terms used in this Agreement
that are not defined herein shall have such meanings as set forth in the Merger
Agreement.
SECTION 11. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(including the documents and the instruments referred to herein) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and is not intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
SECTION 12. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
SECTION 13. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto
contained herein, (ii) waive any inaccuracies in the representations and
warranties of the other parties hereto contained herein or in any document
delivered pursuant hereto and (iii) waive compliance with any of the agreements
or conditions of the other parties hereto contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
SECTION 14. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provision of this Agreement in such jurisdiction, or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction. If in the opinion of WABCO's or the Company's independent
accountants, any provision hereof would cause the Merger to be ineligible for
"pooling of interest" accounting treatment, it shall be deemed to be ineffective
and inapplicable.
SECTION 15. EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense.
SECTION 16. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Pennsylvania, regardless
of the laws that might otherwise govern under the applicable principles of
conflicts of laws thereof.
SECTION 17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more
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<PAGE> 200
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
SECTION 18. NO LIMITATION ON ACTIONS OF THE STOCKHOLDER AS DIRECTOR OR
OFFICER. Notwithstanding anything to the contrary in this Agreement, nothing in
this Agreement is intended or shall be construed to require the Stockholder or
any officer, employee, advisor, consultant or representative thereof or thereto
to take or in any way limit any action that the Stockholder may take to
discharge the fiduciary duties of the Stockholder as a director or officer of
the Company.
* * * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
WESTINGHOUSE AIR BRAKE COMPANY
By: /s/ WILLIAM E. KASSLING
-------------------------------------
Name: William E. Kassling
Title: Chief Executive Officer
/s/ JOHN C. POPE
----------------------------------------
John C. Pope
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<PAGE> 201
ANNEX F
Wasserstein Perella & Co., Inc.
31 West 52nd Street
New York, New York 10019-6118
September 26, 1999
Board of Directors
MotivePower Industries, Inc.
Two Gateway Center
Fourteenth Floor
Pittsburgh, Pennsylvania 15222
Members of the Board of Directors:
MotivePower Industries, Inc. (the "Company") and Westinghouse Air Brake
Company ("WABCO") have entered into an Amended and Restated Agreement and Plan
of Merger, dated as of September 26, 1999 (the "Agreement"). The Agreement
provides for, among other things, a merger of the Company with and into WABCO
(the "Merger"), pursuant to which each outstanding share of the Company's common
stock, par value $.01 per share ("Company Shares"), will be converted into .66
shares (the "Exchange Ratio") of the common stock, par value $.01 per share, of
WABCO ("WABCO Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair from
a financial point of view to the holders of Company Shares, other than WABCO and
its affiliates.
In arriving at the opinion set forth below, we have, among other things:
1. Reviewed certain publicly available business and financial information
relating to the Company and WABCO which we deemed to be relevant;
2. Reviewed certain internal financial information, including financial
forecasts, relating to the business, earnings, cash flow, assets,
liabilities and prospects of the Company and WABCO, as well as the
amount and timing of the cost savings and related expenses and
synergies expected to result from the Merger (the "Expected
Synergies"), in each case prepared and furnished to us by the Company
and WABCO;
3. Conducted discussions with members of senior management and
representatives of the Company and WABCO concerning the matters
described in clauses 1 and 2 above, as well as their respective
businesses and prospects before and after giving effect to the Merger,
and the Expected Synergies;
4. Reviewed the market prices and valuation multiples for Company Shares
and WABCO Shares and compared them with those of certain
publicly-traded companies which we deemed to be relevant;
5. Reviewed the results of operations of the Company and WABCO and
compared them with those of certain publicly-traded companies which we
deemed to be relevant;
6. Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions which we deemed to be relevant;
7. Participated in certain discussions and negotiations among
representatives of the Company and WABCO and their financial and legal
advisors;
8. Reviewed the potential pro forma impact of the Merger;
9. Reviewed the Agreement; and
10. Performed such other financial studies, analyses and investigations and
reviewed such other information as we considered appropriate for
purposes of this opinion.
<PAGE> 202
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all of the financial and other information provided to or
discussed with us or publicly available, and we have not assumed any
responsibility for independently verifying any of such information. In addition,
we have not reviewed any of the books and records of the Company or WABCO, or
assumed any responsibility for conducting a physical inspection of the
properties or facilities of the Company or WABCO or for making or obtaining an
independent valuation or appraisal of any of the assets or liabilities of the
Company or WABCO, and no such independent valuation or appraisal was provided to
us. We have also assumed and relied upon the reasonableness and accuracy of the
financial forecast information and the Expected Synergies furnished to or
discussed with us by the Company and WABCO. We have assumed that the financial
forecast information and Expected Synergies have been reasonably prepared in
good faith and on bases reflecting the best currently available estimates and
judgments of the Company's and WABCO's respective managements as to the expected
future financial performance of, and expenses and benefits to, the Company or
WABCO, as the case may be, and the Expected Synergies. We have also assumed that
such financial forecast information and Expected Synergies will be realized in
the amounts and at the times indicated thereby. We express no opinion as to such
financial forecast information and Expected Synergies or as to the assumptions
upon which they are based. You have informed us, and we have assumed, that the
Merger will be accounted for as a pooling of interests under generally accepted
accounting principles and will qualify as a tax-free reorganization for United
States Federal income tax purposes.
For purposes of rendering this opinion we have assumed, in all respects
material to our analysis, that the representations and warranties of each party
to the Agreement and all related documents and instruments (collectively, the
"Documents") contained therein are true and correct, that each party to the
Documents will perform all of the covenants and agreements required to be
performed by such party under such Documents and that all conditions to the
consummation of the Merger will be satisfied without waiver or modification
thereof. We have also assumed that all material governmental, regulatory or
other consents and approvals required in connection with the Merger will be
obtained, and that in the course of obtaining any necessary consents and
approvals, or any amendments, modifications or waivers to any documents to which
either the Company or WABCO is a party, no restrictions will be imposed or
amendments, modifications or waivers made that would have any material adverse
effect on the contemplated benefits of the Merger. Our opinion is necessarily
based upon market, economic and other conditions and circumstances as they exist
and can be evaluated on, and on the information made available to us as of, the
date hereof. We are not expressing any opinion herein as to the prices at or
trading ranges in which Company Shares or WABCO Shares may trade at any time.
In connection with performing our services for the Company, we have not
been authorized by the Company or the Board of Directors to solicit, nor have we
solicited, any third-party indications of interest for the acquisition of all or
any part of the Company.
We are acting as financial advisor to the Company in connection with the
proposed Merger and will receive a fee from the Company for our services, a
major portion of which is contingent upon the consummation of the Merger. In the
past, we have provided financial advisory services to the Company and received
compensation for such services. In addition, the Company has agreed to indemnify
us for certain liabilities arising out of our engagement. In the ordinary course
of our business, we may actively trade the Company Shares and other securities
of the Company, as well as the WABCO Shares and other securities of WABCO, for
our own account and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities.
Our opinion addresses only the fairness of the Exchange Ratio from a
financial point of view to the holders of Company Shares, other than WABCO and
its affiliates, and we do not express any views on any other terms of the
Merger. Specifically, our opinion does not address the Company's underlying
business decision to effect the transactions contemplated by the Agreement.
It is understood that this letter is for the benefit and use of the Board
of Directors of the Company in its consideration of the Merger, and except for
inclusion in its entirety in any registration statement or proxy statement
required to be circulated to shareholders of the Company relating to the Merger,
may not be
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<PAGE> 203
disseminated, quoted, referred to or reproduced at any time or in any manner
without our prior written consent. This opinion does not constitute a
recommendation to any shareholder as to how such shareholder should vote with
respect to the Merger, and should not be relied upon by any shareholder as such.
On the basis of and subject to the foregoing, including the various
assumptions and limitations set forth herein, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair from a financial point of view to
the holders of Company Shares, other than WABCO and its affiliates.
Very truly yours,
/s/ WASSERSTEIN PERELLA & CO., INC.
----------------------------------------
WASSERSTEIN PERELLA & CO., INC.
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<PAGE> 204
CREDIT SUISSE LETTERHEAD
ANNEX G
September 26, 1999
Board of Directors
Westinghouse Air Brake Company
1001 Air Brake Avenue
Wilmerding, PA 15148
Gentlemen:
You have asked us to advise you with respect to the fairness to Westinghouse Air
Brake Company (the "Company") from a financial point of view of the
consideration to be paid by the Company pursuant to the terms of the Amended and
Restated Agreement and Plan of Merger, dated as of September 26, 1999 (the
"Merger Agreement"), among the Company and MotivePower Industries, Inc.
("MotivePower"). The Merger Agreement provides for the merger (the "Merger") of
MotivePower into the Company pursuant to which each outstanding share of common
stock, par value $.01 per share, of MotivePower will be converted in the Merger
into 0.66 of a share (the "Exchange Ratio") of common stock, par value $.01 per
share, of the Company (the "Common Stock").
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company and MotivePower, as well as
the Merger Agreement. We have also reviewed certain other information, including
financial forecasts, provided to us by the Company and MotivePower, and have met
with the Company's and MotivePower's management to discuss the business and
prospects of the Company and MotivePower. We have also relied upon the views of
the Company's and MotivePower's management concerning the business, operational
and strategic benefits and implications of the Merger, including financial
forecasts provided to us by the Company and MotivePower relating to the
synergistic values and operating cost savings expected to be achieved through
the combination of the operations of the Company and MotivePower.
We have also considered certain financial and stock market data of the Company
and MotivePower, and we have compared those data with similar data for other
publicly held companies in businesses similar to the Company and MotivePower and
we have considered the financial terms of certain other business combinations
and other transactions which have recently been effected. We also considered
such other information, financial studies, analyses and investigations and
financial, economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's and MotivePower's management as to the future financial performance of
the Company and MotivePower and as to the cost savings and other potential
synergies (including the amount, timing and achievability thereof) anticipated
to result from the Merger. You also have informed us, and we have assumed, that
the Merger will be treated as a tax-free reorganization for federal income tax
purposes and accounted for as a pooling of interests in accordance with
generally accepted accounting principles. In addition, we have not been
requested to make, and have not made, an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of the Company or
MotivePower, nor have we been furnished with any such evaluations or appraisals.
Our opinion is necessarily based upon financial, economic, market and other
conditions as they exist and can be evaluated on the date hereof. We are not
expressing any opinion as to the actual value of the Common Stock when issued to
the stockholders of MotivePower pursuant to the Merger or the prices at which
such Common
<PAGE> 205
Stock will trade subsequent to the Merger. We were not requested to, and did
not, solicit third party indications of interest in acquiring all or any part of
the Company.
We have acted as financial advisor to the Board of Directors in connection with
the Merger and will receive a fee for our services, a significant portion of
which is contingent upon the consummation of the Merger. In the past, we have
provided financial services to the Company unrelated to the proposed Merger, for
which services we have received compensation. In the ordinary course of
business, Credit Suisse First Boston and its affiliates may actively trade the
debt and equity securities of both the Company and MotivePower for their own
accounts and for the accounts of customers and, accordingly, may at any time
hold long or short positions in such securities. As of the date hereof, Credit
Suisse First Boston owns approximately 3,300,311 shares of MotivePower.
It is understood that this letter is for the information of the Board of
Directors in connection with its consideration of the Merger and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed Merger and is not to be quoted or referred to, in whole or
in part, in any registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without our prior written
consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio is fair to the Company from a financial point of
view.
Very truly yours,
By: /s/ CREDIT SUISSE FIRST BOSTON
CORPORATION
-------------------------------------
CREDIT SUISSE FIRST BOSTON
CORPORATION
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<PAGE> 206
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
WABCO is incorporated under the laws of the State of Delaware. Section 145
of the General Corporation Law of the State of Delaware provides that a Delaware
corporation may indemnify any persons who are, or are threatened to be made,
parties to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation), by reason of the fact that such person
is or was an officer, director, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, provided such person acted in good faith and in
a manner he reasonably believed to be in or not opposed to the corporation's
best interests and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was illegal. A Delaware corporation
may indemnify any persons who are, or are threatened to be made, a party to any
threatened, pending or completed action or suit by or in the right of the
corporation by reason of the fact that such person was a director, officer,
employee or agent of such corporation, or is or was serving at the request of
such corporation, as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorney's fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred. The certificate of incorporation,
as amended, of WABCO provides that no director of the corporation shall be
liable to such corporation or its stockholders for monetary damages arising from
a breach of fiduciary duty owed to the corporation or its stockholders.
The by-laws of WABCO provide that WABCO shall indemnify any person who was
or is a party or is threatened to be made a party to or is involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he is or
was a director or officer of such corporation or other entity, or is or was
serving at the request of such corporation as a director, officer or merger of
another corporation, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding and that such indemnification
shall continue as to an indemnitee who has ceased to be a director or officer
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators. The by-laws of WABCO further provide that WABCO may, to the
extent authorized from time to time by the directors, indemnify any employee or
agent of such corporation in the same manner as a director or officer of such
entity.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprises,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
The by-laws of WABCO provide that WABCO may purchase and maintain insurance
on behalf of any person who is or was a director or officer of WABCO or was
serving at the request of WABCO as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him in any such, or arising out of his status as such, whether
or not WABCO would have the right or obligation to indemnify him against such
liability under its by-laws.
WABCO has agreed to indemnify, to the extent provided under MotivePower's
charter and by-laws in effect on September 26, 1999, the individuals who on or
before the closing were officers or directors of MotivePower or its subsidiaries
with respect to all acts or omissions before the closing by these individuals in
these capacities. WABCO has also agreed to provide, for six years after the
closing, a directors' and officers' liability insurance
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<PAGE> 207
and indemnification policy that provides MotivePower's officers and directors in
office immediately prior to the closing coverage substantially equivalent to
MotivePower's policy in effect on September 26, 1999.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a list of Exhibits included as part of this
Registration Statement. WABCO agrees to furnish supplementally a copy of any
omitted schedule to the SEC upon request. Items marked with an asterisk are
filed herewith.
<TABLE>
<CAPTION>
EXHIBIT FILING
NUMBER DESCRIPTION METHOD
- ------- ----------- ------
<S> <C> <C>
*2.1 Amended and Restated Agreement and Plan of Merger, as
amended (included as Annex A to the Joint Proxy
Statement/Prospectus filed as part of this Registration
Statement) 1
3.1 Restated Certificate of Incorporation of the Company dated
January 30, 1995, as amended March 30, 1995 2
3.2 Amended and Restated By-Laws of the Company, effective March
31, 1997 (Originally filed as Exhibit 4.2) 4
*3.3 Amended and Restated Bylaws of the Company, to become
effective upon the consummation of the merger (included as
Exhibit 1.4(b) to Annex A to the Joint Proxy
Statement/Prospectus filed as part of this Registration
Statement). 1
4.1 Form of Indenture between the Company and The Bank of New
York with respect to the public offering of $100,000,000 of
9 3/8% Senior Notes due 2005 2
4.2 Form of Note (included in Exhibit 4.1) 2
4.3 First Supplemental Indenture dated as of March 21, 1997
between the Company and The Bank of New York 5
4.4 Indenture dated as of January 12, 1999 by and between the
Company and The Bank of New York with respect to the private
offering of $75,000,000 of 9 3/8 Senior Notes due 2005,
Series B 7
4.5 Form of Note (included in Exhibit 4.4) 7
*5.1 Opinion of Reed Smith Shaw & McClay LLP, as to the legality
of the securities being registered. 1
*8.1 Opinion of Sidley & Austin, as to certain United States
federal income tax consequences of the merger. 1
*8.2 Opinion of Kirkland & Ellis, as to certain United States
federal income tax consequences of the merger. 1
*10.1 MotivePower Stock Option Agreement (included as Annex B to
the Joint Proxy Statement/Prospectus filed as part of this
Registration Statement). 1
*10.2 Westinghouse Air Brake Stock Option Agreement (included as
Annex C to the Joint Proxy Statement/Prospectus filed as
part of this Registration Statement). 1
*10.3 Voting Agreement dated as of September 26, 1999 among
William E. Kassling, Robert J. Brooks, Harvard Private
Capital Holdings, Inc., Vestar Equity Partners, L.P. and
MotivePower Industries, Inc. (included as Annex D to the
Joint Proxy Statement/ Prospectus filed as part of this
Registration Statement) 1
*10.4 Voting Agreement dated as of September 26, 1999 among John
C. Pope and Westinghouse Air Brake Company (included as
Annex E to the Joint Proxy Statement/ Prospectus filed as
part of this Registration Statement) 1
10.5 Westinghouse Air Brake Company Employee Stock Ownership Plan
and Trust, effective January 31, 1995 2
10.6 ESOP Loan Agreement dated January 31, 1995 between
Westinghouse Air Brake Company Employee Stock Ownership
Trust ("ESOT") and the Company (Exhibits omitted) 2
10.7 Employee Stock Ownership Trust Agreement dated January 31,
1995 between the Company and U.S. Trust Company of
California, N.A. 2
10.8 Pledge Agreement dated January 31, 1995 between ESOT and the
Company 2
</TABLE>
II-2
<PAGE> 208
<TABLE>
<CAPTION>
EXHIBIT FILING
NUMBER DESCRIPTION METHOD
- ------- ----------- ------
<S> <C> <C>
10.9 Credit Agreement dated as of June 30, 1998, and Amended and
Restated as of October 2, 1998 among the Company, various
financial institutions, The Chase Manhattan Bank, Chase
Manhattan Bank Delaware, and The Bank of New York (Schedules
and Exhibits omitted) 7
10.10 Amended and Restated Stockholders Agreement dated as of
March 5, 1997 among the RAC Voting Trust ("Voting Trust"),
Vestar Equity Partners, L.P. ("Vestar Equity"), Charlesbank
Capital Partners f/k/a Harvard Private Capital Holdings,
Inc. ("Charlesbank"), American Industrial Partners Capital
Fund II, L.P. ("AIP") and the Company 5
10.11 Common Stock Registration Rights Agreement dated as of
January 31, 1995 among the Company, Scandinavian Incentive
Holding B.V. ("SIH"), Voting Trust, Vestar Capital, Pulse
Electronics, Inc., Pulse Embedded Computer Systems, Inc.,
the Pulse Shareholders and ESOT (Schedules and Exhibits
omitted) 2
10.12 Indemnification Agreement dated January 31, 1995 between the
Company and the Voting Trust trustees 2
10.13 Agreement of Sale and Purchase of the North American
Operations of the Railway Products Group, an operating
division of American Standard Inc., dated as of 1990 between
Rail Acquisition Corp. and American Standard Inc. (only
provisions on indemnification are reproduced) 2
10.14 Letter Agreement (undated) between the Company and American
Standard Inc. on environmental costs and sharing 2
10.15 Purchase Agreement dated as of June 17, 1992 among the
Company, Schuller International, Inc., Manville Corporation
and European Overseas Corporation (only provisions on
indemnification are reproduced) 2
10.16 Asset Purchase Agreement dated as of January 23, 1995 among
the Company, Pulse Acquisition Corporation, Pulse
Electronics, Inc., Pulse Embedded Computer Systems, Inc. and
the Pulse Shareholders (Schedules and Exhibits omitted) 2
10.17 License Agreement dated as of December 31, 1993 between SAB
WABCO Holdings B.V. and the Company 2
10.18 Letter Agreement dated as of January 19, 1995 between the
Company and Vestar Capital Partners, Inc. 2
10.19 Westinghouse Air Brake Company 1995 Stock Incentive Plan, as
amended 7
10.20 Westinghouse Air Brake Company 1995 Non-Employee Directors'
Fee and Stock Option Plan 7
10.21 Form of Employment Agreement between William E. Kassling and
the Company 2
10.22 Letter Agreement dated as of January 1, 1995 between the
Company and Vestar Capital Partners, Inc. 2
10.23 Form of Indemnification Agreement between the Company and
Authorized Representatives 2
10.24 Share Purchase Agreement between Futuris Corporation Limited
and the Company (Exhibits omitted) 2
10.25 Purchase Agreement dated as of September 19, 1996 by and
among Mark IV Industries, Inc., Mark IV PLC, and W&P Holding
Corp. (Exhibits and Schedules omitted) (Originally filed as
Exhibit 2.01) 3
10.26 Purchase Agreement dated as of September 19, 1996 by and
among Mark IV Industries Limited and Westinghouse Railway
Holdings (Canada) Inc. (Exhibits and Schedules omitted)
(Originally filed as Exhibit 2.02) 3
10.27 Amendment No. 1 to Amended and Restated Stockholders
Agreement dated as of March 5, 1997 among the Voting Trust,
Vestar Equity, Charlesbank, AIP and the Company 5
10.28 Common Stock Registration Rights Agreement dated as of March
5, 1997 among the Company, Charlesbank, AIP and the Voting
Trust 5
10.29 1998 Employee Stock Purchase Plan 7
</TABLE>
II-3
<PAGE> 209
<TABLE>
<CAPTION>
EXHIBIT FILING
NUMBER DESCRIPTION METHOD
- ------- ----------- ------
<S> <C> <C>
10.30 Sale Agreement dated as of August 7, 1998 by and between
Rockwell Collins, Inc. and the Company (Schedules and
Exhibits omitted) (Originally filed as Exhibit 2.1) 6
10.31 Amendment No. 1 dated as of October 5, 1998 to Sale
Agreement dated as of August 7, 1998 by and between Rockwell
Collins, Inc. and the Company (Originally filed as Exhibit
2.2) 6
21.1 Subsidiaries of the Registrant. 7
*23.1 Consent of Deloitte & Touche LLP. 1
*23.2 Consent of Arthur Andersen LLP. 1
*23.3 Consent of Reed Smith Shaw & McClay LLP (included in Exhibit
5.1 to this Registration Statement). 1
*23.4 Consent of Sidley & Austin (included in Exhibit 8.1 to this
Registration Statement). 1
*23.5 Consent of Kirkland & Ellis (included in Exhibit 8.2 to this
Registration Statement). 1
*24.1 Powers of Attorney (filed herewith as part of signature
page). 1
*99.1 Form of proxy card to be mailed to MotivePower shareholders. 1
*99.2 Form of proxy card to be mailed to Westinghouse Air Brake
shareholders. 1
*99.3 Form of proxy card to be mailed to participants in the
Westinghouse Air Brake Company Employee Stock Ownership
Plan. 1
*99.4 Notice to Participants in the Westinghouse Air Brake Company
Employee Stock Ownership Plan. 1
*99.5 Notice to Participants in the Westinghouse Air Brake Company
RAC Voting Trust. 1
*99.6 Consent of Gilbert E. Carmichael to be named as a nominee
for director of WABCO. 1
*99.7 Consent of Lee B. Foster II to be named as nominee for
director of WABCO. 1
*99.8 Consent of James M. Miscoll to be named as nominee for
director of WABCO. 1
*99.9 Consent of Nicholas T. Stanley to be named as nominee for
director of WABCO. 1
99.10 Annual Report on Form 10-K for the year ended December 31,
1998 of the WABCO Employee Stock Ownership Plan and Trust 7
</TABLE>
<TABLE>
<CAPTION>
FILING METHOD
-------------
<S> <C>
1 Filed herewith. Also noted by an asterisk.
2 Filed as an exhibit to the Company's Registration Statement
on Form S-1 (No. 33-90866), and incorporated herein by
reference.
3 Filed as an exhibit to the Company's Current Report on Form
8-K, dated October 3, 1996, and incorporated herein by
reference.
4 Filed as an exhibit to the Company's Registration Statement
on Form S-8 (No. 333-39159), and incorporated herein by
reference.
5 Filed as an exhibit to the Company's Annual Report on Form
10-K for the period ended December 31, 1997, and
incorporated herein by reference.
6 Filed as an exhibit to the Company's Current Report on Form
8-K, dated October 5, 1998, and incorporated herein by
reference.
7 Filed as an exhibit to the Company's Current Report on Form
10-K for the period ended December 31, 1998, and
incorporated herein by reference.
</TABLE>
(b) Not applicable.
(c) The opinion of Wasserstein Perella & Co., Inc. is included as Annex F to
the Joint Proxy Statement/ Prospectus. The opinion of Credit Suisse First Boston
Corporation is included as Annex G to the Joint Proxy Statement/Prospectus.
II-4
<PAGE> 210
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the Registration Statement through the date of responding to the
request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
II-5
<PAGE> 211
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-6
<PAGE> 212
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
William E. Kassling and Robert J. Brooks and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and all
acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, WESTINGHOUSE
AIR BRAKE COMPANY HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY
OF WILMERDING, STATE OF PENNSYLVANIA, ON OCTOBER 13, 1999.
WESTINGHOUSE AIR BRAKE COMPANY
BY: /S/ WILLIAM E. KASSLING
------------------------------------
WILLIAM E. KASSLING
DIRECTOR, CHAIRMAN OF THE BOARD
AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT ON FORM S-4 HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.
BY: /S/ WILLIAM E. KASSLING
------------------------------------
WILLIAM E. KASSLING
DIRECTOR, CHAIRMAN OF THE BOARD
AND
CHIEF EXECUTIVE OFFICER
DATE: OCTOBER 13, 1999
BY: /S/ EMILIO A. FERNANDEZ
------------------------------------
EMILIO A. FERNANDEZ
DIRECTOR AND VICE CHAIRMAN
DATE: OCTOBER 13, 1999
BY: /S/ GREGORY T.H. DAVIES
------------------------------------
GREGORY T.H. DAVIES
PRESIDENT, CHIEF OPERATING OFFICER
AND DIRECTOR
DATE: OCTOBER 13, 1999
BY: /S/ ROBERT J. BROOKS
------------------------------------
ROBERT J. BROOKS
DIRECTOR, CHIEF EXECUTIVE OFFICER
AND CHIEF ACCOUNTING OFFICER
DATE: OCTOBER 13, 1999
II-7
<PAGE> 213
BY: /S/ KIM G. DAVIS
----------------------------------
KIM G. DAVIS
DIRECTOR
DATE: OCTOBER 13, 1999
BY: /S/ JAMES C. HUNTINGTON, JR.
------------------------------------
JAMES C. HUNTINGTON, JR.
DIRECTOR
DATE: OCTOBER 13, 1999
BY: /S/ JAMES P. KELLEY
------------------------------------
JAMES P. KELLEY
DIRECTOR
DATE: OCTOBER 13, 1999
BY: /S/ JAMES V. NAPIER
------------------------------------
JAMES V. NAPIER
DIRECTOR
DATE: OCTOBER 13, 1999
II-8
<PAGE> 214
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT FILING
NUMBER DESCRIPTION METHOD
- ------- ----------- ------
<C> <S> <C>
*2.1 Amended and Restated Agreement and Plan of Merger, as
amended (included as Annex A to the Joint Proxy
Statement/Prospectus filed as part of this Registration
Statement) 1
3.1 Restated Certificate of Incorporation of the Company dated
January 30, 1995, as amended March 30, 1995 2
3.2 Amended and Restated By-Laws of the Company, effective March
31, 1997 (Originally filed as Exhibit 4.2) 4
*3.3 Amended and Restated Bylaws of the Company, to become
effective upon the consummation of the merger (included as
Exhibit 1.4(b) to Annex A to the Joint Proxy
Statement/Prospectus filed as part of this Registration
Statement). 1
4.1 Form of Indenture between the Company and The Bank of New
York with respect to the public offering of $100,000,000 of
9 3/8% Senior Notes due 2005 2
4.2 Form of Note (included in Exhibit 4.1) 2
4.3 First Supplemental Indenture dated as of March 21, 1997
between the Company and The Bank of New York 5
4.4 Indenture dated as of January 12, 1999 by and between the
Company and The Bank of New York with respect to the private
offering of $75,000,000 of 9 3/8 Senior Notes due 2005,
Series B 7
4.5 Form of Note (included in Exhibit 4.4) 7
*5.1 Opinion of Reed Smith Shaw & McClay LLP, as to the legality
of the securities being registered. 1
*8.1 Opinion of Sidley & Austin, as to certain United States
federal income tax consequences of the merger. 1
*8.2 Opinion of Kirkland & Ellis, as to certain United States
federal income tax consequences of the merger. 1
*10.1 MotivePower Stock Option Agreement (included as Annex B to
the Joint Proxy Statement/Prospectus filed as part of this
Registration Statement). 1
*10.2 Westinghouse Air Brake Stock Option Agreement (included as
Annex C to the Joint Proxy Statement/Prospectus filed as
part of this Registration Statement). 1
*10.3 Voting Agreement dated as of September 26, 1999 among
William E. Kassling, Robert J. Brooks, Harvard Private
Capital Holdings, Inc., Vestar Equity Partners, L.P. and
MotivePower Industries, Inc. (included as Annex D to the
Joint Proxy Statement/ Prospectus filed as part of this
Registration Statement) 1
*10.4 Voting Agreement dated as of September 26, 1999 among John
C. Pope and Westinghouse Air Brake Company (included as
Annex E to the Joint Proxy Statement/Prospectus filed as
part of this Registration Statement) 1
10.5 Westinghouse Air Brake Company Employee Stock Ownership Plan
and Trust, effective January 31, 1995 2
10.6 ESOP Loan Agreement dated January 31, 1995 between
Westinghouse Air Brake Company Employee Stock Ownership
Trust ("ESOT") and the Company (Exhibits omitted) 2
10.7 Employee Stock Ownership Trust Agreement dated January 31,
1995 between the Company and U.S. Trust Company of
California, N.A. 2
10.8 Pledge Agreement dated January 31, 1995 between ESOT and the
Company 2
10.9 Credit Agreement dated as of June 30, 1998, and Amended and
Restated as of October 2, 1998 among the Company, various
financial institutions, The Chase Manhattan Bank, Chase
Manhattan Bank Delaware, and The Bank of New York (Schedules
and Exhibits omitted) 7
</TABLE>
II-9
<PAGE> 215
<TABLE>
<CAPTION>
EXHIBIT FILING
NUMBER DESCRIPTION METHOD
- ------- ----------- ------
<C> <S> <C>
10.10 Amended and Restated Stockholders Agreement dated as of
March 5, 1997 among the RAC Voting Trust ("Voting Trust"),
Vestar Equity Partners, L.P. ("Vestar Equity"), Charlesbank
Capital Partners f/k/a Harvard Private Capital Holdings,
Inc. ("Charlesbank"), American Industrial Partners Capital
Fund II, L.P. ("AIP") and the Company 5
10.11 Common Stock Registration Rights Agreement dated as of
January 31, 1995 among the Company, Scandinavian Incentive
Holding B.V. ("SIH"), Voting Trust, Vestar Capital, Pulse
Electronics, Inc., Pulse Embedded Computer Systems, Inc.,
the Pulse Shareholders and ESOT (Schedules and Exhibits
omitted) 2
10.12 Indemnification Agreement dated January 31, 1995 between the
Company and the Voting Trust trustees 2
10.13 Agreement of Sale and Purchase of the North American
Operations of the Railway Products Group, an operating
division of American Standard Inc., dated as of 1990 between
Rail Acquisition Corp. and American Standard Inc. (only
provisions on indemnification are reproduced) 2
10.14 Letter Agreement (undated) between the Company and American
Standard Inc. on environmental costs and sharing 2
10.15 Purchase Agreement dated as of June 17, 1992 among the
Company, Schuller International, Inc., Manville Corporation
and European Overseas Corporation (only provisions on
indemnification are reproduced) 2
10.16 Asset Purchase Agreement dated as of January 23, 1995 among
the Company, Pulse Acquisition Corporation, Pulse
Electronics, Inc., Pulse Embedded Computer Systems, Inc. and
the Pulse Shareholders (Schedules and Exhibits omitted) 2
10.17 License Agreement dated as of December 31, 1993 between SAB
WABCO Holdings B.V. and the Company 2
10.18 Letter Agreement dated as of January 19, 1995 between the
Company and Vestar Capital Partners, Inc. 2
10.19 Westinghouse Air Brake Company 1995 Stock Incentive Plan, as
amended 7
10.20 Westinghouse Air Brake Company 1995 Non-Employee Directors'
Fee and Stock Option Plan 7
10.21 Form of Employment Agreement between William E. Kassling and
the Company 2
10.22 Letter Agreement dated as of January 1, 1995 between the
Company and Vestar Capital Partners, Inc. 2
10.23 Form of Indemnification Agreement between the Company and
Authorized Representatives 2
10.24 Share Purchase Agreement between Futuris Corporation Limited
and the Company (Exhibits omitted) 2
10.25 Purchase Agreement dated as of September 19, 1996 by and
among Mark IV Industries, Inc., Mark IV PLC, and W&P Holding
Corp. (Exhibits and Schedules omitted) (Originally filed as
Exhibit 2.01) 3
10.26 Purchase Agreement dated as of September 19, 1996 by and
among Mark IV Industries Limited and Westinghouse Railway
Holdings (Canada) Inc. (Exhibits and Schedules omitted)
(Originally filed as Exhibit 2.02) 3
10.27 Amendment No. 1 to Amended and Restated Stockholders
Agreement dated as of March 5, 1997 among the Voting Trust,
Vestar Equity, Charlesbank, AIP and the Company 5
10.28 Common Stock Registration Rights Agreement dated as of March
5, 1997 among the Company, Charlesbank, AIP and the Voting
Trust 5
10.29 1998 Employee Stock Purchase Plan 7
10.30 Sale Agreement dated as of August 7, 1998 by and between
Rockwell Collins, Inc. and the Company (Schedules and
Exhibits omitted) (Originally filed as Exhibit 2.1) 6
</TABLE>
II-10
<PAGE> 216
<TABLE>
<CAPTION>
EXHIBIT FILING
NUMBER DESCRIPTION METHOD
- ------- ----------- ------
<C> <S> <C>
10.31 Amendment No. 1 dated as of October 5, 1998 to Sale
Agreement dated as of August 7, 1998 by and between Rockwell
Collins, Inc. and the Company (Originally filed as Exhibit
2.2) 6
21.1 Subsidiaries of the Registrant. 7
*23.1 Consent of Deloitte & Touche LLP. 1
*23.2 Consent of Arthur Andersen LLP. 1
*23.3 Consent of Reed Smith Shaw & McClay LLP (included in Exhibit
5.1 to this Registration Statement). 1
*23.4 Consent of Sidley & Austin (included in Exhibit 8.1 to this
Registration Statement). 1
*23.5 Consent of Kirkland & Ellis (included in Exhibit 8.2 to this
Registration Statement). 1
*24.1 Powers of Attorney (filed herewith as part of signature
page). 1
*99.1 Form of proxy card to be mailed to MotivePower shareholders. 1
*99.2 Form of proxy card to be mailed to Westinghouse Air Brake
shareholders. 1
*99.3 Form of proxy card to be mailed to participants in the
Westinghouse Air Brake Company Employee Stock Ownership
Plan. 1
*99.4 Notice to Participants in the Westinghouse Air Brake Company
Employee Stock Ownership Plan. 1
*99.5 Notice to Participants in the Westinghouse Air Brake Company
RAC Voting Trust. 1
*99.6 Consent of Gilbert E. Carmichael to be named as a nominee
for director of WABCO. 1
*99.7 Consent of Lee B. Foster II to be named as nominee for
director of WABCO. 1
*99.8 Consent of James M. Miscoll to be named as nominee for
director of WABCO. 1
*99.9 Consent of Nicholas T. Stanley to be named as nominee for
director of WABCO. 1
99.10 Annual Report on Form 10-K for the year ended December 31,
1998 of the WABCO Employee Stock Ownership Plan and Trust 7
</TABLE>
<TABLE>
<CAPTION>
FILING METHOD
-------------
<S> <C>
1 Filed herewith. Also noted by an asterisk.
2 Filed as an exhibit to the Company's Registration Statement
on Form S-1 (No. 33-90866), and incorporated herein by
reference.
3 Filed as an exhibit to the Company's Current Report on Form
8-K, dated October 3, 1996, and incorporated herein by
reference.
4 Filed as an exhibit to the Company's Registration Statement
on Form S-8 (No. 333-39159), and incorporated herein by
reference.
5 Filed as an exhibit to the Company's Annual Report on Form
10-K for the period ended December 31, 1997, and
incorporated herein by reference.
6 Filed as an exhibit to the Company's Current Report on Form
8-K, dated October 5, 1998, and incorporated herein by
reference.
7 Filed as an exhibit to the Company's Current Report on Form
10-K for the period ended December 31, 1998, and
incorporated herein by reference.
</TABLE>
II-11
<PAGE> 1
Exhibit 5.1
REED SMITH SHAW & MCCLAY LLP
435 Sixth Avenue
Pittsburgh, Pennsylvania 15219-1886
Phone: 412-288-3131
Fax: 412-288-3063
October 13, 1999
Westinghouse Air Brake Company
1001 Air Brake Avenue
Pittsburgh, PA 15148
Dear Sirs:
We have acted as counsel for Westinghouse Air Brake Company, a
Delaware corporation (the "Corporation"), in connection with the preparation of
a Registration Statement on Form S-4 (the "Registration Statement") relating to
the registration of the shares of the Corporation's Common Stock, par value $.01
per share (the "Common Stock"), to be issued pursuant to the Amended and
Restated Agreement and Plan of Merger, dated as of September 26, 1999, as
amended (the "Merger Agreement"), by and between the Corporation and MotivePower
Industries, Inc. This opinion is being furnished pursuant to the requirements of
Form S-4 under the Securities Act of 1933, as amended (the "Act").
In furnishing this opinion we have examined the Registration
Statement, as well as the Joint Proxy Statement/Prospectus included therein (the
"Joint Proxy Statement/Prospectus"), to be filed with the Securities and
Exchange Commission. We have also examined such other documents, legal opinions
and precedents, corporate and other records of the Corporation and certificates
of public officials and officers of the Corporation as we have deemed necessary
or appropriate to provide a basis for the opinions set forth herein. In such
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity to original
documents of all documents submitted to us as certified or photostatic copies.
Based upon the foregoing and subject to the qualifications set
forth below, we are of the opinion that:
(1) The Corporation has been duly incorporated and is
validly existing as a corporation under the laws of
the State of Delaware;
(2) The Registration Statement has been duly authorized
by all necessary corporate action for the
Corporation; and
(3) When the Registration Statement has been declared
effective under the Act and the shares of Common
Stock have been issued and delivered pursuant to the
terms of the Merger Agreement, the shares of Common
Stock will be validly issued, fully paid and
nonassessable.
<PAGE> 2
REED SMITH SHAW & MCCLAY LLP
-2-
Westinghouse Air Brake Company October 13, 1999
In rendering the foregoing opinion, we have examined the
Delaware General Corporation Law and the federal laws of the United States of
America and the foregoing opinions are limited to such laws.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the use of our name in the Joint Proxy
Statement/Prospectus under the heading "Legal Matters". By giving such consent,
we do not hereby admit that we are within the category of persons whose consents
are required under Section 7 of the Act.
This opinion is being rendered solely for your benefit in
connection with the Registration Statement. You may not rely on this opinion for
any other purpose without our express written consent. This opinion is rendered
as of the date hereof, and we are under no obligation to update it or to advise
you of any subsequent event which could affect it. This opinion may not be
assigned, quoted or used without our express written consent.
Very truly yours,
/s/ REED SMITH SHAW & McCLAY LLP
DLD:PDGJr.:KLS:AES
<PAGE> 1
Exhibit 8.1
[SIDLEY & AUSTIN LETTERHEAD]
October 13, 1999
MotivePower Industries, Inc.
Two Gateway Center
14th Floor
Pittsburgh, PA 15222
Ladies and Gentlemen:
We refer to the Amended and Restated Agreement and Plan of Merger, as
amended (the "Agreement"), dated as of September 26, 1999 and amended as of
October 4, 1999, between MotivePower Industries, Inc., a Pennsylvania
corporation ("MotivePower"), and Westinghouse Air Brake Company, a Delaware
corporation ("WABCO"), which provides for the merger (the "Merger") of
MotivePower with and into WABCO, with WABCO as the surviving corporation (the
"Surviving Corporation"), and the common stockholders of MotivePower becoming
stockholders of WABCO, all on the terms and conditions therein set forth, the
time at which the Merger becomes effective being hereinafter referred to as the
"Effective Time." Capitalized terms used but not defined herein have the
meanings specified in the Agreement.
As provided in the Agreement, at the Effective Time, by reason of the
Merger: (i) each issued and outstanding share of common stock, par value $.01
per share, of MotivePower ("MotivePower Common Stock") shall be converted into
0.66 shares of validly issued, fully paid and nonassessable shares of common
stock, par value $.01 per share, of WABCO ("WABCO Common Stock"), with cash paid
in lieu of fractional shares of WABCO Common Stock, and (ii) each share of
MotivePower Common Stock that is owned by MotivePower as treasury stock shall be
canceled and no WABCO Common Stock or other consideration shall be delivered in
exchange therefor. All such shares of MotivePower Common Stock, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired, and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to receive (i)
certificates representing the number of whole shares of WABCO Common Stock into
which such shares have been converted, (ii) certain dividends and other
distributions and (iii) cash in lieu of a fractional share of WABCO Common
Stock.
<PAGE> 2
MotivePower Industries, Inc.
October 13, 1999
Page 2
The Merger and the Agreement are more fully described in WABCO's
Registration Statement on Form S-4 (the "Registration Statement") relating to
the registration of shares of WABCO Common Stock, which has been filed by WABCO
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended. The Registration Statement includes the Joint Proxy
Statement/Prospectus (the "Prospectus") of WABCO and MotivePower.
In rendering the opinions expressed below, we have relied upon the
accuracy of the facts, information and representations and the completeness of
the covenants contained in the Agreement, the Registration Statement, the
Prospectus and such other documents as we have deemed relevant and necessary
(including, without limitation, those described above). Such opinions are
conditioned, among other things, not only upon such accuracy and completeness as
of the date hereof, but also the continuing accuracy and completeness thereof as
of the Effective Time. Moreover, we have assumed the absence of any change to
any of such instruments between the date thereof and the Effective Time.
We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of all natural
persons and the conformity with original documents of all copies submitted to us
for our examination. We have further assumed that: (i) the transactions related
to the Merger or contemplated by the Agreement will be consummated (A) in
accordance with the Agreement and (B) as described in the Prospectus; (ii) the
Merger will qualify as a statutory merger under the laws of the State of
Pennsylvania and the State of Delaware; and (iii) as of the date hereof, and as
of the Effective Time (as if made as of the Effective Time), the written
statements made by executives of WABCO and MotivePower contained in the WABCO
Tax Certificate and MotivePower Tax Certificate, respectively, each dated on or
about the date hereof, are and will be accurate in all respects, and neither
WABCO nor MotivePower will have provided written notification prior to the
Effective Time that a statement made in the WABCO Tax Certificate or MotivePower
Tax Certificate, respectively, is no longer accurate.
In rendering the opinions expressed below, we have considered the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Regulations promulgated thereunder by the United States Treasury
Department (the "Regulations"), pertinent judicial authorities, rulings and
interpretations of the Internal Revenue Service and such other authorities as we
have considered relevant. It should be noted that the Code, the Regulations and
such judicial decisions, rulings, administrative interpretations and other
authorities are subject to
<PAGE> 3
MotivePower Industries, Inc.
October 13, 1999
Page 3
change at any time and, in some circumstances, with retroactive effect; and any
such change could affect the opinions stated herein. Furthermore, the opinions
expressed below might not be applicable to MotivePower shareholders who or
which, for United States federal income tax purposes, are nonresident alien
individuals, foreign corporations, foreign partnerships, foreign trusts or
foreign estates, or who acquired their MotivePower Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation.
Based upon and subject to the foregoing, it is our opinion, as counsel
for MotivePower, that, for federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and WABCO and MotivePower will
each be a party to that reorganization within the meaning of Section
368(b) of the Code;
(ii) no gain or loss will be recognized by MotivePower or
WABCO as a result of the Merger;
(iii) no gain or loss will be recognized by the shareholders
of MotivePower upon the conversion of their shares of MotivePower
Common Stock into shares of WABCO Common Stock pursuant to the Merger,
except with respect to cash, if any, received in lieu of fractional
shares of WABCO Common Stock;
(iv) the aggregate tax basis of the shares of WABCO Common
Stock received in exchange for shares of MotivePower Common Stock
pursuant to the Merger (including a fractional share of WABCO Common
Stock for which cash is paid) will be the same as the aggregate tax
basis of such shares of MotivePower Common Stock;
(v) the holding period for shares of WABCO Common Stock
received in exchange for shares of MotivePower Common Stock pursuant
to the Merger will include the holder's holding period for such shares
of MotivePower Common Stock, provided such shares of MotivePower
Common Stock were held as capital assets by the holder at the
Effective Time; and
(vi) a stockholder of MotivePower who receives cash in lieu
of a fractional share of WABCO Common Stock will recognize gain or
loss equal to the difference, if any, between such stockholder's basis
in the fractional share (determined under clause (iv) above) and the
amount of cash received.
<PAGE> 4
MotivePower Industries, Inc.
October 13, 1999
Page 4
In addition, reference is made to the statements in the Prospectus
under the caption "The Merger Transaction -- Material United States Federal
Income Tax Consequences of the Merger," which have been prepared or reviewed by
us. It is our opinion that the statements made under the caption "The Merger
Transaction -- Material United States Federal Income Tax Consequences of the
Merger," to the extent constituting a discussion of matters of federal income
tax law or legal conclusions with respect thereto, are true and correct in all
material respects.
Except as expressly set forth above, you have not requested, and we do
not herein express, any opinion concerning the tax consequences of, or any other
matters related to, the Merger. Our opinion also does not address U.S. federal
income tax consequences which may vary with or are contingent upon, a
shareholder's individual circumstances.
We assume no obligation to update or supplement this letter to reflect
any facts or circumstances which may hereafter come to our attention with
respect to the opinions expressed above, including any changes in applicable law
which may hereafter occur.
This opinion is provided to, and may be relied upon by, you only, and
without our prior consent, it may not be relied upon, used, circulated, quoted
or otherwise referred to in any manner by any other person, firm, governmental
authority or entity whatsoever. Notwithstanding the foregoing, we hereby consent
to the reference to Sidley & Austin in the Prospectus and to the filing of this
opinion as an exhibit to the Registration Statement.
Very Truly Yours,
/s/ SIDLEY & AUSTIN
<PAGE> 1
Exhibit 8.2
[KIRKLAND & ELLIS LETTERHEAD]
October 13, 1999
Westinghouse Air Brake Company
1001 Air Brake Avenue
Wilmerding, PA 15148
Ladies and Gentlemen:
We refer to the Amended and Restated Agreement and Plan of Merger, as
amended (the "Agreement"), dated as of September 26, 1999 and amended as of
October 4, 1999, between MotivePower Industries, Inc., a Pennsylvania
corporation ("MotivePower"), and Westinghouse Air Brake Company, a Delaware
corporation ("WABCO"), which provides for the merger (the "Merger") of
MotivePower with and into WABCO, with WABCO as the surviving corporation (the
"Surviving Corporation"), and the common stockholders of MotivePower becoming
stockholders of WABCO, all on the terms and conditions therein set forth, the
time at which the Merger becomes effective being hereinafter referred to as the
"Effective Time." Capitalized terms used but not defined herein have the
meanings specified in the Agreement.
As provided in the Agreement, at the Effective Time, by reason of the
Merger: (i) each issued and outstanding share of common stock, par value $.01
per share, of MotivePower ("MotivePower Common Stock") shall be converted into
0.66 shares of validly issued, fully paid and nonassessable shares of common
stock, par value $.01 per share, of WABCO ("WABCO Common Stock"), with cash paid
in lieu of fractional shares of WABCO Common Stock, and (ii) each share of
MotivePower Common Stock that is owned by MotivePower as treasury stock shall be
canceled and no WABCO Common Stock or other consideration shall be delivered in
exchange therefor. All such shares of MotivePower Common Stock, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired, and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to receive (i)
certificates representing the number of whole shares of WABCO Common Stock into
which such shares have been converted, (ii) certain dividends and other
distributions and (iii) cash in lieu of a fractional share of WABCO Common
Stock.
<PAGE> 2
Westinghouse Air Brake Company
October 13, 1999
Page 2
The Merger and the Agreement are more fully described in WABCO's
Registration Statement on Form S-4 (the "Registration Statement") relating to
the registration of shares of WABCO Common Stock, which has been filed by WABCO
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended. The Registration Statement includes the Joint Proxy
Statement/Prospectus (the "Prospectus") of WABCO and MotivePower.
In rendering the opinions expressed below, we have relied upon the
accuracy of the facts, information and representations and the completeness of
the covenants contained in the Agreement, the Registration Statement, the
Prospectus and such other documents as we have deemed relevant and necessary
(including, without limitation, those described above). Such opinions are
conditioned, among other things, not only upon such accuracy and completeness as
of the date hereof, but also the continuing accuracy and completeness thereof as
of the Effective Time. Moreover, we have assumed the absence of any change to
any of such instruments between the date thereof and the Effective Time.
We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of all natural
persons and the conformity with original documents of all copies submitted to us
for our examination. We have further assumed that: (i) the transactions related
to the Merger or contemplated by the Agreement will be consummated (A) in
accordance with the Agreement and (B) as described in the Prospectus; (ii) the
Merger will qualify as a statutory merger under the laws of the State of
Pennsylvania and the State of Delaware; and (iii) as of the date hereof, and as
of the Effective Time (as if made as of the Effective Time), the written
statements made by executives of WABCO and MotivePower contained in the WABCO
Tax Certificate and MotivePower Tax Certificate, respectively, each dated on or
about the date hereof, are and will be accurate in all respects, and neither
WABCO nor MotivePower will have provided written notification prior to the
Effective Time that a statement made in the WABCO Tax Certificate or MotivePower
Tax Certificate, respectively, is no longer accurate.
In rendering the opinions expressed below, we have considered
the applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Regulations promulgated thereunder by the United States Treasury
Department (the "Regulations"), pertinent judicial authorities, rulings and
interpretations of the Internal Revenue Service and such other authorities as we
have considered relevant. It should be noted that the Code, the Regulations and
such judicial decisions, rulings, administrative interpretations and other
authorities are subject to change at any time and, in some circumstances, with
retroactive effect; and any such change could affect the opinions stated herein.
Furthermore, the opinions expressed below might not be applicable to MotivePower
shareholders who or which, for United States federal income tax purposes, are
nonresident alien individuals, foreign corporations, foreign partnerships,
foreign trusts or foreign
<PAGE> 3
Westinghouse Air Brake Company
October 13, 1999
Page 3
estates, or who acquired their MotivePower Common Stock pursuant to the exercise
of employee stock options or otherwise as compensation.
Based upon and subject to the foregoing, it is our opinion, as counsel
for WABCO, that, for federal income tax purposes:
(1) the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and WABCO and MotivePower will each be a
party to that reorganization within the meaning of Section 368(b) of
the Code;
(2) no gain or loss will be recognized by MotivePower or WABCO as
a result of the Merger;
(3) no gain or loss will be recognized by the shareholders of
MotivePower upon the conversion of their shares of MotivePower Common
Stock into shares of WABCO Common Stock pursuant to the Merger, except
with respect to cash, if any, received in lieu of fractional shares of
WABCO Common Stock;
(4) the aggregate tax basis of the shares of WABCO Common Stock
received in exchange for shares of MotivePower Common Stock pursuant to
the Merger (including a fractional share of WABCO Common Stock for
which cash is paid) will be the same as the aggregate tax basis of such
shares of MotivePower Common Stock;
(5) the holding period for shares of WABCO Common Stock received
in exchange for shares of MotivePower Common Stock pursuant to the
Merger will include the holder's holding period for such shares of
MotivePower Common Stock, provided such shares of MotivePower Common
Stock were held as capital assets by the holder at the Effective Time;
and
(6) a stockholder of MotivePower who receives cash in lieu of a
fractional share of WABCO Common Stock will recognize gain or loss
equal to the difference, if any, between such stockholder's basis in
the fractional share (determined under clause (iv) above) and the
amount of cash received.
In addition, reference is made to the statements in the Prospectus
under the caption "The Merger Transaction -- Material United States Federal
Income Tax Consequences of the Merger," which have been prepared or reviewed by
us. It is our opinion that the statements made
<PAGE> 4
Westinghouse Air Brake Company
October 13, 1999
Page 4
under the caption "Material United States Federal Income Tax Consequences of the
Merger," to the extent constituting a discussion of matters of federal income
tax law or legal conclusions with respect thereto, are true and correct in all
material respects.
Except as expressly set forth above, you have not requested, and we do
not herein express, any opinion concerning the tax consequences of, or any other
matters related to, the Merger. Our opinion also does not address U.S. federal
income tax consequences which may vary with, or are contingent upon, a
shareholder's individual circumstances.
We assume no obligation to update or supplement this letter to reflect
any facts or circumstances which may hereafter come to our attention with
respect to the opinions expressed above, including any changes in applicable law
which may hereafter occur.
This opinion is provided to, and may be relied upon by, you only, and
without our prior consent, it may not be relied upon, used, circulated, quoted
or otherwise referred to in any manner by any other person, firm, governmental
authority or entity whatsoever. Notwithstanding the foregoing, we hereby consent
to the reference to Kirkland & Ellis in the Prospectus and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Kirkland & Ellis
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Westinghouse Air Brake Company on Form S-4 of our reports dated February 11,
1999 (March 2, 1999 as to Note 18), appearing in the Annual Report on Form 10-K
of MotivePower Industries, Inc. for the year ended December 31, 1998 and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
October 13, 1999
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 17, 1999
included in Westinghouse Air Brake Company's Form 10-K for the year ended
December 31, 1998 to all references to our Firm in this registration statement.
/s/ Arthur Andersen LLP
Pittsburgh, Pennsylvania
October 13, 1999
<PAGE> 1
MOTIVEPOWER INDUSTRIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MOTIVEPOWER INDUSTRIES, INC. FOR THE SPECIAL MEETING OF THE
SHAREHOLDERS TO BE HELD ON NOVEMBER 19, 1999 AT 11:00 A.M., LOCAL
TIME
The undersigned hereby appoints John C. Pope, Joseph S. Crawford,
Jr. and Timothy R. Wesley and each of them acting in the absence of
the other, with full power of substitution, attorneys and proxies
for and in the name and place of the undersigned, to represent and
vote the number of shares of Common Stock of MotivePower
Industries, Inc. that the undersigned would be entitled to vote if
then personally present at the Special Meeting of the Shareholders
of MotivePower Industries, Inc., or at any adjournment or
postponement thereof. If you do not mark any box, your proxy will
be voted in accordance with the Board of Directors'
recommendations.
This proxy, when properly executed will be voted in the manner
directed by the undersigned shareholder. IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL TO APPROVE AND ADOPT
THE AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER DATED AS OF
SEPTEMBER 26, 1999, AS AMENDED, BETWEEN WESTINGHOUSE AIR BRAKE
COMPANY AND MOTIVEPOWER INDUSTRIES, INC. (THE "MERGER AGREEMENT")
AND THE MERGER. This proxy grants discretionary authority to vote
in accordance with the best judgment of the named proxies on other
proposals or matters that may properly come before the meeting. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS
CARD.
The undersigned hereby acknowledges receipt of the Notice of
Special Meeting of Shareholders and the related Joint Proxy
Statement/ Prospectus dated October 20, 1999.
(See Reverse Side)
P
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS INDICTED,
THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
Proposal 1. Approval and adoption of the Amended and Restated
Agreement and Plan of Merger dated as of September 26,
1999, as amended, between Westinghouse Air Brake
Company and MotivePower Industries, Inc. and the
merger (See reverse)
[ ] FOR [ ] AGAINST [ ] WITHHELD
Please check this box if you plan to attend the Special Meeting [ ]
(Signature)
(Signature, if jointly held)
Title:
Dated: ,1999
NOTE: Please date this proxy card and sign it exactly as your name
or names appear. All joint owners of shares should sign.
State full title when signing as executor, administrator,
trustee, guardian, etc. Please return the signed proxy card
in the enclosed postage prepaid envelope. The signer hereby
revokes all proxies heretofore given by the signer to vote at
the Special Meeting of Shareholders or any adjournments
thereof.
<PAGE> 1
WESTINGHOUSE AIR BRAKE COMPANY
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
WESTIN WILLIAM PENN, PITTSBURGH, PENNSYLVANIA
FRIDAY, NOVEMBER 19, 1999 -- 10:00 A.M. (LOCAL TIME)
The undersigned stockholder of WESTINGHOUSE AIR BRAKE COMPANY (the
"Company") does hereby appoint WILLIAM E. KASSLING and ROBERT J.
BROOKS, and each of them acting individually, with full power of
substitution, as proxies of the undersigned to vote at the Special
Meeting of Stockholders of the Company, to be held on November 19,
1999 (the "Special Meeting"), and at all adjournments thereof, all
the shares of Common Stock of the Company which the undersigned may
be entitled to vote, on the matters set out on the reverse side of
this proxy card and described in the Joint Proxy
Statement/Prospectus and, in their discretion, on any other
business which may properly come before the Special Meeting.
The undersigned stockholder hereby revokes all previous proxies for
the Special Meeting and acknowledges receipt of the Notice of
Special Meeting of Shareholders and Joint Proxy
Statement/Prospectus, both dated October 20, 1999.
You are urged to return promptly this proxy card in the enclosed
envelope whether or not you expect to attend the Special Meeting in
person so that your shares may be voted in accordance with your
wishes and in order that the presence of a quorum may be assured at
the Special Meeting.
The shares represented by this proxy card will be voted as directed
by the stockholder. If this proxy card is executed but no direction
is given, such shares will be voted "FOR" proposal 1.
(Continued and to be signed on the reverse side)
P
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS INDICTED,
THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
Proposal 1. Approval and adoption of the Amended and Restated
Agreement and Plan of Merger dated as of September 26,
1999, as amended, between Westinghouse Air Brake
Company and MotivePower Industries, Inc. and the
merger.
[ ] FOR [ ] AGAINST [ ] WITHHELD
Please check this box if you plan to attend the Special Meeting [ ]
Please date and sign exactly as
your name appears hereon and
return in the enclosed
envelope. If acting as
attorney, executor,
administrator, guardian or
trustee, please so indicate
with your full title when
signing. If a corporation,
please sign in full corporate
name, by duly authorized
officer. If shares are held
jointly, each stockholder named
should sign.
SIGNATURE(S) SIGNATURE(S) DATE: __________
NOTE: Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as
such.
<PAGE> 1
WESTINGHOUSE AIR BRAKE COMPANY
VOTING INSTRUCTIONS FOR THE SPECIAL MEETING OF STOCKHOLDERS
SOLICITED BY THE ESOP TRUSTEE
WESTIN WILLIAM PENN, PITTSBURGH, PENNSYLVANIA
FRIDAY, NOVEMBER 19, 1999 -- 10:00 A.M. (LOCAL TIME)
The undersigned participant in the WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN (the "ESOP") does hereby instruct the
ESOP Trustee to vote at the Special Meeting of Stockholders of
Westinghouse Air Brake Company (the "Company"), to be held on
November 19, 1999 (the "Special Meeting"), and at all adjournments
thereof, all the shares of Common Stock of the Company which the
undersigned may be entitled to provide instructions, on the matters
set out on the reverse side of this card and described in the Joint
Proxy Statement/Prospectus and, in its discretion, on any other
business which may properly come before the Special Meeting.
The undersigned participant hereby acknowledges receipt of the
Notice of Special Meeting of Shareholders and Joint Proxy
Statement/Prospectus, both dated October 20, 1999.
The shares represented by this card will be voted as directed by
the participant. If this card is executed but no direction is given
or if such direction is not received by the ESOP Trustee on or
before November 17, 1999, such shares will be voted in accordance
with the Westinghouse Air Brake Company Employee Stock Ownership
Plan and Trust
(Continued and to be signed on the reverse side)
P
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
Proposal 1. Approval and adoption of the Amended and Restated
Agreement and Plan of Merger dated as of September 26,
1999, as amended, between Westinghouse Air Brake
Company and MotivePower Industries, Inc. and the
merger.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please check this box if you plan to attend the Special Meeting [ ]
Please date and sign exactly as
your name appears hereon and
return in the enclosed
envelope. If acting as
attorney, executor,
administrator, guardian or
trustee, please so indicate
with your full title when
signing.
SIGNATURE DATE: __________
NOTE: Please sign exactly as name appears hereon. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such.
<PAGE> 1
U.S. TRUST COMPANY, NATIONAL ASSOCIATION
NOTICE TO PARTICIPANTS
IN THE
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
Dear ESOP Participant:
Enclosed with this notice is a Joint Proxy Statement/Prospectus with
respect to the Special Meeting of Stockholders of Westinghouse Air Brake Company
(the "Company") to be held on November 19, 1999 (the "Special Meeting"). The
Special Meeting will be for the purpose of the approval and adoption of the
Amended and Restated Agreement and Plan of Merger dated as of September 26,
1999, as amended, between the Company and MotivePower Industries, Inc. and the
merger. The Joint Proxy Statement/Prospectus has been prepared by the Board of
Directors of the Company in connection with the business to be transacted at the
Special Meeting. THE ITEMS TO BE PRESENTED AT THE SPECIAL MEETING ARE IMPORTANT
AND ARE DESCRIBED IN THE PROXY MATERIALS BEING ENCLOSED WITH THIS NOTICE.
DIRECTIONS TO THE TRUSTEE
Only U.S. Trust Company, N.A., as trustee (the "Trustee") of the
Westinghouse Air Brake Company Employee Stock Ownership Plan (the "ESOP"), can
vote the shares of the Company's stock (the "Shares") held by the ESOP. However,
under the terms of the Westinghouse Air Brake Company Employee Stock Ownership
Plan and Trust, you, as a participant in the ESOP, are entitled to instruct the
Trustee how to vote the Shares that have been allocated to your individual
account ("Allocated Shares") and the Shares that have not yet been allocated to
the accounts of ESOP participants ("Unallocated Shares").
Enclosed with this notice is a confidential voting instruction card which
is provided to you for the purpose of instructing the Trustee how to vote your
Allocated Shares concerning the above matters, which are described in the
enclosed Joint Proxy Statement/Prospectus. Your interest in these matters is
important. Please take the time to complete the voting instruction card and
return it to the Trustee. You may instruct the Trustee to vote for, against, or
to abstain from approval of such matters. If you do not provide instructions to
the Trustee, your Allocated Shares will be voted in accordance with the
Westinghouse Air Brake Company Employee Stock Ownership Plan and Trust, which
provides that the Trustee will vote such Shares in the manner directed by the
ESOP Committee.
Unallocated Shares will be voted by the Trustee in the same proportion that
the Allocated Shares of all participants for which participant instructions were
received are voted. Thus, through your instructions, you will be exercising
power and control, as a "named fiduciary" (as defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) of the ESOP with respect to
the applicable portion of Unallocated Shares. Fiduciaries under ERISA (including
"named fiduciaries") are required to act prudently, solely in the interest of
plan participants and beneficiaries, and for the exclusive purpose of providing
benefits to the participants and beneficiaries.
The Trustee will vote your Allocated Shares (and an applicable portion of
the Unallocated Shares) in accordance with the instructions you provide on the
voting instruction card received by the Trustee on or before November 17, 1999,
unless the Trustee determines such instructions are contrary to ERISA.
CONFIDENTIALITY
How you vote will not be revealed, directly or indirectly, to any officer,
any other employee or any director of the Company or to anyone else, except as
otherwise required by law. You should, therefore, instruct the Trustee to vote
the Shares in the manner you think best.
VOTING DEADLINE
Because of the time required to tabulate voting instructions from
participants before the Special Meeting, the Trustee must establish a cut-off
date for receiving your instruction card. The cut-off date established by the
<PAGE> 2
Trustee is 5:00 P.M. Eastern Time on November 17, 1999. The Trustee cannot
insure that instruction cards received after the cut-off date will be tabulated.
Therefore, it is important that you act promptly and return your instruction
card on or before November 17, 1999, in the envelope provided for your
convenience. If the Trustee does not receive timely instructions from you with
respect to your Shares, the Trustee will vote such Shares in the manner directed
by the ESOP Committee, which is currently comprised of William E. Kassling,
Robert J. Brooks, and Kevin P. Conner, unless the Trustee determines such
instructions are contrary to ERISA.
If you also hold shares of Common Stock of the Company directly and not
through the ESOP, you will receive, under separate cover, proxy solicitation
materials including a proxy card. That card should be used to vote the shares
you hold directly and CANNOT be used to direct the voting of shares held by the
ESOP.
FURTHER INFORMATION
If you have questions regarding this information provided to you, you may
contact the Trustee at (800) 535-3093 between 11:30 A.M. and 7:00 P.M. Eastern
Time, Monday through Friday.
Your ability to instruct the Trustee how to vote your Shares is an
important part of your rights as an ESOP participant. Please consider the
enclosed material carefully and then furnish your voting instructions promptly.
Dated October 25, 1999
U.S. Trust Company, N.A.,
as Trustee of
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE> 1
NOTICE TO PARTICIPANTS
IN THE
WESTINGHOUSE AIR BRAKE COMPANY
RAC VOTING TRUST
Dear Voting Trust Participant:
Enclosed with this notice is a Joint Proxy Statement/Prospectus for the
Special Meeting of Stockholders which will be held on November 19, 1999. The
Special Meeting is being called for the purpose of the approval and adoption of
the Amended and Restated Agreement and Plan of Merger dated as of September 26,
1999, as amended, between the Company and MotivePower Industries, Inc. and the
merger, as well as considering any other matters that may properly come before
the Special Meeting.
As a Voting Trust Participant and stockholder you are cordially invited to
attend the Special Meeting. As you know, by the terms of the Second Amended
WABCO Voting Trust/Disposition Agreement dated as of December 13, 1995 by which
we deposited our shares in the Voting Trust, we agreed that the Trustees of the
Voting Trust will be responsible for voting the shares we have delivered to the
Trust. Accordingly, a proxy card has not been included with the enclosed
materials.
Thank you for your continued cooperation and for your faith in the success
of our joint efforts.
Sincerely,
William E. Kassling
Chairman and Chief Executive Officer
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Exhibit 99.6
CONSENT OF GILBERT E. CARMICHAEL
I hereby consent to being named as a person who will become a
director of Westinghouse Air Brake Company, a Delaware corporation ("WABCO"), in
connection with the consummation of the merger (the "Merger") contemplated by
the Amended and Restated Agreement and Plan of Merger, dated as of September 26,
1999, between MotivePower Industries, Inc., a Pennsylvania corporation, and
WABCO, in the Registration Statement on Form S-4 to be filed by WABCO with the
Securities and Exchange Commission in connection with the Merger (the
"Registration Statement"), and to the filing of this consent as an exhibit to
the Registration Statement.
Signature: /s/ GILBERT E. CARMICHAEL
---------------------------
Gilbert E. Carmichael
<PAGE> 1
Exhibit 99.7
CONSENT OF LEE B. FOSTER II
I hereby consent to being named as a person who will become a
director of Westinghouse Air Brake Company, a Delaware corporation ("WABCO"), in
connection with the consummation of the merger (the "Merger") contemplated by
the Amended and Restated Agreement and Plan of Merger, dated as of September 26,
1999, between MotivePower Industries, Inc., a Pennsylvania corporation, and
WABCO, in the Registration Statement on Form S-4 to be filed by WABCO with the
Securities and Exchange Commission in connection with the Merger (the
"Registration Statement"), and to the filing of this consent as an exhibit to
the Registration Statement.
Signature: /s/ LEE B. FOSTER II
-----------------------------
Lee B. Foster II
<PAGE> 1
Exhibit 99.8
CONSENT OF JAMES P. MISCOLL
I hereby consent to being named as a person who will become a
director of Westinghouse Air Brake Company, a Delaware corporation ("WABCO"), in
connection with the consummation of the merger (the "Merger") contemplated by
the Amended and Restated Agreement and Plan of Merger, dated as of September 26,
1999, between MotivePower Industries, Inc., a Pennsylvania corporation, and
WABCO, in the Registration Statement on Form S-4 to be filed by WABCO with the
Securities and Exchange Commission in connection with the Merger (the
"Registration Statement"), and to the filing of this consent as an exhibit to
the Registration Statement.
Signature: /s/ JAMES P. MISCOLL
----------------------------
James P. Miscoll
<PAGE> 1
Exhibit 99.9
CONSENT OF NICHOLAS J. STANLEY
I hereby consent to being named as a person who will become a
director of Westinghouse Air Brake Company, a Delaware corporation ("WABCO"), in
connection with the consummation of the merger (the "Merger") contemplated by
the Amended and Restated Agreement and Plan of Merger, dated as of September 26,
1999, between MotivePower Industries, Inc., a Pennsylvania corporation, and
WABCO, in the Registration Statement on Form S-4 to be filed by WABCO with the
Securities and Exchange Commission in connection with the Merger (the
"Registration Statement"), and to the filing of this consent as an exhibit to
the Registration Statement.
Signature: /s/ NICHOLAS J. STANLEY
------------------------------
Nicholas J. Stanley
